Gold Seasonality: A Reversal After The Debt Deal?

Here`s a chart of the Gold Futures seasonality over the last 20 years:

I have the impression that once this debt ceiling circus is over, gold will have the mother of all corrections.

Related Tickers: SPDR Gold Trust (ETF) (NYSE:GLD), Newmont Mining Corporation (NYSE:NEM), Barrick Gold Corporation (USA) (NYSE:ABX) , Goldcorp Inc. (USA) (NYSE:GG), Yamana Gold Inc. (USA) (NYSE:AUY), NovaGold Resources Inc. (USA) (AMEX:NG), Ishares Silver ETF (SLV), Hecla Mining (HL), Silver Wheaton (SLW), New Gold (NGD), Kinross Gold (KGC), Coeur d'Alene Mines Corporation (NYSE:CDE)

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Washington & Economic Data Sending Markets Lower

Things are not looking good at all on Wall Street. Today`s economic data was horrendous and Washington is still playing politics two steps away from the abyss.

It will be an interesting session. President Obama will speak in a few minutes.

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A Dual Market: Initial Claims Pushing Up, Washington Holding It Down

I closed my short line on yesterday`s break and I am playing the long side with a stock pick. We have a dual market today. While Initial Claims were far better than expected and the first print below 400k since April, we still have Washington pulling the market down.

On the long side of the market there`s a stock that has been catching my attention. DR Horton (DHI) has been acting right recently. Looks poised for a move higher.

Today I will leave you with MGMT, Kids - a fantastic sound track.

Have a great day! Don`t let them beat you.

PS: Check the new upgraded and expanded version of the newsletter here, now in PDF format.


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The US Economy Is Losing Traction

Here`s an interesting view on the US economy by Cullen Roche,

The fact that the domestic economy is losing traction is disconcerting. It’s like being a sick patient whose immune system is completely broken and we’re depending on the uncle no one can rely on (emerging markets) to take care of you... - Cullen Roche, The Prag Cap

I shared my stock market views here on the blog yesterday. A slowing economy is also one of my concerns.

Related: SPDR S&P 500 ETF (NYSE:SPY), ProShares UltraShort S&P500 (ETF) (NYSE:SDS), Bank Of America (BAC), Citigroup (C), JP Morgan (JPM), Wells Fargo (WFC), iPath S&P 500 VIX Short-Term Futures ETN (VXX), Financial Select Sector SPDR (ETF) (XLF), ProShares UltraShort QQQ (ETF) (QID)

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Closed My Short Line. Now They Can Reach A Deal.

I closed my short line on the S&P 500 Index near the closing bell. It has a very decent swing play for 30 points net.

Now, Washington can go for that long awaited deal. Cullen Roche puts it this way,

"Remember, rich people hate two things in this world – losing money and losing money. And Congressman are generally rich people so they hate losing money AND losing money. When they see their brokerage accounts diving due to their own actions they feel pretty silly – especially when the fix is fairly simple.

So, expect fear to motivate these rich people into action in the coming days (week?). And when they finally come to some agreement we can then begin to focus on how much this agreement is going to hurt the economy." - in The Prag Cap

Related: SPDR S&P 500 ETF (NYSE:SPY), ProShares UltraShort S&P500 (ETF) (NYSE:SDS), Bank Of America (BAC), Citigroup (C), JP Morgan (JPM), Wells Fargo (WFC), iPath S&P 500 VIX Short-Term Futures ETN (VXX), Financial Select Sector SPDR (ETF) (XLF), ProShares UltraShort QQQ (ETF) (QID) , General Electric (GE), Nike (NKE), Apple (AAPL), Intel (INTC), Texas Instruments (TXN), Exxon Mobil (XOM), NetFlix (NFLX), Google (GOOG), Boeing (BA), Delta Airlines (DAL)

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An Interesting Sector For A Short-Term Short

I am short the indexes but this sector is also looking vulnerable to a correction. Oil services stocks have been on rally mode recently and are very overbought now. If oil slides back to 90-95 and the stock markets corrects 2 or 3 percent from this level, oil services stocks will surely feel the pain.

The debt ceiling novel continues with an increasing suspense. I think the stock market is ignoring the danger or is acting like those violinist playing when the Titanic was sinking...

On other topic, I will share with you a fantastic band. Meet the Foster The People. My favorite track at the present time. Brilliant stuff.

If you want to share an opinion or make a comment use my Twitter account or email me.

Have a great day!

Related Stocks: Oil Service HOLDRs (ETF) (NYSE:OIH) Halliburton Company (NYSE:HAL) Schlumberger Limited. (NYSE:SLB) Transocean LTD (NYSE:RIG) Baker Hughes Incorporated (NYSE:BHI) Cameron International Corporation (NYSE:CAM) Diamond Offshore Drilling, Inc. (NYSE:DO) ENSCO PLC (NYSE:ESV) National-Oilwell Varco, Inc. (NYSE:NOV) Rowan Companies, Inc. (NYSE:RDC) Tidewater Inc. (NYSE:TDW) Exterran Holdings, Inc. (NYSE:EXH) Nabors Industries Ltd. (NYSE:NBR) Weatherford International Ltd. (NYSE:WFT) Noble Corporation (NYSE:NE)

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Upside Catalysts & Downside Risks

I had this idea last night. I decided to list the upside catalysts and the downside risks to the market right now. Here we go,

Upside Catalysts:
- corporate earnings are strong
- S&P 500 multiples are low (versus interest rates and yields)
- a bullish inertia on the stock market for the last 2 and a half years

Downside Risks:
- debt ceiling deal/ no deal causes markets to panic
- seasonality is weak till mid-october
- the economy has showed some signs of slowdown
- ECRI`s leading indicators are showing an economic slowdown
- markets are close to multi-year highs
- 1 Month ROC, 10-day SMA and 50-day SMA spreads show market prone to a correction
- no ongoing QE - the Fed is not buying securities in the market since June 30
- no more QE ahead (my personal view)
- fiscal stimulus is off of the table
- austerity is just arriving to the US (look at what has happened to the United Kingdom over the last year or so)

Have a great day!

Related Tickers: SPDR S&P 500 ETF (NYSE:SPY), ProShares UltraShort S&P500 (ETF) (NYSE:SDS), Bank Of America (BAC), Citigroup (C), JP Morgan (JPM), Wells Fargo (WFC), iPath S&P 500 VIX Short-Term Futures ETN (VXX), Financial Select Sector SPDR (ETF) (XLF), ProShares UltraShort QQQ (ETF) (QID) , General Electric (GE), Nike (NKE), Apple (AAPL), Intel (INTC), Texas Instruments (TXN), Exxon Mobil (XOM), NetFlix (NFLX), Google (GOOG), Boeing (BA), Delta Airlines (DAL)

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Roubini Thinks A Deal Will Be Reached

Nouriel Roubini is optimistic (is that possible??) that an agreement on the debt ceiling will be reached:

"There are about eight days until the deadline. My baseline scenario is still an agreement will be reached. I don't think the U.S. will default." - in MarketWatch.com

The problem is that if things are not solved very, very soon, the markets will begin to price in the possibility of default.

Tickers: SPDR S&P 500 ETF (NYSE:SPY), ProShares UltraShort S&P500 (ETF) (NYSE:SDS), Bank Of America (BAC), Citigroup (C), JP Morgan (JPM), Wells Fargo (WFC), iPath S&P 500 VIX Short-Term Futures ETN (VXX), Financial Select Sector SPDR (ETF) (XLF), ProShares UltraShort QQQ (ETF) (QID)

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A Timely Quote

“If there is any lesson I have learned... it is that the unexpected and the impossible happen every now and then.” - Richard Dennis

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NetFlix (NFLX) Down 10 Percent After Earnings

It`s not a pretty picture for NetFlix (NFLX) after hours:

I am waiting for Barack Obama to speak on the debt ceiling in a couple of hours. I am still short the market.

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Worst Case Contingency Plans?

“We believe the bank regulators have contingency plans in place and will employ extraordinary measures to prevent a default from crippling the financial system. Yet we also worry this may be like trying to put out a burning building with a bucket of water. In the end, it may be futile.” - Jaret Seiberg, a Washington analyst for broker-dealer MF Global

Tickers: SPDR S&P 500 ETF (NYSE:SPY), ProShares UltraShort S&P500 (ETF) (NYSE:SDS), Bank Of America (BAC), Citigroup (C), JP Morgan (JPM), Wells Fargo (WFC)

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Downside Risks

This is today`s quote of the day on Absolute Returns:

“For the long term health of the nation, perhaps we need to hit rock bottom; perhaps we need to not just face the abyss but to fall into it head first.” - Phil Pearlman

I think it perfectly describes the current state of affairs. I am short the S&P 500 Index and I may even add to that short line soon. I think there`s no other way to play the stock market right now...the downside risks far surpass the upside potential right now.

Tickers: SPDR S&P 500 ETF (NYSE:SPY), ProShares UltraShort S&P500 (ETF) (NYSE:SDS)

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Some Interesting Moves

After an initial sell-off, the US dollar is trying to rally now. Actually the US dollar is trading higher against the Australian and Canadian Dollar.

ES Futures have been quiet in the last hour.

Tickers: SPDR S&P 500 ETF (NYSE:SPY)

Update

Futures are now opening. I have to say that I was expecting bigger moves...

ES Futures are down 11 points, EUR Futures are unchanged and Gold is rallying 17.40 dollars or 1%.

I have the impression that we will have some wilder moves tomorrow.

Tickers: SPDR Gold ETF (GLD), SPDR S&P 500 ETF (Public, NYSE:SPY)

The "Deal/ No Deal" Story Is Getting More And More Interesting

This will be a wild trading week. The "deal/ no deal" story is almost hard to believe it`s actually happening.

I am short and it seems that I will be enjoying the ride.

I will update my market view tomorrow before the bell. Fasten your seat belts!

Related Tickers: SPDR S&P 500 ETF (Public, NYSE:SPY), ProShares UltraShort S&P500 (ETF) (Public, NYSE:SDS)

European Playing Tricks

There`s a constant news flow coming out of Europe today and so far it has impressed the markets.

I am fading the move...

Pre-Market Is Bullish: I Have A Bearish Outlook For The Rest Of The Week

eMini S&P Futures are trading up 5 points on Globex signaling a continuation of yesterday`s rally. The mid day up move on the debt ceiling / "Gang Of 6" news - eMini S&P Futures rallied from 1312 to 1326 - will probably be faded later today or tomorrow.

I haven`t shared music recently (sometimes it`s hard to find time to blog). I will leave you with a house music set - Frankie Knuckles at his best:

Have a great day!

Related Tickers: SPDR S&P 500 ETF (Public, NYSE:SPY), ProShares UltraShort S&P500 (ETF) (Public, NYSE:SDS)

Goldman Sachs: Weaker Economic Data Have Clearly Raised The Probability Of Renewed Monetary Easing By The Fed

“The weaker data on economic activity have clearly raised the probability of renewed monetary easing by the Federal Reserve. In his monetary policy testimony this week, Chairman Bernanke’s main argument against renewed easing was that inflation is now significantly higher than it was in the summer of 2010." - Source: Goldman Sachs

Interestingly enough, I think Ben Bernanke will launch new easing mechanisms if the S&P 500 Index drops to 1050-1150. Sometimes I get the impression that Ben Bernanke is not targeting the economy at all, only the S&P 500 Index level...

Will CenturyLink (CTL) Finally Rebound Today?

CenturyLink, Inc. (NYSE:CTL) is down for 10 consecutive sessions. It`s time for a short term rebound:

JFK: Brilliant Quote

“In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now” - President Kennedy

Rosenberg: We’re Just One Small Shock Away From The Economy Going Back Into Recession

“Everything is telling you how soft the underbelly of the economy really is….We’re just one small shock away from the economy going back into recession.” - David Rosenberg, Gluskin Sheff

Thought Of The Day

"Men talk of killing time, while time quietly kills them." — Dion Boucicault

Now, the question is, what are you doing with your time?

Oil Futures - US Stocks Correlation Is Fading

A very interesting correlation analysis by B.I.G.:

"For years now, the trade has been that when oil is up, equities rally and when oil is down, stocks decline. Recently though, the positive correlation between the two assets has been fading. Over the last six months, the correlation coefficient between the S&P 500 and oil has dropped to 0.39. Although the relationship is still positive, it is a far cry from recent levels where the two had a near perfect correlation with each other. In fact, it has been more than two years (June 2009) since the correlation coefficient between the two assets has been this low."

Related: United States Oil Fund (USO), SPDR S&P 500 ETF (SPY), PowerShares QQQ Trust, Series 1 (ETF) (QQQ), ProShares UltraShort S&P500 (ETF) (SDS), iPath S&P GSCI Crude Oil Total Return (OIL)

For Art & Tennis Lovers. Enjoy.

As you know I am both a tennis fan and an art lover. So, this is in my view the best video I have ever seen. Enjoy:

Thought Of The Day

"If you really want to do something, you'll find a way. If you don't, you'll find an excuse." - Jim Rohn

I Am Going In For The Kill

Fantastic sound.

I just love to trade listening to this track. "I am going in for the kill"...brilliant.

A Very Important Trading Belief

Here`s a very important trading belief:

To win in the markets you need an edge.

What is an edge? An edge is nothing more than an indication of a higher probability of one thing happening over another. Over time you can only get ahead if you have a clear edge.

Have a great day!

Nice Short Squeeze Going On.

Today`s market action reminds me of the famous Jim Rogers quote, "Buy Panic."

Fasten Your Seatbelts!

This was one of the most volatile Globex sessions I have ever seen...

We have rumors coming out of Europe every 15 minutes or so. Fasten your seat belts.

If There Is One Axiom That Holds True In U.S. Government Bond Markets It Is “Don’t fight the Fed”

A fantastic little excerpt on the US Government Bond market from Cullen Roche (The Prag Cap):

If there is one axiom that holds true in U.S. government bond markets it is “Don’t fight the Fed”. (...) So, we’re likely to hear increasing banter from certain circles who are calling for higher yields in US government bonds as the vigilantes supposedly “wake up” and “force the issue”. But as I’ve long maintained, we are a long way from higher rates in the USA or a bond market bubble collapse. Yields will continue to reflect the low growth and low inflation environment that the Federal Reserve sees. - in The Prag Cap

Pizza Margherita: The Origins

I always ask for a margherita when I go to a pizzeria. Today I found out about it`s history:

"In 1889, during a visit in Naples, Queen Margherita of Savoy was served a pizza resembling the colors of the Italian flag, red (tomato), white (mozzarella) and green (basil). This kind of pizza has been named after the Queen as Pizza Margherita." - in Wikipedia

Liquidity & A Shorter Time Frame: 2 Big Advantages

“You have 2 things that many whales can’t have: liquidity and a shorter timeframe.” - Steven Place

While everybody claims that institutional investors have all the advantages over solo traders, this quote highlights two major advantages that individual investors have over mutual funds, hedge funds and other institutional investors: liquidity and a shorter timeframe. And these are two very, very big advantages.

Practice Makes Perfect

As Salvador Dali so wisely puts it, practice makes perfect. Daniel Cole expands this concept in his book, The Talent Code,

“Nothing you can do – talking, thinking, reading, imagining- is more effective in building skill than executing the action, firing the impulse down the nerve fiber, fixing errors, honing the circuit.” - Daniel Coyle’s, The Talent Code

Just as a side note, did you know that Agassi`s father made him hit 8000 balls a day when he a was a little kid? Same concept.

Repetition Breeds Familiarity

“Repetition breeds familiarity. Familiarity diminishes fear. Think of how potent the fear was during your first trade.“ - Tyler Craig, Tyler`s Trading

This is probably the best line I read in the last few months. I simply cannot agree more. Also remember how stress you were when you first drove after getting your license and how effortless that task is now.

There`s no substitute for experience, or for repetition as Tyler so wisely puts it.

Have a great day!

Leon Cooperman & Jeffrey Gundlach On The Markets

Very interesting video with two "Heavy Weights" discussing their market outlook.

Have a great weekend!