(If you haven’t checked out my first three blog posts, please do so: #1 #2 #3. The charts that follow will make much more sense with some context.)
Many of you have probably read Dale Carnegie’s charm school textbook, “How to Win Friends and Influence People.” If you’re trying to cultivate friendships and influence, I highly suggest that you read it. If you’re trying to do the exact opposite of that, I’ve found what has to be the most effective way: just be bullish on stocks. There’s absolutely nothing sexy about being bullish, because everyone knows that stock market bulls are Kool-Aid guzzling oafs. It’s impossible to express a bullish opinion and be received as shrewd or prudent, even if that opinion is data-driven or turns out to be correct. You will be dismissed as a pumper, or a sheep, or, worst of all, a ‘long-term investor.’ Bearish arguments always seem more intelligent, more charismatic–James Altucher does a good job of explaining this phenomenon here (since my heart is half bear too, it’s my cynical pleasure to note that Altucher says in this article that “Dendreon is curing prostate cancer.” Dendreon, ticker DNDN, was a pathetic, fraudulent dilution machine that has since gone belly-up).
Since I’m already resigned to a friendless fate as a stock market bull (as I outlined in my last post), I figure I’ll set fire to the rest of my credibility by airing out the rest of my wildly unpopular opinions once and for all.
- The USD is quickly becoming my favorite big-picture short. This article is fantastically well-reasoned, but articles like this so often mark sentiment reversals in instruments. As the ‘worst case scenario’ projections get worse and worse, the chances of them playing out get smaller and smaller. 99% of the time, the seemingly extreme resolves itself quietly and is forgotten in a year. The 1% won’t be seen in advance anyway, some would argue, by definition. I’ve charted the greenback below.
- Everyone is busy arguing about when the Fed will raise interest rates. A raise is “inevitable” and yet rate-sensitive instruments are in smug, determined uptrends. Not many people are talking about the simple fact that rates should have been raised quite a while ago. The US is in top form, economically speaking. The people that told you otherwise were selling something. “But our national debt is so high!” It’s really just not. Absolute debt doesn’t matter one whit. It’s the affordability of debt that matters. The interest payments on our national debt as a percentage of our GDP is at 30+ year lows, according to the St. Louis Fed. Please also take note on that graph that our interest payments WERE quite high (more than twice as much as today) for almost the entire 1980s and 1990s. As we all know, domestic stocks were dreadfully burdened by that fact and struggled:
- The commodity complex is due for a vicious reversal. Oh, and the fact that commodities got dismantled wasn’t really bearish for stocks in the first place. Commodities are cyclical; stocks are not. Also, the energy and materials sectors are mid-to-late-stage rotation leaders. If this bull market truly is long in the tooth, they should be outperforming, not wallowing at lows:
And the three best performing market sectors excluding the biotech-fueled Healthcare sector? Financials, technology, and consumer discretionary: the three Early Bull Sector Leaders:
- Lastly, markets top on great sentiment and wide range. The current market is most saliently characterized by terrible sentiment and historically narrow range.
Not really a recipe for a rollover, to say in the least. In any case, I’ve probably solicited enough antipathy for now. As always, let’s remain committed to egolessness and introspection as traders. Remember, you are somewhere in between how great you sometimes feel you are, and how insignificant you sometimes fear you are. Enjoy the charts.
Setups
- US Dollar index: Here are the reference points I’m looking at. The higher HVN and 61.8% retracement level continues to be a big obstacle for bulls. One can always wait for the initiative hand to be shown: this balance WILL lead to a new discovery process.
Here’s the higher time-frame chart. That 161.8% termination certainly makes one go ‘hmmmm….’
- EUR/USD: accordingly, I’ll be watching for this balance to break UP (but I’ll trade WITH the initiative hand when she is shown):
- ES/SPY: The ES is still in balance, but the bears have an absolutely fantastic reference point now: the 8/20 high and composite VPOC confluence right around 2090. Additionally, bears took out the 8/12 buying tail: a good victory. If one is bullish, this is the ‘last stand’ area for THIS balance before the initiative hand will take her DOWN to the next reference areas below:
- N: Gorgeous, constructive chart. Reminds me a lot of GOOGL’s chart before she went on a warpath to all-time highs. A good example of using Volume Profile to confirm what drawings suggest about pattern of Price Acceptance. Also a good example of zooming out to avoid the noise on lower time-frames, in order to see what the auction is actually telling you about an instrument:
- SPLK: My favorite chart. Falling wedges and fibs matter. I think this issue is going to go Chiquita bananas and I intend to be there:
- Silver: Industrial metals are one of the best-performing asset classes after an interest-rate hike. Silver is also the liquidity canary of the precious metals complex, and the breakout of this contraction will lead them higher, perhaps forever:
Updates
- Natural gas: bounced perfectly off of the bullish 61.% retracement, after reversing at the bearish one. But fibs don’t matter.
- Crude Oil and the Canadian Dollar: discussed this setup in my last post and the concept of “Correlation and Reflectiveness” in my first. USD/CAD building a lower time frame balance beneath the reference point we discussed:
Here’s a look at the LTF balance. These are the KEY to picking your spots in a bigger-picture trade. 
Crude oil is in a PURE discovery process. I usually have zero interest in fighting conviction this strong, and I’m almost always trading WITH the price discovery rather than against it. That said, this is a very, very interesting location in black gold (especially given reference points in the CAD): 
- TSLA: The 50% Fibonacci retracement level was obviously in play by institutions, as it was good for a very solid bounce. If further weakness in this issue brings it down to the 61.8% level and coincides with the cycle low location, I will be slobbering. The higher time frame view of this name all but guarantees all-time highs… the question (and it can be a very hard one) is where to get on this train before she goes:
This channel has also been highly tradeable and it could take us down to the aforementioned reference point: 
- BZH: LOVE the response this housing stock got off of the range low. It shows me that the big money is looking at the same things that I am (that’s the whole point of all of this for me). I’ll probably put an entire IRA into this name soon:
- PHM, in the same space, also on watch. We’ll see if the clues she’s giving us that a trend may want to be born are for real:
- ZG: can’t chart this in ThinkorSwim anymore but still looks SO good:
- WDAY: the weekly chart on this name is still SO constructive, just a lovely chart. The daily is now a nested 61.8% Fibonacci retracement:
- LULU: Balanced trade here is coiling and staying elevated. Resilient, quiet, and forgotten: all the things I like:
- Coffee: suppliers sold at composite VPOC as expected. Tradeable lower time-frame balance here. Let’s see if she can grind higher:
- CRM: my favorite short idea if they can’t save her right here, right now:
- FSLR: the breakdown of this lower time-frame was very tradeable (acceptance -> discovery!). I’d like her lower for the long:
