Natural Gas

Nat Gas, a time to be bullish? It’s either the right time to be bullish natural gas or bearish just about every other commodity. Nat gas prices are simply to cheap when you compare their prices to most every other commodity. The spreads have widened to historic levels which are not sustainable. Nat gas appears to be a buy!

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Date: TODAY June 17, 2010
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Presenter: Floyd Upperman
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Alert! The 2:30pm key time coming up in the S&P

The stock market is holding onto today’s gains thus far, much the opposite of yesterday’s fizzle (by this time). The market had topped around 11:30am EST (1st key time) yesterday (Wed). Today’s action (Thursday) is much different.

And the way gold is acting in here, I believe we may see gold prices moving down further and the S&P500 along with the FX (euro currency) moving higher.

In regards to the intra-day trades, we may see a burst of buying in the S&P around the 2:30pm key time. I think we could see price push up to the 1080 area, which if that does occur that would be bullish in my opinion and could set up the market for the relief rally I have been talking about (in the S&P/Equities).

If this market holds the 11:30 time period

If we hold in here and continue moving up through 11:30am EST, then we may push higher throughout the afternoon as well. Remember, while yesterday did fizzle, we ca not ignore the fact that the market did hold the 1039 and 1036.75 key lows in the S&P500 / ES. I call these key lows because they occurred in conjunction with FP formations, both daily and weekly forward plungers (FP).

Today’s action is certainly encouraging, and the market is certainly OS. A relief rally is highly likely here.

Notice the dollar doing exactly like we would expect, moving lower, while the gold moves lower too (unusual, but it is what we expected). Also, the FX is moving higher along with other currencies such as the SF, which may also experience a relief rally following the breakout on the upside there.

I am working the long side of the S&P (ES) in here, short side in Gold, and long side of various individual stocks.

Alert! Markets moving as expected – DX down

he S&P500 did hold the 1039 low yesterday (1036.75 in the ES), and we are bouncing again today (off yesterday’s fizzle). The chances are not as great that we have two fizzles in a row. Yesterday’s low is the first area that now needs to hold, then the 1039 area in the S&P500 futures (June).

This action is very constructive for the market here, and indicates we may indeed be carving out a bottom here. I would look to buy the S&P (ES as well as SSO) now on pull-backs, and you could also look to sell short gold via a higher risk entry on an IMPA sell (an early entry). In the S&P I am looking for a relief rally only at this point. In the Gold I am looking for a potential reversal and decline to the 200dma.

In the case of the FX, we are bouncing higher with stocks higher, and the FX has been the only market recently OS on both the daily and weekly detrended analysis and its an IMPA triggered buy selection as well (excellent conditions here for the higher risk “early bird” buy). This is a rare event and one worth noting (now and in the future, as it is a very useful tool).

Gold

Gold appears to be breaking down in here today. If short, that appears to have been an excellent early entry. If not short, then i would recommend waiting for 2 closes under the 18dma and then look to short on the bounce back to the 18dma, using an initial stop of 1250 on an intra-day basis, not close. Ounce short in fact I recommend switching to intra-day data (i.e. 5 min charts) for your trailing stop. You can also consider selling naked out of the money calls in here, of course this is just as risky as selling short the futures but if the market stalls or moves lower the only value the out of the money calls have is time. The time erosion factor chips away at the value as the clock ticks toward expiration (at which time all out of the money options become worthless).

Sugar Trade

Sugar – Here is an option spread. That is buying the Oct 15 calls and selling the Oct 16 or 17 call options (against the 15). This strategy does have a limited profit potential. It also has a limited loss potential as well. I do not recommend legging in or out of it. Enter both sides at the same time, then exit using the 50% rule and a trailing stop, exiting a portion of the entire spread.

Last weeks “Black Hole”

After some investigation, now we are hearing that last week’s sharp and quick sell off (the “black hole” as I call it) was not due to a “Fat finger” error.

I never thought it was due to that either. In fact, I mentioned this in my reports as well. In my opinion this was a ridiculous explanation. The fact is, we can’t find any one single event to pin the cause on (the so called smoking gun). But there is always a “cause and effect” relationship. So what was the cause?

As I was saying my recent reports, computers and computer programs do exactly as programmed, and that’s all they do. In this case, these same systems that we all rely on were in my opinion the main culprit (cause) of last week’s sudden sell off (into a black hole as I have used as an analogy). The black hole itself occurred due to multiple and unusual economic sensitive events.

The electronic systems and computers did not steer the market around the black hole however, rather they steered directly into the heart of the back hole!

And that’s why the markets sold off as they did.

Computers and computer programs can not think or reason like a real person, and sometimes you need a real person that can reason through an unusual event or condition. I believe this is the main thing we will learn from this. That is, you can not always depend on computers (electronic exchanges and electronic trading programs). Sometimes a person or persons with knowledge and understanding is needed. Just like in airplanes. Autopilot can’t do everything. If something extremely unusual occurs, the pilot will have to take over and manually fly the aircraft.

The Stock Market

Employment data stronger than expected was not enough to prevent the stock market from moving lower at this point.  Ahead of the weekend there is just to much nervousness, particularly in Europe.  Next week will likely begin volatile as well.  The VIX (volatility index) is already spiking to a new high for this move, up to 40 already!    This indicates the level of fear is sharply on the rise.  Right now the fear is that anything can happen over the weekend and we could drop sharply on Monday. Thus traders and investors are taking positions off the table ahead of the weekend. However, keep in mind anything can happen next week, and that includes a sharp bounce as well.

Equities

Simultaneous electronic orders to SELL sent equities spiraling sharply lower in the last hour!  How and why?   Today traders, large and small, individual and institutional, exist on every corner of the planet and each trader holds the power to send immediate orders to buy or sell!  And many are trading leveraged instruments as well!  Traders can send orders to the electronic exchanges at the speed of a click of the mouse!  When the masses panic, the orders to sell can quickly overwhelm the system and in a market without an “up-tick rule”,  sell orders can continue to be executed as prices drop and drop, even without the slightest bounce.  It takes buyers to come in and finally provide a floor for the price. Otherwise, the sellers will send prices sharply lower very fast!   I suspect that’s a larger part of what happened in here today.