Brief Weekend Update, August 27th, 2011

9/3/2011: Click here to get to my new blog with comments regarding current market action.

First, from the bottom of my heart, I want to sincerely give a big “Screw You” to all you stupid oligarchist Retardicans who tried to push our economy and country off an economic cliff over the debt ceiling debacle.

Now, I’m only posting this here on this dead blog because I believe we are at a turning point in the market. But I could be totally wrong so your mileage may friggin’ vary.

Next, in my last post I was sounding pretty bearish with expectations of a 2008-like market decline. Still could get there, but there are some things that just aren’t jiving with a double dip recession scenario, at the moment.  The first disconnect with this scenario is the $BDI. Lately, when the $BDI moves up it’s because oil prices are moving up and so those increased expenses are passed along to the consumer. But over the past four weeks, independent of the price of oil, the $BDI has been moving up. This suggests, at least in the short term, that there is an increase in demand for container ships.  Maybe this is just a seasonal phenomena and like last year the $BDI is about to fall off a cliff, but if this trend should persist for a few more weeks then you can forget about a world-wide recession and a double dip for those of us in the U.S.

And then there’s the $CRB Index. Using the 9/20 Cross Method, which has its own tab at the top of this blog, the $CRB index is now a ‘buy.’ It looks to me like the $CRB will get back above its 50DMA  on Monday or Tuesday. Now, you tell me, if the world is getting ready to go to hell in a handbasket, like you Retardican idiots would like to see, then why are commodities being bought with earnest? This don’t jive with the doom and gloom scenario.

XLV and RTH: Last year, right about this time, which may or may not be a coincidence, these two sectors started moving up. Each of these has managed to stay above its respective 20MA for the last three sessions and the 9EMA’s have crossed up through the 20MA.  You might be able to discount or even ignore XLV, but you cannot discount or ignore RTH.  RTH is certainly a seasonal play, but then it is each and every year and appears that expectations for this sector are no different this year than many/any others. Hmm.

$SOX & $TRAN:  Both of these key sectors were up close to 6% for the week. You can go back to August 2010 archives and find a couple of posts I did with regard to the $SOX. Basically I called the $SOX the index to nowhere. And then it started to move up. The market cannot do anything but follow the $TRAN where ever this key sector might go, but if you can get the $TRAN and the $SOX moving up in tandem then you’ve got something. But we’re not there yet. Weekly chart of the $SOX does not inspire much confidence and if the $SOX should drop below 305 then, well, forget about it. But in the mean time, this key sector needs to be watched and watched closely.

$NYSI: I think I posted a couple of weeks ago that I thought $NYSI might go to the -1000 area, or maybe I just imagined that. Regardless, $NYSI seems to be/might be/ could be/ most definitely is turning up, and when the worm turns you go with the worm, if you catch my drift.

$BPSPX  & $SPXA50R: These two have hit oversold levels not seen since the 2008-2009 decline which is telling me that absolutely everyone who wanted to get out did so and that the selling phase of this decline is most likely behind us, or famous last words.

The bottom line for me is that early next week, and using the 9/20 cross method, all the majors and many of the key sectors will flash ‘buy’ signals.  Of course they could all fall off a cliff, too, but if they don’t then it’s time to trade with a long side bias, IMHO, of course.

Meanwhile, in another part of town: This chart of IWM could be a proxy for all the majors and many key sectors. Note that this is a hybrid of the “60min Trading Strategy” in that I’m using 13/34 EMA’s, but the idea is the same. This setup needs to be watched closely early next week as the trend line lacks any real authority and could easily fail to hold.

Chart courtesy of FreeStockCharts.Com

7.8 Billion shares on the $SPX on August 8th. The most shares ever traded. Could that have been “the capitulation”? Do we really need to go through a 2008-2009 like decline?

I’m not sure if I’m hooked on phonics, but I’m absolutely positive that I’m hooked on paranoia.

C.M.

Charts of all the sectors and breadth indicators that I mentioned in the above post can be found at Charts-A-Pallooza, which you should have bookmarked by now.

August 20th, 2011

Just a quick couple of notes since, for whatever reason, I continue to get between 20 and 40 visitors per day to this morgue site.

We have now had 10 instances where the gauges I use to spot climax selling events and bottoms have hit extreme oversold levels, and yet the market has not bottomed. During the 2010 decline there were only 7 such instances where things like $NYUPV went into extreme oversold territory before the market finally bottomed. Obviously comparing this decline to 2010 is wrong. I have been too busy lately to do much back testing but it does appear to me that the decline this current market is modeling is the 2007-2009 decline.

Go over to Charta-A-Pallooza and take a look at the charts in the weekly section and more specifically the charts labeled like this: $SPX II, etc. Look at the Williams% and the 20/20 sto and then take that, using Stock Charts’ drop down menus, and set up any of those charts so that you can look back at 2007-2009. Note how the William’s% and the 20/20 hit extreme oversold levels several time before the market finally bottomed in March of 09′.  Also look back at $NYSI and note that during that decline it dropped to -1600. I keep thinking that $NYSI is headed to the -1000 level, but I could be totally wrong.

More than one index and several key sectors are now back to where they were on the 1st of January 2010. Long term investors are once again seeing the mean side of the stock market.

$VIX is looking like it wants to take out this 48 level and if it does then who knows where that sucker is headed.

The smart money $OEX crowd has been betting heavily on the short side. Just my opinion, but when the smart money senses capitulation and their computers tell them that there isn’t much downside left then you would think that they would get out of their puts and start buying calls at bargain basement prices.  But this isn’t happening. At least not yet. Robert McCurtain will put up a post sometime over the weekend and it may show that the $OEX crowd went in long on Friday, but as of last Thursday puts were being heavily bought over calls.

(Added on 8/24:  This is a link to Schaeffer’s  Volume P/C Ratio page. I’m using it to track the P/C Ratio of the OEX, which is not updated until the wee hours or the following day.  Type OEX into the symbol box, not $OEX.)

Just about every sector is being abandoned but to me the most important sector is the $TRAN and I will be watching stocks such as FDX, UPS, CSX, JBLU, and the rest for signs of bottoming. The big boys will come back to this sector but not until they think the worst is over. That could be when  they believe the double dip recession is going to be avoided or after the double dip recession shows signs of ending. Whichever comes first.

I actually added a few shares of UPRO in both of the accounts I trade and I’m paying dearly for this. However, my system said that a bounce and/or a bottom was, might be, could be at hand and so I went in with a few more shares. I had an order in for some TQQQ on 8/11, the day I added the UPRO, but pulled that, fortunately.  75% of my trading $$$ is in cash and, because I hate the whipsaws on the short side, I’m just going to keep it in cash until the dust settles.

Don’t ever, ever forget that only the paranoid survive.

GL, C.M.

Quick Update, August 9th, 2011

Got our solar system installed about 10 days ago and got Wild Blue installed today.

Well, the market has had several oversold readings since early June per the methods I use to track such things. This would also include Zweig Breadth Thrust, which at 38 is still very oversold and 4week New High/Low Ratio at 6.98. The problem I see here is that even  though the market has hit very oversold levels several times in the past few weeks, the rallies that followed several of these conditions did not hold and the big question, I’m sure, that’s on everyone’s minds is will it be different this time?

A trend line is going to be your best ally at this time. If the market can get some follow through based on what happened today and create some kind of trend line while doing so, then maybe we’ve seen the worst. On the other hand, odds that the market can stay above  a rising trend line are, at least for now, very low.

I am long UPRO in two accounts but with mini positions. I would love to add to these and bring my cost per share down, but I’m not yet ready to commit more money to the market at this time. While I am always more paranoid than you ever will be, I am also way behind in my analysis of the situation since I’ve been stealing bandwidth from WIFI hot spots here and there and haven’t had the time necessary to truly study the markets of late.

Be careful. Stay on your toes. We could easily be looking at a 2008-like decline with dozens of short-lived though very convincing rallies along the way.

I’m not going to start posting here but I’m probably going to spend the next few weeks putting another blog together that will concentrate on what I consider to be the best of the indicators that I follow and with more detail about how to read and trade with them.

Until then: Charts-A-Pallooza

GL, C.M.