Saturday, January 30, 2010

ETF Rewind - Week 4 (1/29/10)


(Click Image to Enlarge/ ETF Rewind Glossary)

Markets provided little respite last week with nary a bounce so much as a brief pause that nevertheless left the S&P 500 (SPY) lower by another -1.7%.  This third week of losses has the S&P 500 roughly -6.6% off its most recent closing highs.

Also, a broad swatch of industries is now fairly heavily oversold in contrast to Treasuries (TLT) and the US Dollar (USD), which are equally overbought.  Then again, these two assets classes are more likely to trend, as is evident in their relatively high ranking Trend Stability Scores.  Equities are still "due" a bounce, but the prospect of added dollar pressure doesn't bode well.

Week Five of 2010 includes another busy reporting calendars, featuring the Friday Jobs Report, and rotation model selections:
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, January 29, 2010

01.29.10 - Sell the News... Again?

A strong GDP just wasn't enough to forestall a gap close on this morning's move higher. Internals are running sideways right now and we seem to be holding at the S&P's prior close for now. Are traders perhaps taking pause to consider:
  1. The Fed beginning to turn off its supportive facilities next week?
  2. The rise of the dollar?
  3. 'Non-perfect' earnings reports on this high GDP reading?
  4. On-going sovereign rating concerns?
  5. On-going domestic political unease?
  6. Job creation remaining on the rocks?
  7. The sudden turn in price momentum?
The charts just look awful, particularly the QQQQ's. Can the change-of-month effect at least provide markets with an overdue bounce after the sell?

Thursday, January 28, 2010

An Open Door?

Does today's action open the door for a second leg all the way down to that dark blue 200-day EMA for the S&P500 ($104.50)?

I'm certainly not rooting for it, but post Bernanke confirmation, MSFT and AMZN beats, a lot will now be hanging on tomorrow morning's Fourth Quarter GDP, expected in at +4.7%. "Short" of that, Bulls would next have to look to a positive change-of-month effect.


01.28.10 - Support Breaks Hard


Internals are heavily negative, and, although price is holding at the mid-day just above SPY $108, this seems to be the second leg down that many Market Rewind chat-room participants had hoped to catch on a firmer bounce -- the lack thereof probably being the strongest clue this was in the works.

In particular, in looking at many of my system indicated buy candidates, I am seeing shocking weakness that far exceeds what is being reflected in the major indices.  I don't want to be too negative and miss out on the possibility of a reversal bid, and as full disclosure I've increased my long line a bit here, but not good.  Think anyone is concerned about the GDP report tomorrow?

Wednesday, January 27, 2010

January FOMC Statement Markup Comparison

Blue-lined markup comparison of the January versus December FOMC statement below. Also see past Fed-Day reactions on this nifty little site, and prior statement markups here. [Click Graphic Below to Enlarge]


01.27.10 - Sideways Ahead of Fed?


Not much to note except that we are hanging in there considering overseas performances.  I will note that Cumulative Tick is very negative.  Even now price is mounting an assault on its morning lows.  This doesn't bode well and the Fed statement had better be benign for the sake today's market.

Tuesday, January 26, 2010

01.26.10 - The V-Recovery You Didn't Have to Sweat


Overnight futures were down significantly at one point on the Asia trade.  Although we gapped somewhat lower at the open, we have had a nice reversal ever since.  The VIX is falling hard, Cumulative Tick is rising and the Advance - Decline line has just gone positive, leading me to believe we will finish the day in the green.  The SPY is just under its R1 floor trader pivot, which corresponds with yesterday's highs.  However, this may prove a [strong] initial resistance level.

Monday, January 25, 2010

01.25.10 - Gap Probe and Hold


I did not like the early weakness on the a.m. gap.  However, the probe failed (or succeeded depending on your viewpoint!) and we have bounced back on stronger sentiment readings. Still, this feels weakish -- though perhaps that should be expected with the FOMC on-deck, housing etc....

Saturday, January 23, 2010

The Perfect Storm?

Part two?  Well, not a very good week.   We shall see -- certainly hope not.  Statistically next week should be a better one.  I expect the first couple days will be important tells.


ETF Rewind - Week 3 (1/22/10)


(Click Image to Enlarge/ ETF Rewind Glossary)

In a retrace reminiscent of the early shots across the bow of 2007, a perfect storm of overbought conditions, peckish earnings responses, and political heat on the Fed and banks left the majority of tracked ETFs down for a second consecutive week.  The move left the "priced for perfection" S&P 500 (SPY) lower by a whopping -5.0%, and equities generally as heavily oversold as they were overbought just a short while ago.  However, inasmuch as we are statistically due a significant bounce next week, whether and how that evolves will tell us a great deal about just how broken this Bull Market truly is.  By the way, look at that VIX stretch: +40%!

Week four of 2010 includes the following busy reporting calendars, featuring an FOMC meeting, and rotation model selections (performance tracking added this weekend):
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, January 22, 2010

01.22.10 -Dipsey Doo


The SPX slid under its 50-day moving average and found support at the round 1,100 mark.  However, price snapped back quickly at that point and we are currently running in range-day fashion with Up and Down Volume just about evenly matched, Cumulative Tick running sideways, and the VIX flattening out just under 23.

Feels like more than a 3.5% correction though, doesn't it!  Speaks to how rare these 50-dma visits have been during this extended rally.  Short-term, we are oversold -- Monday should tell us a lot about just how broken this market really is.  For now I have to give the market the benefit of the doubt and have added to long exposure on the dip.

Never Investment Advice

Thursday, January 21, 2010

Banks versus....

 Hope you will indulge me with a little bit of humor on this big down day...

01.21.10 - SPY Fast Break to 50-DMA


Price action fell to pieces soon after an opening reject of the intra-day 5-DMA, leaving the SPY near its second indicated potential support level at its 50-DMA of about $111.65 (the first for ETFR subs was yesterday's lows).  Thus far that has proven good support, although internals have a lot of damage to repair if we are to see a late-day comeback like yesterday.  Right now I'm just not seeing that and XLF is down over 3% on the White House commentary.

I expect many go-long signals to begin triggering here.  Just be advised part of the reason this will happen is the preternatural narrow range we are coming out of.  Legging in may well be the best way to establish exposure on this particular fast break.  I'd also be remiss not to note that this is some very high volume distribution we are seeing, and that the VIX breakout hardly looks done.  Next SPY support looks to be in the mid-$110 range should we continue to march lower.  Lastly, an "official" 10% correction would take us all the way down under our 200-DMA.  Not suggesting that will happen, just making note.

Speaking of which, the FXI/ the Xinhua China 25, actually has broken its 200-day moving average on last night's hot inflation readings.



Never Investment Advice

Wednesday, January 20, 2010

The New Normal?

I'm not so sure -- but it does feel that way -- doesn't it?  Notice on the SPY chart below how we have moved from nice oscillating (if highly time extended) trend cycles to choppier ranges.  The "New Normal"? 

Hard to say for certain until we finish sorting out this earnings cycle.  Speaking of which, Thursday will be a huge day for that.  Look who's on deck.



01.20.10 - Comeuppance?


Comeuppance?  Overseas performances were compounded by early earnings news today, pushing the SPX all the way back down to its 20-day moving average, which is proving initial support.  The last few days look more and more like a rounded top with a lack of new highs participation.  More immediately, I am looking for stronger resistance to this first reaction bounce between SPY $113.60 and $113.75 and we are otherwise in downside trend-mode.  I expect that this recent uncertainty as expressed through relatively extreme chop has to be taking a toll on bull psychology.

Tuesday, January 19, 2010

01.19.10 - Trend-Day Rebound


We have a healthy tick today and a nice rebound back up near prior resistance at SPX 1,150.  Although Monday was a strong day overseas, early indications this morning were much dicier.  For some reason my Tradestation is taking forever to load, excuse the Yahoo! chart for the day.  So was Friday another one-day wonder?  Amazingly, the S&P has not registered a back-to-back instances of red bars since December 8th.  [IBM Earnings Whispers]

Sunday, January 17, 2010

Portfolio X-Ray: Keeping Dubble Out of Trouble

One of my favorite aspects of blogging is all the wonderful people I meet through the Market Rewind chat-room.  One of our long-time members goes by the on-line moniker "Dubble",  or "Dub", as we call him.

Dub has been diligently working on building his trading skills and has come a very long way in a very short period of time, more recently focusing on Dow futures. One day not long ago, I received an email from a fellow trader informing me that our Dub is none other than acclaimed blues man, David Duncan [link fixed].  In fact, Dave just recently cut a couple tracks with BB King -- check it out!

This post is about Dub's holdings coming into the late-week sell-off.  We had been discussing how the market was becoming increasingly choppy and possibly overbought in the chat-room, and Dub graciously volunteered his portfolio as an example to illustrate basic hedging principals -- Thanks Dub!

Dub sent me a short list of his current holdings, including:  AGU, CF, POT, CNX, MEE, PCX, CLF, WATG, CYD and DWA.  Step One was to get a handle on exactly what these were.  Loading them into ETF Rewind's Exposure Tab, it was easy to see he was playing heavily in the Basic Materials sector.

In fact, the built-in returns matching algorithm perfectly nailed his exposure.  While this mix was relatively simple, you can see in the graphic below where the algorithms attempted to best replicate the portfolio's daily return characteristics (light blue = input), with a mix of popular ETFs organized by Asset Class and Sector (light orange = output):


The main aspect I want to focus on here, is how this virtual X-Ray turned me onto Dub's game.  As shown in the red circle, this portfolio is quite leveraged from a beta standpoint.  Well, not a bad play for a bull market.

However, what to do in light of an anticipated downdraft?  In this case, if Dub had hedged his portfolio using shorts or puts in either the selected mix of ETFs, or even the SPY at the indicated 1.65 times portfolio dollar exposure, he could have significantly reduced his risk without being forced to default to cash.  Here was the actual performance of the portfolio last Friday:



The average loss for the portfolio was -2.5%.  However, using hedges he may have reduced losses to -0.65% (-2.50% - (SPY -1.12% x 1.65)(frictionless).  Not perfect by any means, but not the stiff hit it would have otherwise been.  And hey, peace of mind is important in trading, not to mention understanding potentially hidden risks like this portfolio's beta exposure.  Furthermore, for more complex portfolios, (and perhaps especially for algorithmic traders  who may not always know what all of their individual holdings actually are at all times), you can see how important a tool like this becomes.

So Dubble -- did you manage to stay out of trouble last Friday?  I have no doubt that you did!

ETF Rewind - Week 2 (1/15/10)


(Click Image to Enlarge/ ETF Rewind Glossary)

The majority of tracked ETFs ended the second week of the year lower on Friday's options expiration rout, including the S&P 500 (SPY), down -0.8%.  Bucking the move were the "Safety Sectors," including Utilities (XLU), Consumer Staples (XLP) and Healthcare (XLH), Large-Cap Value (PWV +0.2%) stocks, and long-dated Treasuries (TLT +2.0%).

This corrective move left select Commodities (DBC) and Emerging Markets (EEM) the most oversold of the lot.  Meanwhile, inasmuch as most equity indices have been tightly range bound, the S&P has likewise been unable to record back-to-back losses since December 7th and 8th.  I wonder if we aren't overdue in that regard?

Holiday shortened week three of 2010 features the following reporting calendar and rotation model selections (a new feature for 2010!):
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, January 15, 2010

01.15.10 - Internals Awful on Haunting JPM Missive


Here we go again with some OPEX volatility thrown into the mix.  At the mid-day, SPY price is plumbing the depths of its two week range that looked so close to breaking out just yesterday afternoon.  However, I found this morning's JP Morgan comments rather haunting in the sense that I think they will cast a pall over the market for a while here.  First downside target is the twenty-day moving average near  SPY $112.80, though we are certainly overdue a visit to the 50-day further along towards $111.20.  Price is breaking down once more as I post this in true trend-day fashion.  I'd be careful picking bottoms today.

Never Investment Advice

Thursday, January 14, 2010

01.14.10 - Slow Grind Resumes


A mid-day internet outage has this post up quite late.  Looks like it has been a slow grind higher after the opening noise.  Hard to like those economic reports, but this is an optimistically inclined market.  Timing signals remain mixed after such a rapid recapture of early week losses as we set up to retest highs just momentarily.  Cumulative Tick remains net negative, but has been slowly improving all day long. Pending street and whisper numbers below:

Wednesday, January 13, 2010

01.13.10 - Retest & Back to Five-Day


Morning follow through was immediately sold for a retest of yesterday's low range only to find immediate support there at S1.  SPY Price then catapulted back to the five-day moving average, where it looks to be breaking through initial resistance.  Indeed, internals are now aligned to upside and the VIX continues to cool off, so I'd suppose we hold to the positive for the day.  However, that rising 5-dma may continue to play throughout the day as alternate support and resistance. Market Sentiment also supports a green bar day (see right side of blog under live dashboard).

Update:  Somewhat surprising to me, a trend day has evolved since writing this post, though we are now seeing some resistance again as the Qs sit at their 5-dmas.

Never Investment Advice

Tuesday, January 12, 2010

01.12.10 - Rare Zero Sentiment Reading


This is a risk adverse market (see right hand column): the S&P is setting up to break its premarket lows at S2 on a rising VIX, Down Volume and a Cumulative Tick that is falling apart. Well, the market had set itself up for any earnings disappointment whatsoever as overbought as it was, and so the bears have their day.  And there goes S2...  Depending how damaged this cycle becomes, I'll be looking for initial support about a dollar lower on the SPY (say $112.50-113.00), then down towards the high $110 level -- but that would require more than a one-day wonder.

Monday, January 11, 2010

01.11.10 - Price Struggling in New Week


In-spite of strong overseas performances, the Monday gap was quickly filled and we are headed towards a second pivot test, which I expect to fail presently based on internals at this point.  Nursery rhyme "Jack be nimble" is running through my head.  Whoa, that was fast, line broke before I could even post this/ grab a screen shot...  AD is going negative, watch it -- we were slightly overbought coming into the day as visible in the weekend summary.

Saturday, January 9, 2010

ETF Rewind - Week 1 (1/8/10)


(Click Image to Enlarge/ Glossary)

The first week of the new year brought a powerful rally for equities, leaving the S&P 500 (SPY) higher by +2.8%, although that paled in comparison to the +5%-plus gains seen in the Material (XLB), Industrial (XLI), Energy (XLE) and Financial (XLF) complexes.

While these moves have select indices now pushing into short-term overbought territory, clearly a good deal will ride on next week's forthcoming fourth quarter earnings results.  Lastly, if you haven't focused on the rankings of price versus 10-month moving averages of late, you may be surprised to see Real Estate (IYR) in the top slot.

The second trading week of 2010 features the following reporting calendar and rotation model selections (a new feature for 2010!):
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, January 8, 2010

01.08.10 - Sideways Action

"Life" has this post up later than normal. The market has shown good resilience today, and is slowly chugging higher. Most notable is the significant out performance of the NASDAQ100, which has been several days in the making. Enjoy your weekends and don't forget to check in on the weekend update. Also keep an eye on cumulative tick, it is threatening to change course.

Thursday, January 7, 2010

01.07.10 - Noisy Range Day?


Another flattish day, but this time registering a lower-low on the daily time frame. On one hand, a willingness to hit the sell button has been demonstrated, on the other, internals, though hardly strong, are running sideways and this market has repeatedly been able to save itself by the bell. However, it's certainly hard to imagine it will be able to do the same today ahead of the jobs number, but we shall see!

[ADD] Oh, and where would this market be without the Financials today?  May want to keep a close eye on those.

Wednesday, January 6, 2010

December 2009 Rewind - Steady Sleighing

Short of a sovereign debt downgrade or two, last month provided remarkably steady sleighing  as the majority of economic reports continued to come in ahead of expectation.  For the month, all tracked indices finished higher with the S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices up by +1.78% , +0.80% and +5.26%, respectively. Supporting the smooth ride was a VIX well contained in the low twenties.

That left annual cash (and dividend inclusive) results showing very respectable gains of +23.45% (+26.34%) , +18.82% (+22.15%) and +53.54% (+54.72%), respectively.  You may wish to compare these reading with a histogram of past annual results found here (see second chart -- I'll update that soon!).  A sector-by-sector view is highlighted below:



As shown, Technology (XLK) and Materials (XLB) took the lead.  Going into the new year, traders will soon be focused on the Fourth Quarter Earnings Season, now just around the corner.

Sentiment: Positive
Volatility: Very Low (VIX 20-25)
Direction: Positive



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.

01.06.10 - NASDAQ 100 Dives to 5-DMA


Not a lot to work with save the QQQQ's dive to their 5-dma/ S1, which is holding at this time.  The SPY is essentially flat with the VIX breaking into the 18 handle.  There have been some tradeable oscillations there, but I have mostly stayed away.  Internals do look nicely supportive, and at this time I'm looking for a higher close.

Never Investment Advice

Tuesday, January 5, 2010

01.05.10 - Trend Day Plateau Retest


Yesterday's price plateau around SPY $113.30 has been tested twice and held on mixed economic news.  Like the news, internals are also mixed with Cumulative Tick net negative, mild yet positive Advance - Decline readings, and slightly outpacing Up Volume.  Even if we close within the day's range, that will mark higher highs and lows on on the daily time frame.  With the VIX continuing to fall, for now I assume we finish in the upper half of that range. However, I'd certainly like to see the Semi's and Small Caps start to come back into the green soon to preserve that outlook.

Never Investment Advice

Monday, January 4, 2010

01.04.10 - SPY Hits New Highs for the Year!


My idea of some new year's humor. A confluence of supportive economic news and doubly bullish New Year/New Month seasonality has equities higher in strong trend-day fashion. What more to say other than here is to a very good year for us all!

Sunday, January 3, 2010

ETF Rewind - Week 53 (12/31/09)

(Click Image to Enlarge/ Glossary)

Our second holiday shortened week left the S&P 500 (SPY) lower by -0.5%, although Emerging Markets (EEM) managed to finish higher by +1.8%. Just as last week the vast majority of tracked equity ETFs had reached extreme short-term overbought readings, the late Thursday sell-off left equities at the opposite extreme. Normally I would look for follow through on that move, but with volume as light as it was and coming into the beginning of the month, we'll just have to see.

Meanwhile, the first trading week of 2010 features the following busy economic calendar, including the big monthly jobs report, and rotation model selections (a new feature for 2010!):
A Happy Holidays & Wonderful New Year (and Decade) 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

Mrkt Rotation Models Updated

The MarketRewind major asset class rotation model (#1) has switched from EEM (Emerging Markets) to IWM (Small Caps).  I have updated the sheets so that they should recalibrate daily, although they are only intended to be traded once a week.  This should overcome the problem where Friday readings are not available until the following Monday.

Happy New Year - Jeff