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.

October Opex (by Springheel Jack)

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There was a significant intraday decline yesterday but SPX is still in the rising channel:

101015 SPX 60min Rising Channel

USD is still working its way towards my target but EURUSD has not quite retested Wednesday night's high. I was looking at the USDJPY chart yesterday and we are now approaching a very significant level, which is the all time low set in 1995:

101015_USDJPY_Weekly_1995_Retest

Treasuries have now definitely broken down from the rising channel of the last few months. If equities are going to do well over the next few months, and I'm expecting that they will, then treasuries should do badly. During QE1 treasuries trended gently downwards and I'm expecting to see the same in QE2:

101015_T30Yr_Daily_Rising_Channel_Broken

I was reading some excited talk this week about a golden cross being made on SPX. The golden / death crosses are when the 50/200 SMAs cross on the daily chart, and the bullish crosses have been a very reliable indicators for future rises in the past. Looking at the chart we're close to a golden cross on SPX, but we're not quite there yet:

101015 SPX Daily SMA 50_200 Crosses

I'm still leaning bullish at the moment, and will be until the SPX rising channel is broken, but looking at the historical stats, trading on the day of October opex is historically bearish. On the Dow the last four have closed down, and five of the last six, with a 0.4% gain in the one exception in 2004. I'm doubtful about seeing much upside today and if we see a gap up at the open, there's a good chance that gap will be filled. If we see some downside today I have rising trendline support on ES in the 1165 area, and the SPX rising channel support also in the 1165 area which is at about 1162 on ES.

Out of Whack

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I came up with quite an interesting graph today. Below you can see, in blue, the line graph of the SPY over about the past half-decade. On the same graph, in black, is the 10-year note interest rate.

Notice how, until about the April peak, these two tracked each other quite closely. There were occasions when the SPY had to "catch up" with the movement in interest rates, but it always did manage to catch up.

1006-interestspread

But look at that big, honkin' red arrow I've drawn. There is a huge discrepancy between interest rates (which continue to plunge) and the equity markets (which continue to soar).

My opinion? This is an unsustainable situation. This spread hasn't persisted in the past, and I don't think it will persist into the future.

Overnight Breaks and Recoveries (by Springheel Jack)

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There were a couple of very interesting support trendline breaks last night, followed by swift recoveries.

The first break was on EURUSD, where the support trendline since 1.27 was broken and then recovered. Since then EURUSD has returned to retest the recent high just over 1.38. If 1.38 holds then I'm expecting to see some more downside on this. If it doesn't hold then my next upside target is slightly over 1.39:

GBPUSD hasn't broken support, but is also retesting the recent high. If it makes a new high then my next upside target is in the 1.605 area:

ES broke the recent rising support trendline after EURUSD and recovered less swiftly to the recent declining resistance trendline marked in red. That has held so far:

There is a good chance of seeing a two or three day retracement from here, and I'm watching that resistance trendline on ES and the high retest on EURUSD to see whether that's likely to happen. If those resistance levels hold then I think we will see that retracement. If they fail then we should see a couple of bullish days instead.

I was surprised to see yesterday that 2 year treasuries had made a new high. I tend to watch the longer term treasuries mainly where they're still some distance from the recent highs. Looking at the 2 year treasuries daily chart we're now close to the panic spike high in November 2008:

I had already noticed on the ten year and thirty year treasuries charts that both are still within rising channels from March this year. I'm wondering about that, as if the bullish scenario for equities is correct, then the treasuries rally should be over. They trended sideways to down during QE1, and there's no reason to think that QE2 would be any different.

Of course whether there will be much to QE2 is open to question. With equities already having risen hard in anticipation of a big new round of quantitative easing, much of the rationale for QE2 has already faded with that equities rally.  If the treasuries rally is over, then the rising channels will break soon, but until then that bond rally could still be alive and well, with two year treasuries leading the way up. Here's the rising channel on the 30 year treasuries daily chart: