Saturday, February 27, 2010

ETF Rewind - Week 8 (2/26/10)

(Click Image to Enlarge/ ETF Rewind Glossary)

Choppy sideways trade left markets down just slightly, with the S&P 500 (SPY) finishing the week lower by -0.4%.  While all of the tracked equity indices are once again above their respective 10-month moving averages and most appear neutral short-term, in contrast Transports (IYT) look fairly overbought, while Utilities (XLU) are striking oversold readings.

Week Nine of 2010 includes a busy economic reporting calendar featuring the March jobs report, and rotation model selections, as follows:
Have a terrific weekend!

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

Friday, February 26, 2010

02.26.10 - Stale Trade under the 50-dma

Pretty boring end-of-month, huh?  Well, there is always miracle Monday and a shiny new month for the bullishly inclined.  All in all, internals aren't too bad, but mostly sideways trade indicated.  What's that they say about dull markets....?  Well, it's pretty tempting though, isn't it?

Thursday, February 25, 2010

02.25.10 - Plunge and Resistance at S2/ 250-min EMA

Most of today's action happened in the premarket session.  Since then it has been slow waves around the VWAP.  Internals are a bit nasty, but not really trending per se.  I'll grant that it "feels like" support here just above the twenty-day moving average, but intraday I'm actually finding the placid VIX action to be potentially bearish... if it is unlikely to continue to trend down then...  Meanwhile, I see immediate resistance at SPY $109.70 and support at SPY $108.90.  Thanks again to Charles Kirk for the interview today -- my fingers are still on fire!

(Note: 5-dma is now colored magenta)

Interview by Charles Kirk Today - Noon EST

Hi Gang, I hope you will join us for this one-hour event at Noon Eastern here:  The mid-day post will be a little later than usual, accordingly.  I see the SPY has found initial support at its twenty-day moving average.  Internals remain fairly negative.  Good luck trading today!

Wednesday, February 24, 2010

Babe of the Day!

And now my readership will double, right?

02.24.10 - Inside Day?

Well, inside Chairman Bernanke's head anyhow.  It has been erratic sideways trade during the testimony post opening noise; however, market internals look quite strong, so perhaps we can break to the upside after the hearing.  The only negative I see on the daily time frame -- and it shouldn't be discounted -- is that momentum remains slightly to the downside on the MACD and Net New 52-Week Highs, meaning this morning's strength has yet to resolve yesterday's big sell.  Meanwhile, the 5-dma is providing strong support (dotted cyan line).

Tuesday, February 23, 2010

02.23.10 - Overbought Downdraft

Equities are giving up several days of gains in trend-like fashion.  News catalysts aside, this should come as no surprise to short-term position traders as US indices were highly overbought.  Internals are obviously quite negative, although the VIX remains off its a.m. highs by a hair.  Nevertheless, short of a last hour miracle (which abound in this market), I do expect a somewhat lower close at this time.  I likewise will be looking for support in the low to mid- SPY $109 range, which we are honing in on as this post goes "to press".

Never Investment Advice

Monday, February 22, 2010

02.22.10 - Pivot Bound

The S&P 500 is vacillating tightly around its daily pivot, but below its VWAP.  Internals are on the weak side, but up and down volume are evenly matched consistent with range-day trade.  Small caps have been certainly outperforming, as have been the banks (XLF) and transports (IYT).  Just now it looks like tick is catching a bid, how many up days would this make if they can turn this around?  In fact, it's really the energy complex (XLE) that appears to be keeping a lid on the S&P.

Sunday, February 21, 2010

ETF Rewind - Week 7 (2/19/10)

(Click Image to Enlarge/ ETF Rewind Glossary)

Markets continued their corrective recovery with the S&P 500 (SPY) finishing the week higher by another +2.8%. However, while last week we intimated it might be premature to act on overbought readings, this week they are fairly screaming for a minimal pause in the rise.  In addition, momentum slowed to the extent of divergence on Friday in spite of the impressive reversal from the surprise Federal Reserve discount rate increase.

That said, more broadly speaking last week's strength was just the type of action needed to lessen fears of a third leg down beyond mere correction levels.  In fact, two of our three simple rotation models put the risk trade back on, legging back into into the NASDAQ 100 (QQQQ) (though I might consider belaying that for a short while based on current overbought readings).

Week Eight of 2010 features the following reporting calendars and rotation model selections:
Lastly, don't forget that with Chinese traders back from vacation and Greece seeking to place a large debt offering, overseas news will be back in the limelight.  Have a terrific weekend!

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

Friday, February 19, 2010

02.19.10 - Feels Like "Miracle on Ice"

By the morning session the worst of the Fed window reaction had been absorbed and within the first half hour the S&P was bought off its daily pivot. Reminds me of the old movie "Miracle on Ice" based on the USA hockey win over the Soviet Union in 1980 for you Olympics buffs.

But, not really a total surprise given how strong momentum has been -- is it? (Feels just like early November.) That's one reason I am testing this new end-of-day SPY price indicator. It attempts to quantify e.o.d. price based on various "sentiment" spreads and their historical relation to daily price changes. It should be interesting to watch.

As of the mid-day, this indicator is suggesting we are nearly at "fair value". That said, many elements have fallen into place to call this a trend day. My contrarian/ larger concerns lie in the daily bars, which are showing a slowing of the upward momentum and highly overbought short-term readings.  Lastly, given last night's news and OpEx, volume is lighter than I would have expected.  Oh, and did you see the VIX today... < 20.

Live End-of-Day SPY Forecast Test

In this test I am attempting to project the daily SPY close based on our Mrkt Sentiment spread readings throughout each trading day. This post will be updated in real-time daily. The forecast is for the same day it is viewed, not the next day. Readings should become accurately populated within twenty-minutes of the open. This is strictly an experiment - rely on the forecast at your own risk!

Thursday, February 18, 2010

02.18.10 - Sideways Trade

The sideways trade is contrary to cumulative tick, which continues to move higher.  That said, other internals are muted at best.  The market remains short-term overbought and it seems resistance will initially be strong between SPY $110.50-111.00, just under the fifty-day moving average.

Wednesday, February 17, 2010

02.17.10 - Momentum Carryover

Yesterday's strong momentum has carried over into this morning's session.  However, thus far currency action and moderate overbought readings appear to be keeping a lid on price action.  In fact, the Quad-Qs were able to fill their morning gap before popping back up to VWAP.  With the VIX trending down and internals net positive, I assume we close the day in the green.

Never Investment Advice

Tuesday, February 16, 2010

02.16.10 - Gap & Go

Market internals are very strong today and the SPY's  five- and ten-day moving averages are both hooking higher with the intermediate-term downtrend line definitively broken.  In addition, new highs participation is also present.  This was the type of strength I was hoping to see.  That said, this move puts the index well into short-term overbought territory just as it looks to challenge its 20-day moving average above (say $109.30).  How the market handles these technicals and the extent of any pullback will tell us just how safe this market is here.  Certainly the news-cycle appears more constructive early-on in this holiday shortened week -- we'll see.

Saturday, February 13, 2010

ETF Rewind - Week 6 (2/12/10)

(Click Image to Enlarge/ ETF Rewind Glossary)

Markets made gradual, albeit volatile progress last week that left the S&P 500 (SPY) higher for the first time in a month by about +1.3%. In fact, due to muted closing ranges overall, by some short-term measures equities are actually beginning to look overbought (see the RSI charts below).

The Small-Cap Style ETFs look particularly extended, including IWM, PWT and PWY. However, as these readings maybe exaggerated by the aforementioned narrow range, perhaps markets can build on Friday's late comeback momentum. I'm somewhat skeptical of that, but we'll see. Meanwhile, with nearly 17 days spent under its 20 and 50-day moving averages (which are both pointing lower), I'd suggest that the S&P 500 needs to show stronger signs of recovery strength -- and soon -- if it isn't to be sold for a third leg lower.

Lastly, note how a handful of the tracking indices have recently broken their respective ten-month moving averages, including the: EAFE Internationals (EFA), Utilities (XLU) and Commodities (DBC). This type of damage has the potential to feed on itself and minimally takes weeks to repair. At this point the action may be easy to write-off with hope of a recovery/bounce ahead -- but as a potential early warning sign -- I'd suggest that it should likewise be given cicumspect consideration. (See "Trading the 200-Day" from the archives.)

Holiday-shortened Week Seven of 2010 featuring very busy reporting calendars, monthly options expiry, and rotation model selections, as follows:
Have a terrific long weekend!

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

Friday, February 12, 2010

02.12.10 - China's Gift to Daytraders

Thank you China!  恭喜发财 /88/ 新年快乐  Just as last night provided an opportunity to take a short trade, so too did nice support at SPY S1 with a falling VIX provide a long power bounce well back into yesterday's range.

In fact, today's lows remain higher than yesterday's. However, I think that asking for a higher high might be a stretch -- but we'll see!  I hope everyone enjoys their long weekend.

Thursday, February 11, 2010

02.11.10 - Range Contraction Resolved

The three-day range contracted to a fine point around the 5-dma in triangular fashion, and finally resolved to the upside.  Note how the two converging trend-lines acted to simultaneously confirm support (bottom line) and a break-out (top line) all at once here ("Double Jeopardy").  At the mid-day, internals are very supportive for a continuation trade into the p.m. session, although I'll grant that SPY R1/10-dma at $107.80 is providing strong resistance and longs should likely be protective of their profits.

Never Investment Advice

Double Jeopardy

Are you looking at more than one day's worth of data?

Wednesday, February 10, 2010

02.10.10 - Lows Retest & Hold

After bumping its head on the falling 5-day moving average, SPY price retested yesterday's lows near S1 and held.  Internals have subsequently become far more supportive, although price is once again struggling with the daily Pivot/ 5-dma confluence.  If internals can hold, I assume those will eventually give way, but note how price is just tracing along that dashed cyan 5-dma line for now.

Never Investment Advice

Tuesday, February 9, 2010

02.09.10 - Pivot Catapult to R1

What looked like inventory trolling / an attempted gap play found huge support at the daily pivot where strong buying took equities well past their respective five-day moving averages/ first resistance levels.  Internals are very strong even as we pause here at the S&P 500's ten-day moving average.  If we can hold near the five-day (say $107.85), I put the next upside target at SPY $108.70-109.30 [edit] for later in the week.   

12:45 Update:  News is whip-sawing this market heavily, hedging gains here.  VWAP holding for now... crazy stuff.

Never Investment Advice

Monday, February 8, 2010

ETF Rewind - Announcing Customizable Rotation Modeling

ETF Rewind subscribers have long had the ability to derive customized relative strength models using statistics available in our nightly newsletter. By popular request, the nightly Excel spreadsheet now includes a customizable Relative Strength Rotation back-testing engine, as featured in past posts and this year's weekly rewinds.

While the model uses as many as ten tickers at a time, motivated traders might consider one set of tickers to represent major asset classes, then additional lists to effectively drill down on the active classes with more concentrated scans.  Without a doubt, this addition makes ETFR one of the most powerful and complete interactive newsletters/tools available to the individual trader.  Other features include:
  • Nightly Market Recap & Next-Day Outlook
  • Statistical Summary of Nearly 200 ETFs across 12 Asset Classes
  • Pairs Trading & Scanning Modules
  • Relative Strength Rotational Model
  • Advanced Custom Portfolio Metrics & Hedging Analysis
Quite a Swiss Army Knife!  Three-day trials are still available here.  Advanced functionality expires in 30-days, but the files are otherwise yours to keep.  Why not give it a try?

02.08.10 - Slow Grind Higher

The majority of the a.m. session has been spent above the Volume Weighted Average Price. Speaking of which, volume is the lightest we have seen since mid-January (14th). Cumulative Tick is slowly grinding higher, suggesting underlying strength. However, I'd like to see the slope of the Advance - Decline line pick up.  Semis are doing very well, but the Financials are holding back.  Lastly, here is a nice piece by Rob Hanna.

Sunday, February 7, 2010

January 2010 Rewind - Foundational Cracks

In spite of a relatively decent earnings season, mixed economic readings, domestic political turmoil and an emerging sell-the-news mentality left cracks in the foundation of the ten-month old bear market recovery. This January, the S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices finished down across the board by -3.70% , -3.46% and -6.41%, respectively.

Although the VIX (implied options volatility) set new post-crash lows, it likewise spiked heavily in the month's fourth week when General Electric (GE) missed earnings expectations and strong opposition was indicated for Federal Reserve Board Chairman Bernanke's renomination.

As shown below, Technology (XLK) and Materials (XLB) were the hardest hit by January's reversal of fortune (2009's biggest winners). In fact, only the Health Care (XLH) sector was able to eek out a small gain. With February's trade well underway, it seems clear that last month's poor performance was just the first shot across the bow as volatility remains on the rise while traders ponder the long-term consequences of the swap of private for public debt across the globe.

Sentiment: Mixed
Volatility: Low (VIX 18-27)
Direction: Down

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.

Saturday, February 6, 2010

ETF Rewind - Week 5 (2/5/10)

(Click Image to Enlarge/ ETF Rewind Glossary)

A nervous market nevertheless finished nearly flat with the S&P 500 (SPY) lower for a fourth consecutive week by just -0.7% and the NASDAQ 100 (QQQQ) higher by +0.4%.  However, at one point before Friday's last hour rebound, the VIX had run up +30% from earlier in the week and the S&P 500 had tagged its 200-day exponential moving average for a near "official" correction of -9.2% off its January highs.  This action had the Market Rewind ETF rotation models seeking safety for the first time since the 2009 March lows.

It would therefore seem that Monday's trade may rely especially heavily on news flow over the course of the weekend.  Perhaps the G7 talk will help support a follow-through rebound.  The Dollar's extended overbought status may also assist equities if it can remain contained, suggesting that either partially legging into the rotation model's US Dollar (UUP) indication, or looking at cash while initially maintaining some equity exposure here may be the way to go until the next move better reveals itself.

Week Six of 2010 includes busy reporting calendars featuring retail sales and new rotation model selections, as follows:
Have a terrific weekend!

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

Friday, February 5, 2010

02.05.10 - Plumbing the Depths?

The S&P 500 is thumping along its first indicated level of floor trader's support near $105.60 even as the Quad Q's are holding their ground at the zero-line. I am showing cumulative tick as positive, but really just going sideways along with price and I am more than a bit concerned with the rising down volume and VIX. Nevertheless, if we can hold within this range, I expect it may bode well for another Magic Monday.  On the other hand, that 200-day ema just a dollar below has to look like an attractive target for short sellers.  I only wonder whether that might not be anticipated in advance, meaning we maybe closer to that zone than a first glance may suggest. [Note: $104.75 EMA objective met -- now what?  Successive support down to $102, bounce back first target $108.20.  That's right, NEVER INVESTMENT ADVICE!  ;-)  ]

Thursday, February 4, 2010

02.04.10 - A Rush & A Whoosh

Ouch!  Overseas action was a big heads up, but I didn't day-trade the easy opening action and am pinching myself for that.  Otherwise I am happily sitting mostly in cash.  This has allowed me to put a little bit of capital to work here, but note that I'm 100% hedged for now.  Internals are fairly awful and this looks like a down trend day, so this is crucial until we see intraday signs of a turn around.  Just now the bowl shaped floor is giving out and volume is the highest we've seen in nearly two weeks.

One concern is that this will open the door for shorts to try their luck for once and push price all the way down to the 200-day ema, which increasingly seems within grasp near SPY $104.75 (see early thesis on this from last week).  Even stronger support is technically indicated between there and the 200-day sma, which corresponds roughly to the early November lows (say between $102 and $103).  Look at that VIX go, +18% -- Yee-Ha!

Wednesday, February 3, 2010

02.03.10 - QQQQ Outperformance & A Modicum of Normalcy

The NASDAQ 100 stocks have managed to stage a follow through recovery even as the the other majors remain weighed down.  Cumulative Tick is trending negative along with most other internals, so it will be interesting to see how that disparity plays out.  For once, a "normal" pullback!  Stocks aren't supposed to go straight in any one direction for days on end.  As a second measure of normalcy, price coming back and stabilizing in the middle of the recent range here neutralizes the unusually wide stretches we have seen of late, first to the upside, then the downside.

Tuesday, February 2, 2010

02.02.10 - Follow-Through Day: Huzzah!

Price action quickly closed its a.m. gap but bounced on cue off the cradle of the 5-dma and 500-min ema for a nice rally to R1, which is acting as support for the SPY and a bit of resistance for the QQQQs.  The later has been so beat up, if they can just break above that level, perhaps we can see a second leg higher in the afternoon session.  I only wish I saw a bit more appetite for risk in support of that thesis (see Daily Sentiment Chart to right).  The good news is that volume is stronger today -- nearly on par with Friday's trade.  Huzzah!

Never Investment Advice

Monday, February 1, 2010

02.01.10 - Tepid Bounce Effort

This is a fairly weak bounce effort coming into the new month.  There is most certainly a disconnect between economic news and investor sentiment cycles here.  Meanwhile, internals are strong enough I expect the gains to hold.  If we can't regain the five-day moving average soon though, there will be speculation over whether this is true stabilization or just another pause in the trend.