Sunday, November 30, 2008

November 2008 Rewind - The New Hope

After two months of significant declines, many investors may have believed that November would provide a post-election reprieve. If so, their hopes were dashed as the severity of the global economic crisis revealed its mainstreet connections and US equities posted their third consecutive month of declines and eighth month of losses for the year.

This November, the S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices closed down -7.48%, -5.44% and -11.17%, respectively. Year-to-date, that left the indices down -38.96%, -33.44% and -43.13% from their respective 2007 closes. Even so, those final levels mask the extent of losses experienced intramonth when the S&P 500 traded at eleven-year lows.

Sentiment for the period was characterized by an evolution from systemic concern to economic panic, featuring major automotive and home sales declines, cross-industry layoffs, profit losses and outlook reductions, and a series of dismal economic reports indicating multi-decade slowing and unemployment topping 6.5%.

Matters were only made worse by depressing Big Three Automaker testimony before Congress on a failed bid to seek $25 billion in loans, major internal changes to the workings of the planned TARP rescue efforts, and a near miss on Citigroup's survival.

Similar to October, however, the final sessions of the month saw a major reversal of epic proportions on extreme oversold technicals and a modicum of economic leadership offered by the President Elect.

Style-wise, Mid- and Large-Cap stocks outperformed Small-Caps, while Sector-wise, Consumer Staples and Energy stocks greatly outpaced all others, especially Financials in spite of their outsized month-end recovery. With many technical indicators once again suggesting short-term overbought conditions, The New Hope among traders for December, is that longer-term oversold readings, positive seasonality and continued responsiveness in the credit markets will provide equities with a holiday boost into the new year.

Sentiment: Negative
Volatility: Extreme/Historic (VIX 47-81)
Direction: Down

[Click to Enlarge/ Additional ETF Analyses Posted on Market Rewind]


The Style-Box was calculated using the following PowerShares™ ETFs: Small-Growth (PWT), Small-Value (PWY), Mid-Growth (PWJ), Mid-Value (PWP), Large-Growth (PWB), and Large-Value (PWV). The Sector-Ribbon was calculated using the following Select Sector SPDR™ ETFs: Materials (XLB), Industrials (XLI), Energy (XLE), Staples (XLP), Discretionary (XLY), Financials (XLF), Technology (XLK), and Healthcare (XLV). The Standard & Poors 500, Dow Jones Industrial Average and NASDAQ 100 may be traded through ETF proxies, including the SPY or IVV, DIA and QQQQ, respectively.

Weekly ETF Rewind - Week 48 (11/28/08)

(Click Image to Enlarge/ Glossary)

Markets built strongly on the prior week's reversal into the Thanksgiving holiday shortened week, leaving the S&P500 (SPY) up +19.1%. The period's biggest sector winners were Financials and Real Estate (XLF +34.8%; IYR +31.9%) on hopes of further credit easing and promises of federal consumer lending facilities (Washington Post - US Moves to Revive Spending). Among the tracked ETFs, only the US Dollar (UUP) registered a slight decline of -2.0%.

Week 49 of 2008 holds a packed economic calendar, as follows:

Analysts will no doubt be closely assessing "Black Friday" retail reports next week (MarketWatch - Sales Up +3%), as well as "The Big Three Automakers" part deux (NY Times - Three Plans). Meanwhile, eight out of 11 sector ETFs are highly overbought on a short-term basis. Also, as strong as this recovery has been, with 20-Day Trend Stability indicators universally in the twenties among equity indices (save Utilities XLU), don't forget that this remains an erratic market. Lastly, Precious Metals (DBP) and Bonds (TLT) are even more over-stretched on an intermediate basis. I hope you enjoyed your extended weekend!


Never Investment Advice

Friday, November 28, 2008

11.28.08 - Financials Continue to Lead

Bit of an erratic day within a narrow range. I expect more and more swing traders will be getting net short here either at the close or on Monday, and possibly in size. The magnitude and duration of any pullback will set the tone for the rest of 2008 after this 80-year upside correction. The S&P500 has officially tagged its 20-day moving average (SPY $89). Have a good extended weekend.

9:55AM PST: Strong close - good week for the bulls. Be careful of pile-ons on any signs of weakness next week though.

Thursday, November 27, 2008

Thanksgiving Rally Sector Review

As of Thanksgiving, the S&P500 has rallied 19.8% in the three and a half days since last Friday's bear market lows. The powerful move has left 9 out of 12 major sectors overbought in the very short-term by several technical measures. Possibility of a pending pause or immediate pullback aside, that's not to say there still isn't room to run higher through the end of the year: intermediate-indications remain neutral, debt markets are finally responding to government efforts, and we have entered the traditionally bullish post-Thanksgiving to Christmas season for equities.

The graphs and tables excerpted below from the pending Daily ETF Rewind provide insight into the relative performance of the sectors during the rally, as represented by selected tracking ETFs. Although the weakest sectors for the year, namely Financials (XLF) and Real Estate (IYR), put in the best recovery performances, they still lag the market badly longer-term. The reverse can be said of the recession trade winners, including Consumer Staples (XLP), Healthcare (XLV) and Utilities (XLU).

In the days and weeks ahead, I will focus on emerging shifts in leadership. I hope you had an enjoyable Thanksgiving.





Reading: Traderfeed's Sector Take

Wednesday, November 26, 2008

11.26.08 - Gap Plus

Cumulative Tick has been explosive and all internals are very strong. Normally I'd be levered long by now; however, I wonder how much more juice we can squeeze out of this rally ahead of the holiday (also note that not all sectors are joining in on the fun). Speaking of the holiday, have a wonderful Thanksgiving. Market performance aside, I tend to believe we all have something special to be thankful for. And back to the markets, manage risk with trend line support on this linear move. If we hit R1 at SPY $87.50, I'd even look at legging into net shorts. Lastly, don't forget Friday is a half day and volume should be light. Vix has fallen 6% to 57.


9:20AM PST: Feeling a little heavy here and indicators are struggling to maintain their earlier trajectories. If we do turn south, watch the rising VWAP for potential support. Quantifiable Edges looks at the risk of shorting near major lows here. R1 is proving support for the NDX, which is showing relative strength.

9:40AM PST: Made it through that patch. Very strong day -- headed to R1. TNX is again getting pummeled -- Aggregate bonds (AGG) is very overbought, though it looks like it still has some room to run -- keep an eye on it.

10:05AM PST: Breakout, watch very closely now. Love to be wrong about this being the max for the day. No sign of letting up and not that far away from the 50-day. We'll see.

10:25AM PST: Mumbai terror attacks... You've no doubt read about the perceived risks in the NYC subway systems over the holiday. Hopefully/probably just alarmist chatter. A reminder of the times we live in though.

10:55AM PST: VIX has slowed its rate of descent and AD line has flattened. Cumulative tick remains constructive, however, even as price takes a breather...

11:25AM PST: Looks like that really was just a consolidation breather, well see if this new thrust can hold. Final hour will be interesting for sure.

A Year Ago - This was just about the time the longs started pounding their heads against the wall. Who would have guessed we would have moved down this quickly?

11:35AM PST: Well, I was wrong to be so skeptical [add: of how far this could run]. SPY $89, the [correction] 20-day Moving Average would be the next major resistance point. I'd hate to get there too quickly just to see it fail.

11:50AM PST: Indicators remain strong. Resistive volume spikes are accompanying the price peaks, but they are having no impact, suggesting short covering. If you are thinking of shorting, I'd wait for the close [add:] or much clearer evidence of a reversal (and see the QE link above!).

12:20PM PST: And that 20-Day MA did indeed prove to be a magnet. Now what? See above, but still no evidence of it. Don't get run over by picking a potential resistance level without confirming evidence it actually will play in your favor!

Close: Very bullish intermediate-term and I wouldn't have guessed it coming into the day, but I don't like how short-term overbought we are now. In any event, enjoy your day off!

Never Investment Advice

Tuesday, November 25, 2008

11.25.08 - Mild Pullback...


...after the tremendous move up. Impressive given the news flow today. So far the daily pivot has held (SPY $84.25), but I'd be careful of any breakdowns below it as the immediate upward energy seems to have run its course and this would be a sell potentially running down to S1 or even the rising 5-Day Moving Average. This would actually be quite healthy as long price held there, of course. For now, TRIN is on the negative side even as Cumulative Tick continues a slow upward march. Those that follow this blog know I look for alignment of indicators before I'll risk any size.

I went net short this morning on the opening gap, but have since trimmed back to partial hedges [Add: Obviously I'll put it all back on if we breakdown]. Many long-biased money managers are looking for the all clear to put money back to work here. It may be a longer-term trap, but if they can get a couple months out of it they will, as they can't afford to have these series of 5% and 10% up days without participating.

10:05AM PST: Testing the Pivot under a declining VWAP; Cumulative Tick slope has turned negative, albeit still positive on an absolute basis for the day. VIX is plus or minus 65.

11:35AM PST: TNX (Ten-Year Treasuries) has dropped precipitously. The Pivot (dotted yellow line) continues to hold for the SPY.

12:15PM PST: And we've caught a bid.

Reading:

o Traderfeed/ Trading with the Tick
o AlphaTrends/ Pattern Recognition A
o AlphaTrends/ Pattern Recognition B

Never Investment Advice

Monday, November 24, 2008

11.24.08 - Pop, Pop, Fizz, Fizz


I've been waiting about three months to use that title. We made it all the way up to R2 (SPY $84.40), so be careful at the mid-day. Holding the gap after the first hour on the Citi news was a sign we might see a follow-through trend day.

Will it be sell the news on the Obama nominations? Or will we get a second round up move? The SPY is already up nearly 6% on the day -- no reason that has to be a cap, but it's obviously high. I still have partial hedges on and will look to trim near the VWAP, and more again at R1, but am likewise lightening up on recent position entries on the long side just about here. Cumulative Tick and AD lines are very strong and the VIX has dropped all the way down to the low 60s.

9:25AM PST: Daily Cumulative Tick has changed slope to the downside. Could just be a dip, but watch it. The President Elect is much more coherent today relative to his first economic briefing, which was a mini-disaster in my opinion.

[INO TV Gold Video Analysis]

9:50AM PST: Tick is repairing itself and we got a small supportive volume spike on the dip down from R2. I'd "like" to see price pull back a bit more before increasing net long exposure. May not get it today.

Brian Shannon has increased his intraday postings during the market turmoil. It's worth checking out his his view on today. Complete day trader though, so be advised he can change his mind very quickly. His recent book is pretty good and I recommend it, check it out on the link to the right ("Technical Analysis").


11:10AM PST: Still bound by the VWAP/R2. Internals remain strong. Take a look at the economic calendar ahead to consider the desirability of continuing to hold hedges, also on the right. I'm generally bullish, but don't forget after just two up days that it's still a tough market.

11:30AM PST: S2 Breakout? I've been covering at the VWAP... starting to feel toppy though... should hold above/ close to SPY $84 if we are going to break up in the last hour here.

12:50PM PST: Glad I covered hedges? Darn toot'n! Talk about a power rally. I'll still play it safe overnight... Whoa... talk about rehedging just in time! Lordy -- That's this market, you get it all in one update, heck, all within the couple few minutes it takes to hit "Publish Post". Still an amazing day.

Close: Hard to follow my thoughts today, sorry about that. At least I attempt to post real-time, not after the fact as many do. To reemphasize, I am bullish intermediate-term (though I hardly think we are out of the woods yet) but am going into tomorrow mostly hedged again.

Timing worked out well today, but I'll pin it on luck as I came into the day fairly hedged as well and cover points were few and far between. Better lucky than smart? The tough thing for long-biased funds will be picking a spot to go all in again. Don't want to miss out, don't want to get creamed. No wonder the market is on "hyper speed". Nothing new there!

PS - Germany officially in a recession. Did you XLF today?

Sunday, November 23, 2008

Weekly ETF Rewind - Week 47 (11/21/08)

(Click Image to Enlarge/ Glossary)

A market that remains in "hyper speed" with an ever obvious bias to the downside left the indices at four week lows after a major range breakdown to levels not seen since 1997. This on what can only be kindly termed awful jobless claims and depressing "Big Three" Auto Exec testimony before Congress -- desperately seeking survival capital, but without an articulated plan (WSJ - Automakers Sent Home). A mild recovery then ensued late Friday on "news" of the the appointment of Timothy Geithner as the Obama Administration's Treasury Secretary (ABC - Stocks Soar). By the end of the week, the S&P 500 (SPY) finished down about -8.2%.

To briefly explore our "hyper speed" environment, it is often said among traders that, "volatility begets volatility." Once volatility works itself into a system, it becomes amplified and takes time to work its way out. Statistical economic models such as GARCH and its mouthful-brethren attempt to describe and predict such behaviour.

From a technical trader's perspective, I find it instructive to look back just one day to Thursday's oversold conditions, as highlighted in this MarketRewind blog. Compare the Price Index readings to the one's posted above, and imagine how self-reinforcing and amplifying automated models that fade (trade against) extremes are in environments like this. Add a dash of retail emotion after staggering losses to on-going institutional deleveraging, and tremendous economic and political uncertainty, and it's one volatile brew.

Trading signals that used to take days or weeks to arise are now commonplace intraday. The movement becomes like a spring action, taking time to self attenuate. So too will this marketplace find its center in good time. Meanwhile, as we head into this holiday shortened week, the VIX remains at an abnormally high 73, and, while less predictive in this environment, bullishly stretched above its short-term moving average.

After Friday's positive swing, most of the tracked ETFs are back in neutral short-term territory, with the exception of Healthcare (XLV) and Agriculture (DBA), which remain heavily oversold. The Precious Metals (DBP) ETF, on the other hand, is now very overbought.

Economic releases for Week 48 of 2008 feature Housing Data, Preliminary Q3 GDP, Personal Income and Jobless Claims, among others as follows:

Enjoy Your Weekend and Thanksgiving Holiday!


Never Investment Advice

Friday, November 21, 2008

11.21.08 - Third VWAP Test

As the VIX "settles down" to 75 after price plumbed the depths, we are again testing the VWAP (Volume Weighted Average Price) to the upside. It's difficult to say whether we will break it, as AD remains flat while Cumulative Tick moves slowly southward. However, I am encouraged by the multiple tests. Up and Down Volume are reasonably balanced on this expiration Friday.

Speaking of which, I wonder how many option put writers will get stuck holding the bag today? One market observer I respect lays partial blame on this for the downside breakout this week. [Add:] This makes sense to me since I was shorting the Dow yesterday just to get neutral for that very reason -- imagine that behaviour on a mass scale.

By request, I have annotated today's chart. Here is a 'Vault' post describing many of the daily indicators. Closing data was delayed last night, and I have therefore updated the table below.

Reading:

o Quantifiable Edges/ Market Extremes
o MarketSci/ Excellent Lead-Lag Series
o VIX & More/ Structural Risks
o Reuters/ Goldman Lowers GDP Outlook

9:20AM PST: We are hanging in there by a thread. I'm still hopeful we'll break that VWAP, but this doesn't feel right with Cumulative Tick continuing downward. As a general rule, I won't trade against that. The market is really trendless just now, and did I ever mention I hate narrowing ranges?

9:40AM PST: Tick is picking up some steam. The pivot is just ahead.

10:05AM PST: Back under the VWAP. Tick remains negative.

Fifteen-Years:


10:55AM PST: Still a couple hours to go, but I'm sure not seeing any interest in holding ahead of the weekend/ C news beyond precious metals (GLD +6.82%).

11:45AM PST: Supply is being released and it's making me nervous even though it's not a huge imbalance -- only "midly large" ;-) VIX is up over 77.

News: Geithner, our next Treasury Secretary. How is that for timing -- remaining team to be announced Monday. Back up to the pivot/ resistance.

12:35PM PST: Higher prices on resistive volume = short covering. Ride that wave -- but C risk on Monday? Resistance at overnight SPX highs = 785? Made it through... Twenty minutes to go...

12:40PM PST: Heavy supply at yesterday's last "long" entry point from those "stuck" in the low SPX 790's. This is going to be the "five longest bars" into the close... Bounce off of pivot again? Oh yeah. Finish at the Five-day and no delivery baby. Check in this weekend for final stats, writeup will be brief given yesterday's update below. Have a good one.

Thursday, November 20, 2008

Mini-November ETF Crash Update


[Chart Data Correction Posted] After today's seminal S&P drop to new lows not seen since the last decade, I thought I'd post my usual end-of-week ETF charts as an intermediate point of reference. Note that eleven out of eleven tracked sectors are highly oversold on multiple time frames.

This is extremely rare and indicates one form of capitulation in and of itself... we are seeing a complete throw away in every asset class but treasuries. A slight exception is Gold, which is just now starting to claw back as our nation prints money 24/7. A bottom? Probably not, but maybe soon.

With the VIX stretched more than +28% from its 15-day moving average (also extreme), insurance is far too expensive to purchase and even unlevered investors are left with no 'option' but to go to cash in this environment of unbelievable volatility.

The only saving graces? One, relative strength in value stocks for the first time in a long time [NOTE: I'm not sure what I was looking at when I wrote this - it's not true! Maybe my data was still goofed up. I'll leave it in as a notated honest error rather than being revisionist, which I find distasteful]. Two, commodities down over 15% in the last month. Three, bond yields far below equity yields (for now) and bonds are as overbought as stocks are oversold. Four, today's volume was quite strong. Five, if relative dollar strength can hang in there (probably optimistic), on a recovery -- domestic and foreign funds may find their way back to the US after an extended hiatus. Six, as we all know, there is a government sponsored reinflation attempt afoot. Admittedly, it's a short and hopeful list relative to what we face.


Next month I will be offering this sheet with many more interactive stats for over 130 ETFs on a daily basis (very nominal fee -- hey...). Email me if you are interested in beta testing the Excel spreadsheets (jgpietsch at gmail).

I don't care who you are, this is painful to watch and I can't tell you how much I feel for those nearing retirement. Sadder yet, I'm not sure who said it on CNBC today, but - "2008 is the year 'buy and hold' went to die." That's the state our economy/ country is in right now, but we've turned it around before and can do so again. Remain opportunistically pragmatic, and... hang in there!

11.20.08 - Last Crash Lows


We managed to tag yesterday's referenced target break-down zone and [CNBC fact check edit: hit approached] last crash lows from '03 '02 on the SPX after this morning's gap down. The gap was filled on most indices save the S&P 500 (nearly) and Russell 2000 (not by a mile), which is a bit concerning from a breadth perspective. Cumulative tick was negative from the get go, but just right now we are seeing a healthy spike higher and it looks like S1 held. We'll see if this can lead to some modicum of momentum build. Gettelfinger is unbelievable -- God bless him.

9:30AM PST: ...And what do you know, five minutes later we are green across the board on the auto news. Not so sure that's a good thing, but we'll go with it.

9:40AM PST: Did I just hear Deutsche Bank is calling for $40 oil (we've broken $50 today)? Holy Mother of all Crashes Batman. Should we all buy as a matter of personal consumption hedging this go? PS - Resistive volume spike occurring on the strength -- pause or reversal? Usually a reversal unless strong waves of short-covering come into the market. VIX is down to 75, off its opening highs over 80.

10:30AM PST: Struggling for support at the VWAP. I want to say it will hold, but internals stink, so careful here.

11:20AM PST: Back to S1 as Paulson speaks. Should I put back up the "What Hurts More?" poll? "A Paulson Speech" was one of the choices.

11:40AM PST: Third try higher any bar now? Hard call. Goes without saying though -- manage any trades either way very closely. Paulson -- wow -- If I really wanted traffic to this site I'd start writing about the new world order, or something like that. Still struggling to take back S1 -- nope. Will this be the fourth day of lower highs and lows?

12:10PM PST: With respect to the SPX, the problem with relying on the '02 lows, is that systemic concerns, and Financials and Energy (major SPX components) weren't the focus then, and the velocity of this drop has significantly more energy than the last. Time will tell. Meanwhile, the VIX seems to be leveling off here intraday. Of course that could change any millisecond and the downtrend remains intact.

12:25PM PST: We may yet hit the October 2002 SPY lows of $76.72. Half an hour and another dollar to go. I assume CNBC is talking about either the Cash index or the Dow when they keep saying we've already hit the lows earlier today.

12:40PM PST: SPY is about to break S2 at $77.20. Relentless. Smack Down. What's the phrase -- "Where are we going and why are we in this handbasket?" Yikes. SPY $75.72 08 low?

12:58PM PST: CIT@$1.85. Overshoot, or Right Pricing? Man. Volume is very high. VIX over 81? Man. DELL beats on earnings, but revenues under. Thank goodness they don't give guidance... SPY RSI(2)=5.81.

Close: Zero interest rates on short-term bills. Stay tuned for a "mini crash ETF update" later tonight. For the record, here is how the day finished out. Let's hope it's truly and definitively historic.

SPY 1.68% Gap Down

And I thought we wouldn't gap down! Will it fill? Odds say yes [see Quant Edges*]. I was once invested in a gap strategy 'fund' that just got absolutely smacked.

Adaptive parameters and tight money management are needed for that strategy to work over time (guess what they lacked, not to mention they kept their bet size dollar level even after significant losses - double yikes!). We did touch the very top of my next "zone" target (also last bear market lows, btw) and the Vix broached 80 this morning. We'll see.

8:50am Update: Was your profit target hit? Did you have one? Watch it now.

*Parameters not quite "filled", but you'll get the idea.


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Wednesday, November 19, 2008

11.19.08 - Resistance Too Strong


For those who want to know what the impact of technical and algorithmic trading is on the indices, look no further than last session's overnight trade. See how closely price traces along the five-day moving average (the cyan dotted line) within the orange outlined box? This is a common sell parameter for these models.

Unfortunately, the same impact was felt this morning, and we simply could not string together a follow-on rally. We are now at S1 for the S&P 500 (SPY $83.64). We may see short-term support there -- and I'll be thrilled if it holds for the day -- but the repeated tests of this level don't bode well, in my view.

Also, on a longer-term basis traditional MACD is once again rolling over. I usually don't give that much weight, but trends have been so enduring this year, it has proven worthy of tracking. Lastly, this Auto testimony is out-right depressing to listen to, isn't it? No wonder the market is trading down.


Microsoft - Ticked all these years that you missed out on MSFT? Today you can buy it for $19.00, same as 1998. See -- patience does pay! Cash per share is reported at $2.20. Yahoo! has added a feature, I see, where Market Cap is posted intraday. It actually updates every few seconds -- now that's what I call entertainment! You do see the irony embedded in this paragraph, don't you (lol)?



9:30AM PST: S1 breached. Ground Hog Day (so far...) or complete break down ahead? Think I'll hold onto my cash for now.

10:40AM PST: We have broken yesterday's lows. Low for the year, put in just last week, was SPY $82.09. After that it's make or break time and SPX 750-775 could easily come into play. VIX is back to a whopping 73. Treasuries are catching a strong bid, significantly reducing yield.

[FOMC Minutes]

12:35PM PST: XLF/ Financials are down almost 8% nearing the close.

Close: Loss for words. I'll play long side moves on the overnight as long as I'm awake (Add: won't hold overnight)... though I doubt we'll gap down after such a fugly day (sorry, but hey) -- and who knows -- remember early October? Gotta keep it small. New lows on the year; I show a VIX high of 75. See you tomorrow.

Reading:

o Calculated Risk/ Comparing Crashes
o VIX & More/ Third Highest VIX?

Tuesday, November 18, 2008

11.18.08 - Price Rising / AD Line Falling

Note how the Advance-Decline and Cumulative Tick lines have fallen even as price has risen. So far the VWAP has held, but be careful out there. I'm closing down the "What Hurts More?" poll below and to the right today. So far watching "Cramerica" takes it (lol)!

[Gratuitous INO TV Online Seminars Link]

Reading:

o Calc Risk/ Credit Crisis Not Easing
o Quant Edges/ Pending Bounce?
o VIX & More/ HV MA Rolls
o BBC/ Wholesale Prices Plummet
o BBC/ Bailout not a Panacea

8:50AM PST: Indicator slopes have reversed mildly to the good.

9:00AM PST: At this point keep a close eye on HH/HL pattern sustainability and support at the daily Pivot (SPY $86.30).

9:15AM PST: Semis are diverging to the downside (add: and indicators are oscillating/unstable). When the majors begin to diverge, it's my observation that trends can stall or fall apart. Just a heads up.

10:20AM PST: Ahh, not good. Hope you caught the earlier post when we were still above the Daily Pivot. Declining volume is far outpacing and internals have really fallen apart. May see support between here and S1 ($84.10) but... well, time will tell, no? (Wait for confirmation, no blind hope trading!) Volume is extremely low at the mid-day.

Oh And -- Good-Bye BUD:

[Google Chart]

10:45AM PST: The VIX is trading up 3.2% over 71. Speaking of BUD, longs might be reaching for "long necks" if we really fall off the cliff just here... see, just can't post these fast enough... there we go (S1 breach).

10:55AM PST: Supportive volume spike, can it turn it around? Maybe, but wait for a higher low.

11:35AM PST: Careful. Nearing new closing lows on the year...

12:10PM PST: Second try at a turn. Check out the comments today for more on floor pivot breaches. Now, possible VWAP Resistance. VIX off its highs in the 73 range. I'd guess S1 holds this time... nope... gotta give it a little room though. Seems we keep hitting a wall at SPX 845 this late afternoon.

12:30PM PST: Wow, a real battle going on at this level... doesn't look good, does it? If it can hold, technicians will call it accumulation basing; if it doesn't, a break down out of the descending triangle.

12:50PM PST: Pheww! [Add: We hold and catapult ahead of the auto hearings.]

RSI Gadget Test: What do you think? Doesn't look "current" to me.



1:30PM PST: Interesting close. Finally a "key reversal" (nearly)? Hard to have any conviction in this environment beyond playing the noise. [ADD:] Rumors it was a BUD rebalance trade. Today saw it all though -- a gap down, a fill with higher-highs and lows, straight down trending, an inverse head and shoulders and subsequent chop, then a short covering burst with perhaps a touch of real buying into the close (assumption based on the volume come back). Amazing -- see you tomorrow -- good to be "back in the game."

Late at Night: PSS - Hope you noted that IWM/ Small caps did not particpate in said rally much at all. Yeah, I'd like to see a follow-on rally too, but wait for it muchachos. Long Neck Cheers - Jeff

Never Investment Advice

Monday, November 17, 2008

11.17.08 - Building a Base?

I was a little bearish coming into the day thinking we may see follow through on Friday's end-of-day slide. However, the industrial production number has helped and we seem to be building a base at the mid-day. Perhaps we'll make a tradeable run back up to the five-day moving average before day's end. [Add:] If we do, be aware it may pose potential resistance.

I was supposed to be home at my "trade station" by now, but am stuck at the airport due to fog. Playing the noise feels less risky today with the lower vol, but I continue to play it safe with smaller size and "easy" profit targets.

Reading:

o Business Week/ The Six Unknowns
o MarketSci/ State of the Market Report

CLOSE: Well, I'm home. Choppy afternoon trade -- this market simply cannot catch a bid. More tomorrow after a good night's rest. I'd like to be encouraged that we are holding the range, but it's pretty hard to get excited about that right now.

Sunday, November 16, 2008

Weekly ETF Rewind - Week 46 (11/14/08)

(Click Image to Enlarge/ Glossary)

Another ugly week of trade that saw new lows for the year left the S&P 500 (SPY) down -7.7% on reduced corporate guidance, poor retail sales, and added volatility attendant to Secretary Paulson's TARP revision statements (Telegraph - TARP Torpedoed; Time - Credit-Card Plan Criticism). Sectorwise, Utilities, Consumer Staples and Healthcare continued to outperform, although they also ticked into the red (XLU -0.9%; XLP -3.2% & XLV -3.4% ), while Real Estate and Financials were pounded hard yet again (IYR -16.3% & XLF -10.5%).

Economic releases for Week 47 of 2008 feature Industrial Production and Utilization statistics on Monday, Inflation Statistics on Tuesday and Wednesday, and last month's FOMC minutes, also on Wednesday, among others as follows:

My regular daily posts will recommence next week. In the meantime, enjoy your weekend!


Never Investment Advice

Friday, November 14, 2008

Wary of the V-Reversal for Friday

Yesterday's test of SPX 820 after dipping below support and the explosive reversal was very impressive. However, I'm still on the road and I'd be somewhat wary of the move -- at least for today. In fact, futures are already trading down significantly on [edit] dour retail sales. Maybe that counter move will be enough to restore some upside potential energy, we'll see. I will be able to post the weekend update before Monday, so check back in before the open, and have a good one.

Wednesday, November 12, 2008

Support & The Pain of No Gain

Today's -5.2% sell off in the SPY during the day session and the -1.2% further move in the after-market subsequent to the Intel outlook leave us about a dollar above the October $83.50-$83.75 support level. So it's bear market inflexion point time again gang... will the third test lead to a major break-down, or catapult us back into the new year? I have a "side" bet on the latter, but am more than willing to reverse that trade on a dime.

Separately, I wasn't able to trade during today's session, and I have to admit that it's rough to be out of the game on a day like this. In that vein -- just for fun -- vote in the side bar poll to the right -- "What Hurts More?" And keep an eye on that Maginot line.

Never Investment Advice

Jones Trading

This market is out to whip us, just no two ways about it. Look closely at the day though, even a priori, simple trend channels and breakout awareness could have kept you in the direction of the trade and permitted partial capture of the reversals.

I didn't trade today while on the road except for a very rapid gap scalp in the pre, but the key (like any day) would have been to let the trends reveal themselves through time while watching key levels, looking for channel break outs, and accepting a few scratches along the way. And, last but not least, requiring trend alignment in price and non-price indicators -- lest you bring a knife to a gunfight back along the Indiana Jones theme.

I tend to think we could find daily support near here, but am equally concerned about the possibility of another quick, significant move down if we break, even though it seems less likely during this bull season. Sorry I don't have more to back this up while traveling, just split (okay, virtually bipolar) intuition for now.


Never Investment Advice

Tuesday, November 11, 2008

Traveling this Week

Not for Republication

Hi Gang, I will be travelling through next Monday for business and family matters, so posting will be sporadic. US futures are down about 2% as I write this. Small change, right? Good trading to you.

Monday, November 10, 2008

Goldman Sachs +/-$5 Above 1999 IPO Price


Yahoo! GS Quote - There was a good article in the Wall Street Journal this weekend postulating a "go private" Plan-B option for GS. It seems its asset base build acquisition options are limited.

11.10.08 - Easy Fade


It was an easy fade after the Friday follow-through/Chinese stimulus gap +2% higher. We may see support at the confluence of the 5-Day MA/ Pivot for the SPY at about this level (about SPY $93.30), but be aware that the cumulative tick and AD lines are very negative. Posting a bit early today, I'll update the chart later on.

10:20AM PST: No need to update the chart... it has been a straight, even slope down to S1 (SPY $91.50), where we have found a little support. Tick and AD lines have leveled off, but are statistically in a bad way.

11:25AM PST: Higher Highs & Lows, but the declining Five-Day MA is proving resistance above. Volume is non-existant.

Thank you to Traderfeed and Quantifiable Edges for linking to this blog over the weekend -- it's an honor.

Saturday, November 8, 2008

Weekly ETF Rewind - Week 45 (11/07/08)

(Click Image to Enlarge/ Glossary)

In another remarkable trading week, equity markets stormed higher into the politically historic US national elections, only to summarily retrace half of their recent gains in a gut wrenching two-day, ten percent rout in the face of deteriorating economic readings (AFP - Obama Win a Triumph; LA Times - Unemployment Hits 6.5%). By week's end, the S&P 500 (SPY) was down -3.1% while the EAFE International Index (EFA) was able post a slight gain of +0.3% after coordinated Eurozone rate cuts (AP - European Banks Cut).

In the Sector realm, the recession trade was back on with Utilities and Consumer Staples being the period's only winners (XLU +0.5%; XLP +0.6%), while Consumer Discretionaries and Financials fell back hard (XLY -8.1%; XLF -8.4%). Style-boxes were mixed with Small-Cap Value (PWY) stocks taken down -7.0%, even as Mid-Cap Value (PWP) stocks recorded a mild gain of +0.2%.

Week 46 of 2008 is back-weighted with economic reports, featuring Jobless Claims on Thursday and Retail Sales on Friday, among others as follows:

With significant cash on the sidelines, elections behind us, short-term overbought readings reduced, and redemption season to soon pass, perhaps markets can begin to set the stage for a mild recovery into the year-end in spite of on-going economic concerns. Enjoy your weekend!


Never Investment Advice

The Vault - Monthly Rewinds

From the Market Rewind vaults, a one-stop archival repository for past monthly "Market Rewinds":






Never Investment Advice

The Vault - Finance & Market Commentary

From the Market Rewind vaults, a one-stop archival repository for past posts featuring market commentary and analysis:






Never Investment Advice

The Vault - Studies, Systems & Methods

From the Market Rewind vaults, a one-stop archival repository for past posts presenting trading ideas, methods and historical studies:





Never Investment Advice

Friday, November 7, 2008

10.07.08 - Bad News in an Oversold Market


After being so oversold after the 10% two-day rout, the market is getting a bid in price with a slightly positive, albeit wavering cumulative tick line and a strong, but flattening AD line. Hard to read the tea leaves in the context of the horrible economic news and obvious continued liquidation. It's probably more along the lines of personal cognitive dissonance though, as the outlook feels so risky even as the market catches its slight bid.

Sometimes I think I'd be better off not knowing the news (beyond being aware news "events" are pending in the most general sense). I know many traders swear off CNBC for one. As Brian Shannon pounds home daily at Alpha Trends, "Only price pays!" Traders definitely can't afford to get married to an opinion or blindly follow a model in this fast-break market. Cut back your size if you are uncertain, keep trading what you see, and watch that support line above.

Reading:

o VIX & More - A bull case observation.
o Traderfeed - Win by learning to lose.
o Quant. Edges - A two day edge?
o Emini Addict - Trading plan example.

10:25AM PST: We are at the apex of a narrowing wedge, be prepared for a break out. Signals are still mixed vis-a-vis direction. But that could be resolved soon.

10:45AM PST: Back to range bound. Pivot/VWAP at SPY $92.10 is holding so far.

11:40AM PST: Did I ever mention I hate narrow ranges. Upside breakout.

11:55AM PST: Obama speaks but says nothing here except to confirm social welfare... even a couple concrete points would have been helpful. Too much build up for a nothing event featuring a confused dialog. Alternatively he could have merely presented the process he is using to build a cracker-jack economic team, and referenced generally the many terrific ideas they have, which he looks forward to announcing and implementing "very soon."

12:10PM PST: Supportive volume spike. I agree with Cashin, this should have been scheduled for after the market close. OK, enough politics for the day. We need to break that VWAP again or risk a sell into the close. We are just at it right now, it's a risk point.

CLOSE: Confirmed the supportive volume spike, and away we went. Be sure to check out the Weekly Rewind before Monday, and enjoy your weekend.

Never Investment Advice

Thursday, November 6, 2008

10.06.08 - Sector Correlation to Downside


From Prior Post

OPEN - We are already at the identified range from yesterday. I think we could go lower still. Wait for evidence of a turn.

8:00AM PST - Now testing S1/SPY $93. Next stop $90? -- Just keep watching $93 for now. Dollar is holding up post European cuts. All sectors are very correlated on this drive down and tick is very negative, reflecting trend strength. VIX has rocketed back to 60. Bank of England cut was a shocker ontop of other dire news.

8:30AM PST - Large abnormal volume spike occuring, can often signal a pause -or- turn in price action. Need confirmation before you can trade it and none evident.

Traderfeed Archives - Trading Correlations

9:10AM PST - A "battle" is occuring at SPY $92. VIX still rising to 61. And, break down as volume builds (albeit light overall on the day); see you at $90.

9:40AM PST - Idle speculation, but maybe we'll hold or make a stand at the DIA (S2) and QQQQ (S1) pivots for a bit. We are sitting on those right now. All indicators remain negative, however. I have updated the chart above.

10:15AM PST - SPY $91/S2 in play. Volume overall remains light.

o VIX & More - VIX Nuetrality

11:00AM PST - Trying to peek above downtrend line?

11:55AM PST - As tempting as it looks to buy, be wary of VWAP resistance.

12:25PM PST - Back down under S2; last minute flush before the close to SPY 900? If so, I'll probably carry a little long overnight.

CLOSE - Worst two back-to-back days since 1987.

o Wallstreet Fighter Humor

Never Investment Advice

Wednesday, November 5, 2008

10.05.08 - Overbought Burnoff


So far S2 has provided us a bounce (SPY $97.20). AD and Tick maybe turning the corner into positive slope, but the 5-Day Moving Average ($98.30) and S1/VWAP ($98.85) will likely provide resistance on the way back up.

11:20AM PST: SPY Price is still near S2, but all indicators are progressively negative. The mean reverting VIX is back up 11% to 53 on the day. Many bloggers have been focused on this topic yesterday and today, here from our archives [VIX Stretch]. Note that the inverse applies as well, but in either case it's best to filter this type of model based on current market dynamics (long-only in bull markets, short-only in bear markets). More on VIX stretches to the downside:

o Vix & More
o Quantifiable Edges

ADP was out this morning (six-year low), Jobless Claims are out tomorrow and the big job report on Friday. The impact of the Jobs Report may be softened unless it surprises to the upside based on this ADP and tomorrow's Jobless Claims. [Add] There will still, of course, be trepidation ahead of it.

12:30PM PST: Directional Vol Lives -- Long Live Directional Vol! I think we may see institutional buyers towards or after a test of the confluence of the flattened 10-day and 20-day moving averages in the days ahead (SPY $93.50-$94.00).

Meanwhile, don't forget that this market has been characterized by fast moves, and directional trades that last longer than you expect/ are able to predict by historical measures.
And, watch for the expected Euro-zone rate cut tomorrow.

Close: Supportive volume spike at the close, covered for the overnight, will reasses in the AM. RSI-2 = 13.90; long way down for one day (97 last night).


Open Thursday: We are already at the identified range from yesterday. Think we could go lower still. Wait for evidence of a turn. (8:00AM PST) Now testing S1/SPY $93. Next stop $90? -- Just keep watching $93 for now. Dollar is holding up post European cuts. All sectors are very correlated on this drive down, reflecting trend strength.

Never Investment Advice

Tuesday, November 4, 2008

Missing You Tim Russert

11.04.08 - Upside Range Expansion



Lo and behold, money is coming back into the markets in anticipation of the passing of political uncertainty (see last night's closing commentary). If this is a typical large up day, shorts may mildly dominate the mid-day before another bout of buying into the close off of the VWAP. Watch the Tick and AD lines very closely. They have turned flat for the moment after the explosive morning trade.

However, with the market so short-term overbought and yet another opening gap to fill, I wonder if we won't see some level of profit taking ahead. Also note that volume is non-existent. The 10/14 highs will likely be key in the days ahead. On the other hand, my end-of-day ratio of stock to bond pricing has officially gone bullishly positive. VIX is 45, down another 15%...

10:55AM PST: Note that the real leader over the last several days, small caps, have come down off their am highs even as large caps remain stubbornly elevated. Is it a short-lived rotation/ reversion of the spread trade I mentioned earlier in the week, or is it a leading indicator? Watch it, time will tell. Meanwhile, the AD line is retracing even as Tick and Positive Volume continue higher. These types of divergences are a possible warning as broad market participation levels off.

12:05PM PST: Well that last post was certainly timely to the bar. Indicators are still choppy, but all turned south after the VWAP break. Looks like we've seen the highs for the day afterall...

12:30PM PST: Testing VWAP, should prove resistance ahead of the election close... but with Tick so high it's a tough call -- and, looks like a break higher setting up... hmmm... IWM swinging higher again too -- too quick to call the top for the day? Thirty minutes to go.

12:40PM PST: Closing buyside imbalance -- most bullish election day since 1984? First intuition on the day was the correct one. Now RSI is pushing 97 though -- fourth day over 80, sixth day of strength on declining volume (though today is better than yesterday). Pretty darn high stats. VIX is 47.5.