Leigh Drogen » ES_F

Market Getting Extended

Leigh Drogen — Wed, 17 Feb 2010 14:25:11 +0000

The market ripped higher yesterday slicing through that 20 day moving average like butter. We ended the day right under the 50 day moving average and this morning the $ES_F is up almost 5 points. Take a look at the $USDX this morning, it’s surging off a strong level of support, but equities haven’t moved. As well, Deere $DE is up almost 8% premarket after smashing its numbers. The tone of the market has obviously changed, good news is being met with good market action and bad news, like the PIGS is being swept away in a feeling that everything will be taken care of in time.

I’m not saying this market is completely healthy again, I need to see the financials get some altitude before I make that call, Goldman $GS needs to recapture 160 and Citibank $C needs to hold the secondary offering price. The fact that JP Morgan $JPM went out and bought an energy trading unit yesterday tells me that Dimon doesn’t think the Volcker rule will ever get passed. This is positive for the banks and we saw that in the tape yesterday. Dimon is no fool and he would not have made an acquisition like that if he thought he would have to divest it in a year or two.

Don’t get too antsy to throw risk back on the table just yet, I want to see Gold $GC_F hold above the downtrend line it broke yesterday and equities to show resilience on the next pullback. If both of these take place I will be looking to load the boat on issues showing relative strength and nice basing patterns over the past few weeks, I’m currently 20% cash.

Stick with tech and food services.

Jobs, USDX, ES, and Rates

Leigh Drogen — Fri, 08 Jan 2010 14:22:52 +0000

I hope you all get it by now, that the negative correlation between equity markets and the US Dollar is broken. In fact, we’ve flipped all the way to a .5 positive 30 day running correlation. A few months ago if the $DX_F dropped like it did this morning, equity markets would have been flying. Here’s what we saw this morning.

Pretty obvious at this point eh? The jobs number was bad, far worse than expected at -85K. I’m not surprised, then again, I don’t think you can even trust the number anyway, they always get revised down after the fact. I continue to believe there aren’t any jobs out there, and there won’t be any time soon. This country’s economy is going through a radical shift, we don’t produce anything anymore, and we haven’t embarked found the next growth industry. Will dumb manufacturing jobs ever come back to this country, I doubt it, we’ve moved on, up the ladder of production, we are a service and ideas economy now. We were screwed in the 80′s before the computer changed our economy and gave us all jobs. We will once again find a spark to ignite a new industry to do the same, hopefully it doesn’t take a decade.

Due to the lousy jobs number, and what will continue to be lousy jobs numbers, the $FED isn’t raising rates any time soon. Here’s what will happen. Food and energy prices will begin to creep up, and then explode to the upside. At that point the fed will have no choice but to raise rates, and they will do it quickly by more than a full point to start, sending the dollar screaming. Until then the Dollar is going to wash around as equities churn higher yet. In the short term, here’s what I see for the $DX_F.

That 50 day moving average in blue is going to be tested. This is a very bullish flag pattern which should resolve itself to the upside after that test. I’ll be looking to take a short position in the $EURUSD as it comes back up to test significant resistance levels.

As for the equity markets. We continue to see healthy sector rotation taking place. Financials are running into earnings season, no surprise. Materials are hot as hell but are set to take a break following a crazy run to the upside. A few healthcare names I’m watching are breaking out of long term bases, I would be looking there for exposure. Look to buy the tech leaders on any weakness, I highly doubt they are going to let $AMZN dump before earnings. As well, I believe they are going to blow the numbers out of the park, hell they better after this run, or it’s a long way down from here.

Back to the Bottom (of the range)

Leigh Drogen — Tue, 08 Dec 2009 13:53:01 +0000

I’ve been warning you for a few weeks now that momentum in the market has stalled out. Many weekly time frames were looking ripe for a pull back if not a complete end to the rally, see $AAPL. Market leaders have been slowing getting picked off, one by one, like apples from a tree. Traders started to make calls of a melt up once again, every time that happens we get a pull back. Dubai shook us up a little, then we saw a few bear traps above important resistance, and now this morning. I’m not trying to blow the situation out of proportion, we are only down 90 basis points on the $ES_F at 8:45 AM the time I write this. But we are trading below important support at 1098 and the 20 day moving average. I am very confident that we now move down toward 1077 which is the location of the 50 day moving average.

The US Dollar sits at a major cross roads this morning, located right on the 50 day moving average. In my opinion it will decide which way we move out of this range in equities. I believe we’ve seen an intermediate term low in the $USDX.

My momentum book is +30% cash and my only trading position is in $GLD which I will hold until it makes a new 20 day low. Continue to trade small until the market shows its hand.

Straight Lines

Leigh Drogen — Thu, 22 Oct 2009 04:19:22 +0000

Today was all about moving in straight lines. I won’t opine on what that means for the market, just pointing out facts. Crude oil $CL_F moved straight up between 8AM and 2PM. When I mean straight I mean straight. Traders are chasing crude now, the guys in the pits are having a ball, and stubborn fundamental investors are scratching their heads like normal trying to understand why crude is flying. If you trade commodities, you would be smart to keep this little saying from Jesse Livermore somewhere near your desk at all times, “Prudent speculators never argue with the tape.” Stop trying to figure out why crude is making this move and just read the tape, it says higher.

The move in crude corresponded to similar moves in the $USDCAD and copper $HG_F. There was no one to take the other side of those trades the better portion of the day. The $USDCAD has been especially volatile as it retests an important breakdown level.

Equities where a completely different story. Financials, housing, and even certain retail names are beginning to roll over. Commodities are obviously holding this market up as even tech can’t move forward with conviction, one step forward, one step back there. Once crude had closed there wasn’t much to hold up the market. Traders took their foot off the sell the $USDX pedal and planned on sitting tight for the remainder of the afternoon.

Then Mr. Dick Bove decided to come out and downgrade $WFC. Along side that, Obama announced new pay restrictions on government owned banks and car companies. The market obviously didn’t like one or both of these announcements, and puked.

The market broke support on the $ES_F at 1091.25 and dumped over 2% in an hour. Whoever wanted out wanted out bad and didn’t care at what price. Stocks were sold across the board with the finnies taking the brunt of it.

I sold out of $AMZN today, took a long position in $APWR, and a short position in $JACK. In the spirit of @howardlindzon I plan to walk into a Jack In the Box restaurant tomorrow, puke, and claim the burger has H1N1.