How We’ll Know if The Fed Made a Mistake By Not Hiking. #macro #stocks $TF_f $RUT

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

$TF_f’s price will tell us a lot about this market as a whole. If its price get’s below these levels it reaffirms the markets intentions to go down. But before we get to the chart, let me ask that when you look at this chart don’t just see bars and numbers and lines. Try to see people — acting in what they think is in their best interest. Whether these people are right or wrong doesn’t matter. The fact that they’re acting this way speaks volumes. A lot of times the market sees what we don’t see. I don’t know, but these levels look key to me because If price breaks below these levels it says the Fed made a mistake. But first, the levels, then; why I say it says the Fed muffed a rate hike. Here’s a few $TF_f charts:

$TF_f Wekkly chart showing a huge Megaphone looking formation, more on that later.
$TF_f Weekly chart showing a huge Megaphone looking formation, more on that later.


Daily $TF_f chart with the 1100 are marked with a red line and the 1080 are down to recent lows of $1071.6.. The 2014 lows of $1041 would be the target if recent lows broke.
Daily $TF_f chart with the 1100 are marked with a red line and the 1080 are down to recent lows of $1071.6.. The 2014 lows of $1041 would be the target if recent lows broke.


If this happens, it would say the Fed may have made a mistake by not hiking. If price can break below recent lows It’s risk off like shit.

This is what you were trying to avoid, right? Let me guess, it would have been worse?

But everyone says twenty five basis points don’t matter. The econ textbooks say you shouldn’t hike in this environment, but they also use the phrase “all things being equal” a lot when all things are never equal in the real world. It’s rare that the price of any given thing is equal.

All things are definitely not equal right now. The Fed took some pressure off emerging markets, but it’s unsustainable. They must go through the pain sooner or later. We always choose later, but when “later” arrives we want a even later “later.” Ha, that’s funny because looking at GBP/USD and EUR/USD’s price action it seems like had the Fed hiked it would have tanked both of them making buying U.S. assets a must; reigniting the Euro carry trade. It may not have made stocks go gangbusters to the upside, but it would have put some buying pressure under stocks. This way there’s no reason to buy U.S. stocks right now right here.

I understand the Fed doesn’t want to pull the trigger too soon, but it will always be too soon to for a bunch economies around the world.  Why did we do all those stress tests? I get that the Fed Funds rate futures pricing in a 30% chance of a Fed hike means 30% of that (huge ass) market is ready for a rate hike. That means 70% of the market would feel pain if the Fed hiked. But I don’t believe the market believes the Fed will ever hike. Maybe over lunch between Fed officials and bankers they’ll give them the heads up that they’re about to hike and the Fed Funds futures market will price in a hike, I don’t know.

It is easy for me to say the Fed should have hiked, I’m not the one who would be in the hot seat if that 70% in pain does something irrational (with so high a percentage that’s a given) which leads to some unforeseen event. But the Fed’s obsession with inflation is blinding it from seeing the bigger picture. By waiting they only guarantee that when things are better their rate hike will dampen growth then. They’re in their own matrix. A world they created where the can’t reach their targets because of what they promise will happen once those targets are reached.

The future looks darker because the Fed will have to raise rates one day — in the future. Low interest rates equal low returns after a while. Bill Gross added onto what Ray Dalio said on Bloomberg T.V. It amounted to: Rates must rise in order for returns to rise in the future. The longer you wait the farther into the future you push the recovery from the normalization process itself. You could argue all the worlds problems are attributable to the Fed’s normalization of policy. China’s problems look like a lagged effect of the end of Qe. I don’t know. I do know the price of $TF_f needs to hold the 1140’s or 1100 is on deck. a break of 1100 gives a 1080 target. A break of 1080 gives us a 1040 – 1041 target. If 1041 can’t hold 1126 is on deck. a lot of “if’s” but let’s just call it “data dependent.” analysis. Ha! Thanks for reading, hope this helps some one,and happy hunting this week traders!


No Days Prove The Austrians Right More Than Fed Days. #econ #macro

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

At Austrian Economics’ core there’s a simple principle that anyone can understand: There Are No Free Lunches.

It says:

  • you must first produce something of value
  • keep producing and selling it
  • save your money
  • make good investments; rinse and repeat.

In Austrian economics credit is a byproduct of production, not the other way around. The entrepreneur is praised in Austrian economics because he takes a chance knowing full well that there will be no bailout if he fails. But in Austrian economics it’s entrepreneurial innovation that grows the economy, so, the entrepreneur holds a high status.

In Austrian Economics there’s no sense in bailing out banks because it says all you’re doing is wasting time and money trying to avoid the inevitable. Austrian economists say the sooner you let these banks die the better, because once you stop intervening in markets you won’t have to get back to normal. And since you largely still have the same problems you had in the first place, you can save time and money dealing with problems sooner. Austrians say that propping up bad banks is bad businesses. In an Austrian economy the CEO’s of the big banks would be starting at the bottom after the shit they pulled leading up to the derivatives driven crisis of 2008.

Imagine Jamie Dimon working at some small bank in New Jersey because him, and everyone else at J.P. Morgan lost their jobs because there is no longer a J.P. Morgan bank. It sounds tragic. It is tragic, and the crisis was big enough to make it happen. But theirs a flip side. Imagine all that talent and schooling scattered and humbled. It’s like reseeding the economy. It would be so bad it would force the brightest and the best to dig deeper and produce. Talk about getting out of your comfort zone. It would allow a wider range of people to learn from the great Jamie Dimon, as he would probably build a small bank into a big bank anyway.

When it comes to the Fed.

Right now I’m watching Fed chair Janet Yellen read her prepared statement. The Q&A is what I live for, though. These days, the Austrians are painted as Fed haters. Dr. Ron Paul was on Bloomberg T.V. today and was asked what advice he would give the Fed. His answer, for the most part, was: Let the market decide the interest rates.

Tom Keene of Bloomberg T.V., added a qualifier to the question that the advice be outside the advice to End the Fed. He did that because Dr. Paul’s book “End The Fed” lays out the Austrian Economic case for ending the Fed. I highly recommend reading that book.  The civility running through the book isn’t what you hear about, but it should be. Austrians don’t hate the Fed. Austrians just believe that it’s impossible for a small group of people to figure out what’s right for 300 million people.

2015-09-17_1755Fed chair Janet Yellen has just concluded her Q&A session and it illustrates what the Austrians have been saying forever: a small amount of people can’t figure out what’s right for a large group of people. Yellen probably isn’t a bad person, but she’s on a mission impossible. There are too many variables.

People are too irrational at the times when most assumptions assert market participants will be most rational. At a time when interest are zero for six years you should see wild economic expansion. Cap Ex spending (capital expenditures by companies) should be hitting all time highs with the stock market. But once you “intervene” in markets it becomes rational to do things that would seem irrational in normal times (i.e. negative rates.) At this point it makes more sense to wait for normalcy to return to markets before deploying cash in anyway that isn’t cost beneficial like hell.

This means the Fed could never get to their 2% inflation target. When the Fed will admit that is anybody’s guess. For now, they’re holding onto hope they’ll somehow magically reach their target while still paying interest on bank reserves. Good luck with that.

In the mean time, the economy is on hold until the Fed sees what it wants to see in order to act. People (companies) can’t plan for the future until they can see normalcy in the present. While we would need some sort of regulation, without a Federal reserve system all these problems would have been taken care of early in the crisis. Without a Federal reserve system we probably wouldn’t have had a crisis in 2008 to lead to all this market intrusion we now see. We would have had other crisis, but there wouldn’t be a group of people helping their friends stay afloat to the detriment of many others.

It’s not personal, but I believe the Austrians when they say the Fed will always make huge mistakes because it’s impossible to get the real interest rate right without letting the market tell you what it is. The Austrians have said this from the beginning. The world economy is proving them right. The questions at the press conference were great, been watching the Q&A for about two hours now and I’m still in awe that the Fed chair can speak with such confidence after being wrong on her forecast (and revised forecasts!) for the past three years. The Austrians aren’t mad at her, though, they’re saying no one can get this right. There will never be a “right” time to raise rates after you’ve held rates this low for this long. Markets closed down in spite of the Fed keeping its exceptionally easy monetary stance. I’m not surprised, but I am convinced the Fed has no idea what it’s doing. The Austrians said this, though. When will the world listen?

Why The Fib Spiral Matters to Market Prices. $SPX $SPY

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

When you look at how nature grows from the very small to the very large in the same proportions throughout the whole growth process, it says: this is significant. That significance is seen nowhere more clearly than in the movements of markets. That process can be seen nowhere clearer than in the Fibonacci spiral.

I stumbled across Fibonacci analysis in my market studies. Like many students of the markets, I struggled to make sense of why it should matter. Why should these proportions have any bearing on any markets? The connection is simple once you look at the market for what it is: a crowd of people (for the most part) that together make up one organism we call The Markets.

The cells inside of a seashell make up the shell itself. They probably don’t know what makes them grow in certain proportions, they just build onto what cells before them built. All of them just going about their business. The result is a beautiful reminder that in the chaos there is order.

It’s the same with markets.

So when we see the seashell, and every other living or non living thing in the universe following the same rules; we have to think the market, a living organism will follow these rules also. Not perfectly, as not even the seashell is perfect held up to the math. But it should follow the rules — for the most part.

Applying this knowledge to the market is key. Knowing that it’s not just about drawing a Fibonacci retracement between tops & bottoms is key. Knowing that the market is chaotic, like every other organism — is key. It’s really about chaotic growth. Going back to the seashell, look at how the spiral expands as it grows:


Under a microscope the cells that grew this seashell looked chaotic during the process. Bouncing all around seemingly random. The market looks the same way. Stocks, bonds, futures, currencies, all seemingly going haywire. But if it’s an organism it will follow the rules. It won’t look like it’s following the rules, though. It will look chaotic. No one can argue against the observation that markets do look chaotic. The proportions that a shell grows at makes get wider and wider as it grows. These same proportions are what those Fibonacci retracement lines represent. When market prices are expanding, in any direction, it’s growing. It follows the same rules every other organism does. It grows, or expands in the same proportions as the seashell. The distance between the Fibonacci lines are these same proportions.

These distances you see between each line are the proportions in which all things grow. A picture to illustrate what I mean:


These white lines and arrows point out the distance between each Fib retracement line. These lines make up a grid. They are misleading to what the Fib Grid really is because they’re in percentages, which is great for utilities’ sake. But if you look at the white lines you’ll see a pattern. The distance between 0.0 up to 23.6% is the same distance as between 78.6% and 100%. Or put another way: What happens at the bottom happens at the top. And it goes this way as you move up or down the Fib Grid. When you extend the grid in any direction you’ll see the distances get wider. The spiral is a great reminder of that.

The market’s price expands while it goes in both directions. We have clear proof (on this next chart you can see it if you look) that price expands in distances, or in proportion to the Fib Grid.  Not perfectly, but for the most part.

Before I get ahead of myself: here’s what price looks like while it’s expanding to the downside; hopefully everyone will understand what price expansion means from this:


It’s the measuring of this expansion that tells us what proportions the market should grow/ expand at. Over time some of these levels, or areas, become more significant than others. This is partly how we develop price targets using Fibonacci ratios. Everyone talks about how price retraces according to these ratios, which is important, but not many speak of how price expands according to these ratios, and how you can use these measurements to come up with price target areas.

Even less speak about the chaotic nature of the markets and what that means. Simplified, the market’s chaotic nature means: price won’t ever move in a straight line. This means if price is going down a lot it won’t be a straight line down. There will be times when price actually looks like it’s going to reverse higher, only to continue on it’s downward march. It also means those lines in a Fibonacci retracement should be looked at as areas, not definite lines in the sand. Because the markets chaotic nature means it is easily affected by external forces. Good or bad. If these forces are strong enough the effects can last a long time.

This is only scratching the surface of why the Fibonacci spiral matters so much to traders. It’s also not a very in-depth explanation of how to use Fibonacci ratios to trade the markets. I didn’t even mention the Fractal nature of markets (but that’s super apparent in the spiral as its proportions stay constant no matter the size.) That’s cool, because before you use Fibonacci ratios to trade you need to understand why people use Fibs to trade at all. This builds the confidence in Fibs you need in order to trade them better. It’s not easy to trust Fibs, but if you know everything in the universe follows the same rules it get’s easier.

It only gets easier though if you put in the work. In closing: The Fib Spiral matters because it’s the best reminder that there is order in what looks like chaos. I’ve been going crazy on twitter about a show called “The Code” on Netflix. I think it’s a must watch. I hope this helps someone. Thanks for reading, and may the force (the Fib) be with you!

Why $AAPL Must Go Down Before It goes Up.

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)


That chart didn’t say it all.

It said a lot. it didn’t say that this is when savvy investors who want to build a large long term position in $AAPL would want to start building it, though. When price is going down in a stock for no reason company specific. $AAPL is a money machine. The amount of cash the company generates is so much that if it goes down a little it’s still so much more than 99% of it’s competitors. Their competitor’s revenue is going down a little also, for the most part. But that’s the fundamental aspect, price is another story.

The profit motive drives people to realize gains where they can. Execution isn’t the best in times of stress. That $AAPL low was made in a real time of stress. So these two things make that $92 low into a marker in the minds of the $AAPL market.

It represents so many things to so many people that it is significant now. Price history has been made. Price will test that low. It has to; for psychological reasons, and practical reasons. People know it traded there recently, there’s a chance it could trade there again. Savvy market participants understand– and wait for lower prices. I use technical analysis to give me a template of what price may do in the future. I’ll talk about that in a minute, but first; my $AAPL levels:


$85.13 is not out of the question for this stock. In fact, I think price may range between $103 and $85.13, or around those areas, for the medium term. Short term: I think we test the recent low.

Do what you will with these thoughts. But remember they’re just that: thoughts. This is all just my best attempt at understanding the markets.

Thanks for reading, and may the force be with you traders!

A S/O To Trend Trader #1: Charles Dow. #trendfollowers #ta $dji $djt

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

2015-06-01_2201Charles Dow is the father of technical analysis. Understanding the basic tenants of his theory is to understand the basic tenants of all technical analysis.  At first glance the basics of Dow Theory seem like things us traders should know by now. Yet, we still see traders violating some of these tenants (I am not without guilt.) So a reminder should always be welcomed.

Dow said:



I love that quote.

I think it encompasses the whole of technical analysis. Dow went on to say the most import movement is the “main movement,” and the most important thing to understand in order to be successful in trading stocks or any market is: determining the directional trend of this main movement. Higher swing highs and higher swing lows, and vise-versa. That sounds super simple, but how many times have you seen people become really bearish before seeing major swings make lower lows AND lower highs? I’ve done it.

If you’ve read the book on Jessie Livermoore called Reminiscences of a Stock Operator, (get the audio book!) then you may remember the part about the old guy that always said “it’s a bull market, ya know!” and how at first he thought the guy was crazy. Jessie thought it was worthless for him to keep saying this. He later learned how important it was to keep in mind what direction the main movement was in. Read (or listen to!) that book if you haven’t yet; re-read it if haven’t read it in a while.

But Dow’s trend theory is just as important as his index theory. But we hear most about the index theory. His index theory is brilliant. The basics of it is the biggest companies on the biggest markets will tell us something about the wider market. Knowing of business inner workings he knew that prices of the biggest companies who transported goods would lead the prices of the biggest companies responsible for payment for these goods. A pick up in transportation profits would lead to a pick up in goods makers and sellers; industrial’s profits, and stock prices, and vise-versa.

While starting what would become the Wall Street Journal, he made an index of each. He was old school, he made his charts by hand with big ass pieces of paper and pencil or pen. He never put it all into a theory. Men after him would do that.  There are people who are a lot more qualified than I to even go over the basics of what is now called Dow Theory, but I know who can. But I trade Forex with an index mind frame. Like, how US Dollar pairs trade relevant to each other. He used the price of one instrument to trade another. that was genius. He was the first guy to mention point & figure charting. Dow was just a beast, and should be honored.

If we peal back the layers to his theory we find the foundation of all modern Technical Analysis (TA.)

You wanna know it all? Start pealing that onion! Ha!

I found a cool looking book while doing research for this post, looks like a good one:


His wikipedia page looks pretty accurate also. A look back at where all this TA stuff comes from gives us some confidence that we’re not crazy. Smarter people than us made some very lasting impacts on the world markets using this stuff. This dude died in 1902 and you still hear his name every single day: The Dow.

It was his theory that predicted this most recent crash by months! I sometimes write posts about what I’m observing through a Charles Dow lens. Or some other great market observer from the past because I think it’s important to stay in tune with what has lasted/ worked for so long. In a way I say all this to say: The Dow trend has changed folks. We have lower lows and lower high’s, and the lows were made on big volume. The type of volume that doesn’t just turn around and buy what they just sold. Not with the global backdrop looking the way it is.

The old guy from Jessie Livermore’s day would now say: it’s a Bear market, ya know! Every day, until the trend changes. Outside of all the news stories and pundit harangues there is price. It can’t be manipulated for long. It’s the only thing about the markets that can’t keep going without telling the truth along the way. I place so much emphasis on it for this reason. I think all TA’s do.

Anyway, thanks for reading! Good luck and may the force be with you in these markets traders. I hope this helps you along the way!


Oil Action. $CL_f. $eurusd $ecb #china #dollar #fed #cb’s are #cp’s#macro #thoughts

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

$CL_f’s price slide is spectacular. This is what price looks like when sellers rule the market/ control the market:


Price could snap back up to the $41.63 area but I would expect it to fail if it does, if it try’s it at all. Gas prices are down like shit tho. Which means real wages are up like shit – kind of. Fed rate hike threats create a better opportunity for cash outside the market when the hike occurs. Meaning it kind of makes more sense to be in cash for people who have big cash. So people raise cash while making shopping lists of the best stocks: Good companies when the market is throwing out babies plus the bath water.

With blood in the streets as they say tho.

Is Oil at the “blood in the streets” stage? Price says no. There’s a glut because countries need money right now. The big oil producers are going H.A.M. (hard as a muther fugger) on the production side. Iran is producing more for their own domestic demand; they say anyway. Still, it adds to the glut.

The old math economist are looking at the glut and smaller cars and green movement; and see cause for worry that oil could go to $20, or lower. This is disastrous to the Fed’s whole shit (plan.) Dollar strength alone can’t account for all of the drop because we know there is a glut. So a Dollar reversal may not do anything to stop the bleeding. The Dollar would need to crack a lot crazier than it has in a while. Like, below $90 on the $DX_f — fast. Rate of change (how fast it happens) matters. The Chinese Yuan only went down 4%, but it did so in less than five days, I think. Either way it was fast. In response the Dollar surging against the week, and showing weakness against the strong!

I’ve been reading “End The Fed” by Ron Paul. I watched Star Wars: Episode IV – A New Hope this morning. These two influences make me look at this currency war like an epic battle. Brother against brother, son against father.

Ha. It just sounds more exciting when I describe it to myself that way. 

Anyway, North Korea and South Korea may have just taken it to the next level of war: physical warfare. Another war going on. But physical wars put upward pressure on energy prices. $CL_f could try to snap back above $42.34. Here are the resistance levels it would have to get above before price can challenge $42.34:

30 minute $CL_f chart


Oil’s price action is not saying anything to lead one to believe it can get back above $42.34 in any meaningful way. Although price is moving in a way that could fool someone into thinking it may want to pop here.

Same 30  minute chart as above a couple of hours later:


Above $43 $CL_f would impress me.

Until then it always feel like a trap in oil on the long side these days. That feeling alone is a self reinforcing bias. This China mess only adds fuel to the fire. Re pricing everything to the new Chinese growth picture is a black swan that you could see coming. China telegraphed it’s need to re-balance (become a more domestic dependent economy instead of an export/ foreign dependent economy) so this move was to be expected. But many didn’t expect it. Many thought China would grow to the heavens like that tree in that old fairy tale.

But this is real life. Things don’t work like that in real life. In real life people will pull money out of your country like dentist pulls rotten teeth. It’s like half of China’s teeth need to come out so new, better ones can grow in. They call it growing pains. Every maturing economy has to go through this. The biggest problem China has is its communist form of government. It’s centrally planned by default.  Centrally planned economies are trash. This is why China wants to “move more towards a market based economy.”

A market based economy is the most efficient at allocating capital. On top of that, they were too smart for their own good. They understood Paul Krugman‘s approach/ theory. They believed him and did a bigger Qe than U.S. central planners; implemented faster than U.S. central planners.

U.S. Fed central planners technically told Mr. Krugman to get the hell out of here. But the Dollar is still in trouble. Europeans put on carry trades funded with cheap euros, like: it’s our turn to eat off the weak currency! The Qe! But they didn’t see China coming? IDK, but it’s real out here: $DX_f five minute chart:


That’s nasty and the plain truth is no one wants rump with Don Dadda the Fed when it comes to currency wars. They have whole books about the death of the Dollar:

James Rickards

The euro has the biggest weighting in the $DX_f. $EURUSD looks like it’s ready to run higher at 10:52 am New York time:


The Fed’s hands are tied. They’re magicians, though. People believe in them like they aren’t central planners. Central banks are Central Planners = #cb’s are #cp’s. This tells you that they are still less efficient than the market. The market would have raise rates a long time ago. This says the Fed is too late if you rely on the “natural real rate” of interest. If nominal rates would be higher if not for the Fed, the natural rate would probably be higher. It doesn’t take a super calculator to see the probabilities have shifted. They’ve shifted and shattered in different directions. Oil is going down, corn looks like it wants to go higher. Gold is up almost 2% at 11:18am New York time:


Too bad they didn’t do a 30 year debt extension Greek deal like 5 years ago though. Central planners are so inefficient they waste something more precious than money: Time.

They paid the ECB their money Today. Like, a 3 billion Euro payment. Now the Greeks want a snap election! Summer time markets are like this. Summer of 1996 is talked about in old economics text books from the early 2000’s. Fireworks way after the 4th of July! At the moment the European market is closing down 2% in the German Dax. That bastion of engineering. Too bad they couldn’t do a 30 year debt extension Greek deal five years ago. smh..

Thanks for reading.
May the force be with you.

A Technical Look At $ZC_f… For my Farmer gang. #fg #corn #Dollar #China

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

Corn Farmers got the highly debated Pro Farmer Tour crop report. I know nothing of the crop side, so I leave that up to the farmers and the USDA. I do have a busy $ZC_f chart with lines that price has been respecting. From time to time I share what I see on this chart with my farmer gang. Because of a somewhat free market, whether I know them personally or not, (I know a few real ones from twitter) they supply me the corn. I love to eat corn. Although I pay for my corn, I like to do a little free technical analysis of the price of corn. Sort of as a tip. I love analyzing price, so it’s nothing to me. For them, they can use it as a different perspective on their hedging activities. Hopefully it helps some of them.

Anyway, the $ZC_f chart is a great chart to zoom out on. The day to day action along with all the info we get on a daily basis, on top of the “big crop reports,” can have price action looking chaotic. Qe makes all prices look a little chaotic, but that’s another post. The $ZC_f weekly chart clears things up for me, though: it looks like price is holding up pretty well, and it could go higher. Here’s a weekly $ZC_f chart, the zoom out:


That’s a higher low followed by a higher high. Even the big crop report couldn’t take out the lows. To add to that; a Fibonacci support area held, along with a trend line! This is good looking price action.

What’s funny from a macro view is this: if you put a Dollar index $DX_f up next to this chart you see a big move begun in corn three months after the Dollar took off to the upside.

From June 2014 to January 2015 the Dollar went up against the basket of currencies included in the Dollar index $DX_roughly by 18%. In currency term that’s huge! But corn went up 30% from September to December of 2014! This is significant because it says for some reason while the Dollar was going up so was corn. Corn is priced in Dollars. All things equal, the Dollar and corn should move inverse (in opposite directions) of each other.

But all things aren’t equal.
They Never are.

$ZC_f had two monster weeks in June of this year. Here’s a closer look of what they looked like:


Those two weeks erased 27 weeks of losses. That’s strong action that’s telling you a lot. The price action after those two weeks tells you even more. Price dropped hard, but put in a higher low. A closer look at the five weeks after the two strong June weeks is constructive:


Price retraced nearly the whole thing. Whoever wanted to sell or buy in that range got their chance to do so. Price held up and looks like it wants to go higher, or sideways. price isn’t shy. If it wants to go down it will go down. If it wants to go higher it will do that also. Right now it looks like corn bears have thrown everything they could the market and we still have a higher low. I wouldn’t be surprised if $ZC_f tried to get back above $400. The macro picture with the Dollar side of the corn trade is coming into focus also.

The Fed has been threatening a rate hike since the end of Qe. The more unstable China looks, the more unlikely it is the Fed will get the data it needs to pull the trigger. People are expecting that the heavy handed measures of the Chines government will save the market. But I think that’s wishful thinking. China has the type of problems that aren’t fixed with market intervention, but with lower prices. The old saying goes: low prices are the cure for low prices, and vice versa. This has doubt of a Fed hike creeping into the price of the Dollar in the form of a little weakness. This could lead to more weakness and give a boost to not only corn, but the whole commodity complex. It’ll be uneven. Some commodities will get a bigger boost than others, for various reasons.

All things won’t be equal, corn looks like it could get a bigger boost than most, because it has already exhibited more bullish price action than most. I don’t know what the future holds, but that’s what I get from looking at the price and the market overall.

Thanks for reading!
And I hope this helps someone!

Market Thoughts: Ambiguity Amok, The Fed Dilemma, and Reality -vs- Qe.

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

Recently, I expressed my confusion on these markets in a twitter thought train that I won’t dig up now only to say the same thing later in this post. This is an attempt to clear up some of that confusion by organizing some thoughts.

But first, the markets: The efficient market hypothesis has been proven wrong on the margins. Sometimes everything isn’t reflected in the market’s price at any given time. Sometimes the markets are distorted by outside forces. Realizing when these forces are at work, and what part of the process you are in at any given time is an edge for the studious market participant.

Currently we have QE. It has inflated asset prices to record levels. Not businesses or consumers around the world buying a record level of things, but a flooding of bank reserves that banks use to make loans and create money. Yes, banks create money when they make loans. U.S. stock margin debt is at $500 billion because banks create money.

Not because people have been so successful in their endeavors, accumulated lots of money, put it in banks; swelling bank reserves leading them to make more loans. But by The Fed creating reserves through buying bonds from banks. This means you can’t believe anything you see right now.

It’s all distorted. It’s like the Shanghai composite on June 3rd 2015. On the way to new highs no one should have believed:


We need to see what managers can do in a normal setting. Normal interest rates, normal competition for capital, normal market dynamics. What the Fed means by “Normalization.”

Who can run their businesses (their ship) when the waters get rough?

This is what we need to know before we can make any determination as to what the future looks like for these public companies that make up the market of stocks. (Saw that in a headline the other day. “it’s a market of stocks, not a stock market.” smh.) There are about ten or eleven public companies that you must buy if you see blood in streets. Outside of them, we really need to see who’s a good manager. Who’s innovating enough to withstand the down turns that must happen in any business or industry?

The oil managers are being tested now. The best of them will thrive in this environment. Money will flow to those companies. Seeing who can still produce profits when market conditions aren’t at their most favorable is part of evaluating whether a company is a great investment or not.

The best leaders relish these moments. They know these are really just opportunities to win again. Market share is up for grabs, whole companies are up for grabs. I saw a tweet that relates to this:


It’s cliche, but true. Good leaders feel this way. These are the companies we want to own. Until we get back to a normal monetary world we won’t get the answers to these questions. This is where some of the confusion comes from. Some people are bearish because they can’t answer this question, not because they hate stocks or the markets. Others can’t understand why anyone would be bearish on a market that’s up 300% over the past six years. You get different perspectives clashing in the markets. The other part of the confusion is the mixed messages coming out of the Fed, BoE, ECB, BoJ and all the other alphabet central planners. This is leading to mixed messages going into / coming out of markets.

Ambiguity Amok.

The Fed meant to be more transparent when it started writing longer more detailed FOMC statements. They’ve only become more opaque. Secrecy is key to monetary policy because people will front run you. The Dollar is up before the Fed has hiked. Now we’re getting the price action and market effect we would have gotten if the Fed had hiked; everywhere except the stock market.

The drop in gold would signal a major change in the way the Fed has been conducting monetary policy. It says the Fed is hiking already. There are more Dollars in the world than ever before and all of them are strong. So the Fed has a dilemma: How do you reach your inflation targets with most prices dropping? How do you hike rates with the dollar surging? How do you not hike rates with job growth as high as it’s been in modern times? If you don’t hike rates soon, how will the reversal of a strong dollar play out?

I can go on and on with these. The Fed is dammed if it does and damned if she doesn’t. For all the reasons mentioned above: the Fed must get the market back to normal. Think of it like a patient under anesthesia for too long. The effects can be deadly. If that Dollar fall is triggered by bad U.S. econ data the Fed could be faced with a situation where they can’t raise rates whether their inflation target is hit or not. Central bankers don’t like that type of shit. Rigidity of monetary policy is not a good thing.

One can’t really know what the Fed is watching right now.  Best guesses say they’re watching inflation. But if that’s the case, why haven’t they openly said they wouldn’t be hiking interest rates this year at all because commodity prices have gone to shit in a hammock? Why keep saying you think the data will be good enough to warrant a rate hike this year? Even as the whole world sees prices falling? This is where the Fed induced confusion comes in. Half the market doesn’t believe the Fed can raise rates.

Technology has lots to do with the price dynamics of global commodities. Even gold has Bitcoin to compete with. The Dollar rise also has a lot to do with those dynamics. The Fed keeps wording their statements to reflect a rate hike this year because they can’t be seen as rigid in their policy.

That’s a bad way to make your monetary policy, though. Even if it seems necessary, it’s not good to make these types of decisions based on how it will look. If the market loses faith in the Fed’s ability to hike, the reversal in the Dollar could be strong enough to push inflation up enough to hit the Fed’s target right at the exact time that U.S. econ data starts turning down. Fed Chair Yellen testified to Congress that she wouldn’t hike rates if she thought it would tip us into recession. But what if that’s her only choice?

What if by being so transparent the Fed has given itself only two options: Low rates or recession? The market knows transitioning from zero interest rates is a tricky, so, once that process begins the market (and business managers) need to salvage as much cash in realized gains as possible; wait out the transition, and have better chances at catching good deals on good companies. Companies that have proven they provide products and services people need, not just want.

There’s been lots of debate about bubbles here or there. Now we have to add another asset to the bubble talk: Is the Dollar now in a bubble?

We won’t know what’s in a bubble until the Fed normalizes (or doesn’t normalize) interest rates. But if the Fed depends on good econ data and doesn’t get it, it can’t hike. This means the Dollar is too strong. That should be good for the U.S economy, but the lag between when the Dollar falls and when its fall has a positive effect on the U.S. economy is long enough to give a central banker vertigo. They will be out of step in the beginning. They would truly be out of ammunition. Regular ammunition that is, they could go nuclear. Qe5 would be nuclear. It would also be to the detriment of Japan and Europe, and for different reasons, the U.K.. The IMF has asked the Fed not to hike this year, wonder what they would think of another Qe?

I’m still confused on the markets. I still can’t see a reason to buy or sell stocks here. The Bull case is: The Fed can’t hike, so the punch bowl is still full. That’s a bad reason to buy stocks. The bearish case is: none of this is real, and it will end badly. That’s a bad reason to sell  stocks. Even if we know it will end badly, we can’t be sure when it will end. So for now: I’m still neutral on stocks. As for the Dollar I’m leaning towards neutral there also. Looking for chop in the Dollar index. Each major Dollar Forex pair is a blog post of its own, and this post is already too long. So…

I’ll end it with thanks for reading, I hope it helps, and good luck this week traders!

Ambarella, Inc. ($AMBA) Charts & Fundies..

by Rasool Cunningham
Trading Editor
Philadelphia, PA (DYDD)

First off, I do not currently own any $AMBA shares, nor am I short the stock, nor do I have any options to buy or sell this stock.

Ambarella , Inc is a semiconductor chip manufacturer. They make  a chip that process audio and video using just the one chip. This saves space and energy. Their chips also enable better HD video than their competitors. This allows cameras like GoPro to capture good HD video using a relatively small camera. With everything from police cams, to cars, to garden variety surveillance cameras needing to get better quality video, Ambarella , Inc has many potential customers and repeat customers. There’s no wonder $AMBA has been one of 2015’s hottest stocks. The heat from the run up in the stock, along with recent market turmoil (Greece! China!) leads some to wonder if it’s time to take some chips off the Ambarella table. To answer this question, let’s look at some $AMBA fundamentals, and then look at the stock charts.

When you look at $AMBA’s fundies you can’t help but be impressed. Gross margin 64.2%, Operating margin 26.7%, ROE 31%, ROA 26%, earnings per share this year 84.7%, sales quarter over quarter 73.6%, and earnings per share quarter over quarter 229%! The problem with these numbers are: we don’t know how much of them are due to Ambarella’s great products, or easy money (QE). I say that because QE pulls demand from the future into the present. When you look at $AMBA’s fundies the future numbers don’t look nearly as well as past / present numbers. Earning per share (EPS) for the next five years are projected to come in at 20%.  EPS projections for next year are at 18.5%. Begs the question: has all or most of $AMBA’s product demand been pulled from the future into the present and past? I don’t know, but one has to ask and wonder.

All of $AMBA’s fundies aren’t great. One that jumps out at me is the P/E ratio which stands at 51.9! Forward P/E is only 27.68. This means that while $AMBA’s earnings may not fall off a cliff, what people are willing to pay for those earnings could fall a lot. Another red flag is the recent insider selling. People sell for too many reasons for insider selling to carry too much weight in buy and sell decisions, but they should always be noted because: the people who know the company best are the insiders. Over the past twelve months there have been four insider buys and eighty-three sells. I don’t like that. Over the past three months there have been no buys and twelve sells. Again, I do not like that. While it can’t hold a lot of weight, it is a red flag and shouldn’t be ignored.

Last fundie red flag is the PEG ratio, or Price to Earnings To growth ratio. A broad rule of thumb is a PEG ratio of 1 or under means a stock may be undervalued. Above one, says a stock may be over valued. $AMBA’s PEG ratio is 2.6! PEG ratios vary from industry to industry, sector to sector; you have to look at the whole sector to discern whether a stock’s PEG ratio is high, or just normal for its sector. Out of forty-three stocks in its sector, only nine have a PEG ratio over 2.0. This says that $AMBA’s is high. This means it looks like $AMBA’s earnings growth, or price to earnings multiple expansion is at or near a peak. Ambarella just did a small acquisition last week which could boost earnings, but as of right now it doesn’t look great on future earnings.

Now, the charts. 

Ambarella is up 99.5% year to date. That’s not a typo, that’s a crazy gain for a company this large. Here’s how it looks on the daily chart:




An almost 100% move in the fist six months of the year is enough to make anyone feel like taking some chips off the table (do you see what I keep doing here? Chips? Chip maker? Never mind.)  But the technicals aren’t screaming sell at the moment. The time to sell was on June 19th when the stock went down a little over 6%. If you missed that signal, on June 22 the stock opened for trading down 5%, and added another 16% to the drop by the end of the day!  Wow, that’s brutal price action. What was even more brutal was volume on which this price action happened! Nine million shares traded on June 19, and twenty-five million shares traded on June 22! To put this into perspective the stock has an average trading volume of 2.9 million shares! All these exclamation marks are warranted. These were monster sell days. So strong that all the selling may be done for now. I drew a Fibonacci retracement on the weekly chart, and transferred it onto the daily chart, to give us an idea if there may be more selling to come. Here’s how it looks on the daily chart:


This makes things a lot more simpler. A close below 96.08 would signal a sell for me. (again, I do not currently own any $AMBA shares, nor am I short the stock.) I didn’t go directly to the charts and say this, because I think most chart signals are backed up by fundamentals. $AMBA’s current fundies suggest that new selling would be backed up by fundamentals. I have a rule where I sell any stock that drops 5% – 6%, so I would have been out of this by now. But, Under normal circumstances (Greece! China!) I wouldn’t be surprised if this stock went higher from here. Here’s where I would sell if price went higher:


I drew a resistance Fib from the bottom, or close of June 22 to the top, or open of June 19. If price went higher from here I would move my stop above every fib level price got above. The Greek crisis makes this a different time for analyzing stocks. We could see indiscriminate selling as stock holders sell to front run anyone else who may need to sell. At a time like this you may not be able to wait for a close without getting hosed, so, selling on a close below $96.08 isn’t practical at times of stress. In this case, any price trade below the June 22 low of $93.06 would signal a sell. This isn’t financial advice, just a run down of what I think about $AMBA and how I would probably trade it. I hope this is helpful, if it is helpful thank @Kem312 for asking me to look at this stock.. Thanks for reading, and good luck this week traders!

Don’t Kick the Dog. Posted on June 27, 2015 #ag #farming, #farmers

This is a re-post from  sellis1994’s Blog


Don’t Kick the Dog

Sitting here on a rainy Saturday morning feeling blessed for having a good start to the growing season. Reading about the destruction of yield in the Midwest I felt like I could add a few lessons I have learned from living through a drought every 3-4 years of my farming life.

First: Breath… Easier said then done, but realize: you have no control, you can’t make it stop raining. Or start raining, so freaking out won’t help you get through it.  You can’t kick your dog and snap at your wife but once or twice.  Then they’ll be like:  I don’t need this crap…..and see whether the neighbor is in a good mood.   Breathe and relax.  A clear mind serves you more than anger ever will.

Second:  Calculate

Get out the pencil or the calculator… You must figure how much income you can reasonably generate with crops + insurance.   This is what you will have, more or less.. And this year for some of you it is less.. But know what your pie is so you can figure the best way to slice it.  If you have your aph, your %coverage, and price; then you have a hard figure as minimum income..this number is important.   Then: add up your expenses. All of them. Even beer and ice cream sandwiches.  You got to know where you stand…   Some of you have last years crop and will get by this year. Still you need to know the deficit you are creating to know that it will smack your ass next spring.
So now you have a rough idea of where and how much you are short…


Yep, somebody won’t get paid on time. Don’t let that be the landlord….they MUST be paid, without land no one can do this thing that we do.

Then, after they are straight; figure out who is due when, and who can be worked with. If you have a bill due in November that needs you to wait for crop insurance check, don’t make them call you in December… Go to them in September and say: This is the deal, I will pay you. It will just be when the paperwork is straight..  This helps them breathe.  And not kick their dog.  And another thing:  Pay something!!!

You have an 80k bill?  Send 5k. Someone seeing you trying will work with you better than someone assuming they will get stiffed and assume you are  paying for pretty green equipment.

Stop Digging

Don’t buy anything else that isn’t a must have.  Or can generate income.. Fix the combine one more year. Call shop and rebuild the planter..  Just stop living like lotto queens that we were in 2011-12-13.  Everything can’t be new…  (Note to self. “Read this daily”)

If all this doesn’t work.  Sell something

Excess equipment.   Excess vehicles. A lot on the corner…

“Well I would never sell a lot of my farm.  It looks tacky…..”

Well sir. Your 160 acre block that has 10 acres carved off the far corner looks less tacky then the auction for the whole 160 if you don’t pay bills…

Some of you know more about this then I.  Some of you have old money and can handle a hiccup. But I suspect many have lived life, paid bills, and not seen a year with poor crops and poor prices happening at the same time. Then maybe you get one idea (from this post) that helps you get through this with your sanity, dog and wife intact…..not necessarily in that order.