Category Archives: Stock Market

Seasonal; Santa & Beyond

santa[edit] On a related topic, NFTRH has a market sentiment update this morning as well.

As November came to a close, the market rebound out of the October correction had not only reset over bearish sentiment, but had put it wildly bullish and very unhealthy.  Yet the Santa seasonal was oncoming and something had to give.  Santa’s rally was not going to generate from such unhealthy over bullish conditions.

In NFTRH we reviewed this seasonal pattern (from Sentimentrader.com) and anticipated some corrective activity in the first half of December (NFTRH+ offered a short on SPY, which went right to the downside target).  But this would just be a clearing of the decks for the portly man in red.  Here is the seasonal for December…

seasonal

Looking ahead, here is the 30 year average seasonal for January…

jan.seasonal

You cannot take historical data as a be all and end all because it sometimes fails at the most inopportune times (part of why I take ‘quant’ style analysis with a grain of salt), but it sure is a factor because it is the undeniable reality of what has happened before.

Ho Ho Ho

santaOr Ha ha ha… whatever, he has arrived on cue.

Oh my I am glad I didn’t get greedy on the shorts and held and added the longs.

You see, it is called having a plan and the rough plan – per the average seasonal – was for a hard dump in early December off of hideously over bullish sentiment and then the potential for Santa.  Yesterday and today, as the tax loss sellers evaporated, he got here.

Other festivities could revolve around the ‘January Effect’ depending upon what’s in holiday revelers’ eggnog.

We’ll take it week to week, but for now… the fat man is in the house.

 

It’s the ‘Screw Everybody’ Market

Bulls and bears trading left jabs, and the black boxes just doing what they do, churning the market based on inputs of geopolitical and geo-financial (it’s not a word, I know) angst and inflammatory headlines.  All while a group of interest rate manipulators huddle to try to find the ‘just right’ (ref: Goldilocks) statement to put together tomorrow.

I have one tech company up 5% and the other down 5%. But cash is by far my best holding right now.

As a decidedly non-committed bear I took my own advice and covered all short positions as SPY hit target.   I managed some nice bear trades and still managed to lose money on balance so far this week.  That argues to me that I am not smarter than the market this week and thus, should act accordingly.

As for gold and gold miners, I really don’t know right now.  My already small exposure was eliminated on the pop after yesterday’s breakdowns.  But I tell you folks, if I see the combination of weakening forward-looking data (I could not care less about November’s ‘Jobs’ or Industrial Production) and commodities continuing to implode relative to gold, I for one will be on high alert.  Also, it’s a prime tax loss selling week.  So how real or materially important is that selling in the miners, other than to provide a potential trading opportunity?

Bigger picture, the final piece of the puzzle for gold bugs is the US economy and its headline stock indexes.  This is a very interesting, no compelling market environment for geeks who live for this stuff.   Certain markets and ratios are blowing off (up and down) and it is really fascinating.  Something seems about to change after these terminal moves blow out (cue Silver 2011 reference).

[edit] btw, volatility aside, the stock market has not at all broken its short-term downtrend.

4 Reasons Why…

Today MarketWatch treats us to…

Four reasons why the market will rally for the rest of 2014

Aside from the fact that I hate it when people talk in absolutes (because there is no such thing as a guru who can really predict absolutes) the writer, a CFA and regular Fox Business and CNBC guest tells us why stocks will rally all the way to the end of 2014.  Wow, two whole months?

Before I even read the article let me just say that the irrational fear became extreme earlier this month and while we anticipated the bounce, its strength is now pushing through the top end of expectations.  Got to love the markets, and that ploy of putting a supposed Fed hawk, James Bullard, in front of a mic to go on about QE extension the moment the market took a decent correction.  Right there belies vulnerability and desperation.

Anyway, to the article written by the CIO of the aptly named Global Guru Capital…

He highlights how sentiment is still way too pessimistic out here…

1) The Market’s Manic Mood

Americans haven’t felt this bad about their country since Jimmy Carter’s malaise years. According to a recent POLITICO poll, 64% of respondents believe things in the United States feel “out of control” right now. Exactly half said the country was “on the wrong track.”

Yes and do you know why?  It is because the majority have not participated due to the inequality and inequity of the current recovery, born of policy and aimed at those who already have capital and have assets.  What do ‘Americans’ have to do with this?  It is all about keeping asset owners whole.  Next…

Continue reading 4 Reasons Why…

SPY 1, 2 & 3

Just as we (well, NFTRH) did with the GDX gold stock ETF over the summer, when we gauged resistances 1, 2 & 3 on the Ukraine hype b/s (GDX stopped at #3), we now have established resistances 1, 2 & 3 on the S&P 500, DOW and NDX on the rebound rally, which itself we had anticipated.

SPY hit a trend line today, which I have a feeling will not hold as ultimate resistance.  So understanding that in my nature I have a sort of chronic mental problem with being a strong short (this is me the faulty trader speaking, not me the top notch* macro market manager), I took the small step of shorting SPY today.  No leverage, just a short.  This is against some still held longs but the last 2 weeks have been pretty good and I want to seek out balance again.

This chart of SPY shows what could be the ultimate resistance level beginning at 196, but the indexes (ref. SOX post earlier) have started hitting some bounce targets so I thought it was worth a shot to begin creeping shorter the stock market.

spy

* Sorry, but that’s just how I feel about my own work.  It continually adjusts the faulty trader and keeps his head on straight.

Semi’s to Bounce Target

I found myself feeling self-satisfied at the profit already taken in LSCC and the growing profits in SIMO and INTC (all added on the Semi sector wipe out as bulls puked them up left and right), to go along with the profit in MLNX, which I held through the blood bath last week.  I found myself satisfied and realized that might not be a good sign.

I looked at the chart of the Semiconductor index and saw that it has hit my bounce expectation (not that it can’t bounce higher) and thought ‘book it’.  So I sold the first 3 items mentioned and hold MLNX for another hour, week or month.  In NFTRH we are watching correction leaders for clues on the rebound rally.

sox

Market Summary; Saturday Morning Cartoons

Allow me to share a simple sketch I drew that was part of an NFTRH interim update for subscribers last night.  The black line is where we have been.  The blue line is a projection of what a typical correction (whether a healthy interim one or a bear market kick off) might look like.

marketgraph

We used real charts of the Dow, S&P 500 and Nasdaq 100 to gauge the entry into the current correction and now the resistance points to the expected bounce off of the US market’s first healthy sentiment reset in quite some time.  But our cartoon above gives you the favored plan on how the correction could play out.

Continue reading Market Summary; Saturday Morning Cartoons

Bank Index, Key Support

In poking a lower low and pointing MACD down, the Bank Index needs the bulls to prove their case, not the bears.  Still, it is for now holding the critical support we had been noting in NFTRH over the months of sideways action leading up to last week’s kick off of the bearish festivities.

bkx

Semiconductor Index @ Support

Looking at a couple places where the downside started we note the Russell 2000 trying to be green for a 3rd day in a row and we note the Semiconductor index still holding the key identified support level, which has touch points dating back over a decide.  In other words, it’s mucho significanto.  Adding to the drama, the measurement off the Double Top pattern has been registered, so SOX is a candidate to bounce if it so chooses.

sox

Free Report: “This is It”

[edit] From EWI, which has taken enough grief over its patient stance these last few years.  Whether this is “it” or not, find value in a range of opinions.  This is an extreme and possibly correct opinion.  Good old Bob… ;-)

As Bob Prechter says, bear markets move fast and are intensely emotional.

Please read this free report that could help you sidestep perhaps the biggest bear market in living memory.

Anyone who has been watching the market for the past few years knows that Wall Street wanted the stock market to get back to where it was.

You know, to the optimism and price levels in the time before the 2008-2009 financial crisis.

And Wall Street did get its way in the Dow Industrials more than a year ago. The index reached new all-time highs in 2013.

As for the return to pre-crisis optimism, that took a bit longer. But return it did, and very recently, in two measureable ways:

  1. Stock ownership just hit “a rare extreme” — 34.4% of total financial assets among US households. That’s a higher percentage ownership than in 2007.
  2. The percentage of bears among advisory services fell to 13.3%, the lowest in 27 years. “This means 87.6% of advisors are bullish on the long term trend.”

Of course, these are contrary indicators. Many other similar measures have reached similar extremes. So when it comes to a “Return to 2007,” the real question is:

How far will the re-enactment go?

Markets are most likely to turn when the fewest number of participants expect it. The reason truly big market meltdowns become meltdowns is because so few people are ready beforehand.

We’ve seen a lot of down days in the stock market since the September 19 high. And, after every one of those losses, I read and hear the same idea from the media: This is “a buying opportunity.”

In truth, that notion is also part of the re-enactment.

It’s hardly been two weeks since Bob Prechter published his Special Interim Report. It posted in the afternoon on September 19, the same day as the high.

In 20-point type, Bob said

“This Is It.”

It’s times like these that investors need to prepare for the coming bear market. What we’re seeing is only the beginning. We would rather see you prepare early instead of late.

Preparing early means sidestepping perhaps the biggest bear market in living memory. It means safeguarding your spending power as others struggle to make ends meet.

As Bob Prechter says, bear markets move fast and are intensely emotional; investors and traders who are prepared have greater opportunities on the downside than on the upside.

Please read this free report, “This is It.”

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

Huey to Russell: Strike 1

Huey has a lesson for all those punch drunk small cap speculators out there.  That lesson is “in 2010 some chart wise guy came up with a cute 3 Snowmen (888) target for me and I tried, like the little choo choo that thought it could… but I couldn’t.”

The first red arrow represents Strike 1, thinks Huey.

rut.hui