1/15 Morningline: The Inflation Puppeteer at Play

The price of the longest-term Treasury bonds, issued for periods of 20 and 30 years, gapped up by 3/4 of a percent this morning. Since trading opened yesterday, the bonds have risen 1.6 percent.

The Consumer Price Index, released today before the start of trading, showed very low inflation. Interest rates on bonds are typically a premium over and above the inflation rate. With expectations of lower inflation, the market prices in lower rates when selling bonds by lower the bond price.

The CPI is a like a gigantic global puppeteer. It pulls one string, and all of the world's economic arms and legs and heads spring into motion. . . .

1/14 Morningline: A Nietzschean Moment: Awake!!

The stock market, gold, oil, bonds -- long-term Treasuries and corporate junk bonds alike -- all are trading within a very, very narrow range this morning. It's as though someone put a magic sleeping potion in investors' breakfast cereal.

Even the Big 3 foreign exchange currencies -- the dollar, yen and euro -- are relatively quiet at the open.

Things are so quiet, and dull, and risk-free for the moment, even the  financial crisis inquiry commission would approve.

It's a Nietzschean moment: Sleeper Awake!

This morning's numbers . . .

1/13 Morningline: Blue Chips pause; fear, loathing and bullishness

Oil (USO) gaps down to 0.8% below the prior close. The other indicators and the currencies do little at the opening, as though exhausted by yesterday's drama.

Yesterday's potential bear signal on the blue chips (SPY) disappeared at the close of the day. So they remain in bull mode, and given the lack of follow through to yesterday's declines, my bias on blue chips remains bullish, but with a lot of caution, fear and loathing. . . .

Closed VALE -2.1%

I've closed my bull positions on VALE with the stock down 2.1% and for a 17.6% loss on the options. The price gapped down this morning past support.

The position, a February bull put spread (p30/-p32), was open for six calendar days.

Topics: Vale S.A., mining, iron ore

1/12 Morningline: Volatility gaps up, bear signs on oil and dollar/yen

Volatility (VIX), the fear index, gaps up by 6% after seven days of decline.

Blue chips (SPY) gap down a bit and bounce off of the day-before-yesterday's opening. The macd, stochastic, money flow index remain bullish. The price withdraws from the upper Bollinger band.

Treasury long bonds (TLT) gaps up by 1.5% and shows a potential pps bull signal, unconfirmed by the macd, stochastic, trend, mfi. The third pps signal in six days.

Oil (USO) shows a potential pps bear signal, as the stochastic dips below the 80-line. The 20-day moving average bumps up toward a cross of the ma50 -- a bullish sign -- and the macd and mfi remain in bull territory.

The yen-per-dollar currency pair (USD/JPY) whipsaws, with a pps bear signal on a decline of about 1%, after the second test of a top. The macd crosses below the zero-line, and the stochastic is plunging headlong toward the 20-line. This morning's decline pierces the Bollinger band middle line. All bearish for the U.S. dollar. See Bloomberg's trade deficit report. This is the third pps signal in six days with mainly sideways price movement.

The dollars-per-euro pair (EUR/USD) opens at the top of yesterday's range and stays put.

Among holdings: A pps bear signal on MRVL and VALE, both bull positions. MRVL remains above support, and VALE gapped down past very near term support.

1/11 Morningline: Euro Breaks Out; Fear Takes a Holiday

The euro per dollar currency pair, EUR/USD, shows a potential pps bull signal as it breaks out of an 11-day trading range. It will become the current signal if it still exists at the close of the U.S. markets. The dollars per yen, USD/JPY, pair shows no corresponding signal or movement.

The fear index, measuring volatility, gaps down by 6.5% and then falls further. Blue chips open higher and then, counter intuitively in light of the VIX, fall back into yersteday's trading range.

Gold gaps up by 1.8%.

No new signals on the indicators or holdings.

The numbers . . .

1/8 Morningline: Employment Numbers Savage Markets -- Not!

I woke up this morning to National Public Radio reporting a loss of 85,000 jobs in November, in the usual doomday tones that accompany such stories.

Blue chips (SPY) opened this morning -- well, unchanged, in the middle of yesterday's trading range. Illustrating once again that the monthly employment figures are a trailing indicator, showing where we were, and the markets are a leading indicator, showing where we think we'll be.

The dollar  retraced nearly all of yesterday's gains again the yen (USD/JPY), pulling back from resistance set in December and in recent weeks. The decline came the day after a pps bull signal.

1/7 Morningline: New signals on dollar-yen, semiconductors

A new potential pps bull signal on the yen per dollar (USD/JPY) currency pair, on the second day following a bear signal. A potential pps bear signal on SMH, the semiconductors etf, a bull holding.

Blue chips (SPY) remain in bull mode and open barely changed from yesterday's narrow trading range.The price, trending sideways the last three days, is pulling away from the rising upper Bollinger band.

Corporate junk bonds (JNK) continue their price rise (interest rate decline)for the fourth day, as the price marches along an uptrending upper Bollinger band.

Opened VALE bull position

I've opened a February bull put spread on VALE, with the 30 strikes as the long leg and the 32s as the short (p30/-p32), for 0.89 credit with the underlying at 32.19.

The stock clearly broke out of a three-month-long sideways pattern that was a pause in an uptrend that began nearly a year ago. The next real resistance is around 37, so there's around 15% worth of potential on this one.

Support is at 30, where I'll set a stop loss that's 4% below my entry level.

At expiration, the position will be profitable if the stock is above 31.32, and it hits max profit at 32.

All of the indicators I follow are aligned in bull mode on this stock.

Topic: Vale, Brazil, mining

1/6 Watchlist

Treasury long bonds (TLT) are declining in price, contrary to yesterday's pps bull signal. Otherwise, all indicators are in line with the signals noted in the Morningline.
The dollar is rising against the yen (USD/JPY), contrary to yesterday's pps bear signal, but remains nearly contained within the prior day's range. The stochastic is in bear mode, and the macd is heading that way. The 20-day moving average is rising and is above its 50-day counterpart.

The euro-dollar pair (EUR/USD) is in the ninth day of a sideways move.

My holding are marking time, except for MRVL, which shows a small rise. My positions is a bull put spread (p20/-p22.5).

Also interesting among the high-volume . . .

Closed VALE -5.9% (-27.4% on the options)

I've closed my bull call spread (p30/-p31) on VALE at 27.49 on the stock for a 0.85 debit on the options.

The stock was down by 5.9%, and the loss on the options was 27.4%, on a position lasting three calendar days.

12/17 Watchlist

A new bull signal on Treasury long bonds (TLT), and a bear signal on gold (GLD). Otherwise, nothing to add to this morning's discussion of the indicators.

No new signals on the currency pairs (EUR/USD and USD/JPY)

Among holdings:

Three January bull positons -- AET, HPQ, VALE -- have pulled back from peaks. I'm thinking of closing the positions.

LVS, a January covered call, is showing a bear signal, and prices remain in a sideways range.

KO, a January iron condor, has moved back in to max profit territory.

UNG, my December covered call, is trading well above 10. The call is a 9 strike, so the position will be exercised by whoever bought the call.

High-volume stocks and etfs priced $20 and above:

• QQQQ, bear signal, uptrend
  
• EEM, bear with a downward gap, uptrend
  
• JPM, bear, downtrend, but already at resistance
  
• MSFT, bear, uptrend
  
• MJN, bear,sideways trend, on the fourth day following a bull signal; confused puppy mode
• FCX, bear, amid a sharp pullback following an uptrend, the day following a bull signal; drunken sailor mode
• PG, bear, uptrend, on the fourth day following a bull signal (no more metaphors)
  
• FDX, bear, uptrend, on a gap down following earnings
• VWO, bear on a gap down, uptrend
  
• MOS, bear, sideways with some deep fluctuations
  
• DTV, bear, uptrend
  
• IVV, bear, uptrend
  
• XLI, bear, uptrend
  
• XLV, bear, uptrend
  
• VOD, bear, uptrend
  
• AXP, bear, uptrend
  
• GPS, bear (but no gap), trend change (maybe) from up to down
  
• DIA, bear, uptrend
  
• COF, bear, sideways following a strong uptrend
  

So, all in all, a fairly broad switch into bear mode. A lot of the stocks, not just those noted above, showed whipsaws from bull to bear the last few days. With the holiday trading week coming up, closing questionable positions is the prudent course.

JPM is the only trend following trade  in the batch, and since it is already at resistance, I don't find it to be compelling.

No covered call scan today.

12/17 Morningline

The November leading economic indicators report will be out shortly.
This is my favorite economic indicator, because it's forward looking and so matches the mindset of the markets. October was the seventh month to show an increase.

Meanwhile, to the indicators:

• Blue chips (SPY) opens at 110.72 on a gap downward, entered bear mode at close on Dec. 8 (at 109.61)
• Fear index (VIX) gaps upward 21.79, bear, Dec. 11 (21.59)
• Treasury long bonds (TLT) 92.5 on an upward gap, bear, Dec. 1 (95.25)
• Gold (GLD) 109.47 gaps downward, bear, Dec. 4 (113.75)
• Oil (USO) 36.59 no gap, bear, Dec. 4 (38.33)

Mainly, it's a gappish sort of day.

Currency pairs:

• Dollars per euro (EUR/USD) 1.45, bear, Dec. 4 (1.49)
• Yen per dollar (USD/JPY) 89,76, bear, Dec. 9 (87.86)

Holdings, December expiry:

• UNG, covered call (-c9) 10.20, bull, Dec. 7 (9.22)

Holdings, January expiry

• AET, bull put spread (p31/-p32) 33.56, bull, Dec. 8 (30.47)
• HPQ, bull put spread (p49/-p50) 50.94, bull, Dec. 9 (49.95)
• KO, iron condor (p50/-p52.5/-c57.5/c60) 58.26 and falling, bull, Dec. 1 (58.08)
• LVS, covered call (-c16) 15.55, bull, Dec. 14 (16.31)
• X, bear call spread (-c40/c41) 49.26, bull, Dec. 9 (46.74)
• VALE, bull put spread (p30/-p31) 28.27 on a gap down, bull, Dec. 14 (29.20) 

VALE is showing a new bear signal on a gap down but with a rising price since the open. It will bear watching.

KO is dropping back into profitable territory on my iron condor.

(Signals derived using Person's Proprietary Signal applied to daily charts.)

12/16 Morningline

The Consumer Price Index rose 0.4 percent, a fraction of the Producer Price Index's 1.8 percent rise announced on Tuesday. So, we can all refrain from a full-scale inflation panic for at least another month.
The Federal Open Market Committee will make their statement on rates and the economy at 2:15 p.m. Eastern (11:15 a.m. Pacific).

December options expire on Friday, which is a Quadruple Witching day,  sort of a speculators' Halloween. Be sure to lay on a supply of candy for any frazzled traders that come trick-or-treating at your door on Friday.

No new signals on the things I look at.

The indicators:

• Blue chips (SPY) opens the day at 111.8, entered bear mode at close on Dec. 14 (at 111.87), barely changed from yesterday
• Fear index (VIX), 21.5 , bear, Dec. 11 (21.59), falling
• Treasury long bonds (TLT), 91.93, bear, Dec. 1 (95.25), at the top of yesterday's trading range.
• Gold (GLD) 110.83, bear, Dec. 4 (113.75), rising
  
• Oil (USO), 36.08 , bear, Dec. 4 (38.33), rising
  

Currency pairs:

• Dollars per euro (EUR/USD) 1.45, bear, Dec. 4 (1.49), rising and within yesterday's trading range
  
• Yen per dollar (USD/JPY) 89.6, bear, Dec. 9 (87.86), at the top of yesterday's range.
  

Holdings, December expiry:

• UNG covered call (-c9), 10.22, bull, Dec. 7 (9.22), at the top of yesterday's range
  

Holdings, January expiry

• AET bull put spread (p31/-p32), 33.54, bull, Dec. 8 (30.47), slight gap up and rising
  
• HPQ bull put spread (p49/-p50), 50.9, bull, Dec. 9 (49.95), at the top of yesterday's range
  
• KO iron condor (p50/-p52.5/-c57.5/c60), 58.95, bull, Dec. 1 (58.08), within yesterday's range (and 1.20 above max profit at expiry)
  
• X bear call spread (-c40/c41), 48.95, bull, Dec. 9 (46.74), at the top of yesterday's range
  
• VALE bull put spread (p30/-p31), 29.04, bull, Dec. 14 (29.20), within yesterday's range

(Signals derived using Person's Proprietary Signal applied to daily charts.)

12/15 Watchlist

Indicators, currency pairs and holdings are showing no new signals since the Morningline.
Mobile phone companies showed bear signals after reports that Google plans to enter the cellphone hardware and service business. Among the high-volume stocks and etfs:

• BBY, bear signal on a gap down following earnings guidance; the stock has shown three signals in five days. The stock has been on an uptrend since June, so a bull signal after a pullback would be playable.
  
• VZ, bear, uptrend since October
  
• T, bear, uptrend since July
  
• GILD, bear, pretty much sideways since February
  
• XLE, bull, downtrend since October
  
• BK, bear, sideways, mainly, all year
  
• FLR, bull, downtrend since July
  

The number of new signals is something of an indicator. Compared to yesterday, today is a yawner.

BBY, VZ and T  might be playable on the next bull signal, if accompanied by price/volume confirmation, but the bear signal is counter-trend, something I'm avoiding these days.

The rest are either counter-trend or stocks going nowhere, and so don't pique my interest.

Looking more closely at my holdings:

UNG, my remaining December option, just keeps rising. In hindsight, better to have held the shares rather than hedging with a covered call (-c9). Go figure.  Even so, I'll profit from the covered call when the shares are drawn away from me after the option's last trading day, Friday.

At current prices, it would cost net 0.14 to exit UNG and the covered call, against a net 0.39 profit if I wait until expiry.

The bull put spreads:

• AET (p31/-p32)  is bumping up against resistance set last January. I'm holding for now but will close at the first sign of a price pullback. 
• HPQ (p49/-p50) has hit resistance set in November, and I'll be fairly hair-trigger about closing that position as well.
• VALE (p30/-p31) is trading within the range set yesterday, when I opened the position

X, a bear call spread (c41/-c40) is toying with upside resistance set in September. If it bumps through then I'll close for a loss. The stock flipped into bull mode on the fourth day after I opened the position.

KO, an iron condor (p50/-p52.5/-c57.5/c60), sits at a resistance level set in May 2008 and remains above max profitability, proving yet again that an iron condor has double the risk of beaking your heart. It can be unprofitable on both the upside and the downside.

12/15 Morningline

A new bull signal is showing this morning on USD/JPY, the third signal in nine trading days. The price, now 89.94, remains below resistance at about 90.20 and is trading within Friday's range.

Treasury long bonds (TLT) gapped down in price after the Bureau of Labor Statistics said the producer price index increased by 1.8%. The TLT decline prices in a likelihood that the Fed will increase interest rates sooner rather than later to stave off inflation.  (Rule of thumb: Higher interest rates, lower bond prices.)

The Fed is meeting today and will make an announcement on Wednesday, at 2:15 p.m. Eastern (11:15 a.m. Pacific).

Indicators:

• Blue chips (SPY) opens at 111.46, entered bull mode at 111.87 on Dec. 14, but with a suspicious price bar that leads me to believe that it's a spurious signal. Prior, SPY entered bear mode at close on Dec. 8 (at 109.61)
• Fear index (VIX) , 21.09, bear, Dec. 11 (21.59)
• Treasury long bonds (TLT) 91.57, bear, Dec. 1 (95.25)
• Gold (GLD) , 109.94, bear, Dec. 4 (113.75)
• Oil (USO), 35.62, bear, Dec. 4 (38.33)

Currency pairs:

• Dollars per euro (EUR/USD) , 1.47, bear, Dec. 4 (1.49)
• Yen per dollar (USD/JPY) 88.62, bear, Dec. 9 (87.86), but with a new bull signal showing this morning, confirmed by an intra-day price rise.
  

Holdings, December expiry:

• UNG, covered call (-c9) , 9.99, bull, Dec. 7 (9.22)

Holdings, January expiry

• AET, bull put spread (p31/-p32) 32.13, bull, Dec. 8 (30.47)
• HPQ, bull put spread (p49/-p50) 50.52, bull, Dec. 9 (49.95)
• KO, iron condor (p50/-p52.5/-c57.5/c60) 59.15, bull, Dec. 1 (58.08)
• VALE, bull put spread (p30/-p31), 28.89, bull, Dec. 14 (29.20)
• X, bear call spread (-c40/c41) 48.18, bull, Dec. 9 (46.74)

(Signals derived using Person's Proprietary Signal applied to daily charts.)

Opened VALE at 29.21

I've opened a January bull put spread (p30/-p31) on VALE at 29.21 for 0.64 credit. It his max expiration profit at 31 and so must bump through resistance at 29.93.

12/14 Watchlist

Among the indicators, blue chips (SPY) continues to show a bull signal, but I'm not sure that I trust it. The chart showed a drop at the open from 111.87 down to  105.48, and then a quick recovery back up to slightly below 112. I won't act on the signal until I see some price confirmation.
Otherwise, there are no new indicator or currency signals.

New signals among high-volume stocks and etfs are big on energy, emerging markets, and additions to the S&P 500 index. I find VALE to be the most interesting, because it has the clearest trend, and QQQQ, because of its position as one of the top two etfs:

• VALE, bull, uptrend since March, pause since mid-November. Wonderful trend. 

Others:

• XTO, bull on a sharp gap upward on news. Exxon-Mobil announced it would take over XTO Energy.
• QQQQ, bull, uptrend since March, sideways since late November.
• EEM, bull, uptrend since March, sideways since mid-November.
• CHK, bull on a gap up, downtrend since early November
• MSFT, bull, uptrend since March, sideways since late November
•  OSK, bear on a decline from 41.42 down to 33, on news about an Army contract
• WMT, bear, up since early october, sideways since early December. Confused puppy mode: It's the third signal in seven trading days.
• XLK, bull, uptrend since March. The fifth signal in 15 days; also a confused pup.
• IYR, bull, uptrend since March, sideways (with some good volatility) since early September.
• MJN, bull, uptrend since April, sideways since August, and a fair dinkum drop from late September. It was added to the S&P500.
• PM, bull, up since January, sideways from early September.
• IWO, bull, up since March.
• HAL, bull, down since October
• DVN, bull on a gap up, sideways since October with a drop this month.
• COP, bull, sideways since October.
• PG, bull, up since March. This issue has a wonderful uptrend but has been giving some confused puppy signals since September. So, I'd be prepared for a disappointment on this one.
• APC, bull, downtrend since September.
• EOG, bull on a gap up, sideways to down since September
• SWN, bull on a gap up, down since October
  

Follow-up:

• ORCL gapped up through resistance today after showing a bull signal on Friday.
• V gapped up through resistance today after showing a bull signal on Thursday. It was added to the S&P500.
• APOL rose through resistance after a bull signal on Thursday.
• BBY blew past resistance after a bull signal on Friday.

No new signals on my holdings.