Yearend Window dressing

SPYDER/ S&P500
A Spike up and above 1120 in the holiday season on less compelling Volume contains the major risk of a headfake unless we see some follow through in the first week of Jan....

GLD/ GOLD
...doesn't look too healthy, maybe bottoming in a week or two.... (mid Jan ??)

Corporate Bonds will be the key tell.....and Santa doesn't seem to like them....

EUROPEAN vs US CREDIT Contraction & Mutual Fund Flows

If you're looking for a loan (commercial or consumer) in the US, you better wear your best suit...

....and given that this Credit contraction is global (look here for China) the same is true in Europe.

If you were wondering who is powering the Santa Rally...... it is NOT the retail guy, because he is busy saving & delevering....

WEEKLY UPDATE

the next weekly update will be in 2010.

SPYDER FLOW from Mar 3- Dec 18

The blue line representing the large Traders show how the big money has supported this rally and also when it decided to take money off the table.

Isn't it pure coincidence that the smart money deserted right around the time when the Equity Mutual Fund Investors decided to take it easy on their US domestic Equity allocations .....?

All in all you get the picture why Volume has deteriorated so much if only the machines and prop desks are left to play AIG and Citi......

Investment Flows and Bank Credit

US TIC report

Money Market Fund Flows
Mutual Fund Flows
US Bank Lending
Do you see the greenshoots (nobody is using this word anymore ?!) in the Bank Lending report ? CAPEX and Consumers are getting hammered!!

VIX OSC update

SUSI WEEKLY UPDATE

• Dollar rally has begun with a vengeance
• 1o Treasury Yield indicate some deflationary tendencies
• Gold and Dollar might pause a bit here before going the next leg. Both seem to not have reached their targets yet (mid Jan 2010 ; look also at a Chart of SLV for silver with a clear trendline breakdown)
• All 3 main Indices are on solid sells
• Brasil and China have left the party and seem vulnerable
• Japan left in September
• Banks have developped a picturebook rolling top (look at JPM !!)
• Industrials (XLI) flipped beautifully to the downside
• ...but what the hack is the VIX doing (maybe related to some positioning in this week's OPEX - Option Expiration)
• some commidities show resiliancy against the dollar picture

Bottom line:

1. WATCH the DOLLAR (Dollarstrength <=> stable Equities !!! something has to give here, we are stretching a rubberband and either the dollar will fall back or Equities will surprise to the downside!!)
2. nobody seems to be interested in weakness around yearend, let's see how long they can uphold the tide
3. recent Volume Flow Charts (will post an update next week) indicate that the institutionals have continuously taken money of the table since September

COT Update on Precious Metals and the Dollar

Silver:
...is a a beautiful case study of the structural shift in the perception of Prec. Metals and furthermore of a "normal" correction of excessive long and short positions.

Gold:

We have a similar extreme position here like in Silver with the difference that the Commercials have restarted the shorting. This situation is not sustainable!! Only one sode can win where the commercial bet on much lower prices and the large Spec's on the opposite. My bias goes with the Commercials because the large Investment banks are also classified in this category and tend to have an edge.....

DOLLAR

The upturn is now also visible in the COT report!

Gold Flow update after breaking below 1100

The Dollar still strengthens and Gold still corrects with some solid distribution...

SUSI WEEKLY UPDATE

• The Dollar has flipped which could mean a lot of liquidation going forward for at least up to March

• All major indices seem to develop tops
• Let me remind you that "bottoms are datapoints" whereby "tops are processes" , i.e. this could morph into a rounded elongated top rather then a quick downdraft. This would also fit into the yearend seasonality where nobody wants a big down impulse.....
• Most commodities also seem to have turned which supports the liquidation theme
• The TimeCycles seem to hint at some important point in JAN 2010
• GOLD & SILVER seem to lead the correction, which will probably not go in a straight line...

Contrarian Question of the Year:

What if GOLD is doing more than the expected (me included) correction down to 1070-1030 and instead decides to go deep......everybody seems to be married to the correction idea....??

We will follow this development in detail here at REFLECTIONS.

Dynamic Trading View on GOLD

Here you see where are the Gold Time Cluster (Indicator below the Chart with a spike around the end of Jan 2010) and Price Cluster.

Financials and S&P500 FLOW update

The Financials look very bearish. Keep in mind that the market can NOT rally for long without the financials!!!



The Spyder still seems undecided with a bearish bias on the large Traders side (Institutionals). We are clearly at a major resistance which can mean a consolidation towards the next level up or a rolling top. The next week will answer this question.
Pls don't forget that we are in the low volume holiday season where the "PLAYAS" at the prop desks can do whatever they like without too much institutional interference..... (see the orange small traders line creeping up which shows price moves accomplished with low Volume)

Gold just in a quick 6 week correction ...?

COT report on GOLD:


Large Spec's start to take some profits but far from agressive Liquidation. This feels and looks like a short term correction which most likely has further to go, meaning we need to get rid of those extremes before we can continue....


Gold Flow Update:

Still a healthy correction that has a deeper Price than Flow move which hints at limited liquidation. We need to take out a much deeper FLOW LOW in order to interpret the current correction as a new BEAR in Gold. Time will tell.

High Vix FUTURE premiums normally mean something ?!

How many times can they pull the market back from brink of an collapse. Each time you buy Insurance for the 3 month future (=Vix future is priced at a premium to the cash Vix) some miracle happens.

Does this look like a healthy volume supported rally ?

(55 day Moving Average of Up Volume/ Total Volume)

.....before getting too excited pls. bear in mind that the big guys channel a fair portion of their volume through dark pools and ECN's (electronic communication networks). Like in the Casino the HOUSE likes to have a secret advantage up their sleeves.....

Mutual Fund Flows & Insider Sales

Our Friends "the dump money" either are smarter then the "smart money" or the rally has legs, because the retail guy is still taking profit...

(weekly ICI data)

...on the side "the insiders" are selling the hack out of their virtual profits to turn them into real dollars....

(quarterly Flow of Funds data)

Dollar Carry unwind through the lense of Gold (Flow update)

THE DAY the US$ broke out.......

1. Trendline break out
2. 50 day Moving average break out
3. confirmation of the 2 closes above the 50MA

This is big, because it could mean the 1. round of short covering in the US$. Given the direct high inverse correlation with the risk trade this could mean that some TURBULENCES are ahead.

Just see what is happening to GOLD, OIL etc.

Consumer & Banks

The Consumer Credit data still looks abysmal. This is the deepest fall since WWII. Revolving Credit (read CREDITCARDS) get repaid at lightening speed

Pls also see these MUST SEE Videos from Whitney on the Banks. (hat tip to trader mike!)

Gold Flow update

SUSI WEEKLY UPDATE

Key theme of the week:
We had 3 days back to back where the market popped up all the way through a major resistance field and got sold down towards the end of each day.

If we'd held above the resistance area the Market could have targeted 1200 (S&P500) or 120 (SPY ETF). The fact that it didn't happen is a strong message.

Even stronger though was the fact that run #3 was supported by "DREAM ECONOMIC DATA", reminding me that bull campaigns always end on good news and that the WALL of WORRY has now been torn down, now that we KNOW based on the employment data that the turn around has been accomplished !!

In terms of contrarian thinking this is Nirvana. You have 3 failed break outs with Volume and the last one on good news right around the 50% Retracement level (TIME & Price , pls see here) of the entire 2007-2009 crash.

• Gold got hammered
• the US$ had a great turn on Friday
• Banks still look like a bear flag that has never confirmed the S&P500 new highs of the last swing
• Small Cap look like the Banks

Bottom line:

Next week should be very interesting. If we see a run#4 that succeeds then expect a quick melt-up towards 1200 (SANTA rally 2009). The current picture looks like we just had our SANTA rally and that we could see some downside action into Jan-Mar 2010.

GOLD Breakdown

So here it is!! The US$ has started to strengthen and Gold took a dive. This could be the beginning of a Gold correction where the 1. leg could run into Q1, 2010 with a target around the Neckline of the BIG Head&Shoulders. The Neckline also coincides with 2 Fib levels, namely the 61.8 Retracement of the entire last rally and also around the 61.8% Fib Level of the copy of the last bigger correction.

Below the Neckline we find a huge Volume cluster (on the left side of the Chart) which indicates a major Support area.


If we fall through this area things could take an entirely differnt direction.....

Pls bear in mind that if Dollar strength comes into the market that it could run for up to 1 year. (pls compare to last week's Gold Roadmap)

Flow Analysis S&P500: DISTRIBUTION !

( Flow Analysis from Sep 25 to Dec 4)

Margin DEBT: Bullish ?

One month certainly does not mean too much, but should be seen as a warning sign. A confirmation next week would stress the possibility of a new BULL MARKET!

Investment Flows/Liquidity & Credit update

STATE STREET CONFIDENCE Index:

This Index shows what one of the largest global custodian is observing in their Asset Portfolios (mainly Institutionals, Pension Funds etc.).

They allocate out of the risk trade.

MUTUAL FUND FLOW:

Retail Investors are taking profits. Temporary solace had been found in BONDS but overall the retail guys seems to behave more risk averse than what most think. What would you do if you are a baby boomer with no Fixed Income Annuity stream...... behave risk averse ?

EQUITY FLOWs raise the question, who is running this market up if NOT the retail and the institutional guys?

MONEY MARKET FUND FLOWS:

No Panic or flight to quality here yet.

FED BANK LENDING REPORT:

The Banks are not lending to Corporates and Consumer.

COMMERCIAL PAPER:

Asset Backed and "good" Corporates are still struggling

The Credit Markets are on balance contracting, whereby the effects are most likely stronger felt the further down you are in NON INVESTMENT GRADE land.