DJI completes 1200 point rally to top end of trading range in 9 days.... here's what it cost

The past 9 trading days starting on Oct 4 the DJI has rallied from 10404 to 11644. That is a 1200 point increase or a 12% increase in 9 trading days. The dollar declined from 80.43 to 76.79 or about 4.6%. Oil rallied from 74.95 to 87.42 or 16.6% and wholesale gasoline increased from 2.46 to 2.84 or 15.4%. The 10 year rates increase from 1.70 to 2.26% or 33% and the 30 year rates rose from 2.70 to 3.25% or 20%.

It is important to remember that just prior to this rally how bad the news was on the economy. The US government sold large amounts of debt into this news at the lows on interest rates. Stocks broke the low end of the trading range and remember that Bill Gross manager of the largest bond fund in the world, and by the way the smartest bond fund manager in the world, reversed his position from bearish on bonds to bullish on bonds. I wonder who pays his salary?

This blog reported that the market was extremely oversold and the put/ call ratios indicated that the players were extremely negative. How could they not be with the news background at the time.

The point is that the financial markets are like a symphony. The news is the music that is conducted by the central banks to direct funds in any direction at any time to accomplish any result they wish. That is why my approach is to monitor price action and indicators to guess what their next move will be.

Today the market is at the top end of a trading range. The bonds they sold  have declined 6% since the bond auction in August and they have the ability to buy them back now, if they wish, for a nice profit.  All they need to do is to compose some good economic news.  Put/calls finally capitulated and fell to .82 today and the Mikey 5 is an overbought 150 and the Mikey 10 is at 107. This indicates that we are nearing the upper range of this move now.

The same thing is going on in Europe. They are playing ping pong with Euro debt and the offset is the European stock market. If you read this blog you know that the European market just turned up. The European markets had a nice 18.5% rally in the last 9 trading days. This is not bad for an economy that is falling apart.

One school of thought would say that the central banks are profiting from the financial misery they themselves created.  Meanwhile, the cost of living, in dollar terms, has just increased by 5% in the last 9 trading days . The positive is that the financial markets can continue intact and this game can continue. The downside is that you are paying 5% more than you did 2 weeks ago. I will let you decide what is most important.  

Mikey

Closing Prices

US Stock Indexes
DJIA 11644.49 +166.36 S/P 500 1224.58 +20.92
NYSE Comp 7350.46 +121.38 NASDAQ 2667.85 +47.61
S/P Midcap 855.84 +15.51 Russell 712.46 +13.64
DJT 4691.46 +103.00 DJU 438.76 +4.23
US bonds and interest rates
US Gov rates: 6 mo .0559%  2 yr .2614% 5 Yr  1.10  10 yr 2.24 30 yr 3.23
IEF (US10 yr) 102.38 -.51 TLT (USLT)113.95 -1.68
MUB (NatlMuni) 105.62 -.48 CalMuni (NCA)9.00 uc
Preferred (PFF) 26.88 +.04 HYG (High Yield) 86.43 +.60
BND Total Bond Index 82.85 -.15
Commodities
Commodities Indexes (DBC)27.78 +.62 (USCI ) 61.78 +1.08
Gold 1683.00 +14.50 Silver 32.17 +.50 Copper 3.40 +.10
Platinum 1554.90 +22.50 Nickel (JJN)27.25 +.90
Oil 86.80 +2.57 RBOB 2.82 +.06 Nat Gas 3.70 +.17
Grains (JJG) 46.25 +.52  Livestock (COW)31.56 +.33
Cotton (BAL)63.41 +1.15 Agg complex(JJA)56.35 +.82
US Dollar Index and World Currencies
Euro 1.3822 +.0088 Pound 1.5790 +.0033 Swiss Franc 1.1070 +.0056
Yen 1.2765 -.0059 Aussie 1.0363 +.0139
Dollar Index 76.90 -.39
World Debt markets
BWX(Intl Treas) 61.02 +.18 PCY(EmerMkt) 26.88 +.04 IBND(Intl Corp) 33.50 +.22 


All Markets Current Trends

World debt markets

US Bonds: 10-12 current trend neutral

US Natl Muni Markets:: 10-14  current trend down
Intl Treas Bonds 9-9 current trend down

Intl Corp Bonds 9-2  current trend down
Emerging Markets Debt: 9-21 current trend down
US High Yield 8-2 current trend down

US Preferred Stocks 10-14 current trend neutral

Commodities

Commodity index (Broad based) 9-12 current trend down
Gold: .9-23 current trend down  
Silver: 9-22 current trend down
Copper 8-8 current trend down

Platinum 9-19 current trend down
Palladium 9-7  current trend down

Nickel 8-8 current trend down

Grain complex 9-19 current trend down   
Sugar 10-14 current trend up
Cotton 10-10 current trend neutral
Livestock 9-27 current trend up
Coffee 9-21 current trend down

Lumber 9-23 current trend down
Agg complex 9-16 current trend down

Oil 10-12 current trend neutral
Gasoline 10-14 current trend up
Natural Gas 7-28 current trend down

World Stock markets

US Stocks: 10-11 current trend up
Europe 10-14 current trend up
China: 6-3 current trend down

Brazil 7-1 current trend down

Japan 10-12 current trend neutral

India 8-2 current trend down

Russia 8-4 current trend down\
Emerging Markets: 8-2 current trend downl

Total world markets 10-12 current trend neutral 

Currencies markets

US Dollar Index 9-6 current trend up
Aussie Dollar 10-14  current trend neutral  
Euro 9-2 current trend down
Brit Pd  9-2 current trend down
Swiss Franc: 9-2 current trend down
Jap Yen 10-12 current trend down
Canadian Dollar 8-8 current trend down

Mexican Peso 8-3 current trend down
Brazilian Real 8-9 current trend down
Indian Rupe 8-9 current trend down

Trend changes:

World Stocks:
Currencies:  Aussie to neutral
Commodities:  . Gasoline to up, Sugar to up
World Debt :

Intermediate Term Trends
Oil: Down
Gold: Up correcting
Silver: Down
Commodities: Down
US Bonds: Up
World Bonds: Down
Emerging Debt: Down
Emerging Markets: Down
Dollar: Up
World Stocks: Down 
US Stocks Down


US Stock Market Trends

Mikey Short term neutral  10-13 11478

Mikey Intermediate Trend: down  8-4-11 11779
Mikey Long term Neutral 8-4-11 11779
NYSE 10-14 Current trend up 

NASDAQ 10-11 Current trend up
DJ Utilities: Current trend up
Transports:10-14 current trend up
Russell 2000: 10-14 current trend up   

IBD :10-12  Market in confirmed uptrend 11518

US markets short term technical trading indicators:

Mikey10 Meter +107 Mikey5 Meter +150 (-100 OS, 0 Neutral,  100 OB)

VIX (OB 10 - OS 40) 28.24  ,VXZ 52.81
Mikey Int OB/OS index (80 OB 20 OS)+47
Put/Call Ratio .82 10 day average 1.03
Ratio Put Premiums to Call Premium (.34 to 2.5) .92 10 day ave 1.20
Mutual Fund Purchase/Redemptions ( 1.5 to .66) .92
Williams %R 12 day -18.27 Weekly -52.81
Bulls 34.4 Bears 46.3   Bull/Bear ratio .74
Daily DJIA MACD  +49.90 Rising/ Positive cross 10-6
Weekly MACD 253.93 Rising/Negative cross 5-16

NYSE New Highs 22 (12/7-10 429) New Lows (8-8-11 1345 ) 11
NASDAQ New Highs 31 (12-7-10, 352 ) New Lows 24( 10-4-11, 755 )
Advance/Declines

Daily NYSE Advance-Decline  +2019 Nasdaq Advance-Decline +1265
Daily Mikey A/D line NYSE (7-7 37567) (8-8 19199) 28144   
Daily Mikey A/D line NASDAQ (2-18 10095) (10-3-10-15390) -8576
5 day AD NYSE +6014 NASDAQ +4611  NYSE..(OB +4000 OS -4000)
10 day AD NYSE +6422 (6000 OB -6000 OS)
% above 200 day ave  25%

below 50% indicates intermediate trend down

Days to option expiration 5

DJI Moving Averages

5 day 11498 Rising/ Price above
20 day 11143  Rising/ Price above

50 day 11200  Flat/Price above
90 day 11675 Falling/Price below

200 day 11968 Flat  Price below

20 week 11670 Falling /Price below
50 week 11854  Flat/Price below
90 week 11259 Flat Price/above
200 week 10640  Flat/ Price above

Daily comments for last 30 days:

9-12(OpXpWk) Keep in mind this is options expiration week and going into this week there are alot of put holders. I doubt that they will be winners and a market rally to possibly the top of the trading range of 11600 would not surprise me.

9-13 It looks to me like we are in a trading range and we are near the bottom of that range.  That range is 10700 to 11700 which is the 200 week on the low side and the 200 day on the upside.
9-14 Talk is that the Fed will be buying long end and selling short end. That is I believe a plant by the Fed Look for long rates to stall in here I think the rallylk is that the Fed will be buying long end and selling short end. That is I believe a plant by the Fed Look for long rates to stall in herethat the Fed will be buying long end and selling short end. That is I believe a plant by the Fed Look for long rates to stall in here I think the rallylk is that the Fed will be buying long end and selling short end. That is I believe a plant by the Fed Look for long rates to stall in here I think the rally in these is topping.
9-15 The shorts are losing their grip. Put/call ratio ran a low .49 today indicating no interest in short this rally. I still think wee take out the 11700 high which is the 200 day average. That would give the bulls bragging rights with a new high and a break above the 200 day average which is a buy signal to trades
9-16 Puts vaporize at expiration. Market closes near top of range.
9-19 Recent $ strength eating away at commodities markets
9-20 The DJI was up 7.65 but most indexes and indicators were down today. Their story is still negative and I think they are pressuring law makers to "do the right thing. this reminds me of 2008 before the Congress pasted the 800 billion bailout. If they balk then the market will teach them that they must comply with the powers that be.
9-21 I mentioned some time ago that the best return is zero interest and in dollars. That trade is clearly outperforming the risk trade and the risk traders still have not figured it out. They will when Gold and Silver joins the party. Silver is poised on the edge of a cliff now and the crowdmentioned some time ago that the best return is zero interest and in dollars. That trade is clearly outperforming the risk trade and the risk traders still have not figured it out. They will when Gold and Silver joins the partyst return is zero interest and in dollars. That trade is clearly outperforming the risk trade and the risk traders still have not figured it out. They will when Gold and Silver joins the party. Silver is poised on the edge of a cliff now and the crowdmentioned some time ago that the best return is zero interest and in dollars. That trade is clearly outperforming the risk trade and the risk traders still have not figured it out. They will when Gold and Silver joins the party. Silver is poised on the edge of a cliff now and the crowd is yelling jump,jump. IBD went to uptrend under pressure today. I think their uptrend call was ....errrr a reach.
9-22 Gold -66.40 and Silver -3.89 joined the party and the market retested the lows at the 200 week. 30 year rates fell to an incredible 2.80 today as the price hit  the 2008 highs. This is truly shock and awe now and you wonder if anyone is driving this runaway truck.
9-23 Gold and silver bugs get nailed with Gold 1639.80 -101.90 and Silver 30.10 -6.48. Copper dives another .20  to 3.28. That means that Copper is a cool 31% off of its April highs, Silver is now 40% off of its highs and Gold is 15% off of its high. Gold has a long way to go to catch up with the other commodities. A 30 % correction would put Gold at 1347 and as I said earlier this week I forecast Gold to 681 beforesilver bugs get nailed with Gold 1639.80 -101.90 and Silver 30.10 -6.48. Copper dives another .20  to 3.28. That means that Copper is a cool 31% off of its April highs, Silver is now 40% off of its highs and Gold is 15% off of its high. Gold has a long way to go to catch up with the other commodities. A 30 % correction would put Gold at 1347 and as I said earlier this week I forecast Gold to 681 before it is all over. Gold is now a source of funds for other depreating assets. The risk trade is unwinding and that is exactly what they want.
9-26 The DJI held the 200 week for the forth time since August 8th and rallied 272 points.  I think the shorts have to make a decision here to cover or hold. The talk I have heard leads me to believe that the lows are going to break. The market rallied with the announcement in EUROPE on a deal to bailout the banks similar to the TARP agreement.
9-27 Stocks and commodities rallied as some air was let out of the recent dollar rally. We are at the end of the quarter and this rally maybe just the window dressing the system needs to show the 401K plans that things are not that bad. This happened at the end of last quarter. Bonds along with the dollar took it on the chin today. The trend is still down on all asset classes. The dive into the end of the quarter would have been a good thing if you are looking for a low
9-28 Oil and Gasoline looks like it could cave in. Copper Silver and Platinum are the most recent casualties of the dollar rally and the soft world economy. Stocks today dropped 179.99 and resumed their decline and I believe at some point have another leg down. My indicators are slightly oversold but puts ran at a hefty 1.30 today and the VIX was over 40. Normally when the VIX runs at 40 either the sell off is over or we enter a crash phase. The path of least resistance is still down.
9-29 Good GDP numbers released and the market rallied. I will not comment on those numbers or any other because they are not only subject to revision but they make them up. I have learned that figuring out the real economy is just a pain in the ass. It will not make you any money and just cause you to attach to the wrong thing which is the story. Keep focused on the price if you want to trade and not the Alice in wonderland numbers they system makes up. Today was an up day for what ever reason and the trend is still down. Apple (390) looks very toppy to me and many of the leadership stocks have been nailed a move to 340 would not surprise me.
9-30 End of Qtr closes down 240 near long term support.
10-3 The averages closed right on the edge of the cliff today. The support of the 200 week is at 10662 and the DJI closed at 10655. The brokers and banks are acting just like they did in Sept 2008 when we had the credit meltdown. Long term US bonds closed higher that they did in 2009 and yields are at their lowest levels at 2.74. The market is now at a 52 week low and has wiped out QE2 and is working on QE1 from June of 2010 which started at 10300 in July. That is the result of fake money being pumped in by the Fed to save the banks and corporations. Gold and silver was also aided by this pump and its day is coming too.
10-4 The risk trade awoke today just in time to save the DJI from breaking down. Its a good thing for the market makers because there have been a lot of puts bought and they would have been on the hook. The truth is that 95 out of 100 of these the puts lose just like they did today. They must first make this 10600 level unimportant and then it can break. The threat to the puts is the Fed and Bernanke was out rattling the sword today. The municipal bond market took a hit today with the National fund and the California funds trends turning for up to neutral. Keep your eyes on these trends because the way the banks and brokers are trading credit quality may be a concern and these markets could get ugly with out Federal support.
10-5 The 200 week is the line between a long term uptrend and a long term downtrend. It is an important line and the traders are watching it. The shorts got too excited this last week and the "risk traders" (you know who) pulled it back above the line. The market internals still show an oversold market and the puts got some religion today with Put/Calls running at a calmer .86. It looks to me that they want to stair step this down trend a little at a time.
10-6 Stocks and commodities edged higher on the lower dollar today. The 50 day average on the DJI is at 11262 or about 30 points above the current close. The average is falling so the odds favor the market meeting resistance in that area. The intermediate trend is down and for it to turn up the DJI would have to get above 12000.
10-7 Jobs sell off
10-10 300 point fix Europe rally dollar tanks but gold rallies
10-11 Nearing the top of a trading range. Current trend changed to neutral

10-12 counter trend rally continues IBD calls market in uptrend
10-13 Daily MACD turns positive