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.
Why No Bottom? June 4th, 2011
We are getting out of sync readings from the gauges and ratios that I use to spot bottoms and or tops. We have had a couple of heavy volume down days over the past two weeks which some would mistakenly think were bottoming signals or capitulation events. But until most or all of the gauges I use give oversold, climax-type readings on the same day, then I have to think that there is more selling ahead, regardless of how convincing any bounce might be.
For instance, $NYUPV hit 75 on May 23rd but $NYUD:$NYUPV only went to -7, when -12 is the key level. Still, the market managed to bounce out of the May 23rd low only to fail a few days later. Then on June 1st these two hit levels not seen since the 2010′ decline, and the market couldn’t have cared less.
We have now had two 90% down days since the May highs, but we have not had a 90% up day reply. Without a 90% up day to indicate that the Bulls are back, then you have to expect the current down trend to remain dominant.
So here’s what I’m looking for and when all of these give extreme readings on the SAME day, then I think it will be a good time to scale in long. This might not happen for several weeks. It could be several months.
Zweig Breadth Thrust must drop to or below 40, like it did on March 16th. Current reading of 47.62 doesn’t cut it.
4wk New High/Low Ratio must drop below 15 and it would be better if it would drop below 10, the way it did on March 16th. The current reading of 14.97 is showing extreme oversold, but one indicator by itself is just not enough.
$NYUPV must close below 80.
$NYUD:$NYUPV must close at -12 or less.
$NYSI must drop by -70 to -90 points. It dropped by -49 on the 23rd of May. Not enough. It dropped by -1.7 points on June 1st. Total BS.
$NYMO and $NAMO must tag their lower BB’s, or be within a hare’s breath.
$VIX must tag or blow through its upper BB.
$CPC must give a reading of 1.15 at minimum. A reading at 1.25 or higher would be better. This past Friday’s reading of 1.24 is definitely bullish for Monday, but that may be it.
$NYAD, the daily, must give a reading of -2000 or lower. This went to -2500 when the market was bottoming in the late June/July period of 2010.
The day must also be a 90% down day, which, if all the above give extreme oversold readings, it would just about have to be.
$USHL5 should be well below 0 on the same day that all of the above give these important readings.
$NYADV should be giving daily readings well below 500 in the days before all of the above give their extreme readings.
$BPSPX will probably be in the 40-50 range on the day we’re looking for.
$SPXA50R will probably be in the teens or maybe in the single digits.
For things to set up the way I think they should could take a long time. And there is the possibility that, with oil just way too high, that we’re headed into a recession and that the market may have put in a major top. We could be staring a 2008 scenario right in the face. But I don’t have a crystal ball so I just don’t know.
I did get suckered into some UPRO at 83.01 on May 16th based on a bullish cross of the 13EMA above the 34EMA on the 60min charts that day. About 5% of available cash. I had a sell order in place while traveling and almost got taken out on May 31st, but not quite. I’m a bag holder. Don’t try this at home.
I’m in Sheridan, Wyoming at the moment and will soon reach my New Mexico home.
https://signalgenerator.wordpress.com/2011/03/12/weekend-update-march-12th-2011/
Be careful.
My paranoia has served me well and kept me mostly in cash since May 2nd. How has your paranoia been treating you?
Brief Update May 21st 2011
Wait
Have patience
There simply can not be a bottom without a capitulation event. That is just my opinion based on a study of every bottom we’ve seen since the 09′ lows. So far this still appears to be valid.
What we’re seeing now are a series of bear flag patterns in the 60min charts that continue to be confirmed with breaks of the lower trend lines.
You can easily see a couple of major ones on this chart of SSO along with a failure to hold decisively above the MA’s.
This kind of action will eventually take its toll on the retail crowd as they finally conclude that dip buying just isn’t working anymore and that preservation of capital is the best trading strategy.
If you ever posted a comment on this blog, then I sent you a link via that email address. If you use multiple email accounts, then you might want to check to see if you got my message.
I am moving next week so this really is my last post.
Remember:
Money in the market is money at risk.
Only the paranoid survive.
It takes forever to reach a destination that does not exist.
GL
Edited at 8:20 P.M. local time to add the following:
Notice on this chart from the week ending 5/13 that when the RSI rose above 70 that IWM sold off. In the recent past buying in IWM has been so strong that even when it was so obviously overbought with the RSI above 70 all it did was pause a little bit. Also notice the bear flag and failure.
Notice on this 60min chart for the week of 5/20 that each rally attempt lately has failed with a break of the rising trend line/bear flag pattern. This chart uses the 13/34 EMA mechanical system stolen from Stock Tiger and shows how the 13EMA just can’t seem to stay above the 34EMA for very long.
Charts courtesy of FreeStockCharts.com
During the decline from April 2010 to the first week of July 2010, this pattern repeated over and over again. Until there is some kind of capitulation/selling climax event in the market, then I expect this pattern to repeat much as it did in the year ago period.
Weekend Update April 30th, 2011
(5/10/11: I’ve added an addendum to my previous ‘comment’.)
$VIX closed below its lower BB on the 20th and 21st, then tagged the lower BB on Thursday but closed back inside the lower BB. It seems to me that try as the market might, it can’t seem to push the $VIX lower. Why? Recent closes have been at levels not seen since the summer of 2007. $VIX certainly can go lower but in order to do so it’s going to take a monster rally lasting most of next week and I don’t see that happening. Also on days when $VIX and $SPX close green there is about a 60% chance the following session will end in the red.
Zweig Breadth Thrust has now pushed up to 62.28 and that’s higher than it reached on either Nov. 4th, 2010 or April 1st, 2011. This indicates an extreme overbought market and suggests a cooling off period of some type beginning in the next few sessions.
4wk New High/Low Ratio finally pushed above 90 on Friday to 90.02. While 95 is much better, levels slightly above 90 have worked well in the past in signaling an overbought market especially in conjunction with overbought readings on ZBT.
Cumulative Volume Index or Cumulative $NAUD with slight negative divergence. Notice on the linked chart that there was also some negative divergence between $NAUD and the $COMPQ back at the end of March and the first few days of April. This decoupling appeared to have been negated a few days later as the $COMPQ and $NAUD got back in step with a rally in the $COMPQ accompanied by a huge spike in $NAUD. Or not. The very next day the wheels started coming off. It is possible that we could be setting up for some kind of similar event. For the moment it looks innocent enough and could have as much to do with the rebalancing of the $NDX as anything else, but I do believe it’s going to be important to watch this in the first days of the upcoming week to make sure that what happened Friday was just an anomaly.
$NASI rose by 32 ticks on Thursday and 32 ticks on Friday. If $NASI should rise by less that 32 ticks on Monday, then that would indicate breadth momentum is on the wane.
$NYSI weekly chart (bookmark it) showing a persistent series of lower highs since the summer of 2009. With the market making new highs day after day and in some cases making new all-time highs in certain key sectors, it seems to me that $NYSI should be up in the +1200 range but at 672 $NYSI is just above the bearish 500 level. I’m already concerned about the market but would be even more so if $NYSI turns south before rising above 800.
$USHL5 rose to 2114 on Friday. While 2500 is much better as a signal that the market has reached extreme levels of overboughtness, this only managed to get to 2300 in early April before turning south. A window dressing rally day this coming Monday should/could push this up closer to 2500.
Stealth Distribution: In the last nine sessions, we have had seven days where the market has closed higher. On four of those rally days, including Friday, the $TRIN closed above 1.xx hinting at underlying distribution. This is a red flag warning of covert distribution but remains such until there are signs of overt distribution.
The markets have gone higher almost every day for the past two weeks in a froth fest that can’t possibly end. Right? Then why is it that $NYA50 and $NYA150 are putting in lower highs? I mean, come on, maybe it’s a little hard to keep every friggin’ stock on the $NYA above the 50MA but it should be a piece of cake to keep stocks above the 150MA and yet that is not happening. These two gauges are indicating that participation in the rally is getting narrower and narrower. This can go on for quite some time before cracks begin to appear, but it can’t go on forever. Either participation broadens or the market will fall of its own weight.
$SPXA50R: Slight drop on Friday and not the end of the world. This can waffle at any time, but it always waffles when the market is topping.
Let’s cut to the chase: I’m getting uber paranoid even though I really cannot make a case for the downside. I see potential for some downside but then I see negativity all the time that does not impact the markets and is eventually righted. Regardless, I sold some MVV on Friday that I’ve been holding since the middle of March and had a sell order in for some UPRO at the end of the day at 86.71 and missed that by 4 cents. I will unload the UPRO on Monday, or at least that’s the plan now. That will protect half my profits and leave me with some MVV and UPRO and some REMX. If we do start to see failures in the 60min time frames for $SPX, IWM, Q’s, $MID, etc anytime next week, then I’m probably going back to cash.
60Min Chart of $SPX:
Part of the reason I’m getting more paranoid than usual is the $USD. Oil prices are through the roof and gas prices are beginning to take their toll on the economy. One way to bring oil prices down is to allow the $USD to rise and if oil prices don’t come down, then we’re headed into another recession. The mad men at the helm are between a rock and a hard place. If they don’t want to be blamed for another recession then they’ve got to do something pronto. Obama probably won’t be re-elected as our country’s racist roots re-surface but he definitely won’t be re-elected if we go into recession. Bernanke’s reputation is at stake, as well, and Mr. ” I’ve Got It All Under Control,” will have egg on his face if he allows the country to slide into recession. Of course the puppet masters may have other plans, but I think it’s time for a $USD rally of one type or another.
This chart below shows what I’m looking at, which is mainly the RSI. The RSI can go lower. It dropped to 20 in November of 2007, but it need not as the $USD has turned around previously when on the weekly chart the RSI has just approached 30. Right now precious metals, commodities, and equities are the best games in town, but if the dollar should start to rise then these asset classes will come under pressure and probably drop as money starts chasing, well, money. Exports would decline for a bit but gas would come down and that would mean a little extra consumption money for consumpters (I got that word from my favorite Alaskan, S.P.). Consumer spending is 70% + of the economy and if consumers are staying off the road because all they can afford is just the gas money to get back and forth to work, then everybody suffers. So that’s my story and I’m sticking to it.
Direct link to chart of UDN showing RSI at 77. Notice on the left of the chart what happened to UDN the last time the RSI reached similar levels.
Charts courtesy of StockCharts.com
And that’s a wrap. Going dark.
Thanks for stopping by. I hope you learned how to fish. This post shows a lot of what I track and how I interpret them.
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Augustus Owsley Stanely III, January 19th, 1935 – March 13th, 2011. RIP, brother.
It takes forever to reach a destination that does not exist.
Oz out!
Update April 27th, 2011
Higher highs, overbought, with negative divergence.
Zweigh Breadth Thrust hit 60.69 today and so this has entered the land of the overbought. It did this back at the end of March and the 1st April which pushed the market into the most recent consolidation period.
Cumulative $NYAD & Cumulative volume index/cumulative $NYUD are both moving in step with the markets, which is to be expected.
But….we have negative divergences in several breadth indicators. So what? These haven’t been at all helpful since the August top and may be of even less help because cumulative $NYAD and CVI are confirming the move. Or not. Is it time to wave the red flags or is it just time to make sure you know where the red flags are? I don’t know.
The following indicators went backwards today:
4wk New High/Low Ratio dropped to 87.63 from yesterday’s 89.13. Seems insignificant but this should have pushed easily above 90 today, IMHO, of course.
It really isn’t that much to be concerned about but with ZBT above 60 then you have to expect some kind of pause or give back for tomorrow. Even so, we’re headed into the end of the month with some window dressing expected and then there’s Monday, which may also come under the window dressing spell. After that, who knows? Sell in May and go away?
$VIX Bollinger Band signal appears to have been a false signal. At least so far.
$RUT Monthly chart now showing RSI at 68.03 so getting close to the important 70 level.
GL
Weekend Update April 23rd, 2011
Zweig Breadth Thrust at 58.79, which is confirming the move. A rally on Monday will probably push ZBT back above 60. When this happened recently, the market did a slow roll into last Monday’s low.
4wk New High/Low Ratio at 86.91 and like ZBT is confirming the current move. This only reached 90 back at the end of March and first of April and would probably need a rally on Monday and Tuesday to push this 90. If the market should rally throughout the week, then this might get up close to 95, which is considered extremely overbought.
$VIX has closed below its lower BB for the past two sessions. Normally this would be a red flag with a ‘sell’ signal coming when $VIX closes back inside the BB and above the high of the candle that preceded the close, which in this case would be 15.83. At the moment I’m leery of this set up mainly because of what happened to $RVX and IWM last week.
If you remember, $RVX closed below its lower BB on 4/15 and then the market fell off a cliff on Monday, the 18th, but this turned out to be a total head fake rather than a legitimate ‘sell’ signal for IWM. I’m thinking the same thing could happen to the $VIX and $SPX. Time will tell.
Sell in May and go away?
There have been summer sell offs in six of the last eight years, going back to 2003. These pull backs began anytime between the 1st of May and mid-June. Some were minor and some, like the drop in 2008, were substantial. On the far left side of the chart below of IWM, you can see two more summer pull backs. All of this suggests that there may be a pull back of one degree or another starting some time in the next 30-40 days, if not sooner.
IWM Monthly Chart:
I mentioned the $RUT monthly chart a few weeks back and the chart below shows what I’m looking at. If you notice on the chart the number of red arrows that line up with times when the RSI has tagged or pushed above 70. Most of those situations have resulted in some kind of consolidation period or pull back lasting for varying amounts of time. With the RSI now at 67, it’s going to take quite a rally from current levels to push the RSI up to 70. Unless IWM screams higher before next Friday, that isn’t going to happen in April. But it may happen in May, or not. Just something to watch.
Next weekend I will put up my last post and go dark.
GL in the week ahead.
Super Quick Update April 20th, 2011
I have extreme overbought readings from $NYADV and the daily $NYAD plus the $VIX and all the other volatility indexes blew through their respective lower BB’s today and so you would expect a pause day for tomorrow, under normal conditions.
Obviously AAPL’s earnings, etc., are setting up another rally for tomorrow, or so it seems at 7:20pm ET.
Looks like this rally leg may get some traction. If the $SPX should close above 1339.46 tomorrow, which might be a stretch, then 1344.07 will probably go next week.
Weekend Update April 16th, 2011
Is this love or just confusion?
Sure seems that everyone loves the Russel. Maybe they love it a little too much. 60min chart sure looks good and meets all the criteria for a ‘buy’ signal per the 60min trading strategy. 72% of the stocks in the $RUT closed in the green on Friday. Disclosure: I am not long IWM, UWM, or TNA, but maybe I should be.
Chart courtesy of FreeStockCharts.com
According to the 5/10 method, IWM should give a ‘buy’ signal on Monday.
But here is the problem I see. $RVX has closed below its lower BB and is now at levels similar to those from April 2010. The big difference between last April and this April is the fact that the BB’s on $RVX were compressing. Still, a ‘sell’ signal comes when $RVX closes back inside the lower BB.
Chart courtesy of StockCharts.com
What this set up says to me is that the $RUT may pull back a little in the week ahead, though from what level is anyone’s guess, and that a better entry level could present itself. At the moment, and subject to change without notice, I am more interested in adding to long positions rather than selling out completely; however, there are going to be a ton of earnings this week and if the market doesn’t like what it hears, then that’s another story.
Intervention is just another word for manipulation.
GL in the week ahead.
Buy/Sell Signal Generator 