Tuesday, March 31, 2009

03.31.09 - Mid-day Doldrums

Half way through the last day of the quarter, the morning recovery has stalled at the rising Volume Weighted Average Price and internals, while still net positive, are also headed sideways. In particular, the NASDAQ 100 had difficulty breaking past its first level of resistance even as the Financials also put in a contemporaneous double top... and here we are.

As BZB Trader pointed out in the Chatroom; however, as long as we don't completely roll over here, we may just be seeing a mid-day lull. We get a number of "creme de la creme" bloggers in the chat room from time to time. Why not check it out for a day? No charge, just an open exchange of ideas and market views. The more the merrier!

Monday, March 30, 2009

Trading the 200-Day Linkfest

Much has been written about the value of tracking price versus long-term moving averages.

Research has shown that semi-active portfolio management using more difficult "to game" secular trends is helpful in reducing draw-downs and volatility while also prospectively enhancing returns and assisting in the identification of the strongest performing indices for rotational purposes.

As promised in last weekend's ETF Rewind, here is a mini-linkfest on trading rules built around the 200-day/ ten-month moving average.
  1. Trading Markets - The Most Important Rule in Swing Trading
  2. Trading Markets - Why Every Trader Needs to Watch
  3. Word Beta - A Quantitative Approach (PDF)
  4. World Beta - Timing the Nasdaq (12-Month)
  5. World Beta - Performance in Up and Down Markets
  6. ETF Trends - A Trend-Following Plan for All Seasons
  7. Quantifiable Edges - Strong Up Days Under the 200
  8. Quantifiable Edges - Evolution of the 200/50 Quadrants
  9. Quantifiable Edges - Where Gains and Losses Have Been Made
  10. MarketSci - 50/200 Day Crosses Debunked?
  11. MarketSci - Moving Average Spectrum
As noted this weekend, a column featuring the percentage difference between the last closing price and the trailing simple moving average of the prior ten 20-day end periods has been added to the ETF Rewind. Pardoning the plug, this and many more key statistics are provided nightly for over 170 ETFs by ETF Rewind Pro.

03.30.09 - Down Trade Continuation

Friday's narrow range and slight sell picked up strong momentum in the Sunday futures on the GM CEO news leading into today's major gap down. And yet this really only puts us down a small fraction into the recent rebound range. While Cumulative Tick still looks very weak, (although there has been a series of higher-lows on the individual tick bars), the Advance - Decline line has been showing sings of stabilization since mid-morning. Will the emergent 'buy the dips' tendency assert itself to salvage the day?

Saturday, March 28, 2009

ETF Rewind - Week 13 (03/27/09)

(Click Image to Enlarge/ Glossary)

Several economic data points suggesting a slowing in the pace of our nation's economic decline, together with more details on the TALF Program, provided the fuel for another broad-based advance that left the markets up for the third week in a row and uniformly positive on the month (NASDAQ - Treasury Unveils Program).

The S&P 500 (SPY) finished the week higher by +6.4%, now up +11.2% over the last four weeks. In fact, the technology laden NASDAQ 100 closed higher on the year -- not a small feat given where the markets were at only a short while ago. Said data points included Existing and New Home Sales, Durable Goods Orders, and Gross Domestic Product.

While encouraging in many respects, not all the data points were rosy, including a worse than expected decline in Personal Income (even as Spending rose -- hmm...). With first quarter earnings nearly on deck, analysts will no doubt be pondering how these early indicators may translate to a trough earnings scenario, as well as to the prospective pace of growth ahead. I expect there will be heavy brooding over this point in the coming weeks by a market that has so quickly rebounded from its recent lows.

Week Fourteen of 2009 features another busy week of key economic reports, culminating in the closely watched Jobs Report, as follows:

Changing topics, much has been written about the value of tracking price versus longer-term moving averages. Research has shown that semi-active portfolio management using more difficult to "game" secular trends -- is helpful in reducing draw-downs and volatility, while also enhancing returns and assisting in identifying the strongest performing indices for rotational purposes.

Mebane Faber, a fellow asset manager, author of World Beta, and proponent of long-term rotational timing methods, reports that his readers have very few resources to easily track this key statistic. (He has written an excellent introductory white-paper on the topic, which may be found here. I will post additional research links next week [here].)

I am therefore pleased to announce the addition of this metric to the Weekly ETF Rewind. Note under the "Price Change" header the new "10-Month" column. This provides the percentage difference between the last closing price and the trailing simple moving average of the prior ten 20-day end periods (not the 200-day moving average, although both may be effective). The next column shows the "Rank" order of these results across all thirty or so tracking indices. Positive differences are indicated as green, while negative differences are shown as red. Are you surprised by the top ranked security (DBP +6.0%)? How about the fifth (QQQQ -11.3%)?

I hope that longer-term investors find this to be a helpful addition. This, and many more key statistics, are provided nightly for over 170 ETFs by ETF Rewind Pro. A weekend-only version is also available.

Enjoy your weekend!

Never Investment Advice

Friday, March 27, 2009

03.27.09 - Low Energy Trade

Not a lot of directional movement today. Notably, however, the slope of the Cumulative Tick line has taken a turn for the worse (third pane, dotted "colorful" line along side tick -- trying to repair just as I hit 'publish post'). The AD is also headed south.

Note how yesterday's highs took us nearly all the way up to the prior/pre-fall February QQQQ swing highs. This would be a natural pause/ resistance point for the index that has been leading the market. Put that together with the pause in the Financials (XLF), and we have all the ingredients for a day like this.

Reading: BZB Trader - VIXEN Redux; a whole series of excellent studies we have been following on Chatroll.

Thursday, March 26, 2009

03.26.09 - Testing Highs

SPX 820 has proven to be a strong magnet for this market and yesterday's late-day recovery smacked of "buying the dip" mentality from scared money managers still holding cash buying at obvious support. However, that very same level has also proven fairly stiff resistance thus far.

That said, certainly the more times we test it, the more likely it is to definitively break. A good 'tell' on the upward drift this morning has been Cumulative Tick, which has been moving steadily higher. The daily Average Price has also proven strong support, and Advancing Volume has widened its advantage over Declining Volume.

Support Lines:

Wednesday, March 25, 2009

03.25.09 - Raging Bull?

Another strong morning on the "slowing in the economic decline" thesis. Just now we are testing a potentially important intraday level on the SPY, as indicated by the bold orange line derived from yesterday's price wavelet peaks and troughs. Internals are net positive, but I'll be trading carefully here -- this raging bull has taken us very far very fast. Can we break out (again) for a full retrace of the February swing highs going into the new quarter? On one hand, we have an end-of month/quarter effect and a strong rotation back into equities. But how much of that have we already seen (note declining volume)? And we will soon face a "fresh round" of earnings risk.

Reader Contest: Just for fun to commemorate the "Blogger Triple-Play" below, a complimentary copy of Martin Pring's "Breaking the Black Box" to the first reader who can successfully identify the baseball greats in this picture.

Tuesday, March 24, 2009

Blogger Triple-Play

Three of the web's most prominent financial bloggers, Rob Hanna of Quantifiable Edges, Bill Luby of VIX and More, and yours truly here at Market Rewind have joined forces to offer our readers a unique package of insights to help navigate today's volatile markets.

For a limited time, get three great market newsletter services all in one and save $240 (25%) off of the regular combined monthly subscription price.

If you are interested in this special offer, please read more here.

03.24.09 - Range Trade above Pivot

We are seeing a fairly stable, relatively narrow sideways range just above today's SPY Pivot (between $80.90 and $81.75). That puts the bottom end near the price cluster observed just before yesterday's final leg higher. Internals are mildly negative, but not in a deteriorating state.

Overall, impressive performance after a 7% up day. Speaking of which, on the margin, my research last night indicated that rare power moves like yesterday tend to be greeted with moderate give backs in the two days that follow with the tendency being stronger in the NASDAQ 100 versus the S&P 500.

Reading: BZB Trader's Bucket List/ VIX & More on Trading Rules

Monday, March 23, 2009

03.23.09 - Powerful Trend Day

Each offer of supply has been met with buying today on the TALF news, although the SPX is now struggling with the 800 level.

Hallmarks of an up-trend day:
  1. Early Attempts to Sell Met with Buying;
  2. Consistent Higher-Highs and Lows;
  3. Strong Pullback Support at VWAP/ Floor Pivots;
  4. Rising, Even Sloped VWAP, Adv. Volume & Cumulative Tick;
  5. Stopping/Resistive Relative Volume Peaks Met with Buying;
  6. Declining or Level VIX;
  7. High Correlation among Leading Industry Sectors;
  8. No Breakdown during the Mid-day Lull;
  9. Prospectively, Weakness in Bonds & Commodities (Rotation);
  10. Strong Net Advance - Decline Levels featuring low volatility.
In fact, the A-D line is pegged near maximum values with ADUSD exceeding 4,400! Do you have more to add? Leave them in comments, please! From this weekend's ETF Rewind Pro:

"We have a 'mixed signal Monday' coming up both quantitatively and perhaps in terms of news flow respecting pending Treasury details on plans to revamp the TALF. With overbought conditions negated late last week, the markets should have the potential to regather strength going into the end of month. Meanwhile, many of our model shorts have been gradually stopped out, and new long-side trend leaders have emerged for a near full rotation of the Trending portfolio."

Reading: Quantifiable Edges on Gaps.

The Recovery:

Saturday, March 21, 2009

ETF Rewind - Week 12 (03/20/09)

(Click Image to Enlarge/ Glossary)

Last week's Relative Strength Index (RSI) charts (below) show the extremes the markets moved to on the Federal Reserve's surprise 'reflation' announcement before pulling back on expiration Friday (Bloomberg - Fed Aims to Ease; Wachovia - Implications for $1.25T Purchase).

Nevertheless, the S&P500 (SPY) finished the week higher by +1.5%, although the real stealth winner over the last four weeks has been Emerging Markets (EEM +11.1%), no doubt receiving an added boost from the US Dollar pullback (UUP -3.3%). Commodities have also seen a strong move higher during the last month (DBC +12.8%).

Week Thirteen of 2009 features Durable Goods, Housing, Gross Domestic Product and Personal Spending reports, among others, as follows:

Traders will also be reading Monday's finalized Treasury Plan with a keen eye (Bloomberg - Geithner Finishing Touches). Will the Treasury finally come through for the markets?

If you are interested in a significantly more thorough version of this weekly summary, consider taking a look at Market Rewind's new nightly ETF Rewind Pro service (free trial). In addition to coverage of over 170 ETFs across twelve major asset classes, you will find three model portfolios, daily market signals and commentary, pairs trading and portfolio management tools. Enjoy your weekend!

Never Investment Advice

Friday, March 20, 2009

03.20.09 - Five-Day Moving Averge Penetrated

After eight days above the five-day moving average, the S&P 500 has finally penetrated that line, halting the uptrend. However, at the mid-day, Cumulative Tick and the Advance Decline lines appear to be healing themselves and the falling VWAP has flattened. And this remains a mixed market with the Dow a fraction higher.

I wouldn't be surprised to see the SPY rechallenge the five-day from the downside later today if we can break convincingly above the VWAP, though I expect that higher level would then provide strong resistance in the absence of a bullish news event, especially going into the weekend. So, most likely trade is more or less sideways to continued moderate move lower, perhaps to SPY $77.50 or so, in my opinion.

12:50 EST Update: Nope... as soon as Bernanke finished we broke down, now coming up on my downside target, which looks to get taken out at this rate.

Never Investment Advice

Thursday, March 19, 2009

"The Daily Trading Coach"

An alert to Market Rewind readers -- Traderfeed's new book is finally out, I can hardly wait to read my pre-ordered copy when it arrives. Congratulations Dr. Brett!

"Every trader is an entrepreneur. And just as a new business must capitalize upon the strengths of its founders, a career in the markets crucially hinges upon the assets—personal and monetary—of the trader. As an active trader and a coach of traders in hedge funds, proprietary trading groups, and investment bank settings, author Brett Steenbarger has helped others see the personal assets they have possessed all along: those that can pay a lifetime of dividends. In The Daily Trading Coach, he provides the tools to help you prioritize both your trading goals and your life—and become your own trading psychologist."

Another Time Machine Update (March 19, 2009)

However directionally correct and as fun as it has been to "watch the squiggly line," as Dr. Ponzo puts it, this will probably be my last "time machine" update. It's just plain "time" to move along!
Note how the range has bumped up significantly to SPX 680 to 880. What we see in the aggregate prediction is a drift higher before an eventual return to current levels or lower (all scenarios). Still, that's alot of room to run!

You may want to read the research note here in conjunction with this post. In fact, we did not get a sixth day above RSI-2 95, but rather fell to just under 90. Nevertheless, I still think the persistent bullish behavior may be telling us something important, at least in the very near-term even if we do get a small pullback soon. In that regard, the Fibonacci retrace chart here may become helpful in identifying target ranges.

    Never Investment Advice

    03.19.09 - Mild Pullback

    We are back near the mid-point of yesterday's range.Cumulative Tick is negative, but fairly flat in slope. The A-D line is net strong, but downward sloping and down volume is slightly edging out up volume. Just now, price has put in a small higher low and is peaking out above the daily pivot. Should we test the VWAP, I would expect that first test to fail, and we'll take it from there. Meanwhile, markets remain short-term overbought.


    o Quantifiable Edges - 20% in Two Weeks
    o Woodshedder - Variable Reversion Performance
    o VIX & More - Put to Call Ratio at Lows

    Research Update:

    The last two times we had RSI-2 readings on the GSPC (S&P500 Cash) > 95 for six days in a row (such as today, RSI-2 > 99!), the subsequent price changes three, five and ten days later were:

    1. 11/05/04 3-Day (-0.3%) 5-Day (+1.5%) 10-Day (+0.4%)
    2. 10/22/98 3-Day (-1.2%) 5-Day (+0.7%) 10-Day (+5.1%) [LTCM?]

    2004 - Close Up

    2004 - Step Back

    1998 - Close Up

    1998 - Step Back

    Never Investment Advice

    Wednesday, March 18, 2009

    Time Stamp Reset

    Not sure why I didn't do this sooner, but I have finally reset my blog entry timestamps to Eastern Standard Time to more properly coincide with Mr. Market. Hope that helps.

    03.18.09 - Redux

    Today feels like a repeat of yesterday with an early morning pullback and subsequent rebound. The VIX is holding in the low 40's and the intraday internals are coming off their lows along with price. The FOMC statement will be coming out at 2:15pm EST.

    Federal Reserve -- Let's Reinflate!

    Post-Fed Internals Update:

    Tuesday, March 17, 2009

    03.17.09 - Caught by the Five-Day

    After an early dip down to S1 (SPY $75.40), the S&P spent most of the morning tracing just above the (intraday) Five-Day Moving Average. Price is now testing/breaking the Daily Pivot, though I expect fairly heavy resistance much higher towards/above yesterday's opening gap price of about SPY $77. That said, internals have turned positive across the board, if not mildly so, and perhaps momentum will carry the day. Almost forgot --

    Monday, March 16, 2009

    03.16.09 - How High?

    How much higher can we move without some modicum of pullback? Longer-term, we have recovered by 50% from the severe decline off of the February Swing-Highs through the March Swing-Lows, 52-Week Highs - Lows are back to normal, and the near-term trend has turned obviously positive. On the other hand, we have snapped back awfully fast and shorter-term indicators are looking quite overbought with the S&P (SPY) RSI-2 over 98.50!

    Within the daily time frame, Semi's are struggling and S&P resistance has been shown at R2 ($77.60). However, Cumulative Tick, the Advance-Decline Line and Advancing Volume remain very bullish. So we have a conflict between key levels and momentum. I'll bet on momentum for now, but we are officially overdue at least a small pullback here, and it could turn with very little notice -- watch that trend line!

    Never Investment Advice

    Saturday, March 14, 2009

    ETF Rewind - Week 11 (03/13/09)

    (Click Image to Enlarge/ Glossary)

    Last week's bear-market rally leaving the S&P500 (SPY) higher by +10.4% makes the index's four-week loss of -9.0% all the more poignant. Highlighting the rotation into equities was the slight weakness in Bonds and Commodities (TLT -1.5%; DBC -0.4%).

    Week Twelve of 2009 features several key Manufacturing, Housing, and Inflation reports, not to mention a Federal Open Market Committee meeting, as follows:

    As much as we were long overdue this bounce, the ferocity of the minor recovery has nearly every major index, sector and style flashing overbought on the short-term Price Index, as highlighted in both the table above and in the charts below. A small pullback going into expiration next week -- finding support well above the prior lows -- before starting a second leg higher would be a healthy and desirable "pause that refreshes."

    Hope springs eternal, except perhaps in China were "worry" over our economy has apparently been expressed (AP - Premier Worries; Bloomberg - Obama Expresses Confidence). Enjoy your weekend!

    Never Investment Advice

    Friday, March 13, 2009

    03.13.09 - Only Consumer Staples Green

    ... and that tells us... Well, traders had to expect at least a small pullback after this week's enormous run. Not unhealthy and so far quite moderate in scope. In fact, yesterday's big winner, the Russell 2000 remains flat.

    Internals are mixed at the mid-day, with Cumulative Tick attempting to repair and the AD line seeming to flatten. Just now it looks like we may see a reversal to the VWAP. We'll have to take it step by step from there as we remain overbought short-term. Will we see support and confirm the right side of an inverted head and shoulders? Oh, the dot, dot, dots above... the recession trade isn't completely over, is it?

    Thursday, March 12, 2009

    03.12.09 - Strong Trend Day

    Though we are now well into overbought territory (very short-term technicals), with the Financials even more so, you can see from the cumulative tick and AD lines on today's chart how strong market internals are as we get an apparent second leg higher off of yesterday's consolidation trade. Next resistance for the SPY is $74.65.

    Do check out the new 'live chat' feature on the Market Rewind blog, even if I'm not logged in, you can always use it as a comment drop box, as well as a community resource.

    Wednesday, March 11, 2009

    Time Machine Update (March 11, 2009)

    Here is my second update to the Ponzo Time Machine post. Note how the indicated range from the last update has widened in both directions from SPX 620 to 800, now applying Mar '74, Dec '76, Jan '84, and Sep/Oct '00 as the best fifty-year analogues. I'm thinking that interesting, more meaningful follow-on research may be to run the price analogies alongside P/E ratios and other more fundamental indicators.

    03.11.09 - Struggling under R1

    The market has tacked on a bit and appears to be consolidating yesterday's gains. It's good to see follow through past the first hour, but SPY Floor Resistance of $73.60 proved difficult to breach, and we are now trading near the opening lows. The A-D and Cumulative Tick lines are marginally negative for the day, confirming the overhead difficulties in price, and it wouldn't surprise me to see us trade lower.

    Reading: Quantifiable Edges/ 90% Days

    Commentary from last night's ETF Rewind Pro "Dashboard":

    Feature Addition - As an experiment, I've loaded chat functionality. Just click the "ChatRoll" icon to the right.

    Never Investment Advice

    Tuesday, March 10, 2009

    03.10.09 - Recovery Day on Strong Internals

    The markets are sporting a remarkable advance supported by strong internals. A few small sparks on the tinder... Yesterday's decline looked more like apathy than anything else, featuring muted volume, a stable VIX, and generally balanced Up and Down Volume. Today we see strongly advancing Cumulative Tick/ Up Volume and an Advance - Decline Line pegged near 2,800 stocks. With price already up +5.5%-plus, however, traders will be watching the higher-high/low pattern very closely going into the second half of the day.

    Commentary from last night's ETF Rewind Pro "Dashboard":

    Monday, March 9, 2009

    03.09.09 - Chopping around Flat

    Not liking Cumulative Tick here in this mixed market as Declining Volume moves higher. The Advance - Decline line is within normal bounds, but flat.

    Saturday, March 7, 2009

    ETF Rewind - Week 10 (03/06/09)

    (Click Image to Enlarge/ Glossary)

    Last week's bear market extension left the S&P500 (SPY) down another -6.8%, now some -57% below its October 2007 highs. Small caps and the Financials showed relative weakness (IWM -10.1%; XLF -18.7%), while Commodities managed to post a slight gain (DBC +0.5%). In spite of the grim jobs report (US News - What You Should Know), retail sales came in above expectation led by the discounters (Reuters - US Sales Beat).

    Week Eleven of 2009 provides us with a somewhat lighter reporting calendar, as follows:

    The market's persistent inability to rally will have traders guessing over the weekend whether or not Friday's action represented the start of a key reversal. We'll learn soon enough. Enjoy your weekend!

    Never Investment Advice

    Friday, March 6, 2009

    03.06.09 - Market Nadir?

    Such a difficult time to think about buying/adding to core positions. But I've begun to wonder, if not now, then when? S&P 650, 600, 550? And I am thinking about this against a back drop of many long-term investors asking me if this is the time to sell! Clearly many, maybe most have already made that call. A Martha Stewart "Good Thing?" But, obviously we all want to see more signs of stabilization first, and today certainly isn't providing it.

    The gap up was quickly filled, though S&P 675 stemmed the morning tide. Internals aren't great, but up volume is struggling to keep pace with down volume, and cumulative tick is net neutral on the day, albeit downward sloping. Will today prove to be a market nadir? No bottom calling yet, time will provide us with more clues -- but looks like we are awfully close.  Let's see some comments gang!

    Reading: Calculated Risk/ Comparing Past Recessions

    Thursday, March 5, 2009

    Pick Your Price-Earnings

    Here is the most recent Standard & Poor's Earnings & Estimates Report. Trailing twelve-month reported earnings are at about $55 per share, forward estimates vary from $35 (top-down) to $65 (bottom-up). Historic market earnings multipliers typically range between 10 and 20+, clustering towards the upper end. As of today's close, we are currently just over 12 on a trailing basis. The wide-range of resultant market values such a multiplier matrix suggests is emblematic of the uncertainty we are facing.