www.trainingfortraders.com

OLD SCHOOL VERSUS NEW SCHOOL, LET’S SORT IT OUT

April 8th, 2015 by Leonard

Directional Sign Posts 04-08-15

 

OLD SCHOOL VERSUS NEW SCHOOL LET’S SORT IT OUT

 

 

Old School Markets

 

1. Fed eases interest rates to halt a 2008 financial crash. Bonds go up lowering interest rates. Feds are forced to create Bond buying programs (QE) because house of representatives¬† won’t create a fiscal policy and instead obstruct fiscal stimulus. Bonds continue to rally further lowering interest rates .

 

2. The dollar falls and stays depressed due to the lower interest rates and the great recession.

 

3. Gold rallies as a monetary replacement hedge for the dollar.

 

4. Stock market responds positively to lower interest rates projected months and years into the future.

 

 

New School Markets

 

1. Fed brings Bond buying programs to a halt in Oct 2014. House of Representatives still do not have a fiscal program of stimulus for the economy and still obstructing. But oddly instead of Bonds falling in 2014 on expectations of rising interest rates, they rally and lower interest rates without Fed help reflecting one of the worst years on record for consumers who are facing severe attrition of assets and savings as the great recession  continues to drag on.

Double click on charts to enlarge, Then the back button to reduce

Weekly US 30 Year Bonds 04-08-15

Blame it on the weather…….Not.

 

2. Dollar rallies on projections for higher interest rates into the future based on a better US economy while the Euro gets crushed due to monetary stimulus bond buying programs in the Euro zone and globally.

 

3. Gold continues to weaken as dollar hedges are not required but still holding firm as the “late to the party” global economies begin slashing interest rates as the great recession deepens throughout the world.

 

4. Our Stock market begins to sputter without QE Bond buying programs and creates a volatile time correction generally moving sideways from December 2014 into current times while global commodities like copper and crude oil collapse reflecting the ongoing deflationary forces. Consumers binge buy for 2 months at a time, then get scared and clam up for 3 or 4 months at a time. Blame it on the weather………..Not.

Double click on charts to enlarge, Then the back button to reduce

Weekly E Mini S&P 04-08-15

 

 

SUMMARY

 

Old School is ……..

 

1. Bonds go up to lower interest rates and stimulate the economy as a replacement for fiscal stimulus.

 

2. Dollar moves down on lower interest rates.

 

3. Gold rallies as a replacement hedge for the dollar.

 

4. Our Stock market rallies on lower interest rates .

 

 

New School Should be……….¬†

 

1. Bonds sell off to raise interest rates to anticipate a stronger economy.

 

2. Dollar rallies along with higher interest rates and a stronger economy.

 

3. Gold falls as monetary replacement hedges for the dollar are not needed.

 

4. Our stock market returns to a normal standard of moving up on solid economic numbers and fighting with the head winds of higher interest rates keeping growth in check.

 

 

So What’s Wrong With the Current New School Picture?

 

The economy is not unified……It’s spotty out there

 

For one thing The Great Recession is not yet over.

 

Secondly the U.S. is immersed in generational power struggle wars between Old Yuppie Boomers, slightly nihilistic Generation Xers , and Millennials . These are ideological wars about lifestyle, social morals,  redefining the work place,  and the impending death of how 100 year old industries are structured such as Fossil Fuels, Health Care, Pharmaceuticals, the Industrial Military Complex, and Wall Street. Even how retail is structured is being coerced into change.

 

The older generation, the ones with the money and the power will fight to their death a futile ideological war to maintain what they know to be how the world is supposed to look. But in the end they will be gone and change will win out ….it always does as the younger generation assumes power and control.

 

 

Fear, Resistance to Change and ObstructionismLuael and Hardy 3

 

I don’t know why the older power brokers are so resistant to change other than it might put a temporary disruption on their money flow. They could instead be using their vast experience to help usher in an America that surpasses all of it’s benchmarks of excellence and achievement in it’s almost 240 years of existence. But fear not . Early candidates for the 2016 presidential elections have tossed their hats into the ring.

 

 

Gustav Mahler

The great composer Gustav Mahler b 1860- d 1911 despised the Machine Age and it’s rickety noisy machines as the world moved deeper into the Industrial Revolution. He mourned the loss of the Romantic Era.

 Gustav Mahler 04-08-15

 

But paradoxically his music became the bridge between the 19th century romanticism and the 20th century modernism. Interspersed into the sweetness and romanticism of the 19th century in his music you will hear grotesque and violent harmonies that sound out of place that then resolve into tender passages of pathos only to be disrupted again. It was his view that the machine age was harsh and frenetic.

 

And at this time the world is once again moving again thru another revolution out of the 20th century Industrial revolution and into the 21st century technology information age.

 

The Great Recession beginning 2007-2008 is much more than just a financial recession .Real inflation ended in 1979. Dis-inflation began in 1980 as the machine age began to unwind. Deflation began in 2000 and has yet to bottom out.

 

U.S. Bonds are the key

 

Keep your eyes peeled on the U.S. Bond Market. Bond traders will tell us when the economy will begin it’s real unified recovery. They will sell bonds to bring the rates up. And then perhaps we will see New School Markets in sync.

 

ATTENTION

For greater detail and analysis on the direction of the markets you are invited to attend a free on-line workshop

Saturday April 11 at 12:00 Noon EST and on Tuesday April 14 at 4:30 pm EST

I will be conducting a Free online workshop on day trading in the worlds most unloved bull market. You will be catching a glimpse of Novy Market Flow Momentum Charts amongst other subject matter. Long term charts will also be analyzed.

 

To Register for the Free Leonard Novy Webinar

for  Saturday April 11 at 12:00 noon EST or for                                              

Tuesday April 14 at 4:30 pm  EST

Email¬†me at¬† info@trainingfortraders.com ¬†and type ‚ÄúWebinar‚Ä̬†for a registration link

For information regarding classes please inquire at   info@trainingfortraders.com or leave a voicemail at 760 841 1522 Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2015 www.trainingfortraders.com

HAPPY BEARS CATCH A BREAK, CAN’T SAY I DIDN’T WARN YOU.

October 12th, 2014 by Leonard

HAPPY BEARS CATCH A BREAK, CAN’T SAY I DIDN’T WARN YOU

Happy bear 3 Oct 2014

 

There is a difference between warning one of a potential break in the market or issuing a sell signal. So many traders have called a top over the past 5 years only to see the bulls walk all over those predictions. So I warned. You can read about what I was seeing that caused a warning in my previous blog, MARKET STILL BOUND WITHIN THE RISING WEDGE: BULLS GAME TO LOSE.  Published September 3rd, 2014.

 

In that publication, I posted charts of the Daily ES pointing out certain weakness such as an August rally on low volume that ends with a series of Dojis that represent confusion, all contained within a large 18 month old Bearish Rising Wedge. See charts below

Double click on charts to enlarge, Then the back button to reduce

ES DAILY E MINI 09-03-14

ES DAILY E MINI 09-03-14 close up

 

The market finally broke down. Charts further down

 

 

The GLOBAL SLOWDOWN

Well it had to be something to knock the market down. Let’s see a global slowdown in the EU, Russia and China? How about a global slowdown accompanied by tapering out the last $15 billion a month from the Feds QE to end the program? That will happen this month. Or how about consumer discretionary stocks hit on a slowdown in spending? Or income inequality or political discord between various countries and all the land grabbing. Maybe it’s just a compilation of things that have put stocks in pricey territory relative to an uneven and still somewhat soggy economic recovery. Voters have a chance to choose between growth and stagnation at the polls this November.

 

The 2 charts below are self explanatory, the first being a broader view, and the second being a closer up view of the Daily ES with explanations on the charts.

Double click on charts to enlarge, Then the back button to reduce

 

 

ES Daily E-Mini 10-12 14 broader

ES Daily E Mini 10-12-2014 Close up

 

 

If you are interested in being included on my mailing list to receive notice of newly written blogs or to attend free webinars conducted by me, please email me at info@trainingfortraders.com and say, “add to mailing list”

 

Thank you

 

Leonard Novy

info@trainingfortraders.com

For information regarding classes please inquire at   info@trainingfortraders.com or leave a voicemail at 760 841 1522 Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2014 www.trainingfortraders.com

 

MARKET STILL BOUND WITHIN THE RISING WEDGE: BULLS GAME TO LOSE

September 3rd, 2014 by Leonard

ES DAILY E MINI 09-03-14

Double click on chart to enlarge, Then the back button to reduce

MARKET STILL BOUND WITHIN THE RISING BEARISH WEDGE.  BULLS GAME TO LOSE

 

It was just about a month ago in my previous blog Aug 6, where I posted a picture of the Daily ES-mini chart.

At that time we saw the market touching down on to the 100 day moving average for the 6th time since June of  2013.

The market rallied after each of the previous 5 touch downs to the 100 day moving average. Would the market rally again? or would it fall out of the Rising Bear Wedge?

THE BEARS ARE DENIED

Once again, the bears were denied as the bulls found reasons to rally the market for a 6th time in the last 15 months from the 100 day moving average and to close at record highs for the month of August.

 

GEO-DISTURBANCES

And to boot, traders found no reasons to let geo-political wars, skirmishes, disputes or barbarism in Iraq and Syria, Hamas against Israel, China tussling with Japan, Vietnam, and Hong Kong, the testosterone ladened Russian Czar land grabbing in the Ukraine and threatening a recession in the Euro zone. And tucked in between all of that, Scotland wants autonomy.

The market is either saying that these exogenous events are all manageable therefore no threat or perhaps the bulls have put on the blinders and are willing to bet on a stampede. Myopia is part of omnipotence

As an example traders are ignoring the declining volume and  the record setting loss of volatility related to slow trading throughout the entire month of August.

It does seem however that there is some awareness of the large Rising Bearish Wedge in which the market resides as prices continue to tickle the underside of the upper line of the pattern over the last 7 trading sessions. 6 of those 7 recent bars are dojis illuminating confusion.

Double click on chart to enlarge, Then the back button to reduce

ES DAILY E MINI 09-03-14 close up

But let’s not get too excited about that ……..The old Scottish saying is “Where there’s muck there’s money” . The old definition of muck is dung. Somebody has to do the dirty work and they get paid well. In modern times it means where there’s trouble there’s money.. And from any perch these days there are mountains, hills and valleys filled with trouble ahead.

Just be sure to keep a disaster stop in the market out of range of your normal ¬†playground when day trading on the buy side. Tis better to lose a little and then find out what caused the floorboards to give way later. Only bulls can start a bear market. It’s the Bulls game to lose

This Thursday September 4, at 4:30 EST and on Saturday September 6, at 12 Noon  EST, I will be conducting a Free online workshop on day trading in the worlds most unloved bull market. You will be catching a glimpse of Novy Market Flow Momentum Charts amongst other subject matter.

 

To Register for the Free Leonard Novy Webinar

for  Thursday Sept 4, at 4:30 pm EST or for                                              

Saturday Sept 6 at 12:00 Noon EST

Email¬†me at¬† info@trainingfortraders.com ¬†and type “Webinar”¬†for a registration link

For information regarding classes please inquire at   info@trainingfortraders.com or leave a voicemail at 760 841 1522 Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2014 www.trainingfortraders.com

 

BEARISH RISING WEDGES ……….IN THE FACE OF OMNIPOTENCE

August 6th, 2014 by Leonard

 

Bearish Rising Wedges………..In the Face of Omnipotence.

Not that the bulls need any help since the E-mini S&P is sitting on the 100 day Moving Average again, but bullish traders are quick to point out that this is the 6th time since June of 2013 that the market has touched down to challenge the 100 day MA on the daily chart. And all the other times it rallied.

 

Interestingly, 3 of those touch downs took place at the bottom of a giant Bearish Rising Wedge in the year 2013. That pattern ultimately failed and the bears had to cover their short positions as the market rallied.

 

The other 3 touchdowns to the 100 day MA have all taken place in 2014 at the bottom of an even larger and current giant Bearish Rising Wedge.

 

The Market today created the 6th touch down to the 100 day moving average at a crucial point since the breakdown of Bearish Rising Wedges normally takes place about half way to three quarters of the way thru the pattern. That would be somewhere in the month of August.

 

Should the market break down, the downside target is the first low of the Rising Wedge at about 1732.00 by classical standards of price projection.

Double click on chart to enlarge, Then the back button to reduce

Daily E-Mini S&P Wedges 08-06-14

 

Of course we have this psychological betting game taking place called¬† “How is the market going to break down?”.¬† There are those very experienced traders who say ….the market can’t break down¬† if everyone is bearish and not until it is frothy will it break down. That’s completely understandable as a traditional market psychology.

 

But then there are those who say that omnipotence comes in many forms. Therefore it is omnipotent if not complacent to say that unless there is froth the market can’t break down.

 

So then every other day a fund manager in NYC takes an hour break and taxis down to the television studios at CNBC or Bloomberg and sells his or her position in the markets. Some of them are famous and use the media to wage public battles and campaigns to bolster their respective positions. And then we see the billionaire titans waging wars against each other

 

One thing we as traders know for certain. The market will break down when least expected.

 

If that were to happen it would certainly satisfy many people watching the most hated bull market of all time. And 1732.00 would only be a mild correction of about 13%.

 

But think about the benefits

 

Almost everyone hates this market. The I hate this bull market list is very long.

 

A big breakdown would satisfy the Obama haters, The Federal Reserve haters, the disenfranchised public who see the market as a playground only for the wealthy haters, all of the famous gurus who lost their standing by calling early ¬†”tops are in”¬† haters, most of the Generation Xers who just want to burn the place down haters, the Tea Party I hate government haters, and don’t leave out the Millennials who are busy creating their own alternative universe of haters ..what’s a stock market? …and who watches cable, and who cares haters.

 

Oh Yah we’ve got a lot of hate going on. And lets not even get into the entire Mid-East, Africa and Russia, There’s so much hate going on in the world that folks have to take a ticket to stand in line for the next opportunity to dominate the news cycle. Putin had to wait for a small window of truce between Israel and Hamas before he rattled his sabers.

 

And to think ……….all it would take is just one crummy little break of 13% to 1732.00

E-mini S&P to bring the market down to try to say “hello” to the economy and to satisfy so many people. It would be such a relief to have something in the world make sense.

 

Leonard Novy

 

This Saturday August 9, at 12 noon EST and on Tuesday August 12, at 4:30 EST, I will be conducting a Free online workshop on day trading in the worlds most hated bull market. You will be catching a glimpse of Novy Market Flow Momentum Charts amongst other subject matter.

 

To Register for the Free Leonard Novy Webinar

for  Saturday Aug 9, at 12:00 noon EST or for                                              

Tuesday Aug 12, at 4:30 EST

Email me at  info@trainingfortraders.com  and type Webinar for a registration link

For information regarding classes please inquire at   info@trainingfortraders.com
or leave a voicemail at 760 841 1522
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2014
www.trainingfortraders.com

MARKET CHOOSES TO PULL BACK ON FED TAPERING IN JAN AND EARLY FEB

February 10th, 2014 by Leonard

In my last Blog published Jan 15 ‚ÄúTHE LONG SLOW WALK, UNWINDING DEFLATIONARY EXPECTATIONS‚Ä̂Ķ‚ĶA DIFFERENT GAME, ¬†I did a little forecasting regarding how traders might react to the Jan 28 FOMC meeting and subsequent meetings into the year..

 

The “Measured Pace”

 

It basically boiled down to 2 words……”measured pace” . The Fed can do anything with those 2 words and that’s a good thing. My thought was that the Feds will adjust their tapering program to the pace of an economic recovery and measure it’s sustainability.

No one can say just how many waves of recovery it might take for the economy to actually grab hold of a trend. The market is a separate issue. It tends to cure itself.

Double click on chart to enlarge, Then the back button to reduce

ES Monthly Chart 02-10-14

Into The Future

 

The Fed plans on how their actions will affect the economy 6 months to a year out. They can’t be over steering or rapidly changing course on every positive or negative economic report.

 

Businesses may want to perk up as easy money becomes a little more expensive when interest rates eventually rise along with a stronger dollar.

 

The Self Correcting Bond Market

 

For now the Bond market is self correcting because some of the money pulled from the stock market gets stored there. When the market is ready to go up, the Bond cash returns to stocks slightly raising interest rates as Bonds fall. That’s a pretty good scenario for the Fed.

 

More Expectations

 

I would expect some passive investing to give way to growth. Intense speculation at each and every FOMC meeting should continue. The stock market could vacillate in a wide trading range with solid breaks leading to higher prices over time while the economy catches up to current valuations.Gold should lose it’s luster as a hedge.

 

The S&P should be the winner since it has been the laggard relative to NASDAQ over the last 5 years and who doesn’t like dividends?

 

The FOMC tapered to $75 Billion for January and to $65 Billion for Feb..

 

Old School Investing

 

“Old School Investing” (Bond rallies lowering interest rates, Dollar falling with Gold going up as the store of value) will continue to return whenever the economy recedes after a small growth period but it should only be temporary as the Feds continue to pull out it’s support. . The tug of war should be minor.

 

 

Bring it all together

 

I expect all of the above to happen barring any unexpected and horrific external events in 2014

 

Market valuations need to come down to meet the economy or the economy needs to rise up to meet market valuations (minus the Fed).

 

Perhaps a little of both will happen. The speed at which this happens is dependent on several factors including how fast Congress creates stimulus policies of growth.

 

Next FOMC meeting is on Wednesday March 19, 2014 at 14:00 EST

 

 

Register for the free Leonard Novy Webinar Wednesday Feb 12, at 4:30 EST or on                                              

Thursday Feb 13, at 4:30 EST

Email me at    info@trainingfortraders.com  and type Webinar for a registration link

For information regarding classes please inquire at   info@trainingfortraders.com
or leave a voicemail at 760 841 1522
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2014
www.trainingfortraders.com

“THE LONG SLOW WALK, UNWINDING DEFLATIONARY EXPECTATIONS”……A DIFFERENT GAME

January 15th, 2014 by Leonard

Unwinding Deflationary Expectations

 

 

“The Long Slow Walk, Unwinding Deflationary Expectations.”….A Different Game.

 

Ok, what’s different now, what’s changed in the now tapered market versus the pre-tapered market??………….Expectations.

 

Prior to tapering (before Jan 2014) Expectations were that as long as the Fed continued a bond buying program (QE), that the market would remain stable to higher occasionally getting over heated and lightly pulling back for purchases. That’s been the feel of the market. Bears were never invited to the party.

sad bear

Traders could depend on $85 billion in Bonds and MBS being purchased monthly, keeping stock prices elevated. And that when stocks would fall, some of the money liquidated would go into bond purchases, further depressing rates.

 

Good Game, but that’s over and tapering could play out differently.

 

What do Traders know now??

 

They know that the Fed lowered it’s QE purchases down to $75 billion from $85 billion and that the intent of the Fed is to continue to lower the amount of purchases at a “measured pace”.

 

What does “measured pace” mean going forwards for traders??

 

Seems to me that the Fed is saying that they will lower the amount of purchases by an unspecified amount over an unspecified amount of time. Timing and amounts are going to be dependent on economic activity.

 

Ok, so, that means the Fed is slowly pulling out their proxy support position for stock market valuations. Money will still be supporting bonds as the unwind takes place but it will be smaller in amounts and ratcheted down over time based on the pace of a growing or slowing economy.

 

 

In the past when a few unfavorable economic reports were posted, the market might turn a blind eye and rally based on firming QE program support.

 

But now as the market looks forward to 2014, traders are seeing potentially less support from the Fed, and that might put a cap on rally attempts unless the economy is heated and able to accelerate revenues. How much money consumers spend, will depend on how much consumers earn. The market may want to see faster growing revenues.

 

If we see favorable economic reports some might presume that tapering would increase and come at a faster pace. But that would only be an assumption. And just as I use the word “assumption” I can picture in my mind a more than usual jittery market just before the Feds release the FOMC report with traders placing bets (assumptions) on whether the Fed does or does not taper that month. Can anyone say “volatility”??

Flipping Coin

 

Traders are “feeling out” how they want to play the new taper game. Do we go up on a few strong reports and then run into an interest rate blockade that caps the rally? Do we ignore rates? ¬†Can economic expansion outpace rate hikes? Will breaks in the market be more severe? Will breaks come more frequently? How will the Fed evolve through the unwinding of deflationary expectations? These answers will roll out soon enough.

Janet Yellen

 

I hope Janet Yellen has a thick skin. There are dream scheme plebeians, sophists, and dilettantes posing as congressmen and women trying to get their political claws into the ¬†Federal Reserve to bend and shape the economy to their liking. ¬†It is crucial for the Fed to remain independent…..particularly since the standards for becoming a politician in congress in recent times has been lowered to unprecedented levels of ignorance, and self aggrandizement. What little most Fed haters know about running the Federal Reserve, especially in a global setting might fit into Bernanke’s or Yellen’s little finger nail.

 

We will watch and trade the market, interest rates, and the dollar.¬† Traders on the floor seem to be raising the bar on what interest rate will cause outright selling in the market. It used to be 3.0% on the 10 year notes. But nothing happened when that level was hit.¬† Now it appears to be 3.25%. Is that valid? We’ll find out.

 

There is a Head and Shoulders bottom pattern on the daily 10 year treasury yield chart that targets 3.10% as a minimum target projection. Inversely, there is a Head and Shoulders top pattern on the 10 year T-Notes that already fulfilled minimum downside price projections at 123’105 (see chart below)

Double click on chart to enlarge

10 year treasury notes and yields 01-14-14

 

Earnings Season has begun………mostly banks this week along with a mix of manufacturing reports and a couple of housing reports.

 

Barring any unexpected and horrific external events in 2014, I would expect the dollar to eventually go up as interest rates rise and gold falls. The stock market could vacillate in a wide trading range with solid breaks leading to higher prices over time while the economy catches up to current valuations.

 

So far the intraday trading action of the S&P since the beginning of this New Year has been un-inspiring, choppy, and confused. The market has gone nowhere. It will take a while longer for the traders to hook on to a direction and a theme. There should be more guidance on tapering at the Jan 28-29 FOMC meeting. Report falls on Jan 29 at 14:00 EST.

 

The Economy still has a long ways to go to generally catch up to market valuations The S&P should be the winner since it has been the laggard relative to NASDAQ over the last 5 years and who doesn’t like dividends?

 

Be patient and observant.

 

Register for the free Leonard Novy Webinar Thursday Jan 16, at 4:30 EST or on                                              

Saturday Jan 18 at 12:00 Noon EST

Email me at    info@trainingfortraders.com  and type Webinar for a registration link

For information regarding classes please inquire at   info@trainingfortraders.com
or leave a voicemail at 760 841 1522
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2014
www.trainingfortraders.com

OUT ON A LIMB The Great But Not So Great Dis-Connect

October 29th, 2013 by Leonard

Out On a Limb

THE GREAT BUT NOT SO GREAT DIS-CONNECT

 

The spread charts below depict the many degrees of separation between the Economy  and the investment class. The NASDAQ tech stocks are leading the S&P higher by price. That part is normal. What is abnormal is that they are also leading the S&P stock by value.

 

At $50 a point for the E-Mini S&P and $20 a point for the E-Mini NASDAQ it is clear that a 10 point move in the NQ is equal to $200 whereas only a 4 point move in the S&P also equals $200. Over time in normal economies the S&P moves 7 points on average for every 10 Points of NQ. The S&P is a much bigger index than the NASDAQ 200 and it is also very broad based representing the top 500 Blue Chip stocks, in other words the meat and potatoes of the economy.

 

The NASDAQ has often been called the pump and dump arena where the hot stocks that represent widgets and gizmos of technological wonder tend to find hyperbolic trends pushed by the announcement of a new creation or upgrade to an existing electronic device. Social media has been included in this arena as well.

 

That’s all well and good but in order for the economy to do better it has to integrate these advanced tools into the workplace to create jobs.

 

We’ve seen these kinds of separations before in the late 1990s when “investors” blew up the tech market only to drop it more than 80% in value while the S&P dropped much less. This was a correction to an untenable condition where the NASDAQ moved way too far ahead of the S&P and that means way too far ahead of the economy.

 

We are in a different situation now with an economy trying to rebound from a major deflationary move to the downside (2008) driven by systemic fraud, loosely policed regulations and greed.

 

But once again investors have piled in on NASDAQ leaving the S&P trailing behind as the economy is burdened by a global recession, the restructuring of several Major Industries, a lack of fiscal stimulus and political heel dragging as regressives are forced to come into the 21st century kicking and screaming. It’s called change. And for some change creates fear and their fear causes anger and their anger leads them down irrational paths.

 

 

In the first chart below we see a close up of the ES/NQ value spread that I call the economy. You can see that since the end of July 2013 that the spread has been trending down while the markets have been trending up.

 

For the sake of the exercise I am calling the spread the representation of the value of the economy. A legitimate bull market would have the S&P leading the way in value and the economy would be trading at a much higher reading.  The S&P is currently very discounted to the NQ

 

Notice that the economy has recently broken out of a coiled triangle to the upside. and moved above the 50 day Moving Average. It needs to stay above that 50 bar MA in order to maintain any value gains.

Click on chart to enlarge and then click again for clarity

ES-NQ Daily close up 10-29-13

 

Let’s go to the next chart that broadens out the picture

 

Click on chart to enlarge and then click again for clarity

ES-NQ Daily Mid View 10-29-13

Here we have the charts going back to the early summer months of 2011 when the combination of the Greek Debt Crises combined with the Tea Party threat of default on the US Debt Ceiling knocked the tar out of the economy. It took about 14 months for the economy to recover.

 

And then the economy zoomed into 2013 until once again the obstructionists Tea Partiers embraced sequestration, shut down the government and attempted to default on US debt over the following months. The economy took a hit as seen on the chart.

 

Interest rates had gone up earlier in the year as the economy improved but Bernanke and the Fed quashed any notions of tapering their buying programs as a direct affront to the Tea Party threatening default again. The message was clear ……… Big money billionaires supporting irrational ideological agendas do not have an infinite amount of money to print and spend. The FED will do what it needs to do to protect the economy.

 

 

So the Fed continues buying assets to support the markets waiting patiently for fiscal stimulus with or with out Tea Party members of Congress. The Fed took tapering off the table about a  week before the debt ceiling crises deadline. The Tea Party took a political hit and moderates in the GOP are beginning to turn against that program as public sentiment goes negative on it.

 

Traders do not like nasty political headline markets.

Click on chart to enlarge

The Sun and the Wind Aesops Fable

 

This last chart shows the spread in it’s long term picture. It is in this chart that we see just how flat the economy has been over the last 4 years.

Click on chart to enlarge and then click again for clarity

ES-NQ Daily Long Term View 10-29-13

With the markets making new highs we should see this spread up near 380.

 

It seems that when the wet blanket of obstructionism is peeled back, the markets and the economy do better. It is a trend the public is beginning to notice. The economy must catch up to the markets or the markets must come down to meet the economy. Perhaps a little of both will occur.

 

Register for the free Leonard Novy Webinar Thursday Oct 31, at 4:30 EST or on                                              

Saturday Nov 2 at 12:00 Noon EST

Email     info@trainingfortraders.com  and type Webinar for registration

For information regarding classes please inquire at   info@trainingfortraders.com
or leave a voicemail at 760 841 1522
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2013
www.trainingfortraders.comClick on chart to enlarge and then click again for clarity

THE SHIFTING ATMOSPHERE

January 29th, 2013 by Leonard

 

THE SHIFTING ATMOSPHERE 

The dynamics of change are now fast moving. Most of the marketing on television is now about things old folks need or want. Advertising for the millennials is done on the internet with social media. I believe the chart below describes much of it. You can fill in the details of events with what you choose but it doesn’t change the outcome. Shifting demographics and a generational drift towards the millennials is inevitable

Click on chart to enlarge and then click again for clarity

With regard to the market  the chart below is self explanatory. At the expense of repeating what is already on the chart I would add that in the near future we may find ourselves pioneering into unchartered waters.

Click on chart to enlarge and then click again for clarity

Register for the free Leonard Novy Webinar  Saturday Feb 2, at 12:00 noon EST

Go to info@trainingfortraders.com  and type Webinar  

For information regarding classes please inquire at   info@trainingfortraders.com
or leave a voicemail at 760 841 1522 
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright 1995-2013
www.trainingfortraders.com

If You’re Looking For Something, You’re Sure To Find It .

October 3rd, 2012 by Leonard

IF YOU’RE LOOKING FOR SOMETHING YOU’RE SURE TO FIND IT.

 

Hello Traders and Friends,

Back from a summer break, away from the blogosphere, but like you, I have been watching the ongoing drama ¬†”Which Way Now”, the elections.

The C.E.O. of America Inc.

The market has climbed to new 4 year highs. Romney wants to be CEO of America Inc.

C.E.O.s get hired by Board of Directors. In fact they are usually members of the Board of Directors (which is a complaint). So the real trick is in how to become a member of the board. Guess you have to get invited and that means working your way up the ladder through bonding and friendships, networking, and connections and you have to have management experience and memorize corporate lingo like “drill down”, and “skill sets”. You have to be able to stand behind a podium and “sell”, “sell”, “sell” .Deals take place in quiet rooms.

 

One problem with a C.E.O. running America Inc is that C.E.O.s are not required to reveal their future plans for the corporation to the corporate share holders. Shareholders don’t make decisions. Again, deals take place in quiet rooms.

Having been through a few corporate mergers myself as a commodities futures broker in the 1980s, it was always done the same way.

The employees are last to know that a merger has taken place. Everyone is promised that nothing will change, and that there will be vast improvements, and benefits.

6 months later everything changes as the new C.E.O. and his team bring in all their friends they were quietly hiring, and the old management heads begin to roll, or employees quit because they hate everything about the new environment.

I predict that Mr. Romney will become a billionaire within the next 10 years whether he wins the presidency or not. He seems to be made for money. A hobby would probably be good.

Ben Bernanke

In the meantime Ben Bernanke continues to baby sit the economy while the negative spin bloggers continue to sell the end of the world scenarios. The public seems to be getting tired of this pessimism . I even caught an online news piece on CNBC today by one pundit claiming that the Fed announcing QE3 two weeks ago had no effect on the markets and that they’ve run out of bullets.

This 4 year rally has destroyed the reputations of many prominent Gurus getting caught calling the top, and now we have op-ed writers as economists challenging the Fed Chief.

It is a despised bull market because the economy as a measurement relative to stock prices doesn’t seem to make sense. Stocks appear to be doing much better than the economy. The Fed has kept most 401Ks in recovery mode for the working class who have 401Ks, while continuing to increase the wealth of those who can afford to buy stocks. That would include the super rich who are the investment class.

After almost 40 years of boom or bust cycles, deflation is beginning to level the playing field both here and mostly abroad.. Deflation has highlighted the imbalances and inequities of the income stratum as it continues to chip away at the excesses built up over the last 4 decades. This is causing change.

Trust me lower taxes creates jobs …no I don’t think so…Its a “passive hedge”.

Romney’s lowering of taxes by and for the investor class is a hedge against anticipated wealth loss. It is a strategy to offset lower anticipated income from a global slowdown ¬†by keeping more of what you got.

Problem with that strategy is that it is passive, and defensive, at a time when there needs to be active growth. It creates a non productive environment where the wealthy can sit on their hands and it feeds on itself.

You can never get the taxes low enough to compensate for a negative spiral that creates ever slowing business. And then with the money being largely retained by the wealthy, but drained from the support system, services eventually fall off.

Mr. Bernanke has managed to keep equities elevated without the help of Congress.

Scorched Earth Retards

The economy has managed to lumber along much to the surprise of the regressives, the obstructionists, and the supressionists. The attempt to oust the president through inaction, hasn’t quite gone as planned. The public seems to prefer action instead of inaction ¬†and the most vocal wing nuts in the Tea Party are now fighting for their political careers. But there is still hope for them. The Globe spins very fast, and anything can happen in the next month or so.

 The Markets

Click on chart to enlarge and then click again for clarity

 

At the moment, markets are trading near the tops of a large 12 year trading range. All trading ranges eventually break out. That would require more than Ben Bernanke’s help even if he targets mortgage rates to drop to 3%.

Should the markets drop first before staging an optimistic bull rally? Perhaps, particularly if the current global recession continues to grind downwards.

Should the markets move significantly higher before dropping down? They could, because bullish sentiment is not exactly beaming. There is no omnipotence showing up.

For now we trade day to day and watch the building of market structure that tells us stories about the internal mood of the collective traders. Traders are very aware of the position of the market relative to the old tops. If the movement begins to pick up, it could invite some unexpected bullishness. What we’ve seen is that down moves over the last 2 weeks seem to hold ground. No high level of fear or anxiety as of yet. I’ll have more on this in my next blog

Unemployment coming at the end of this week and corporate earnings around the corner

Register for the free Leonard Novy Webinar  Saturday Oct 6, 2012 at 12:00 noon EST go to info@trainingfortraders.com  and type Webinar  

For information regarding classes please inquire at   info@trainingfortraders.com
or leave a voicemail at 760 841 1522 
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright1995-2012
www.trainingfortraders.com

THE TEUTONIC TWO STEP and DOUBLE DUPERY

June 4th, 2012 by Leonard

 

 

 

The Teutonic Two Step and Double Dupery

¬†In Case You Were Wondering About the Recent Activity in May …………It’s D√©j√† Vu

Through the months of Feb, Mar, and April 2012, a small Head and shoulders top formation completed itself on the daily E mini S&P, created by the heated financial battles between the Germans and everyone else  It is pictured below. The minimum price objective of the pattern was the 1289.75 area. As you can see, more than one trader in the world was aware of that price level as the market bounced up sharply upon touching it.

After that a bear flag developed as bearish news began to compound itself with a messed up Euro Zone, Slowing china , Dying India , and sluggish domestic employment numbers. It’s price projection is 1223.00 on the downside.

This is the third and smallest  Head and Shoulders topping pattern created since 2007 when the largest and most major of the 3 patterns developed from Dec 2005 thru Sept 2008 crushing the markets in a crash.

Click on chart to enlarge and then click again for clarity

The second largest Head and Shoulders topping pattern developed from Jan though July of 2011, as the Germans spent countless hours lobbying France’s Nicolas Sarkozy to be the intermediary puppet, to bring the southern countries into line with the dictates of the north and the Germans. It was a time representing all of the brunches, meetings, discords, cajoling, threats, lies and theatre called the Euro Zone crisis.

During that time, the peacocks of the finance ministries were jetting off to and from country to country, neck scarves flailing in the wind as they exited their limos waving, trying to foist off the debt load and losses of their banks, on to the “let them eat dolmades” citizenry. All of this after they blew up their financial systems with risky banking bets.

That pattern reached it’s price objective of 1117 on Aug 8, 2011 with climactic volume of 6 million contracts traded. That volume was a blow off an it put an end to the decline in the market. It only took two more months for Sarkozy to become Angela Merkel’s surrogate.

Click on chart to enlarge and then click again for clarity

The Teutonic Two Step

The Germans seem to move between two paradigms. When they run into trouble they hint at ways in which they can compromise to bring about a resolve but then that is quickly followed by a very stiff protruding chin that is followed by a mouth opening and dictating the rules and regulations that you must do to bring yourself into compliance.

It’s a hopeless endeavor to tread on the sovereignty of another country by disciplining the culture. Germans are not Greeks or Italians or Spaniards and they certainly are not French. It seems all too easy from their perspective for everyone to just follow the rules .¬†¬†

As time wore on, the union wore out, and Europe began making a political left turn that cost Sarkozy his re-election. All of a sudden being really good friends with Germany’s Angela Merkel can get you fired from your government job.

The current Head and Shoulders top developed from a higher price level than the 2011 top due in large part to the Fed’s Operation Twist and a strengthening US economy.

However this new H&S top came as Germany’s Angela Merkel lost her French power broker puppet Nicolas Sarkozy to the “let them eat crepes” citizenry when they made a left turn and elected Francois Hollande who is generally an anti-austerity advocate. By the way anti-austerity does not mean against austerity. It means against the imperialists who are attempting to foist off the debt they created on to the middle and lower classes by quickly and forcefully jamming extreme austerity programs down the throats of the masses without sharing in the losses.

  

In the meantime, the “let them eat dolmades” crowd on the left in Greece has also been winning approval of the citizenry.

Left Turn Signals

There seems to be emerging left turn signals coming from the Euro Zone lately as the general masses both here and abroad are beginning to understand that they have been duped not once, but twice.

Double Dupery

The underclass was first duped by systemic fraud originated by bankers, corporate heads, lobbyists, and politicians, who used the masses as cannon fodder, to create the fake home loans, that generated all of the fake commissions, that generated a very large and unwieldy fake economy, that imploded, and created more debt for the underclass  than was already created by unfunded wars, coupled with deep tax cuts for the investment class. 

Secondly during the worst part of the implosion and crash the masses were duped a second time by clever marketing groups masked as “grass roots political action committees” tied to the interests of banks, corporations, lobbyists and politicians. These so called “grass roots” political action start ups knew that if they struck early enough, they could deflect and divert the anger that should have rightfully been targeted at them and their constituents, to the “let them eat $5 pizza” crowd, the very same people from whom they just stole the money.

Interesting and Historical Times

We are indeed in the midst of the most interesting times with a contentious election ahead of us. Both sides want to take America back which presents a problem going forward. Then there’s the shifting of our naval forces to a 60% Pacific 40% Atlantic presence from the current 50/50% to counter a military build up of Chinese who seem to believe that every sea shell and island in the South China Sea all the way down to Malaysia belongs to China, a thought not universally shared.¬†

Anything, at any time can deck these markets but the traders seem to be way too bearish for a very hard crash. Interestingly the dollar recently has not been a safety haven. The scared money has gone to the bonds and gold. But this would make sense if traders are betting on a Fed intervention within weeks. QE’s tend to drive the dollar down.

This Thursday all ears and eyes will be pinned on Bernanke’s testimony for the Humphrey-Hawkins testimony beginning 10:00 am EST. The market may consolidate briefly to await that testimony. The road will be rocky.

I will be starting a new sequence of courses starting the week of June 11, 2012 with a new 8 week class on the foundations of Novy Principles of Market Flow and look forward to working with all of you throughout this year.

For information regarding this class please inquire at   info@trainingfortraders.com
or leave a voicemail at 760 841 1522 
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright1995-2012
www.trainingfortraders.com