One Reason To Stay Long Term Bullish

I realize that recently I have sounded like doom and gloom with most of my posts calling for lower prices.

While the intermediate term low has yet to be put into place I thought it important to show the long term health of the market and why there is quite a bit of upside left in it.

The chart below is the S&P 500 Weekly.

• The Blue Line is the Commercial Traders Positions, which is heavily long (BULLISH)


• The Green Line are the commodity fund positions, which are heavily short (BULLISH)


• The Red Line are the small traders positions which are Neutral

The fund traders have been selling like crazy ever since the recovery following the March correction. It is as if they have been waiting for the other shoe to drop and I am certain that the most recent market action has them smiling. Remember though, the Funds are usually wrong at major turning points and this is no exception.

It is important also that you realize the C.O.T. data trumps all other analysis in the S&P 500. This is not true in all the futures markets, but it certainly is true in equities.

Commodities Update - Quick Run Down

SUGAR - Long Executed Today at 9.45

LUMBER - Long From 2.74

COTTON - Aggressive Long From 61.21

CORN - Continue To Hold Short


Please refer to the weekend post on these commodities for the more detailed intermediate term outlook.

USU

I am looking for a further pullback in USU in order to get back in on the long side.

I firmly believe that the low is put in place for the stock on an intermediate term basis, but a retest of the lows cannot be ruled out.

Equity Market Analysis

While todays action was not exactly to the blueprint, it certainly was close enough to count.

If we waited for a direct reproduction I can guarantee that you will never see it. The best we can hope for in analysis such as the blueprint is a general outline and this is what we got.

So from here we can look for the market to make its way lower and put in the intermediate term low and much lower prices. The blueprint calls for a selloff tomorrow followed by a strong recovery going into the close.

Cover Shorts - Sit Out

Looks like the market is going to try and push to new highs for the day, so cover your shorts and sit on the sidelines for another opportune time to sell this rally.

USU - Take the Money and Run

It has been an excellent two days in USU, but I think it might be time to cut and run here.

Although I am not prone to flipping, sometimes it just makes sense and with the volatility we have been seeing, it only makes sense to take profits.

Rally Should Not Hold Together

Could be just about all the rally the market could muster here.

Looking to sell this rally.

Crude Oil - Final Hurrah?

Crude Oil is really starting to look like its time is limited.

There is extreme long positions by the public (bearish) and extreme short positions by the commercial traders (bearish)

The Commodity funds have very large long positions, so once the trend shifts you should see quite a large decline as these funds begin to unwind their longs and establish shorts.

Sugar - Get Ready To Pull The Trigger

I have been waiting for the 9.46 to 9.21 level on sugar to establish a long position and we are very close to that right now.

The potential rally off this swing low is going to speaks volumes about the intermediate term health of this market.

Keep a close eye on this one!

Lumber - Ready to Move Higher

Lumber has been a little slower to react then I had thought, but it appears to me that it will make its move very soon.

We are long from 274.

Cotton - Aggressive Short Term Play

We continue to wait for the final push up to new highs in cotton to put a low risk short position in place.

Those of a more aggressive nature can buy long in here for the last gasp up in price.
Cotton has reached a point of strong support and should begin the final rally from here.

I stress the long side as an aggressive trade and to make sure you keep a close sell stop in place.

Corn - Decline to Continue

Corn looks very weak in here and a resumption of the decline seems eminent.

Keep your short positions in place with a protective buy stop at 3.46 1/2.

SPX Blueprint - More In Depth

Here is a close up of the blueprint I had spoken of earlier.

This calls for an early rally on Monday which should complete that up leg.

Look for strong resistance at 1467, 1472 and 1475. 1472-1475 being the most logical.

From there you can see that the clear direction is down.

August 24th remains the most logical day for the low.

Terra Nitrogen TNH

TNH is currently near and at the buy area, however the stock looks like it wants to make one more push lower so look to purchase at the lower end of the buy zone @ $66 or so.

Potential Blueprint For The Rest of August?

Just to many similarities to ignore.

Sentiment - Low Still Not In Place

I continue to stress the fact that this corrective phase in the market is not over and there is still quite a bit of potential downside left.

The above chart helps to support just this as these sentiment indicators need to get much lower before a low of substance can be called.

Final Hour Rally?

Look for the market to have a pretty sizeable rally in the last hour here.

Of course, the buy side is off limits right now, but there certainly is no rule against
shorting strength and it has been very profitable!

Cover Your Speculative Shorts and Puts

Looks like we are entering an area of stabilization so it is a good place to cover your shorts and sell your puts.

It simply remains to risky to trade anything for a rally so we will just stand aside for now.

The main hedge we have had in place remains in tact as this only looks like a potential for a short term bounce.

Commodities Outlook

Corn remains in a bear market.
Shorting all strength continues to be the best action.

Copper remains in a secular bull market and needs to complete its current pullback before
the purchase can be exercised.

I continue to look for cotton to have one more move to a new high above 63.

When 63 or above is obtained it should be set up for a short sale.

Sugar is getting quite close to its area of purchase.

Keep close tabs on this one as it has some serious upside potential.

Lumber has not broken down and that is a good thing. While the advance has and continues to take a while to get going, I still remain bullish.

A close below 265 will cause me some concern, but right now all systems look go!

S&P 500 Price and Time Model

The Probability Model suggests that the following scenario could occur.

A Short term low at 1449.
Rally to 1476.50
Final Collapse to 1387 for the end of the correction.

The time model continues to suggest the date of August 23 to August 24 for the ultimate low.

Remember that these models are for guidance only and nothing is ever etched in stone.

However, it does appear to me that the final low is NOT in place yet and while there has been some short term fear created, we have yet to see the wide spread despair that comes with major lows.