cycle dates

We are going on a vacation for a couple of months. So we won't be able to post, not regularly atleast. In any event we just wanted to paint an intermediate scenario.

Our tentative next cycle dates are on July 9, July 22 and aug 11. The polarity is still not clear to us. But as of now it looks like 9th will be a high, 22nd a low and 11th a high to bring the bear out in real strength again. The July 22-aug11 is very important. We expect to see a 2-3 month bear from that time frame. We don't have price targets, but anything in the 750 area is game. It is possible that gold may provide temporary respite during august when we expect a mini crash.

The cycles are just waiting for the dollar to put in a double bottom or some sort of base. There may be one more drop in the dollar and then a blistering rally. Sentiment has been negative for quite a while.

On a fundamental note, we are seeing signs of distribution in the bond etfs - notable the junk bond and munis. While it is a tad too early, the loss of momentum bears watching. Have a good summer.

The widowmaker revisited - natural gas

Above are the monthly and daily charts of natural gas.

Our preferred ew counts are labelled on the daily. It makes the argument for another leg down into July 23rd or Sept1 or oct 11, which are seasonal turn dates for natural gas. The long term chart shows a nice 1:1 symmetry at 2.7$. We expect a nice bounce off there should prices dip down into that area.

We did buy UNG when natgas was at 3.25 and had a huge move up. We rode the 'a' leg up a month or so ago, mistaking it for a new bull run. We got out at the 50d moving average. Natgas pierced the 50d but was stalled by the 20W moving average. Since then it has gone nowhere.

Ofcourse, all this will be wrong if natgas exceeds the peaks of A,C. Lets just say, if natgas can break above the 20W moving average, then we will jump on board again natgas again.

In essence, whichever way this triangle gives, there will be a whole lot of supply/demand above/underneath. Looking at the volume on UNG a lot of players are interested. Seems to us, they are tad too early.

Jun 25

11:45 a.m Sweet rally from the cycle low of Jun 22. Cycles work! (well atleast 70% of the time and it sure is good enough with good discipline).

12:00 Noon We will update the nat gas chart post later today. We left it unfinished yesterday night. The gist is that there maybe one last downleg remaining (our preferred count) to at least the 2.5 level.

5:45 P.M Ok, we got our rally. That was the easy part. The next few days until our cycle turn on July 9th is the tricky part. 927 will be a stiff target and the market is overbought on the shorter timeframe. Our inclination is still on the bullish side, but we don't know about price limits. The problem is we are unable to identify a leading sector. Very few chart patterns have a basing formation. If we follow the cycles, we will wallow our time until July 9th and then short the market.

Jun 24

00:10 a.m Too busy yesterday, so a short summary. We still own DIA and are still underwater. 888-890 is still holding and we are still oversold. But this is not bullish action. We need to break 900 before the 26th, because that is a key date in terms of pivot days and weeks since the rally started. This action looks almost like the stock market is waiting for the dollar to put in the last few pieces of a bottom pattern before a waterfall drop. We need to hold rally tomorrow.

10:30 a.m. Jun 22 cycle lows seem to be holding for now. We have a nice rally, albeit with a light volume. Our DIA bet is in the money now. 927 is the real test. If we get over that we can attempt the recover highs of 956.

11.10 a.m A personal rant - We would like to see Roubini and Cramer face off again. At 666, Roubini called cramer a fool. Cramer may be one but he is definitely a rich one and anyone who followed cramer would be sitting on tons of profit. Maybe Roubini has good fundamental reasoning (arguable in our view), but whenever he speaks of doom the market rises.

1.45 P.M Out of longs for a negligible profit. FED meeting coming up and we cannot handle whipsaws.

5:20 P.M Standing out of FED decisions is always a good thing. We continue to look for a rally into 26th atleast. We think the market can make it to the 920s before that day. Our next cycle low is in the first week of July 7th. It is quite likely the market rallies into 930-950 by the July4th weekend on relatively light volume.

Jun 22

10:50 a.m. Just got back from a week long trip. Looks like the market has followed gold and silver into selling off. But we are within our cycle low turndate period. We expect some bottoming action here around 8375-8400 dow. We would be a scalp buyer here with a stop around 8200 dow. Our target is back to the old highs near 9000.

3.00 P.M Opened long at 83.65 DIA.

5.00 P.M Absolutely no respite in the selling. And that means we are nicely under water in our long position. We have to start rallying tomorrow and SPX 890 must hold, otherwise the cycle has inverted again and (it is high time) we have to go back to the drawing table on our cycles model. On the bullish side, we have some positive divergence on some small stochastics and they are oversold, very oversold. That is no reason for a rally if the trend is bearish. For the bulls, 903 is a key level if taken out, 927 is the next target.

Gold and silver must be shorted on any rise. It is a pity we got out a week earlier before our trip. SSRI has sold off more than 30% since we first shorted at ~25 and only captured about 10% of the move. The precious metals have indeed been leading the commodity complex. Natural gas is still stuck in no man's land according to us. We continue to wait for july seasonal low or a break of the 20W MA.

Bonds and the dollar continue to rally. We are looking for a 4 handle on the 30 yr
yield.

Jun 17

12.00 Noon We are traveling this week, so will have intermittent internet connectivity. We got the top on Jun 11th as expected, next turn is a short term low 22 (+/-) - so late this week to monday. This bounce could be a 3 wave or a 5 wave bounce. If it is a 5 wave bounce, we can rally to new highs in august, otherwise we need to look for a break of 903 and then 875. For now, we are slightly leaning to the bull camp. But lets react not act.

Jun 15

5:45 P.M Brief update as we don't have too much time this week. The level highs from our Jun 8th turn date has produced a reversal.

Our trades - We covered a lot of left over SPY slivers from 950/960. We will look to short gold and silver stocks on any palpable bounce. We covered them PM shorts a bit too early on friday. Shorting PM looks the best trade in town. But no worries.
The message is clear - don't try any "bottom fishing" until next week (Jun 22-25 cycle turn) to see how the pullback ensues. Intermediate term, we are looking higher into august.