Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

The Crossing

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During bubbles, we cynical/discerning/skeptical folks increasingly have one thought dashing through our swelling, itchy brains as we watch those participating in the party: "This doesn't make sense. Something is wrong with them."

And the bubble gets bigger. "This doesn't make sense. Something is wrong with them." We stand outside the window, staring inside, and the party just gets more fun. More booze is carted in. Strippers show up. People are hanging off chandeliers.

"This doesn't make sense. Something is wrong with them."

And, after a certain amount of time, depending on the observer, there is a shift: "This doesn't make sense. Something is wrong with me."

At this point, a decision has to be made. The observer decides he is wrong, steps away from the window, and goes inside to join the party; or the observer accepts that perhaps there is something wrong with him, but logic still forecloses him from walking inside.

What happens once this crossing takes place? Who knows. Maybe the party goes on for a while longer. Maybe the observer has such rotten timing that, after he's missed all the fun, everyone dancing around nude suddenly contracts syphilis the moment he walks in the door.

I have felt myself at this crossroads lately, particularly as every other bear on the web has given up any hope of a big downturn and the most dramatic drop is maybe a few percent. I know that our friends in Gainesville have offered three (!) different scenarios for what's next, including, almost as a postscript, the remote chance of a big drop, but I think that's in there just as an insurance policy for future marketing efforts.

The fact is, the bears have given up. Period. Every one of them. Believe me, because they send me emails about their views, and they've thrown in the towel.

This came to mind over the past 24 hours because of what's happening in Ireland. The Irish finally gave up, accepting the fact their economy is a total basket case, and went for a bailout. The market's reaction, naturally, was to rally boldly on the news. All asset classes zoomed skyward.

So what's accepted for fantastic news these days is an important industrialized country affirming that it's in financial ruins and accepting the 2,387th giant bailout package to forestall the inevitable.

And that's when the thought appears: "This doesn't make sense. Something is wrong with me."

When I woke up this morning – far too early, as usual – I glanced at my iPad, and I was surprised to see that not only had the huge Euro and ES gains vanished, but they were now losers. As I'm typing this, the ES is down five points – a 12+ point reversal from just hours ago.

It will be interesting to see where this party eventually winds up. I'm still betting on syphilis.

ES, EURUSD, Republicans Break Up (by Springheel Jack)

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Looking at Bloomberg this morning I see that the Republicans have convincingly won Congress and reduced the Democratic majority in the Senate by at least six seats. That might well be a good thing, even from a Democrat perspective, as the last Democrat President Clinton also had a lacklustre first two years and only really came into his own as President after the Republican landslide in 1994. What it means in practical terms though in the next two years from a market perspective, is that the main and possibly only tool for the US government to 'fine tune' economic policy is likely to be quantitative easing by the Fed. We should expect a lot more of it as Obama seeks to pump up the US economy in preparation for his re-election run in 2012.

SPX has been bumping up against a key resistance level in the last few days, and that has been the 200sma on the SPX weekly chart. That was the trendline that marked the peak in April this year and it is at 1194 now, slightly below the SPX close last night. A cross of this trendline with confidence will place the last cherry on top of the already bullish larger technical picture here, and a break of this level with confidence now should eliminate the possibility that we will retest the IHS neckline at 1130 before playing out to the target at 1244:

During trading hours yesterday SPX bumped up against resistance, but didn't break it, and the rectangle was intact at the close:

After hours though ES broke up over 1193 and rose as high as 1196.5 before chopping sideways between 1191 and 1194.5 overnight. It isn't confirmed until the rectangle is broken during trading hours, but I'm inclined to treat the rectangle as broken, and I'm expecting further upside later this week with the next real resistance at the April high:

EURUSD broke up from the declining channel shortly after I published my post yesterday. I'm expecting a retest of the broken channel trendline within the current rising channel before the next move up to challenge the October high. If that then breaks, and USD breaks triangle support, then the prospects for USD look very bleak over the next few months, and though we could see support at the last two big lows over 70, my next declining support trendline is in the mid-60s:

I'm expecting a big move on SPX soon, at the end of this week or the start of next week, and I'm expecting that move to be against the trend of the rest of this week. That trend looks as though it will be up over the next three trading days, and so we could rise to a significant high over the rest of the week, perhaps near the SPX April high at 1220. If we see weakness at the start of the session today I have channel support for ES in the 1178-1180 area, and that would look like a very good long entry if we reach it. If we should reach the upper trendline of the ES rising channel on Friday, resistance will be in the 1211 to 1213 area then.