By Bob Hoye
By Bob Hoye
By Bob Hoye
November 27, 2015
I came across this chart this week on FRED. For the uninitiated, FRED is the Federal Reserve Economic Database, operated by the St. Louis Federal Reserve Bank. It is a genuine treasure trove for those who are into economic or financial data.
By Bob Hoye
Over the last week we (NFTRH) have used market sentiment indicators and index charts to gauge the prospects of finding a high on the post-September relief ‘bounce’ rally.
During August and September market sentiment had become brutally over bearish and this was very dangerous from the bears’ perspective. We set upside bounce targets for the SPX at 2020, 2040, 2060 and 2100. The first three were resistance levels (broken support) and the last was the general measurement of the ‘W’ bottom that formed in August and September. With the extremes in bearish sentiment, it was not so surprising that SPX climbed all the way to just above 2100.
Well, as we have noted in weekly reports and in-week updates recently, that problem for the bears was methodically eliminated by the rally as bulls’ backbones firmed up very well to the point of strenuous (though not hideously extreme) over bullishness. Here is one chart (courtesy Sentimentrader.com) among many sentiment graphics and data points we used in an NFTRH update on November 4. We had been watching pessimism dissipate quite nicely, but now the other component – rapidly growing optimism – was kicking in as well. This would pave the way for a correction from a sentiment standpoint.
As a ‘look ahead’ we then used and continually updated this 60 minute chart of the SPX beginning with an update called What to Look for w/ Respect to the 1st Signs of a Market Breakdown in order to be prepared to view the very first inkling of what a correction might look like, now that sentiment was coming in line. The ensuing string of updates also included daily charts of SPX for viewing forward-looking support parameters in the event that the market did have an initial breakdown (per the 60 minute view).
By Bob Hoye
Well, there are way too many tools whirring along readying their signals to just depend on a single market or indicator, but I think the Small Caps are a good one none the less. Earlier in the week we looked at this daily of the Russell 2000. It is still holding the key 1180 area. A successful hold of support targets 1280.
Here is a weekly view using a chart of IWM (RUT ETF) that was posted a while back. It is a little less reassuring as it has not made a weekly close above resistance and is pausing at the EMA 45, which used to support the bull and resisted the bounce most recently.
The Russell 2000 used to be a post-2012 leader. Now, not so much. So what’s next, catch up move with manic bulls taking the market higher or the other thing (you know, the thing that fewer and fewer participants have been considering likely lately)? Eh Bueller?
Suddenly, things are just swell!
Over the last month, stocks have absolutely blasted off with one of the most powerful moves in years. More precisely, in this century the only months with bigger gains in the S&P than last month’s 8.3% were March 2000, October 2002, March 2009, April 2009, September 2010 and October 2011.
There is no ‘because’ – as far as I can tell, there is little coherent reasoning behind the rally. Economic data has been generally weak; there have been positive signs too but the bad signs have been getting worse faster than economists have been expecting. Nothing is collapsing, but we are talking about a market that is overvalued on most major metrics. “The economy is not collapsing” is not a strong argument for why we’ve added 10% since the beginning of October.
Taxicab medallions and margin debt: A similar reversal in the making
As a native New Yorker, I can say with complete confidence: It’s true; there’s no place on earth like The Big Apple. It’s also true that, until recently, most New Yorkers would trip a nun if it meant hailing a Yellow cab first.
Fact is, the NYC Yellow cab used to be the hottest commodity in the five boroughs. When you needed a ride, spotting a cab with its service light on was like finding the last pair of Manolo Blahnik shoes in your size at a Manhattan Sample Sale.
But those days are over in NYC (and nearly every major U.S. metropolis). In the past year alone, street hail vehicles have suffered a series of crippling blows — including plummeting demand, fleet changes, sliding medallion values, and the “Taxi King” himself — Gene Freidman — filing for bankruptcy.
From NFTRH 367 as RUT sat around 1160: “This pattern targets 1280 if resistance is exceeded. So for all you momo bull traders out there, watch 1180 but be nimble.”
That is only the most tentative of support right now, but so far so good for the momo’s.