SUSI WEEKLY UPDATE

• There is a lot of red on our weekly SUSI sheet. Most key areas are on a sell signal as are most of the "HOT" areas.


• The DXY / Dollar is on a BUY SIGNAL which means if the DXY has bottomed the market should become very susceptible to risk
  

Bear in mind the phases of this rally:

1. short covering (1st couple of months since March....)
2. institutional and retail (mutual funds) chase the rally (up to Aug/Sep)
3. hot money gambling with retail and institutional profit taking
4. correction ???

Medium Term Flow Charts: Initial Liquidation

look for the blue line (large traders)

explanations pls find here

Pls find some initial signs of liquidations in some of the "HOT" and/or key areas, like Consumers (XLY), Silver (SLV), Materials (XLB) and Emerging Markets (EEM).

Are we there yet? (update)

"When TIME and PRICE aligns CHANCE is inevitable"

We could be there but don't forget that even in 1938 we had another move below the 38% (SPX1000-1030) before finally hitting the 62% (1200 ish , maybe around Jan 2010) and then turning down for good....

We need to keep an open mind for both sides in an situation where it seems that time and price have aligned.

Animal Spirits seem to have peaked out!

Equity Options spike to a new multi-year high!

"The 4 Horsemen and Friends" seem to have peaked.

Relative Up Volume has peaked.

Key Question?

How can we revive and exceed the recent speculative excesses in order to keep the market going or in other words how much more money printing do we need to keep the beast alive?

We will find out next week!

VIX Future structure resembles last year....

Pls compare the termstructure of the VIX of last week with the frontrunning we saw before the waterfall last year.

BE ALERT!

How much Pain can the short & medium term traders take ?

We have reached a point where most short and swingtraders are sitting on loss positions and seeing the Volume Spike in the last 10min on Friday supports the notion that we are close to some collective position exiting. Don't underestimate this risk! We are close to a meltdown unless we see some heavy bullish action on Monday morning !

VIX approaches the PANIC SELL OFF level

Neutral SPY Targets

Whatever Mr. Market decides to do, we have to benchmark the action action against the standard Target Zone now the the correction has been confirmed.

The Bulls have to initiate the Bounce NOW or will loose control.....

Now that the Day and the Swing Traders are running for the exit we have to monitor how much staying power the Position traders have and to what extent they start buying the dip, which we should expect. The question is whether this will overcome the current weakness?

The Breadth Picture is similar, where we see clear cracks in the bullish fassade. The Bulls have to recapture the Tape before the weekend or we run into a potential Black Friday- Crash next week scenario....

Thursday and Friday will be very important for the Bulls!!

The Correction has begun....

• Pretty much every single Index has broken through their trendline. Leading down are the transports, Small Caps and all other high betas......
• We have to watch if this can stick or whether it will bounce.

...Remenber my PUMP & DUMP post from las weekend......

Art Cashin Interview - MUST SEE

Here is a Must see interview with ART CASHIN from UBS, that summarizes all you need to know in 10 min. Why don't we have more guys like him rather........

courtesy of the always excellent zerohedge.com

SUSI WEEKLY UPDATE

for comments pls see earlier posts of today.

Gold & RISK update

Volume & Flow for GLD:

(see last post for more explanantions)

COT REPORT on GOLD:

• We saw a price spike in Gold followed by some PUMP & DUMP which warns of profit taking


• The COT report as of Friday still shows an extreme SHORT position held by the Commercials

Conclusion:

1. We could see some fairly impulsive action on the downside (unless we can somehow resolve this extreme COT situation)


2. If Gold tumbles it could take the other markets hostage and indicate a (temporary) end to the carry trade (short US$ - long risk, like commodities, emerging markets etc.)


3. Any weakness in Gold will also show as strength in the US$
   

Weekend Special Summary

Sentiment:

BREADTH:

VOLUME & FLOW:

Pattern & SUSI:

• Sentiment & Breadth show us that the Market is overly extendend
• Pattern & SUSI signal resistance in the market
• VOLUME & FLOW showcase PUMP & DUMP

Conclusion:

We experience a change in the Market and have to monitor whether we see follow through.

One shot at the Big Picture....

As stated earlier, we are at the 1120 crossroads right here within the Target area of 1000-1200 from Sep 15 to Jan 15...

with courtesy of etf corner

SUSI WEEKLY UPDATE

Observations:

• Some Sectors or Markets are insanely over-extended (Tech, DJI, Staples)
• Susi has flipped OIL and some of the commodities, but most of them can easily flip back
• The banks turned down again
• The Semis struggle to break out
• Goldminers look bearish which ususally tend to lead Gold, Silver also went too far too fast..
• Euphoria seems back after the breakout in OIL and Gold
• How much lower can the Dollar fall. Always bear in mind that with low single digits % of Bulls (SENTIMENT) most bears have already sold. You need to find the next dollar bull that throws in the towel in order to let it fall further.....otherwise it will bottom!! Even the FT started publicly (through alphaville.com) to laugh about ROSENBERG & EDWARDS for their bearish stance....

Bottom line:

We are close to next crossroads with the Dow at 10000 and the S&P500 at 1100 (close to 1120!!) and Mr. Market has to decide how he can throw a curveball to most participants, that all believe the bottom is in, fundamentals look up ....bla..bla..bla.

When you follow the earnings this season pls bear in mind that "you can not grow (your revenues) infinitely by cutting cost (exceeding / improving EPS)" at some point we need real growth, new credit, new jobs etc. or will face a day of reckoning.

I believe you know by now that your humble blogger does not believe in fairy tails.....

COT GOLD shows extreme short position of the Commercials

Watch the Net Commercials position (from last tuesday's Commitment of Traders CFTC report) in Gold......WOW!!! (Chart shows the trend adj. net position of the commercials in red)


Apparently the Miners and some quasi Commercials (like JPM in particular) are betting big time that Gold will tank right around the time that the INFLATIONISTAS have bet the farm on the next big upleg in inflation (higher interest rates, higher oil, higher gold, lower US$) after the inverse Triangle break-out in Gold.


The Commercials were particularly right the last 2 yrs so it will be interesting to see whether the market will steamroll them (and force them to cover) or wether they are right this time again.

It clearly seem though as if we are VERY CLOSE timewise to some kind of resolution of the current extremes.

Someone will loose a lot of money here ...either the Commercials or the Non-Commercials, i.e. the Speculators (Hedgefunds)

watch the leading SEMI's

Semiconductors are usually the leading sector in any recovery so we want to watch where the semi's go....

NASDAQ & GOLD Volume pictures show waning conviction...

GOLD:
QQQQ (NASDAQ)

What do we see here on the effective Volume Charts (1 Minute Bars of the last 2 months):

Thick Blue line: all QQQQ traders of the last 5 days are roughly break-even (VWAP =volume weighted avg. price is at the market price (grey) (Loss positions for the avg GLD trader)

Thick Red line: All Swingtraders are in the money (QQQQ & GLD)

Thin Blue line: Institutionals have used the last Option Expiration (BONANZA!!) week to lighten up ....

Thin Orange line:...by pushing the market up with low Volume trades.....

Technical Update: We are right in the ZONE!

Watch Fixed Income......

• Fixed Income: The Ted Spread on the short term side and the High Grade Corporate Spread on the longer durations is showing weakness. As I've been saying for some time, Fixed Income is where we have the wildest excesses and therefore will be the tell. How High Yield will dovetail into this remains to be seen next week
• FX: The US$ got killed as Gold and Oil started to fly. This looks very overbought and a countertrend could be in the cards, maybe even a medium term bottom. Don't forget that the US$ has become the FX Carry (short side of the trade) Currency of choice. If we see some kind of credit unwinding, then the US$ will strengthen and Gold suffer. (Pls bear in mind that the target for gold resulting from the Triangle breakout is around 1055 to 1100 and has been hit. It could go higher here but it could also sport a headfake. The headfake could be part of a much bigger headfake, namely related to the Monster inverse Head & Shoulders everyone is following for the better part of the last couple of month. Gold has to stay above 1000-1020 to keep the Goldbugs euphoric otherwise we will go to 650-700 within the next couple of month before trying the big up-swing again....)

Bottom Line:

try to assess things through the lense of de-leveraging

We see a Re-test with no conviction and/or Volume

Liquidity blow off.....

• Mr. Market plays the Inflation and the Deflation Trade at the same time !! which is a clear indication of a pure technical and temporary dislocation

SUSI WEEKLY UPDATE

SUPPORT/ RESISTANCE PROFILE S&P500

• last week's action seemed encouraging for the bears but as we can see below the S&P500 has to break 1 of the 2 major SUPPORT/ RESISTANCE areas or will stay within the range
• A breakdown could turn into a fairly bearish scenario
  

Weekly Summary

COMMENTS

• SUSI proved to be right last week and the Flip took place

• Pls also recall that a TCS (TimeCycles Spike) does indicate an increased probability for noticeable action, which can be a turn or some kind of impulsive behaviour. Giveb that we ahve a good amount of TCS coming up in the next 2 weeks I'd expect some Volatility which can turn either side.



• Will we see confirmation and continuation next week?



• Next week could offer some heavy liquidation driven by Institutional profit taking. They all had a good Q2 and Q3 and are all sitting on some nice unrealized gains protected by tight stop loss levels. So far we've seen the first trendlines and wedges been broken and unless we see some "DIP BUYING" we could see a quick move through the Support area (see above) to 980 on the S&P 500.



• The LQD has triggered a SELL Signal which is the first since the beginning of the madness in March. LQD went in a straight line and sofar has ignored all minor pull backs in the Equity market. Therefore you must watch the Fixed Income Market be it the LQD as a Corp. Bond Proxy or the TED Spread on the short term side of the yield curve.

(Due to our travelling schedule we will NOT post a weekly update next week)

CFTC Commitment of Trader Report (COT)

With Gold we observe still this extreme Net Short stance of the Commercials which could limit the upside potential for the immediate timeframe.

The Commerials are also taking are more cautious posture with the S&P500 Future, i.e. are reducing their Net Long position.

NASDAQ large Investors Flow, constructive but still early...

Here we see the effective Volume Flow Analysis for the QQQQ (ETF NASDQ100). The blue line has slightly turned down (Blue: Large Investors) but needs more downside action to confirm a potential top.

See also the brown line (proxy for the average gain/loss of all active traders in QQQQ) that seems moving down and thus indicating some profit taking in the short term community.

We need to see this preliminary not yet conclusive action in the context of the longer term flow (see below), where we are still at the tip of the bear market rally. We need to see indications of serious liquidation (see blue line in 2008) in order to conclude that the "echo crash" or C-Wave has begun.

Also notice how shallow the upmove of the blue line looks compared to previous real volume action before. This further indicates that the rally since March is phoney....

Pls see for explanations here

The VIX Oscilator is crossing the rubicon....

Our old Vix OSC is showing some clear deterioration in the Sentiment, including the medium term lower highs (NEG. DIVERGENCE !!)....

...whereby our newer VIX OSC has already entered the "dark side" below the zero line for the the 2nd in the last 2 weeks. If the indicator stays there or can not find a solid footing in the short term then things could get pretty ugly next week......

Mutual Fund Flow & Margin Debt UPDATE

MUTUAL FUND FLOWS:
Investors allocate away from Equities towards Fixed Income ....

MONEY MARKET FUND FLOWS:
We see the first allocations out of the short term fixed income risk trade (primarily corporate CP). Pls note that the blue line has reached the lowest level in this series apart from last year's crash where we saw a flight to TSY only MM funds.

MARGIN DEBT NYSE:

This has been a solid medium term indicator with a multi decade track record and it still stands on the bearish side. The red bars have to turn positive in order to become bullish again.