Gas Buddy can be used as an inflation proxy. So can gas buddy be used to predict the size of the rebound/run? In the following table, I have weighted:
1 to be ROC20 – event,
-1 as rapidly falling gas buddy and 2 as rapidly rising,
and the run event as 1 being a small run and 2 being a large run.
So a -1 gas buddy weight equates to a large run and a 0/flat gas buddy to a small run.
On Feb 19, the Fed minutes are released. These are the best times to play a rebound provided ROC – is observed. Last year the months were: Feb, Apr, Aug, and Oct. May and November would not have been played as ROC was + for both times. Rebounds are stronger when GCPI and GasBuddy are falling.
The next date to watch is Feb 19. If ROC – exists, I say buy on the first ROC – day as the difference is marginal between ROC – days and it’s important not to miss it. SPY should also be near/at the bottom of the BBd. The sell point would be 2-3 weeks after when 2 red HA bars occur.
In general, ccpi 2.0 might not be achieved this year so TLT may be off the table until next year. See the following table from the economist describing what I call the ‘Japanization’ of the world economy.
And on inflation this year….
“Stubbornly weak inflation is shaping up as the wild card for U.S. monetary policy makers this year, with top Federal Reserve officials stumped by why it has lingered so low for so long and at odds as to what to do about it.
As the Fed wrestled through last year with deciding when to start trimming its massive bond-buying stimulus, the bulk of attention was focused on the unemployment rate, which until recently has been slow to fall following its spike up to 10 percent during the recession.
By last month, policy makers had grown confident enough in the job market
to dial back on the program. Figures released Friday showed the jobless rate fell to a five-year low of 6.7 percent in December, despite the smallest monthly job gains in three years. With much of the hiring slowdown attributed to bad weather, however, many analysts say the Fed will stay on track with plans to end bond buying by late this year.
But there is a hitch: inflation has been drifting down for much of the last two years, measuring a feeble 1.1 percent in November by the Fed’s preferred gauge…..”
http://www.reuters.com/article/2014/01/12/us-usa-fed-inflation-idUSBREA0B09R20140112
CPI release schedule can be found here..
http://www.bls.gov/schedule/2014/month_sched.htm
The best trade will be when cpi reaches 2.0 and then falls out again..the saw-tooth pattern. SPY benefits from CPI falling. The 3 best runs are Nov-Jan 2013, Apr-May (Feb CPI 2.0) and Oct-Nov (Aug CPI 2.0) were all driven by CPI falling from 2.0. Couple this with a pullback ROC- (Apr and Oct) and you have a great SPY run.
1.x-2.0 TLT
2.0-1.x Sell TLT, Buy SPY
The SPY run now will be limited as CPI is now rising. It’s now a buy TLT watch.
Cash for now until cpi reaches 2.0. BTW, FXC is now falling nicely.
I say stay cash until Jan. 8 (Fed Minutes) when to look for 3 green bars. Probably Jan. 9. We are too close to debt debate to take risk now. There is a rebound today BUT
For your reference, HA candles: C=Close, O=Open, H=High, L=Low.
Green means higher than the average of the previous candle- (H+L+O+C)/4
So cpi rose above 1.2 so we’ll see after 1:30 edt what impact the fed statement has. I suspect we’ll have red bars after wards until Friday-Tuesday due to Fed being less nervous if inflation were below 1.0. They may want to signal a market ‘cool’ signal. After the first 2 green bars look for the 3rd green bar and buy at open of that bar so example
9.30-11.30 Monday green
11.30-13.30 green
1331 open green BUY
Settings for Heiken-Ashi or HI candles–
SPY
2 hours
Heiken-Ashi
Under gear symbol look for time frames on right and select edt
Now that we are in ROC- territory Heiken Ashi candles can be used to fine tune entry point. See url here…
https://www.tradingview.com/e/?symbol=SPY
Use SPY and 2h Heiken Ashi candles. You have the usual Lo-Hi line and Open-Close filled box. I see that the 3rd green candle at the open of the 2h period is a great time to enter AFTER the Fed event. Any reds and you stay cash.
The market had a great run from Oct 9-Dec so the Fed has to cool it off. The -3 BBd ‘stretch’ point is $175 but I want to use Heiken-Ashi for entry point.
Last year December:
Inflation…
And current ROC…see event driven:
So it can bottom on Dec 18 or 5 days later. Because inflation is so low I suspect the turn point will be Dec 18 or 19. Look for 1st ‘up’ day at the close.
ROC20 is now minus
But I want -4- on/after Dec 18 before I consider buying large. See here Sep, Oct, and Nov were mostly +ve..a break is needed before next rebound.
The rally could still start Dec 18 as Nov PPI just came in -ve again -0.1% with YoY at 0.7% both low. BUT the complication here is the debt ceiling Jan 15-Feb 7 so on a balance of risks I still say not worth it unless ROC -4 occurs Dec 19-24.
OEXd is in the 78-82 rebound range. 1st dot above is the key here looks like Dec 18-19 will be the start of the rebound.
After every -4-, you get a solid rebound. However, with a – 1 the rebound is usually smaller. So there will be a rebound but not as significant as a -4 event.
TLT Sidenote:
TLT 200dma X necessary for new bull mode…usual X is late Mar-late April time frame.
If not buy TLT Mar/Apr. For now stay cash. ROC-4- means rate of change 20 days for SPY falls more than 4%. Now it is 0% and crossing to – territory can take a few days to a month. There will be some kind of dip before the debt dabate.
I am concerned with 3 good months in a row..Sep, Oct, and Nov that Dec will be a pause or ‘down’ month. I prefer a solid ‘dip’ of ROC -4- before taking a chance especially before the debt debate Jan 15-Feb 7. If ROC is -4- then I say buy otherwise wait for Jan bottom/just before debt debate resolution.
I am not saying there won’t be some kind of Christmas rally after Fed mtg but it might be anemic especially just before debt debate round 2. It could also be choppy (see June this year) until debt debate is resolved.
As OEX crosses the 10 wkma and approaches the 78-82 range, look for a bottom soon. I say most likely will be Fed minutes Jan 8-12 but could be Dec 18. Confirmations are OEXd 4dma X to the upside and the bottom of the daily bollinger band cross.
Looks like TLT should turn into bull market in March-April time frame. Currently it’s a bear mkt although flattened.
Credit Flow Investor 