Lena tells us how markets are doomed

Will earnings season be the catalyst for a move down in US equities? Or USD strength..or both..

To me it seems the smallest trigger anywhere globally could be enough to send Chinese markets into turmoil.

 

 

 

Hi I’m Lena,

Welcome to James Farro’s Market Overview.

Earnings Season begins today with a number of large companies reporting including J.P. Morgan, Johnson & Johnson and Intel among others.

The technical picture continues to be bullish but basically riding along very long term resistance levels as you can see here on the S&P futures monthly chart.

You can see the same overall picture here with Russell 2000 futures. And here with the I-Shares US housing construction ETF
James feels that these resistance levels will hold and the market will have a substantial correction with the catalyst either being continued Dollar Strength, the massive bubble we are seeing in Asian markets or negative earnings surprises out of the US.

The alternative would be for resistance levels to break and a subsequent parabolic move to new highs. But with the market totally ignoring USD strength for months now that case seems less probable.

Now, let us take a closer look at the US Dollar. This has been totally ignored by the US market. Here you see the USD Index going back to 1987. To maintain this trend the Dollar currently has an upside target of 1 point zero 8. This level is another 9 percent above where we are now. From here on up USD strength could become an issue for US equities. The knee-jerk reaction here is to assume the Fed will of course hold-off on raising rates as USD strength becomes a major drag on US growth.

The Fed can either lose credibility quickly by raising rates and crashing the markets and economy or they can lose credibility slowly over time as their attempt to eliminate the natural market cycle brings us all closer to a crash of epic proportions.

The best charting teacher I know:
The Morning Analysis Service by Paul Coghlan

Russell2000 again at long term resistance

Here we are again. Russell 2000 futures, the screaming high-multiple sector of the final stage of what i believe will be remembered as the “Activist Central Bank” bull market of the go-go 2000 teens is once again at long term resistance.

What could go wrong?

Well,  April is historically an up month and with buy-backs showing no signs of letting up any time soon it could be a while until any sizable down-leg. And dont forget it’s only another month until the front-running of the summer rally that is now required by Executive Decree begins..

But what will get me in the short position is that fact i will be risking 6 points to the upside with ~200 to the downside.

Russell2000 Futures:

 

YT558472-262

 

 

 

 

 

 

 

 

The best charting teacher I know:
The Morning Analysis Service by Paul Coghlan

Another opportunity in crude oil

It’s been about once per month that we get these short opportunities in crude oil. Goldman says this, CitiBank says that..oil rallies and we get short. I’d expect the seasonal increase in price to begin soon to rightly rape the US summer drivers but all this slowing growth might make this time a bit different.. But this is a technical trade.

Here it is again. How long this keeps up i dont know..

YT558472-260

 

 

 

The best charting teacher I know:
The Morning Analysis Service by Paul Coghlan

Calling the top in Home Builders/Housing

So much bullish sentiment on housing lately.

The rates-lower/housing-higher knee-jerk has over played it’s hand in the face of consistent month over month slowing growth.

Presenting the Ishares US Home Construction ETF

Beginning to look ripe for the short and it’s a long way down from here. I can live with that additional possible .5% upside risk and will use it to average down the position cost.

ITB:

ITB Daily chart

 

Lumber tends to lead housing by 1.5 years and it’s not painting a pretty picture.

 

Lumber Futures:

YT558472-258

 

 

 

The best charting teacher I know:
The Morning Analysis Service by Paul Coghlan

Huge NFP miss and last month’s post

Shortly after the February NFP number came in as another stellar beat i posted the following lengthy article explaining why i believed something was amiss. The disparity seen in energy related jobs’ losses between the governmentally generated data vs the Challenger jobs data was a clue.

All econ data for the past 3 months has been consistently missing/declining while the bulls continue to point to the “solid jobs numbers” that come like clock-work at the beginning of every month via the official BLS monthly Non-Farm Payrolls number. Yesterday’s big NFP miss now completes the negative overall picture that ive been referring to technically for the past 2 months.

A good overall video run-down of this negative technical picture can be seen here from 3 days ago – explained by Katerina.

We’ve now had 5 consecutive PMI declines which hasnt been seen since 2008.. With market near all time highs..

Chart via @NotJimCramer

CBgwAHFUcAIAQS1.png large

But youve heard nothing but long-term bearish case from me for months now.. Broken record..

 

 

 

 

 

The best charting teacher I know:
The Morning Analysis Service by Paul Coghlan

Katerina explains an SPY trade (ES futures data) @jimcramer

Last week @jimcramer made two points when i asked when the last time he had a profitable trading year had been.

You can see that back-and-forth here.

He made the point that he was rich (had done well for himself) and that i did not have a show.

Here’s my first “show” entry that i promised and i believe that 99% of red-blooded males would rather watch this any day over anything that Jim Cramer puts out.  Not to mention my trades probably have about 3x the success/failure ratio.

More to come.

The following video refers to my post last week that can be seen here.

screenshot

 

 

 

 

The best charting teacher I know:
The Morning Analysis Service by Paul Coghlan