The news driven short covering rally yesterday was impressive and now momo’s are being punished. Makes sense.
The US dollar has been the anti market to so many items lately, with just one of them being the SPY in the lower panel of the chart.
Here is USD fund UUP making a hard reversal on volume on its daily chart.
Don’t they say that traders don’t care if the market goes up or down, just as long as it moves? Well, I find burning commissions pretty annoying, but I find this market very interesting. All shorts were covered at the first sign of the reversals because so many things were at support levels.
It’s the old dry kindling just needs a match sort of deal.
The Russell 2000 obviously has an ugly topping pattern. It has long since nudged to a lower low to the August low and now has eased below March and January. If it holds below the line this thing will be in a bear trend. The bears should hope that TA geniuses do not come out and blow horn the DEATH CROSS!!! of the MA’s 50 and 200, which is a Red Herring. The chart is bearish enough without the help of that hype.
Anyway, RUT was a leader to the upside on this most intense bull market phase, which has been the post-2012 period and that leader is starting to lose its bull market.
I took some puts on the SPY on Friday’s b/s joy fest and woke up on Monday ready to see red… in the markets. Instead, what I saw was index futures up 1%+. I saw red alright. But I held on because yesterday just didn’t feel right. It felt like a bull trap. Here’s the wild ride in the SPY puts I held *.
* I say “held” because not being a river boat gambler (or even a particularly good trader lately) I took the flash profit this morning. I hold a few other less dangerous bear positions pending the October view, which I am nowhere near convinced will remain bearish.
Also, I know this was not called publicly so feel free to disregard it. This is not a site for casino calls anyway. There are plenty of those out there.
We have been reviewing various pictures of fading US stock market internals as its sponsorship thins out. Here is another, with the Nasdaq COMP featuring fewer and fewer advancers even as the price of the index rises.
On September 12 we did a heads up NFTRH update about how the EM’s (MSEMF vs. SPX, EEM vs. SPY) was losing leadership and breaking the first level of support. It is still password protected, so no link. Here’s EEM-SPY…
Nominal EEM has since gone on to lose the August low, potentially indicating a bearish trend to come. I shorted this (jumping the gun a little because it had already broken down vs. US stocks) using EEV on Friday.
Excerpted from the September 21 edition of NFTRH, #309, which went on to do extensive technical and macro work across all the key markets…
Last week we noted that Uncle Buck would be front and center in the analysis, not because the strength in the (anti-market) currency was not expected (it was), but because our big picture theme of an ongoing economic contraction had remained intact (ref: gold vs. commodities ratio) over the long-term.
It is important here to remember that NFTRH would only be on its big picture macro themes as long as indictors implied they are still viable. I will be damned if I will let us follow a Pied Piper off an ideological cliff, no matter what readers (including me) might want to hear. We must dedicate to know what is happening, not what our hopes, dreams, egos, etc. think or worse, hope will happen.
The first draft is me on Saturday fighting my way through piles of macro stuff, charts and personal observations, opinions and conclusions. A review on Sunday morning let’s me sit back, try to figure out where I may be confusing people, sounding like a pompous ass or who knows what else is not in the best interest of the work? It let’s me make the report presentable. Anyway, here’s one whacky macro chart from #309.
I love these crazy ones with different colors and mark ups. Note how the 6’s are the only numbers that are the same color on the correlation of the gold-silver ratio (GSR) and the S&P 500. It’s something we noted months ago, but it could be relevant going forward now that the USD is getting in correlation with the GSR.
We take the Way Back machine to a time of normalcy and plenty, in the 50’s when the stock market did okay but savers were paid (through T Bill yields) to do the most prudent thing people in a natural economy can do… save. Ever since 1980 the theme has been for the nation to eat its seed corn, with asset owners getting increasingly more portly in the process and savers nudged ever further out to the margin. The S&P 500 has sure got no complaints these days. It’s in lockstep with policy.
The 10 year view shows savers have been erased from the picture. ‘Screw them’ is the implication as the brave new world of finance follows one rule, ‘asset appreciation or bust!’ In service to asset appreciation has been the duel input of ZIRP (zero rate policy) and a rising money supply, much of which we’d presume was instigated by QE’s money printing and Treasury and MBS asset purchases. S&P 500? Still not complaining.
Guest Post by Chris Hunter
Will market historians look back on the $21 billion IPO of Alibaba – the biggest US IPO in history – as signaling the top of the five-year rally for the S&P 500?
Only time will tell…
But we note with interest that almost half of Nasdaq stocks (47%) are down 20% from their peak over the last 12 months (the official definition of a bear market).
And 40% of Russell 2000 small-cap stocks are in bear market territory.