A Double Double Bluff ......................

So Buy the Dip worked again ... My inbox packed out this weekend with emails explaining that stocks wont crash this time because everyone is looking for it ... I Disagree ... I fear we may now be in a classic game of double bluff, with mkt sages (Mostly bears for years) now calling the clever card saying we don't get a major correction because its way too telegraphed ... of course, the problem is that they themselves are the double bluff and in fact just add fire to the bear story ... i agree ... corrections don't come when people are expecting them .

 Regular readers will know my love of the IG index customer sentiment readings (For the uninitiated IG index is a financial bookmaker and they publish near real time customer sentiment numbers reflecting as a percentage of their customer base how people are positioned in their contracts) At first glance these offer little insight but if you know where they've come from on a 6 month basis they offer a crucial insight into "Man on the Street" positioning ... positioning which is very fadeable !!

Lets look at their Wall St contract (Dow Jones industrial average) .. Over the last 2 years this has historically traded short ... its been as high as 90/91 % short (Mid Aug Highs) as i write we sit at 63 % Short ...

At no point in the last 2 years has this sat less than 70% short for an extended period and im reading this as the perfect example of Dip buying , bears turned bulls ... The DJIA is still very much our leader lets look at the chart quickly ....

We are hovering above this very important level (18050/18100) .. A marginal new high today looks horrible with a total lack of follow through ... As i began writing this update we started a pretty sharp sell off which as  has stalled at 18155/65 for the moment .... the real key here the close ... if this pushes lower again today/ tomorrow it sets up Horribly and remember we don't have the huge short base to buy the dip this time ... 

Untill next time .... 

As always twitter updates @contrarycalls

Well .... that escalated quickly !!!

Morning all , this time last week i wrote about the risk to equities and in particular the frothy old FTSE 100 !

Last week was a shocker for global eq's and the FTSE indeed lagged pretty badly ... the $6bln question now though was this a head fake or is this just the beginning ...

No doubt the summer has/had bored out many if not all but the most stubborn of bears ... the BTD (Buy the Dip) gang have had it all their own way now for nearly a year now with no major (Over a week) follow through to the downside ... in short the dip buyers haven't felt any pain for long enough and with a thoroughly deluded short base all buying the dip now as well now i think we may be in serious trouble into year end !

Lets look quickly at the charts ..

Our favourite and our short position ... here in weekly form ... If anything this chart highlights just how much downside risk their really is ... The key here is the cluster of averages around 6500 .... a close through this level opens up my initial target of 5700 and maybe a lot more downside .... 

The Nasdaq 100 ...

Home of the tech giants , home of the froth , home of the hot money ... The most violent performer last Fri and will set the tone again this week ... The broken down trend line (A) is the key 4460/4450 this week ... A sharp down move may stall here for a bit but if this gives way on a closing basis i'm looking at sub 4k by year end ....

Lastly the king , the leader , the Dow ..

Of all the charts of all the major indices this is the most worrying ... Much column space was devoted in the past few weeks about Dow theory (Confirmation of Index highs by other related indices) and its usefulness or lack thereof in current times but strict students of the theory will be the first to tell you the recent industrials (DJIA) high was not confirmed by the Transports (DJT) and this was critical ... That aside the DJIA has broken back into the channel that has held it steady for over 2 years now and looks extremely vulnerable to more selling pressure ... 

In summary a very critical day today , especially for US stocks ... we'll see bounces i'm sure of that , the market has made too much money buying dips for it not to attract buyers but it really feels like we are going to test the nerve of these buyers ... a DJIA close below 18050 opens up a lot of downside ... sentiment is still very blase and that's the single most worrying thing to me ... I remain short my FTSE .. depending on closes and levels this week i intend to add shorts across all major indices and with vol (Albeit higher in the last 2 days) at very very low levels some Oct expiry way out the money downside looks a great investment ... 

Until next time ....

Please follow my twitter feed @contrarycalls for more updates .

....... Sell again after Labo(u)r Day .............

So , finally back from a summer of travel ...what did i miss ??

Its been almost 2 months since i last posted .. If you remember i left with a short GBP/USD position a little higher than where we currently stand with a stop above the notable descending weekly / daily down trend broken after the brexit vote . Well guess what ? Having spent the last 7 weeks bumping around in a pretty tight range we now find ourselves back against these massive levels see daily and weekly charts below

Clearly a very key time for this cross .... i remain short but will be very quick to cover and reverse long on a clean break of 1.3426 .

The post Brexit stock move has been far more interesting ... An initial slump followed by what can only be described as a major squeeze ... Volume over the summer disintegrated (At least 2 days in Aug the benchmark $SPY etf traded less rhan christmas eve 2015) and the market ground out new highs in most major US indices in what looked a very painful manner ..... bears, as always very keen to jump on any downside , lows made first 2 hours of US trade , squeeze into close , repeat, seems to sum the summer up but now with Labo(u)r day behind us we have the chance for the real move and i wonder if it will be the move we were all looking for in late June ??

See long term FTSE 100 chart below ...

I See the squeeze , i see the classic pain rally but look if this was an index going places we would have cleared and held above the series of old highs by now (6958 High December 1999 , yes 1999 !!) . I hear the index has changed, i hear the weak pound benefiting multinationals i hear all that but good old price action is saying to me that perhaps we get our Brexit selloff into year end .....Technically stacks of resistance here.... im selling here (6890) , ill add at 7000 with a stop at 7150 ,, if im right and this plays out i'm looking for a retest of the post brexit low around 5700 ... and which point we ll re consider ...

Until next time .....

Stocks confound but trouble ahead for the Pound !!

Good morning all ! Been 2 weeks since my last post where im sure you will remember my Doomsday prediction for the stock market IF we broke the key 17710/20 level in the Dow Jones (A) ... you will i'm sure have noted the low a day later at 17110.6 !! I missed the ensuing rally but i wasn't going bear turned bull , market graveyards are full of long term bears/bull turned short term bull/bears turned bankrupt !! I wasn't going down that road !

We did , at the time , have a short Nasdaq position with a tight stop (4510) Triggered on the 8th July.

Stocks continue to confound me ... No doubt technically we have broken to the upside on all the major indexes... We have broken out of a 2 year trading range to the upside (B) and we have held the breakout .

We will watch with a close eye how this breakout shapes up .... still a little too much back slapping and self congratulating on social media for my liking ... the 3rd week of July is historically a shocking week for US Indices and with the market at a very key and important level i'm keen to get short on a break back down into the range ... watch the Twitter feed or subscribe on the right hand side to make sure you don't miss any alerts !!

Our other position has fared a lot better and the more i read the more bearish of #GBPUSD i get . A tertiary hashtag search on Friday eve showed an FX pair that has dragged in value buyers again .. The Bof E holding rates on Thursday seemed to be the final straw for a lot of hot money wrong level shorts and a false upside  break almost straight after the announcement dragged a lot of longs back in with pretty much all of my sentiment metrics now pointing to a very spec long position ..  New updated chart below ...

We have now had 2 failed retests of the long term downtrend (1.3480/90) and still sit well below the post brexit high of 1.3534 (29/6/16) ... I think we test the recent multi year lows early this week and i am re iterating my call for significantly lower levels once we clear the 1.2800 level . Sell any rallies with a stop on a decent clear of the long term downtrend .

Good luck and happy trading .... updates as always via our twitter @Contrarycalls .

GAN.

A quick update after a couple of very weird trading sessions in financial markets ! Clearly the GBP bear is working ... i have no inclination to unwind a the moment ... The "New" FX market is loaded with piano catchers (Dip Buyers ) and as i said last week Cable over extends its over extension ...Ultimately this is a real mess and with no clear political solution we are further away from BREXIT than we were last week although we have to ultimately go down that route ...its the uncertain uncertaintitys .. its an investors night mare .

Stocks continue to trade , well , differently ... last nights asia session looked for all the world like we d get our selloff but again dip buying and all round back patting and we held some key levels ... Although i still wouldn't be surprised to see a MASSIVE SELL OFF in equities from here ... So much bad news NOT in the market ... Nasdaq 100 target still 3800 watch 17710/20 in the DJIA .. this might be our trigger for my selloff .. if it gives way easily we will see 1k off the dow over 1/2 sessions ...

Enough of this .. back with an update when it deserves in the meantime please subscribe using the form on the left if you like what i say ... any comments appreciated and follow the new twitter feed @contrarycalls

Good Luck

Uncertain Uncertainty

Well that really was some week !! The opposition Labour party seem intent on keeping BREXIT off the front pages with an infight that to me has no clear ending and The ruling Conservative party are playing hot potato with Article 50 ... Politically the greatest loser this week bumbling Boris Johnson who clearly never thought he'd "win" the leave vote but would garner enough good will in defeat to mount a challenge for leader once Mr Cameron's time was up and is shown up as a political chancer who didn't really believe what he was campaigning for ... anyway enough of this ...

 The markets ... Stocks... a huge win from Tuesday onwards for the BTD (Buy the Dip) brigade ... it happened again .... As i mentioned last week for this to be the beginning of a new bull run we need a significant sentiment shift and by that i mean i want to see doom and gloom posts i want to see crash predictions . My timelines across social media this week were 85/15 bullish stocks biased ... various twitter sages patting each other on the back having successfully caught another piano... Pundits lording the FTSE 100 rise to yearly highs (More a factor of a currency devaluation on an index whose earnings are heavily skewed away from the UK) and more complacency .. even more than last week if that's at all possible.

We have 2 positions , lets start with our nasdaq short .... heres the updated weekly chart ...

Note the lower low and lower high here on the weekly ... still holding the downtrend with this coming shortened holiday week clearly going to be very important ... 4510/15 is the top of the channel for the coming week and i'm using this as our stop ... we did takeout and close above the major averages last week but something just doesn't feel right (Sentiment Sentiment Sentiment) ! Clearly world stocks took their Q from Europe this week and the amazing rally in the FTSE 100 (A mixture of currency deval and a good old fashioned squeeze) .. Very interesting to note stocks massive underperformance relative to treasurys as measured by the etf TLT ... This has been a very leading indic for stocks and the kind of underperformance seen this week suggests to me that this puff up fails and we fall hard ... my first target is still bottom of the range 3800 .


And so to our second short .. GBP USD (Cable) ... updated chart below ...

An almost perfect technical setup ... The down trend support , broken early in the week then held any upside perfectly ... we still need to push below the major 20 yr support with some real conviction ... a days trading below the level should be enough but price action stinks ... The UK is in a real mess and no obvious path out which leaves the market with its one major fear ... UNCERTAINTY ... The longer this mess drags on the lower we will go ... Governor Carney managed to pull the rug out of any rally by talking rate cuts late on Thursday and i'm not expecting this rhetoric to change anytime soon ... Market trades value long and very vulnerable to firstly 1.25 then over an extended period to 1 ! Stay short add to shorts on rally back to trendline !

I'm just in the process of setting up my twitter account .. please feel free to follow me @contrarycalls for shorter daily updates on positions and general rants  and subscribe to the blog on the right hand side of this page to make sure you don't miss any updates ...

CAVEAT EMPTOR

Re visiting our 2 Calls from late last week / weekend ! GBP USD played ball and in true FX fashion pierced our support and held below for a number of hours before creeping back above in a 2 day bounce not even worthy of a lifeless cat ... This morning sees it under a little early pressure im expecting a fairly quick break down now (3/4 days) back through those lows and to begin carving out a new trading range in the mid to high 1.20's ... lets see ...

Perhaps more interesting is Equity land where our favoured short , the nasdaq 100 has broken lower and is as i write re testing the cluster of averages and technical levels in the 4390/4410 area (A on the chart) . This is the perfect re - sell area for a new and much more concerted fall ... Im still amazed at the total complacency of Longs even the brazen longs on twitter mocking the 2 day sell off as a blip and congratulating themselves on buying the dip again !!    Caveat Emptor  !

REAL TROUBLE AHEAD FOR THE POUND

GBP/USD FX  (Monthly chart above) ... Fridays low wasn't an accident .. 1.3228 is the key the next 30 points in this cross .

The total surprise nature of the Brexit vote again is critical here ... at 11pm on referendum day we printed a yearly high in GBPUSD ..The remain vote was albeit nailed on and you would have had a very hard job for making a case to be Short the pound .. hence the move obviously. This is a notoriously volatile cross with a love of over extension .. 2 was always seen as physcological level that was unsustainable so it spent the best part of 2007 pushing 2.10 before collapsing at the first hint of the 2008 crisis ... We have a much lower level to fall from today and with sparce liquidity, a market that is positioned very badly and a hamstrung central bank i fear we may see a serious over extension again but this time to the downside ... Clearly Fridays low 1.3228 is the key .. if we see a significant break and hold through that level the unthinkable becomes thinkable ... Parity against the Dollar !!    GAN.

Complacency .... Complacency ... Complacency

Not sure what the fuss is about .... Back to where we were last Thursday .... Still up on the year ....  The same sentiment echoed across dealing rooms and social media around the world on Friday in response to the Historic Brexit decision from the UK.  After the dust had settled we'd had a pretty decent sell off in risk assets and of course the pound but its the complacency that worries me , a lot!

The whole bull run in stocks back up from 2008 lows has been maligned. We have rallied pretty much in a straight line for most of that time pausing for breath along the way but most people seemed to deem it a house of cards and have been keen to declare its vulnerability jumping on every selloff as a new crash and calling the end of the world ... until that is .. now !!

Sentiment has changed and its changed quickly ... now my social media timeline is full of dip buying recommendations , the news isn't that bad  .. it always bounces right ??

Barrons 28th May cover was a major warning signal .... A huge red rag to a Bear if you pardon the pun !! 

Friday was a horrible day across the board pretty much but the standout was the Nasdaq 100. Rammed with spec long money its the index where the major bio tech and real tech darlings live ... its jammed with late to the party hot money longs.

I think the real clue about Friday was the close .. it closed nicely below the 2 previous lows .. as you can see from the chart we have an initial target in the low 3800's but i fear that maybe just the beginning ...this noticeable sentiment shift takes out the short covering that used to accompany major sell offs .. instead we ll have vacuum gaps lower and we could easily see 3400 in this index. 

World stocks are in serious trouble over the next few months and maybe a much longer time frame we will have to see if sentiment changes but in my experience this is only the beginning !   GAN.