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Lending: The Good, Bad, And Ugly

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CNBC Squawkbox Europe

LET'S LOOK AT THE S&P 500 INDEX

S&P500

Two weeks ago on Squawk Box I laid out the cycles into March and the parameters for this trend. I indicated the current move down was less than the 25/26 points of the previous counter trend moves and that kept the trend intact and as long as the counter trend moves down were less than 4 days and less than 26 points the trend could exhaust upward. The first time window to end the trend was the end of November to early December at 90 to 99 days from low. The index clearly showed an exhaustion move up but the current move down has been 22.75 points and 4 days which, if a complete counter trend move down, offers a probability of further exhaustion move up. The counter trend moves have been 2 days and 26 points, 3 days and 25 pts, 1 day 26 pts, 2 days 24 points (indicating a possible blowoff trend starting) and now POSSIBLY 4 days and 22.75 points. A move to 1235 or 1247 is still possible for this leg. The next correction will be 22 to 30 calendar days and once 4 days and 30 points are exceeded we can assume that has started.

We are seeing insiders selling at a rate I haven't seen before and little insider buying. Cisco may ruin the party as they had a very poor forecast and there is speculation as evidenced by the performance of the NASDAQ. Short term consensus is into extremes but the longer term consensus numbers are still short of the enthusiasm seen at other tops. I still like March for the end of the bull campaign with some risk during early December and first week in January at 180 days from the July low. But you must keep in mind once a high is hit for the trend there will still be many months of distribution creating a large sideways pattern of trading before the trend will change to down.

LET'S LOOK AT US T-BONDS

30-Year T-Bonds

Four weeks ago on Squawk Box I stated T-Bonds had topped and were about to trend down. Two weeks ago I laid out the objectives for this move down. Because this is a huge market we can anticipate the possibility of a topping pattern and not just a top if we are correct. So our objectives were the price that would still keep the trend intact or would be the low to a sideways pattern. Our strategy has been to take part or all of the position off as it dropped into the 1/3 to 3/8 retracement and see if it can go lower to 123.92 to 124.65 as the end of the move down before a larger counter trend or test of the highs. Also a vast majority of trends will have an important high or low as a 50% mark when the trend is complete. You can see this occurred again in this circumstance and does add some confidence to the significance of the top.

 

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