Thursday, April 30, 2009

A "Fun" Game

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PS - To learn more about how I prepare my daily estimates, consider a subscription to ETF Rewind Pro.

04.30.09 - Big Gap Reversal

The market gap higher pushed short term indicators well into overbought territory. Although first hour indications pointed towards a potential trend day, volume wasn't there and the Advance - Decline line did not confirm the move. Then the VIX made a sharp reversal higher just ahead of the "official" Chrysler bankruptcy announcement. Though is seems we are headed for a gap fill at the mid-day, it's important to note that Cumulative Tick remains net positive and that Up Volume continues to outpace Down Volume for now.

Reading: Quantifiable Edges/ 10-Day High Gaps

Wednesday, April 29, 2009

FOMC Statement Comparison

The Federal Reserve has clearly accepted the "slowing decline" thesis with no net changes to policy:


04.29.09 - Light Volume Breakout

We have seen tremendous breadth in the A-D line, and Cumulative Tick and Up Volume this morning are as strong as we've seen in several days. However, the big move in advance of the FOMC statement only increases the possibility for high magnitude noise going into the afternoon session. I'll be watching the yield curve very closely post release ($TNX.X now higher on the day). I also note that the NASDAQ100 finally tagged its closely watched 200-day moving average earlier in the day.

Tuesday, April 28, 2009

04.28.09 - Another Gap Filled

The market recovered from yet another sizable gap down. The resiliency was supported by strongly sloped cumulative tick and advance decline lines, and a falling VIX. Note that volume is just a touch ahead of yesterday's -- which is to say -- on the low side. Perhaps institutional desks are holding out for tomorrow's FOMC statement. On the volume side of life again, a curious misalignment for the day is down volume, which continues to outpace up volume in spite of the recovery.

Although momentum "feels" stalled here, for now I am assuming another sideways/ positively biased trade for the second half. However, with volume as low as it is and with contradictory internals, certainly anything goes.

Never Investment Advice

Monday, April 27, 2009

04.27.09 - Still Inside Multiday Range

We recovered nicely off of the five day moving average for the nth time. However, the market encountered some resistance near Friday's late session trade, and has pulled back to the Volume Weighted Average Price. Note that Down volume has been outpacing Up Volume for most of the day in spite of the early a.m. recovery and the Advance Decline line has now turned over as well.

Saturday, April 25, 2009

ETF Rewind - Week 17 (04/24/09)

(Click Image to Enlarge/ Glossary)

We finally saw a pause in the recovery incline, but only by a touch with the S&P500 (SPY) ending the week down just -0.5%. However, the NASDAQ100 was able to post a seventh week of gains at +1.1%, leaving it just -1.0% below its 10-month moving average.

The weekly trade was highly news driven, starting with fresh bank nationalization fears (Deal.com - Stressed Out), followed by a flood of earnings and economic reports, merger and acquisition happenings (Register - Oracle Sun)(NYT - Pepsi Bottling), and ending with the release of the "stress-test" methodology (WSJ - Water Torture). You can see the wide range this put the market through in the RSI charts below.

Other equity indices joining the NASDAQ100 in approaching their long-term averages are Emerging Markets (EEM), Consumer Discretionaries (XLY), and, naturally, Technology (XLK). Although four week recoveries in these sectors have been dwarfed by those of Financials (XLF) and Real Estate (IYR), up +16% and +26% respectively, note how far those two have yet to go before moving back into bullish territory.

Week Eighteen of 2009 features another heavy earnings and economic calendar, including a Federal Open Market Committee statement out Wednesday, as follows:

Looking at Price Index readings for next week, the market remains slightly overbought, particularly in the Materials (XLB), Industrials (XLI), Consumer Discretionary (XLY), and Technology (XLK) spaces. It will be interesting to see how these overbought reading play against strong Relative Strength in these very same areas. On the flip side of the coin, Treasuries (TLT) and the US Dollar (UUP) look relatively oversold. A recipe for rotation on the right news flow? Enjoy Your Weekend!

Never Investment Advice

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.

Friday, April 24, 2009

04.24.09 - Second Run

We are making a second run at the Monday gap lower on strong internals. Note how the five day moving average (dashed cyan line) is again moving higher. Interestingly; however, we have seen fewer extreme tick highs today relative to the last few days, and volume appears to be fading ahead of the "stress test" methodology release. This move makes us vulnerable to anything unexpected in that release, or even a sell the news phenom. We'll see soon enough, it's a small wild card -- for now the trend is obviously higher.

Never Investment Advice

Thursday, April 23, 2009

04.23.09 - Semi's Like an Anchor

Semiconductors (SMH) are down over 3%, weighing heavily on the broader indices. Financials (XLF), Energy (XLE) and Transports (IYT) are actually higher on the day. Tick attempted to up-shift a short while ago on an apparent buy program when support was found along the bottom of the hourly trend channel in spite of negative internals. That trade brought us back up to the VWAP, which naturally posed resistance on the first attempt to break out above it.

VIX is now going sideways, perhaps we'll see more positive mid-day action ahead if we can put a higher low in right here. The "stress test" methodology will be released tomorrow. One less uncertainty for the market to concern itself with? MSFT and AMZN report after the bell. Here is the whole list.

Never Investment Advice

Wednesday, April 22, 2009

04.22.09 - Trying to Fill Weekly Gap

The market quickly found support at the open near its pivot and then proceeded to rocket towards R1 on the SPY ($85.90). After several resilient hours just over Monday's opening gap down, that price level was summarily rejected and we are now sitting near the VWAP on Cumulative Tick and Advance Decline lines that appear to have rolled over even as the VIX reverts higher. We are seeing some prospective supportive volume just now; however, that big change in tick character has me thinking that the nature of the afternoon trade may be quite different than this morning's.

Note: Wow! I'd say that played out to a T! Wish I could say I was expecting quite that much drama though!

Tuesday, April 21, 2009

Praise for ETF Rewind

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04.21.09 - Recovery Day

Internals opened with mixed signals through the first bounce from S1/ the first retracement line to yesterday's down trend line, but we've been all green since and appear headed back to the five-day moving averages post Geithner. The financials (XLF) got this recovery going on his allusions disconfirming yesterday's nationalization fears. Note that Yahoo reports tonight.

Note: We did in fact hit that "out on a limb" level suggested above.

Never Investment Advice

Monday, April 20, 2009

04.20.09 - Down Trend Day

We are seeing a broad-based pullback today with relentless sell pressure. Unfortunately, the out sized gains of the last six weeks really sets the market up for days like this, and it doesn't do much for long-term investor confidence, does it? Though Friday looks like a pivot high, the real question is where we go from here. Various levels are suggested on today's chart. Will we finally get a pullback that lasts more than a couple days? Meanwhile, I'd be careful trying to fade strong trend days like this.

Reading:

o Quant Edges/ Overbought?
o Quant Edges/ Time Stretches

Never Investment Advice

Sunday, April 19, 2009

ETF Rewind - Week 16 (04/17/09)

(Click Image to Enlarge/ Glossary)

As referenced Friday, personal commitments have me putting up a very quick post late Sunday evening. Therefore, below is an out-take from tonight's ETF Rewind Pro subscriber commentary in lieu of the regular writeup:


"Welcome new subscribers! Conceptually, Friday's further upside left me slightly worried that, even though it was good for the S&P500 overall, to a degree it had the appearance of a pre-reversal laggards'/ options-strike-price-induced rally. Looking at the [near-term] RSI-2 and Z-Score columns on the 'Rewind' tab, you will note that overbought readings are again creeping across many sub-sector ETFs. I maintain that a five percent-plus pullback would be healthy for this market, and our 'Bearish' mechanical signal [from late last week] remains intact.

On the brighter side, I noticed that the first major sector, Consumer Discretionaries (XLY), has finally moved above its 10-Month Moving Average. I thought Technology (XLK) would get there first, but it's certainly not far behind. A long-term bullish confirmation indeed."



Preparation for Week 17 of 2009:

A seventh week of gains with the VIX nearly 15% below its short-term moving average post-expiration seems a little unlikely, doesn't it? We'll see. Enjoy Your Weekend!

Never Investment Advice

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.

Friday, April 17, 2009

04.17.09 - High-End Range Resistance...


... or just morning chop before another afternoon move? The market is valiantly holding above its Volume Weighted Average Price and Cumulative Tick has gone net positive on the day. However, like yesterday's first half, it's less than inspirational trade on low volume, and some in the Chatroll are asking whether the market is actually open for business!

Weekend post won't go up until late Sunday this weekend. The mean reverter in me has low expectations for next week post-expiration. Have you looked at the VIX lately? Under 35 today! If we do see another power move higher, color me net short at the close. And no, I'm not a permabear -- just hard not to have an intraday-view only for me at this rate of incline.

Never Investment Advice

Thursday, April 16, 2009

04.16.09 - Multi-Month Pivot Above

It seems we are finally seeing a cumulative effect of the positive earnings. Note that after the easy morning fade, buyers stepped in convincingly at the five-day moving average. The slope of the cumulative tick and advance decline line are looking strong, and up volume is outpacing down volume.

That said, the absolute values of tick have not exactly been exuberant, and the long-term median line going all the way back to October of last year just above SPY $86 remains resistance. Tomorrow is options expiration, and volatility may begin to pickup here after its significant downshift. I'll therefore be watching tick and price behavior around the VWAP closely.

Longer-Term Chart

Here is that long-term SPY median line. Also note the blue 200-day moving average is now visible in picture!

Wednesday, April 15, 2009

04.15.09 - Do Your Duty, Sell the News

Taxes and Earnings... Semi's (SMH) are down over three percent, presumably on Intel's "vague" guidance. However, Financials (XLF) are holding steady after yesterday's sell off on the Goldman offering. Whatever the cause, the last two days put us under the up-trend line from the March bottom. This is healthy so far and that trend was clearly not sustainable. On the downside, I expect initial support at the twenty day moving averages should we fall that far in the days ahead.

For today, internals are net positive and upward sloping. However, the daily SPY pivot has acted as resistance twice. We'll see if this nascent up momentum can bring us up and over that pivot and into the five-day. If we do, I'd expect stronger resistance at that level. Just now, that momentum is beginning to look a tad sluggish though.

Tuesday, April 14, 2009

04.14.09 - Technical Market

The overbought S&P cooled off on the horrific retail sales news, only to be bullishly caught by the upward sloping five-day moving average soon after the open. After an extended bounce to just above the pivot, the market rolled back over and is now back near those opening levels. As for the balance of the day, while this level may provide brief support a second time, internals are currently pointing southward, and I expect the VWAP to prove a challenge for the bulls.

INTC reports today after the close. Tech has been one of this rebound's strongest leaders... I'll be watching that report closely.

Monday, April 13, 2009

04.13.09 - Consolidation Trade

Price is showing nice resiliency ahead of significant news risk. Just one more example of the market's recent bullish behavior. Cumulative Tick and the A - D lines are moderately positively sloped and the VIX remains below 40. Nonetheless, the broad indices wouldn't look nearly as nice without the Financials more than pulling their weight. We'll see how far into the day this pre-earnings optimism can hold.

Saturday, April 11, 2009

ETF Rewind - Week 15 (04/09/09)

(Click Image to Enlarge/ Glossary)

The holiday shortened week brought us a fifth period of gains, first cooling off overbought conditions only to then close higher on the unexpected positive pre-announcement from Wells Fargo (Reuters - Fargo Boosts). In fact, the S&P500 (SPY) posted a large gap higher Thursday to end the week up +1.8%.

Week Sixteen of 2009 features both the opening of the earnings floodgates, and key retail sales, manufacturing and housing reports, as follows:

Over the longer-term horizon, the NASDAQ 100 (QQQQ), Emerging Markets (EEM), and several major Sector ETFs are now within striking distance of their 10-month moving averages, potentially confirming the apparent change in investment tone. Additionally, the VIX (implied options volatility) has now downshifted below 40. Note, however, in as much as we appear to be breaking out of the down-trend channel, how negatively stretched the VIX has become (-12.5%). It will be interesting to see how the broader markets react as these leading indices respond to their first key level tests. Meanwhile -- Enjoy Your Holiday Weekend!

Never Investment Advice

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.

Thursday, April 9, 2009

04.09.09 - Congestion Around VWAP

We have seen a relatively narrow lateral trade since the opening +2.6% SPY gap. Cumulative Tick and Advancing Volume are very positive and the stats warn against fading large gaps. On the other hand, the Advance - Decline line is tapering ever so slightly and this move puts us back up into near-overbought territory on a daily bar basis. Volume is hardly there, so anything goes. The VIX is at 37.5.

Intermediate- vs. Long-Term Trendlines:


Lots to think about this long weekend -- Enjoy!

Wednesday, April 8, 2009

04.08.09 - Second Verse, Same as the First?

After a slightly lower-low in the premarket, today's range looks just like yesterday's. However, internals are marginally more positive and as long as we hold above the rising VWAP, perhaps we'll see a test of that declining (intraday) five-day moving average. Just now it looks like R1 on the SPY will be challenged once again... third time's the charm?

Yesterday I received a comment asking what I mean when I reference "internals" -- these two posts should help:

o Market Rewind: Anatomy of a Day
o Market Rewind: Trading Tick & AD Line Convergence

Update: VIX breaks under 40 yet market advance halted at the declining five-day moving average.

[FOMC Meeting Minutes]

Tuesday, April 7, 2009

04.07.09 - Between the Gaps


After gapping down -1.6% (SPY), price is now in a sort of no man's land between yesterday's close and the April 1st/2nd gap. Internals are moderately negative, and yet price has held its own between S1 ($82.60) and S2 ($81.55) with a slightly upward biased VWAP. Hard to say if that's actual buying, or short inventory from yesterday's post-recovery close being taken off for a profit. However, it has really been a lateral move from the open -- we'll see if this can continue to hold or even recover. At the time of this posting we are just under the VWAP with vacillating internals.

The experimental chart above is updated in realtime by BestFreeCharts, check it out (orange line is VWAP)!

Monday, April 6, 2009

04.06.09 - Slow Grind Lower

I think the most notable aspect of today's trade is how widely proclaimed it was. Even CNBC was looking for a "pause" today ahead of earnings season. So, the corollary observation is how orderly this pullback is on fairly light volume. Nevertheless, though we are seeing a pause in the declines at the midday, it's hard to imagine a scenario where we recapture the VWAP/ 5-DMA as overbought as we were -- with technicals and price well aligned, the day's trend remains firmly down, if not midly so. Next potential SPY support is near $82 (S2).

Never Investment Advice/ Twitter Down Today

Saturday, April 4, 2009

ETF Rewind - Week 14 (04/03/09)

(Click Image to Enlarge/ Glossary)

Lest we get too excited here, a fourth week of gains that left the S&P500 (SPY) up another +3.2% really just has the indices back to early February levels. Among the majors, Emerging Markets (EEM) posted the healthiest rise of +6.8%, while domestically the greatest strength was shown in the Small Caps, as represented by the Russell 2000 (IWM), up +6.4%. Meanwhile, Real Estate (IYR) managed a whopping gain of +15.6%, even as Precious Metals (DBP) continued to soften, down -3.4%.

With fewer economic reports, week fifteen of 2009 will be focused on the advent of first quarter earnings season, commencing with Alcoa Tuesday evening, as follows:

News flow and economic reports were really mixed at best last week, culminating in the 8.5% unemployment rate report (AP - Unemployment Soars)(WSJ - Easing Rules)(Bloomberg - G20/ECB Cut). The news was nonetheless well digested by a welcome return of a bullish "buying the dips" behaviour on the turnaround anticipation trade. That said, this week's table is now virtually screaming overbought across multiple time frames. Will this next holiday shortened week provide pause to the markets' historic come back?

This article marks my five-hundred-first post. Thank you for all your support over the last two years and -- Enjoy your Weekend!

Never Investment Advice

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.

Friday, April 3, 2009

And So it Goes...

From Think or Swim:

"NOTE: Pursuant to SEC Release 2009-56 there is an impending increase to the Section 31 fee rate that all clearing firms are required to charge to securities transactions on the exchanges and over-the-counter markets. As of April 10, 2009, the fee (commonly referred to as the "SEC Fee") will be raised to $25.70 per million dollars from the current $5.60 per million dollars."

"NOTE: Beginning March 1, 2009 the Chicago Board Options Exchange (CBOE) implemented a new transaction-based Options Regulatory Fee (ORF). This fee is $.006 per contract with a minimum of $.01 (one cent) per trade. For example, if you buy one option, the ORF is .01; if you buy 10 options, the ORF is $.06; if you sell 10 verticals, the ORF is $.12. The fee is being charged on any options trade that clears as a customer transaction at the OCC regardless of the marketplace of execution. In other words, it does not matter if the trade was executed on the ISE or some other exchange as long as the trade was executed by a firm that does business with the CBOE. The reasoning provided by the CBOE for assessing this fee is that it has regulatory obligations that reach across all exchanges, for example, many of the surveillance programs for customer trading activity require the CBOE to look at activity across all option markets, such as surveillances for position limit violations, manipulation and insider trading."

04.03.09 - Bullish Catch at Support

The market came down hard on the jobs report, but was quickly caught at SPY S1 and price turned nearly on a dime. After a brief struggle with the VWAP, the "Everyone Loves Bernanke" effect kicked in and we are now challenging the Pivot (about SPY $83.65).

Internals have changed to the positive across the board, and many leading sectors have exploded higher. Nevertheless, I'm expecting a sideways to down trade on the balance of the day as the morning move has done nothing to burn off toppy market technicals... but this has been a very bullish period and certainly traders need to be ready for anything.

Never Investment Advice

Thursday, April 2, 2009

Thursday Recap

04.02.09 - The Gap that Didn't Look Back?

The extreme gap this morning (SPY +2.5%) was a sign that follow-through strength was likely and the Advance - Decline line has been pegged in the 4,000+ range all day since.

We have seen nothing but higher lows and highs in every index except... the Financials! And curiously, the VIX has been on a mild advance along with price (subsequent to the initial dive).

The factors at work are apparently the Mark to Market rule changes and more promises of global stimulus by the G-20. Take a look at the Transports on that latter news -- biggest one day move since the late 1930s (IYT +9.8%) and that in spite of oil's equal advance (USO +7.9%)!

Strong volume suggests there is some real money behind this move. However, even as a confirmed trend day, the divergences above do have me mildly concerned and this thrust puts us nearly into overbought status ahead of jobs and the weekend. I suspect that more active managers may start looking for places to minimally get hedged soon. Indeed, demand for protection may explain the rising VIX, but I'll leave that analysis to the options experts as I'm not currently tracking open interest.

Never Investment Advice

Wednesday, April 1, 2009

Judging the Book by its Cover

After posting my twentieth monthly Market Rewind summary today, I am struck by how the titles alone tell the story of this dramatic period in our economic history. From the vaults, a one-stop archival repository for past monthly "Market Rewinds":


March 2009 Rewind - Real Life Roller Coaster

The old March standby "in like a lion..." just doesn't fully capture it -- does it? Last month brought us both a historic plunge to price levels not seen since 1996, followed by an equally historic recovery boasting monthly returns not recorded in over twenty years -- and yet the S&P 500 remained down nearly -12% on the year!

This March, the S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices rose +8.54%, +7.73% and +10.74%, respectively.

News flow started off on the wrong foot with price already at a vulnerable level. In the first week alone, AIG came back to the till on a $62B loss, followed by worse than expected automobile sales and job losses. However, by mid-month with Madoff jailed, AIG bonuses blocked, added TALF details, and a handful of economic upside surprises, the markets were able to turn it around and powerfully so. Throughout the roller coaster ride of a month, the VIX (implied options volatility) once again remained in a relatively narrow range.

Sector-wise, Financials (XLF +17.2), Materials (XLB +15.4%), and Consumer Discretionaries (XLY +12.7%) led the up-across-the-board majors, while Style-wise the Mid-Cap Values (PWP +10.9%) led the charge. With first quarter earnings soon on deck, analysts will be looking closely for any signs of a near-term trough earnings scenario. Will traders get an April follow-through on the strong March reversal?

Sentiment: Mixed
Volatility: Level (VIX 40-52)
Direction: Upside Reversal

[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.

04.01.09 - Gap Fill and Highs Retest

Need I say more? Internals began to struggle as price challenged yesterday's highs. However, they remain net positive at the mid-day and R1 (SPY $80.40 on my charts including the pre/post) is thus far providing support from above. I'll be watching the rising VWAP and Cumulative Tick very closely today. Some April First foolery for you...