Thursday, December 31, 2009

Happy New Decade!

All the Best to You & Yours from Market Rewind!

Three Defining Posts, Systems & Commentary from 2009

Three posts that defined the year here:

March 5th - Pick Your Price Earnings
March 6th - Market Nadir? 
March 10th - Recovery Day!

    And the seemingly obligatory redux from our Vaults:
    Enjoy your long holiday weekend!

      BZB Trader's Second Rotation Model Added

      I have added BZB Trader's revised rotation model "The Retired Lazy Man's System" to my recent post (see third model "BZB2"). What about retired ladies, BZB?  Happy New Year, Jeff

      12.31.09 - Morning Slide to Support

      The morning gap was quickly faded to the SPY's five-day moving average. That provided support for one go, but immediately broke.  However, price seems to have found support just below S1 (say $112.30), which is acting as mild resistance. My main 'worry' for the afternoon session, such that it is with the lowest volume of the year, is the rising Vix, keep an eye on that plus the five-day/VWAP as potential resistance.  Otherwise I would guess we have seen the daily range.

      Wednesday, December 30, 2009

      12.30.09 - Wide Vacillations

      The S&P 500 has been ping-ponging between its daily floor pivot and support levels.  Internals are highly negative, suggesting a difficult afternoon session.  The only positives I can see are that the five-day moving average held as support, the VIX is remaining relatively contained, and the Semi's continue to lead nicely.

      Never Investment Advice

      Credit Tsunami Blow-by-Blow in Three Words or Less

      What an incredible string of years!  Monthly recaps from the Market Rewind vaults (right hand side) documented here in real-time are included below.  I find it astonishing how quickly trading regimes and optimal methodologies have shifted during this turbulent period.

      What will 2010 bring?  Naturally, time will tell.  As for me, I'll keep playing it one day at a time here as I find that I trade better through direct observation over anchoring myself to any particular set of macro outlooks.

      Tuesday, December 29, 2009

      12.29.09 - Weakish Internals -> Gap Fill

      In spite of the successive overnight gap efforts, price action has been "feeling" more and more heavy and an intraday willingness to sell has now been demonstrated.   Cumulative Tick, AD and DN volume all point to a difficult afternoon session ahead.

      Monday, December 28, 2009

      12.28.09 - Holiday No Man's Land

      Although the markets gaped higher on the late holiday retail pickup, internals are in what I'll call, "extreme neutral mode". Heck, the Advance - Decline line has vacillated between +200 and -200 for hours. Cumulative Tick is also running sideways, and Up and Down Volume are precisely evenly matched.

      Even though this is a full trading day, I also note that volume is nearly as low as Thursday's. As overbought as equities are very short-term, I expect that some level of caution is warranted here. Lastly, the simple ETF Rotation models were down briefly this morning, but are now back up.

      Never Investment Advice

      Saturday, December 26, 2009

      ETF Rewind - Week 52 (12/24/09)

       (Click Image to Enlarge/ Glossary)

      A strong holiday shortened week left the S&P 500 (SPY) higher by +2.6% with the NASDAQ 100 (QQQQ) up a full +5.1%. While the Santa Clause rally may well carry us into the new decade, I would be remiss not to mention that the vast majority of tracked equity ETFs have now reached extreme short-term overbought levels. Of course, extended overbought readings are a frequent byproduct of powerful bull markets.

      Meanwhile, abbreviated week Fifty Three of 2009 features the following economic calendar and rotation model selections (a new feature for 2010!):
      A Happy Holidays & Wonderful New Year to all of my Market Rewind Readers!

      If you are interested in a significantly more thorough version of this weekly summary, consider taking a look at Market Rewind's nightly ETF Rewind Pro service. In addition to coverage of nearly 200 ETFs across twelve major asset classes, you will find three model portfolios, daily market signals and commentary, pairs trading and various powerful portfolio management tools.

      Never Investment Advice: Prior Weekly Summaries: ETF Rotation Models

      BZB Trader's Rotation Model Added

      I have added BZB Trader's rotation model variation to my recent post (see second model "BZB"). Please note that his post inadvertently excluded mention of the SPY as a switching candidate, and that VTI must be shorted to replicate his model as specified. Cheers, Jeff

      Happy Holidays!

      Thursday, December 24, 2009

      Mrkt Rotation Model [Live]

      For some time now, I have wanted to publish a live Major Asset Class Relative Strength Rotation Model along the lines of an article that I posted earlier this year on the topic (see Two Simple Relative Strength Rotation Models).

      Since I had a little time this Christmas-Eve afternoon and was feeling motivated by BZB Trader's excellent post from this morning (now included, see "BZB" below) to get started on this particular New Year's resolution, I fired up Google Docs and here is the result. The embedded table below will be updated dynamically each week, so you may check in on current ranks regularly should you so desire.

      Dynamic Weekly Ranks

      The mechanical system assumes equity is reinvested once a week (Friday afternoons -- though given the length of holds, I imagine the following Monday should be just fine) in the highest ranked security according to a simple relative strength formula (see orange colored cell). I was somewhat limited by how far I could go with this in Google Docs, so I settled on a simple stop-less model evaluating six select ETFs representing major asset classes featuring varying degrees of inherent risk, as follows:
      • SPY - Large Capitalization U.S. Equities
      • IWM - Broad Capitalization U.S. Equities
      • EEM - Emerging Market Equities
      • AGG - Aggregate Bond Index
      • DBC - Commodity Basket Index
      • UUP - US Dollar Index

        [Automatically Updates Each Weekend]

        Historical Performance

        While this is hardly a complete system as presented, you can see that the simple switching model is nonetheless quite tradable and performed admirably during one of the most difficult decades for investors in recent memory. Do note that many of the ETFs only more recently became available, however. In the earliest years it was a contest between IWM and SPY alone.

        Nevertheless, with a little money management, I'd imagine one could go quite far with a little system like this, particularly in a 401-K type account. At the very least, it is a terrific way to read the current risk appetite of the markets. I will revisit and improve on the model throughout 2010.

        Never Investment Advice

        12.24.09 - A Dickens Christmas

        With volume that only Tiny Tim could appreciate, the market has managed to put in another day higher, definitively breaking out of its prior range and moving well into short-term overbought territory (is there such a thing?). Although Cumulative Tick has been net negative the entire session, it has also been upward sloping with most of my other indicators likewise slowly grinding higher in near trend-day fashion.

        On behalf of Market Rewind, enjoy your holiday, time with family, and -- "God Bless Us Everyone!"

        Wednesday, December 23, 2009

        12.23.09 - Explosive Cumulative Tick (but no Volume)

        After the morning gap close on the housing report, cumulative tick and the advance - decline line turned on a dime and exploded higher.  However, thus far price hasn't been able to do much with that and the SPY remains relatively flat-lined just above its green VWAP.  Perhaps we'll have a stronger second half of the day.  That said, usually not good to see both price and the VIX rise, which is exactly what we are seeing.  I probably don't need to mention it, but volume is the lowest in over a month - so anything goes really.  Meanwhile, all eyes in the trading room remain on SPX 1121.

        Tuesday, December 22, 2009

        12.22.09 - VIX Breaks 20

        As has been the recent pattern, we saw an early gap and now range trade persists with evenly matched up and down volume.  Speaking of volume, there is none to speak of and I want to be on guard for any air pockets that may materialize as we push well into overbought territory here.  For that matter, somewhat contradictory to the green on the screen, Cumulative Tick is negative albeit mostly running sideways.  In case you missed it, the VIX has finally broken 20 -- who would have guessed that one-year ago?

        Monday, December 21, 2009

        12.21.09 - Zat You, Santi-Claus?

        We have been in an apparent trend-mode, this shortest day of the year. Here is a link to the Market Rewind vault for a trend-day definition. It is the mid-day right now; however, and internals are struggling a touch. Per this weekend's commentary, the dollar is level and that would appear to be good enough. We'll see if they can't hang in there -- Zat You, Santi-Claus?

        Sunday, December 20, 2009

        ETF Rewind - Week 51 (12/18/09)

        (Click Image to Enlarge/ Glossary)

        Dollar strength on the back of the FOMC's quantitative easing withdrawal time line left the S&P 500 (SPY) down -0.3% even as the less sensitive Russel 2000 (IWM) finished up +1.7%. In as much as currencies often trend, the US Dollar (UUP) is now overbought on multiple time frames -- perhaps a brief pause or pull back will offer year-end relief to equities. Meanwhile, holiday shortened week Fifty Two of 2009 features another busy economic calendar, including a Third Quarter GDP revision:
        A Happy Holidays to all of my Market Rewind readers!

        If you are interested in a significantly more thorough version of this weekly summary, consider taking a look at Market Rewind's nightly ETF Rewind Pro service. In addition to coverage of nearly 200 ETFs across twelve major asset classes, you will find three model portfolios, daily market signals and commentary, pairs trading and various powerful portfolio management tools.

        Never Investment Advice: Prior Weekly Summaries

        Friday, December 18, 2009

        12.18.09 - Bounce Back to VWAP

        This chart looks worse than it is given the SPY going ex-dividend today to the tune of $0.52 (unconfirmed).  See the GSPC to the right for a truer graphic.  While we retested and extended yesterday's down range, note the positive turn in the AD line, advancing volume and tick.  I expect some initial resistance at the VWAP, but looking further out we remain oversold, 52 week new highs have held their trend, pressure is off the VIX, and we are entering positive holiday seasonality.  OPEX volume is certainly through the roof.  On the bearish ledger, the question that needs to be answered is how much of that volume is expiration related, and how much is true distribution.  Hard not to imagine a good deal of the latter.

        Thursday, December 17, 2009

        12.17.09 - Jobs-Dollar Smack Down

        Well, the dollar is now about as overbought as equities are oversold in a mere 1/2 session.  The same could be said of the VIX yesterday, which had fallen to the very bottom of its recent channel.  And here we are.  Internals are extremely negative and many trend indicators are rolling.  With price back under the twenty-day moving average, the borderline oversold conditions may not matter for a while with OPEX volatility adding to the mix.  Volume is huge today.  Rolling aside, it's hard not to see this action as distribution.

        Wednesday, December 16, 2009

        December FOMC Statement Blue-Line Comparison

        Blue-lined comparison of December versus November FOMC statement. Also see past Fed-Day reactions on this nifty little site. [Click Graphic to Enlarge]

        12.16.09 - Positive Fed Day Internals

        Somewhat predictably after yesterday's afternoon jitters, the major indices gaped higher and remain above their moderately rising VWAPs on fairly strong internals.  I expect that price action will quiet down going into the announcement, then noise levels will begin to rise significantly directly into and after the announcement.  Don't forget to check back later today for a mark up of the policy statement.  Here is the November statement as a baseline.  The usual play book is to fade any large move higher at the end of day, should that occur.  As a breaking news point, I hear that Greece just had its sovereign debt officially downgraded to triple-B.

        Never Investment Advice

        Tuesday, December 15, 2009

        12.15.09 - Negative Catalysts + Overbought

        Internals are mildly negative with the Financials seemingly struggling the most.  However, selling pressure looks modest and the relative match of down and up volume suggest a range-bound day for the time being.  However, I will note that volume is fairly strong, indicating a possible squaring of positions going into the Fed day.  Therefore, watch that momentum doesn't sneak up on you in either direction (the concern being to the downside here).

        Never Investment Advice

        Monday, December 14, 2009

        12.14.09 - Stealth Trend Day?

        Internals are looking very good and are continuing to improve. The trick will be for the SPY to break resistance at the pre-open/ R1 level of $111.90. On the daily time frame this move has the MACD turning back above its signal line, while on the other hand we are pushing well into short-term overbought territory.

        Saturday, December 12, 2009

        ETF Rewind - Week 50 (12/11/09)

        (Click Image to Enlarge/ Glossary)

        In spite of some mid-week "moodiness" (US Credit Rating Questioned - Reuters) the S&P 500 (SPY) ended up a flat +0.1%.
        While tracked equity indices otherwise put up a mixed board, perhaps the real story was the pullback in commodities (DBC -3.1%) on nascent US Dollar strength (UUP +0.9%). Week Fifty Two of 2009 features another busy economic calendar, including an FOMC policy meeting next Tuesday:

        If you are interested in a significantly more thorough version of this weekly summary, consider taking a look at Market Rewind's nightly ETF Rewind Pro service. In addition to coverage of nearly 200 ETFs across twelve major asset classes, you will find three model portfolios, daily market signals and commentary, pairs trading and various powerful portfolio management tools. I hope that you had a terrific weekend.

        Never Investment Advice: Prior Weekly Summaries

        Friday, December 11, 2009

        12.11.09 - Dollar Manhandling Markets

        Good economic reports here and abroad had US markets advancing nicely until the dollar matched that strength.  However, yesterday's mid-line near the five-day moving average has provided initial support and risk-taking sentiment is hanging in there.  Still, it's troubling to see the Semi's and Financials not participating, but perhaps the Retailers can keep the broader indices propped for a bit longer.  I'll be watching for potential resistance at the falling VWAP.

        Thursday, December 10, 2009

        Blush: MrktRwnd #1 Timer

        Well, I wouldn't have put this up if the chat gang hadn't insisted.  Honestly, as helpful as it can be to have a viewpoint and outlook on the next market day, in my opinion, being flexible in that viewpoint and responding to the market as it evolves throughout the day is much, much more important.  Also, certainly my personal consistency varies according to the market environment.  Like everyone else, a top priority here is developing robust adaptive models.

        All that said, I do appreciate the subscriber testimonial below for ETF Rewind from another very successful timer.  As an old professor of mine used to say, "if you don't blow your own horn on occasion, someone else will inevitably use it as a spittoon."  As I recall, that was from Ken Blanchard (The One Minute Manager), and that was a very long time ago indeed.  Thanks Gang! (Blush)

        "MrktRwnd is absolutely on fire over the last 2 months.  Subscribers have been enjoying 90%+ accuracy rates on next day's S&P 500 directional forecast.  It's like having tomorrow's newspaper today.  Keep up the great work.  Best Regards, MrIce"

        12.10.09 - Gap & Slide Right

        ... as we used to say out on the water -- slide right (surfers will understand). Internals remain very strong so I tend to think we can hold or move higher into the close. However, note Financials are not participating.

        Never Investment Advice

        Wednesday, December 9, 2009

        12.09.09 - Hard Go at Stabilization

        The market is trying to stabilize, but you can see the negative impact of the dollar on price action and small-caps are disconcertingly divergent anyhow.  I'll be back to regular posts tomorrow.  Some nice news -- Mrkt Metrics are now available across all browser platforms.

        Tuesday, December 8, 2009

        12.08.09 - Very Negative Cumulative Tick + Rising VIX

        Although price is holding its morning lows, internals are showing no sign of support for the afternoon session, for which I expect price to continue to struggle.  Also note that the twenty-day moving average has failed to hold or inspire buying as yet.  I was able to cajole Google doc's Market Metrics back on line this morning (right hand side).  Maybe it was last night's post.  I'll still be looking into alternatives for that feature.

        Never Investment Advice

        Monday, December 7, 2009

        Google Docs Apparently Hopeless

        Sorry about the broken Market Metrics on the right-hand side.  It's a complete mystery.  I know many of you follow that pseudo-religiously.  As a side project, I plan to look into alternative solutions and add a simple rotational model as well that blows away most you'll find on the web -- at least for free.  Stay-tuned.  Best, JP

        12.07.09 - Rising Cumulative Tick Suggests Higher Close

        After a flat morning, internals appear to be aligning to the upside, bucking the overnight trade in most of Asia.  I also see the dollar and VIX are coming back in.  However, I'll be less enthused if both the SPY and the VIX close higher by day's end.

        Never Investment Advice

        Sunday, December 6, 2009

        November 2009 Rewind - Sharing the Bounty

        Horrid internet connectivity issues last month meant that I had to recreate a good deal of the November news table -- my apologies for the delay.

        In spite of some Dubai induced gyrations towards the end-of-month, November yielded bountiful results leaving the S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices all much higher at +5.74% , +6.51% and +6.02%, respectively. That left annual results at very respectable +21.30% , +17.87% and +45.87%, respectively

        Going into December, a renewed focus on the US Dollar due to the Dubai event and surprisingly strong economic reports will have traders balancing the reinvigorated economic indications against the foreseen impact of any loss in earnings power overseas and the possibility of sooner rate hikes as we dash into year-end.

        Sentiment: Positive
        Volatility: Wide Ranging (VIX 20-30)
        Direction: Positive

        [Click to Enlarge/ Weekly ETF Analyses/ Prior Monthly Summaries]

        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.

        ETF Rewind - Week 49 (12/04/09)

        (Click Image to Enlarge/ Glossary)

        In spite of Friday's tug-of-war between the US Dollar (UUP +1.0%) and the unexpectedly positive Jobs report (see WSJ, HP), all of the the major indices recovered nicely from the Dubai news with the S&P 500 (SPY) up +1.3% for the week.  Even the recently beleaguered Small Caps (IWM +4.9%) but in a strong showing, potentially auguring well for a year-end rally.  While Energy (XLE) looks about as oversold as the Transports (IYT) look overbought, the market overall maybe considered in neutral territory when considering many short-term oscillators.

        Week Fifty of 2009 (is that even possible!) features a much more subdued but no less important economic calendar, featuring consumer credit, wholesale inventory and retail sales reports:

        If you are interested in a significantly more thorough version of this weekly summary, consider taking a look at Market Rewind's nightly ETF Rewind Pro service. In addition to coverage of nearly 200 ETFs across twelve major asset classes, you will find three model portfolios, daily market signals and commentary, pairs trading and various powerful portfolio management tools.  I hope that you had a terrific weekend.

        Never Investment Advice:  Prior Weekly Summaries

        Friday, December 4, 2009

        Top Five Market Timers

        Hey, gotta capture these moments while they last... in the top five market timers at The Capital Institute.  It's just for fun, but check it out if you want to try to qualify to see what others are thinking.  Speaking of which, I want to know what "Firebird" knows that I don't!  How can anyone be 100% correct over such a long period!  ;-)  Have a good weekend.

        12.04.09 - More Wild Oscillations

        Might as well recycle that title... a real megaphone pattern evolving here even as momentum oscillators contract inversely. In spite of the huge dollar/ commodities reaction this morning, internals are mostly positive and the VIX is coming down, so I believe we can minimally hold those reaction lows -- though I also expect we may see some stronger SPY resistance between $111.10 and $111.35. Volume is very heavy today.

        Never Investment Advice

        Thursday, December 3, 2009

        12.03.09 - Wild Oscillations

        The market has oscillated like a 60s go-go dancer this morning, only now settling into a tighter coil formation.  Indeed, the early morning pop on the BAC TARP pay-down faded fast on less than stellar retail sales and ISM Services reports.  In fact, all of the leading sectors that I follow are down, save the Semiconductors.  However, internals remain flat to slightly positive, and with a higher-high and higher-low put in thus far, I have to categorize this as consolidation over resistance for now in spite of the many building momentum divergences.

        Wednesday, December 2, 2009

        12.02.09 - Financials & Energy Hold Back Advance

        The market is having a difficult time in the face of weak Financial (XLF) and Energy (XLE) sector performances.   While the balance of volume still suggests a range day, right now my other internal indicators are looking weak.  Nevertheless, there is still a slight preference for risk today with the Small Caps (IWM) and Emerging Markets (EEM) holding their ground, so there is no obvious second-half-of-day direction indicated.

        Tuesday, December 1, 2009

        12.01.09 - Shiny New Month Pop

        Good economic readings combined with strong seasonality have provided us with a nice up move containing nearly all the components for a verified trend-day.  The only lacking component I'd say is an upward sloping A-D line, though it is certainly very net strong.  The VIX is down over 9% at the time of this writing.  Will the markets finally break out to new levels on this third attempt higher?  The choppy mild down-trend channel remains in tact for now.

        Monday, November 30, 2009

        11.30.09 - VIX still Rising

        The VIX has continued its move higher on conflicting Dubai and retail sales reports and interpretations, leaving the Russell 2000 (IWM) down nearly a full percent.  Down Volume is slightly outpacing Up Volume, Cumulative Tick is very negative and the Advance - Decline line has been vacillating in direction while maintaining a negative net disposition.  That said, selling pressure "feels" light, SPX 1,085 has provided sound support, and price action may yet be saved by turn-of-month seasonality -- still it will be an upward battle to fight these internals.

        Sunday, November 29, 2009

        ETF Rewind - Week 48 (11/27/09)

        (Click Image to Enlarge/ Glossary)

        In spite of the late week Dubai World induced rout, equities put in a mixed performance depending where you looked, and losses were well contained on balance. For instance, even as the majors finished marginally lower (SPY -0.2%), the "Safety Trade" Large-Cap Style Stocks (PWV +0.5%), Utilities (XLU +1.3%), Consumer Staples (XLP +0.1%) and Healthcare (XLH +2.0%) Sectors edged higher.

        In that regard, the shift of money flow over the last month away from the riskier Small-Cap (IWM) and Emerging Market (EEM) arenas has become increasingly pronounced. With volatility reintroduced and an increasing reliance on the large internationals to carry the major indices higher, it will be curious to see whether any dollar follow-through on last week's news places a cap on equities going into the Friday job numbers.

        Week Forty-Nine of 2009 features another extremely busy economic calendar:
        If you are interested in a significantly more thorough version of this weekly summary, consider taking a look at Market Rewind's nightly ETF Rewind Pro service. In addition to coverage of nearly 200 ETFs across twelve major asset classes, you will find three model portfolios, daily market signals and commentary, pairs trading and various powerful portfolio management tools.

        I hope that you had a very Happy Thanksgiving weekend.

        Never Investment Advice