Head and Shoulders

Friday, July 03, 2009

Has your ability to forecast the market gone dry? Feel like equities are being driven by a bunch of flakes? Are you itching to see stocks find their rightful levels?

Well, you can now say good-bye to flakes with Head and Shoulders!

"A few weeks ago I noticed that profits had been avoiding me because of dandruff in my portfolio. But recently I've started using Head and Shoulders to time my trades, and both the flakes and premature short sales have gone away!"

Yes, just apply Head and Shoulders to your market analysis every day, and you'll soon see your dry, flaky forecasting replaced by rich, glossy trades.

"I timed half my trades using Head and Shoulders, and half using ordinary methods. Head and Shoulders kept my portfolio clean, but with with my normal style, the flaky trades came back. You can bet I'll be using Head and Shoulders from now on."

Head and Shoulders is not yet available in the Chinese market.



No driving, no tennis, and no sunshine for Macro Man today, so he's been forced to keep an eye on the market during a slow day. Good thing he's washing with Head and Shoulders!

Posted by Macro Man at 8:26 AM  

22 comments:

Shanghai's stockmarket is indestructable. They fear nothing!

Anonymous said...
9:26 AM  

inrShanghai reminds me of a guy named Malice Green back in Detroit. Malice was high on PCP one night and decided to wup the local neighborhood trick. When the cops got there they proceeded to beat Mr. Green over and over again because he wouldnt stock wup'n this trick. As he was on PCP he seemed indestructable. He was throwing cops, breaking car windows and still slapping this whore.

By the time back up came Mr Green's PCP high wore off... And he was dead on the spot. Them two police officers are still in jail.

If the Chinese government keeps giving the market PCP it will keep rising. But when that PCP wears off, that market is dead...

Anonymous said...
10:07 AM  

MM what do you think about the negative interest rate thing in Sweden.
Is this the new trend? What does it imply and how do we protect ourselves from it?

Manc Trader said...
10:28 AM  

http://ftalphaville.ft.com/blog/2009/07/03/60386/bubbles/

ties in all today's themes nicely...

vandalsstolemyhandle said...
10:59 AM  

try again:

http://ftalphaville.ft.com/blog/
2009/07/03/60386/bubbles/

vandalsstolemyhandle said...
11:02 AM  

Comments are great... Poor guy HAD to steal $43,000. Her was going bald after all. Wish it was that easy Alex Chan......

Anonymous said...
11:09 AM  

MacroMan - Don't you think this set-up is too obvious? We all know GS dominates and manipulates the market. Volume on sell-off yesterday was light and no PPT proping up market in last hour was very suspicious. It almost feels like they will let markets break lower only to whip it back up.

Please note, I am a grizzly bear, but have lost more money than I've made shorting this past 2 months. USD is still weak, which would suggest another leg up. Based on Elliot Wave analysis, we should not breach 888 levels and 870 is absolutely line in the sand for the Bulls.

It just doesn't seem like we reached the top. Tops are usually followed by heads lines that we are at the start of a new bull market. Seems like a breach of 1000 on SPX would create such a pyschology and all talking heads will come out and say economic destruction has been averted.

Sorry if this is long response, I would love for H&S to play out, but just feel like it's WAY too obvious. Robert Prechter believes we have another leg up to 1000-1100 and you do not want to bet against that man.

Anonymous said...
12:17 PM  

I reckon it is all at a turning point - commodities took a bath yesterday, equities fell, VIX jumped 6.5%, cable looks dodgy, blah blah - but this situation keeps repeating itself and then somehow we magically move higher/stabilise again.

Chris

Anonymous said...
12:20 PM  

Chris - Agree that market seems to get propped up when they looked ready to break. Despite the fact that GS is manipulating this market, truth is, there were no real sellers. If everybody was rushing to sell, GS's efforts would be in vain. The current opinion among not-so-bright fund managers are, we are at the beginning of a new bull market. No one wants to sell and 1) be holding cash/USD that's continues to decline in value and 2) potentially miss out on the start of this perceived bull market. If you noticed, earnings for the last 2 weeks have generally be well-receieved. From my side, even among the bears, everybody is looking to buy at 880-870 levels on expectation that we rally higher for final leg in bear market rally. My advice is be very very careful. Until we get strong volume sell off to 830 on SPX, any sell-off could be viewed as a correction in this countertrend rally. FYI: I covered all my short position when we hit 930 on SPX because USD continues to weaken. I believe USD will break support at 78.5, which would fuel a rally to 1000-1050 on SPX

Anonymous said...
12:34 PM  

Dear MM.

I am not so plagued with dandruff, but rather massive hair loss. Do you think Head and Shoulders could be prescribed for that as well?

Thanks in advance.

Anonymous said...
12:43 PM  

Could these set ups be a head fake? Of course they could. Will they? Well, we'll only know for sure ex-post. What I do know is that upside volume and momentum has waned, which surely must be a necessary if not sufficient precursor for downside volume and momentum to increase. Europe in particular has traded very poorly for a month now.

As for Prechter, well, let's just say that different Ellioticians seem to arrive at different conclusions when looking at the same data, which sort of undermines the integrity of the discipline. I've found that the thing to do is to find a guy that you like and stick with him, rather than flitting from forecaster to forecaster. I've liked Drew at MS for some time now...and he's running partial (though not full) shorts in Europe.

As for the dollar, I have to laugh a bit. The guys trading the dollar (other than Voldemort, of course) are watching equities for direction, and the equity guys are watching the dollar.

So who's driving the bus?

Macro Man said...
12:46 PM  

Anon @ 12.34, so you've been scalped? Maybe this cool guy's shampoo can help....

Macro Man said...
12:51 PM  

Shampoo is really hot today, watch this:
http://ftalphaville.ft.com/blog/2009/07/03/60386/bubbles/

ECB is going to the err again as last year, but in the opposite direction: mkts are absolutely full of liquidity, everything is going tighter and yields are vanishing. Do we really need other rate cuts? please..
policymakers are watching M3 growth yoy or worst again lending growth rate and they can't see any slowing, so money for everyone and and lower yields: ECB has just defreezed 5% of Euro GDP!!! And where is this money going? on a huge carry trade in the markets.
Policymakers don't wanna to understand that people and firms don't want more and more debt, how do i employ all of this new debt??
In sweden they're again more clever: if holding cash is better than doing deposit, i maybe retire my money from banks, and then???
A huge buy on strongboxs' builders!

2:07 PM  

you forgot the H&S in Oil .. lets just hope those patterns dont end up the way the Eur/USD did the last week...

i hate canadian banks said...
3:02 PM  

ha! MM, same thing could be said for crude oil, perhaps, even more so..

crude traders are watching the dollar, and the dollar traders are watching crude...

and neither really know whats going on

Imo, dollar sentiment is about as bearish as it gets, and pretty soon a major multi year bottom should occur, I mean when a certain return is taken for granted by investors thats usually the peak.

In recent days I have seen analyst who cover banks, consumer staples, tech equities, commodities analyst covering coffe, S&P 500 recommendations, gold/ silver bugs, recommend trades based on a weaker dollar.

Anonymous said...
3:11 PM  

I don't know if this is at all relevent but no one on this board has any conviction. Vol must be cheap since no one wants to step up and do anything directional. Got to say though, when I come back from the gym and see this:

http://www.bloomberg.com/apps/news?pid=20601087&sid=azwnKzoDDKZo

It looks like a good time to short EM futures. I'm keeping the 18600 call on HSI because that ponzi scheme has a ways to run yet.

Nemo Incognito said...
3:19 PM  

Nemo, I can only speak for myself, but I've nearly doubled my VaR over the past couple of weeks. Part of that's a function of previously-purchased puts (say that five times fast!) increasing in delta, and part of it's the fact that I'm just seeing more opportunities in different markets than I have have several months.

The nice thing about relatively low vols is that it's even pretty cheap to slap on a few hedges to cover your back if this is indeed another head-fake screw job.

After a few months in the doldrums, it's nice to see the investment ideas coming thick and fast for a change....

Macro Man said...
3:31 PM  

What, no comment about PVM? I thought that would be the story of the day. Granted, a slow news day.

Charles of MercuryRising
www.phoenixwoman.wordpress.com

Anonymous said...
3:39 PM  

"Europe in particular has traded very poorly for a month now."

Except for Spain (one of the sicker economies) which has remarkably continued to soar ever higher.

Anonymous said...
5:36 PM  

MacroMan - You are correct, different EW counters have different view. EW analysis is a very fine art and many people only understand the very basic rules when applying them. Robert Prechter is quite arguably the best market technician ever. He is the Michael Jordan of TA and EW analysis and you are welcome to play against him at your own risk.

I have shorted into this market for last 2 months perhaps because of my bearish bias. As mentioned, more times than not, I've gotten burned on those trades. I blame them on PPT, but to be objective, when I look back, the prices (although manipulated) did not indicate a break in this rally.

You are correct that equity and USD traders are looking at each other for direction. The edge I would say is on the side of equity/GS simply because they have more conviction than the bears. A month ago, when EURO/USD broke it's H&S, I thought for sure we reached the top, but then it did something strange... the Euro rallied back, was trading in range and kept making higher highs within the preceding month. I didn't want to believe it, but I finally accepted that the H&S break out was a fake-out and that the Euro was going to rally further. Technically, USD should be rallying right now, but it is not supported by fundamentals just yet. India just announced today they want to diversify away from USD. You already know China and Russia's stance. Middle Easter countries are also trying to divest from USD and some are now transacting in other currencies or swap.

I believe the USD should continue to rally through the summer and into the fall. At that point, the destruction can no longer be ignored by the Federal Reserve and they will have to signal in some comment an imminent raise in interest rates. I believe this is possibly the bottom of the USD. We could also have a collapse in another country's currency, hence creating a rush back into the USD.

If this is a bear market rally (which I am confident it is), SPY can rally as high as 1100-1200 (this level is the major downtrend line from 2007) If we break that level with volume and conviction, all bets are off that markets will collapse.

As mentioned earlier, given comments by major countries, there is no fundamental reason for any traders to be long USD right now. Technically, the H&S on Euro failed, further suggesting we will make new highs on Euro. Unless we somehow close 7.5% lower in SPY this upcoming week, which I do not see, then the immediate risk for shorts far outweights the longs.

Anonymous said...
10:30 PM  

MM, the dry scalp video reduced me to tears.

On a more serious note, one wonders how much selling would be required to induce the GS "Kerviel-ware" to turn seller.

Anonymous said...
5:10 AM  

Anon @ 10:30PM -

If that change in reserves is indeed occurring like we've been led to believe, then why did the latest reserve statistics show an overall increase in USD reserves and a DECLINE in EUR reserves world wide?

Anonymous said...
1:52 AM  

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