7 replies to this topic

[Jhoe]

Todays afternoon reversal was all too predictable--for anyone who's studied the tape carefully during the last few weeks. I've been a buyer on weakness nonstop since Feb 2009, but this last run up after touching the 200 DMA on the spx has not been the same action we saw before. Before I get into details, I want to point out two things which I've been waiting for since last Fall, the occurence of which would be the warning that dips are no longer buyable. First, Apple - almost every institutional investor, and every US market maker like JPM and Goldman have large positions in Apple including calls at or above $220 for March or later in 2010. Lets face it, if the indices begin to retrace a significant portion of the bull run, it wont be easy for anyone to pump Apple back up over $210 so they can unload shares. Second, and for a similar reason, is the action in Citigroup today. Again, if Citi ends up finding a home closer to its normalized EPS potential for 2010, the govt will take quite a loss on their common shares holding. So long story short, I've been waiting for Citi and Apple to make "breakout" moves before seriously considering a significant correction as the next market move. Apple has made new highs recently but This is the first time we've traded Apple up to the end of the range call buyers have hit up the last 6 months--the high volume areas being 200-230 or so. Sure enough, now that we're there, I'm not seeing the same sort of volume extend to 250, 260 etc. in coming months, signaling this could be the end of the road and as high as institutions take ApplNot only did we get both but it sort of fits the theory by happening all in the last 3 days. Not to mention, from my perspective, the market is clearly in distribution---mainly based on these three things: volume increasing as price does, low put/call ratios, and dip buyers becoming VERY hard to come by (giving us the low volume selloffs that take the whole market down like we've seen three times in the last nine trading sessions or so). the put/call ratios being so low especially in individual stocks really concerns me, and marks a transition from dip buying long positions to speculating with long calls instead. The implication of such a transition should make any bull nervous--clearly suggesting that something has changed strategically for hedge funds and other institutions. And just from watching the tape and trading this market, I have witnessed the conviction of buyers disappear . The staple of this rally has been institutions protecting with puts instead of selling, but now it seems like being long is more speculative than being short, even though all the green lately may confuse people and hide this transition. The price action itself has just been soooooo bearish in my POV. goldman sachs' resurrection last week, and prompt reversal today, reeks like a distribution joy ride for the big banks still holding the bag. So much buying and conviction in GS for 3-4 days, but one little dip today takes the stock nearly to an outside reversal day? Seems more like shorts covering and/or stopped out rather than the next leg up for financials. The failure of names like MS or JPM to break above resistance sort of confirms the fraud of the move. Same goes for Apple, though I've admittedly traded some 220 and 230 calls the last few days for some uber gains--and in fact I played it that way for the very reason that I dont believe in the move--stock is too overowned and too "mainstream" to be anything different. Or I could believe that AAPL is going to $300 and its just the easiest 40% move in the history of the stock market for every retail investor who has a brokerage account. Hmmm tough call? lol and this all leads me to an interesting question. Just what will the "end" of this rally be like?? Sharp move down? how far? Or do we sort of slowly slip into a "new normal" with the VIX below 20 (almost below 17 now) and yearly 8% gains? Hard to believe a run like this doesnt end in debauchery. just my humble opinion though. just to be clear--This is not a doomsday SPX 400 by next Friday call here, and I'm not even sure which way we go yet. If the next big move is down, then its exactly that--and not a short term panic or sell signal. We could drift around between 1134 and 1150 for two weeks, then eek down to that quicksand level between 1090 and 1112 and sort of hang out there for MONTHS. and on the flip side, we could make a new SPX rally high tomorrow and I still wouldnt be longer term bullish just like that. I went from more long than short to about 60/40 short today just before that reversal, and the action confirmed exactly what i feared. I have not made a decision yet on whether the "end" is definitely here or not--but as someone who has been long term bullish since Feb 2009 when I bought my first stocks, and bearish only for a few days at a time, I now find myself wondering if the next move down is more than 8-9%. Any thoughts appreciated, and I'll update when I've done more work and come up with my theory on direction and how to position accordingly. PS--taking a step back to the here and now technicals, we went above the 78% retracement level from the January-feb move down on the SPX but have not reached the 99%, and/or made a new high yet above 1151. Another bearish signal especially if we dont close above Tuesdays reversal point before this Friday

Edited by Jhoe, 10 March 2010 - 12:11 AM.

[Rogerdodger]

I think we need some downside for a little bearishness, and I've been predicting some soon.
As far as "The End" I think you are fighting a very strong MCO.
"The End" usually doesn't come from this level.
However the top is limited here by Laundry's envelope top, currently at 1147 and rising. Chart LINK

Three days of a typical month's eight bullish trading days begin Thursday.

Edited by Rogerdodger, 10 March 2010 - 01:27 AM.

[jack]

You tell an interesting story, THX

Todays afternoon reversal was all too predictable--for anyone who's studied the tape carefully during the last few weeks. I've been a buyer on weakness nonstop since Feb 2009, but this last run up after touching the 200 DMA on the spx has not been the same action we saw before. Before I get into details, I want to point out two things which I've been waiting for since last Fall, the occurence of which would be the warning that dips are no longer buyable. First, Apple - almost every institutional investor, and every US market maker like JPM and Goldman have large positions in Apple including calls at or above $220 for March or later in 2010. Lets face it, if the indices begin to retrace a significant portion of the bull run, it wont be easy for anyone to pump Apple back up over $210 so they can unload shares. Second, and for a similar reason, is the action in Citigroup today. Again, if Citi ends up finding a home closer to its normalized EPS potential for 2010, the govt will take quite a loss on their common shares holding. So long story short, I've been waiting for Citi and Apple to make "breakout" moves before seriously considering a significant correction as the next market move. Apple has made new highs recently but This is the first time we've traded Apple up to the end of the range call buyers have hit up the last 6 months--the high volume areas being 200-230 or so. Sure enough, now that we're there, I'm not seeing the same sort of volume extend to 250, 260 etc. in coming months, signaling this could be the end of the road and as high as institutions take ApplNot only did we get both but it sort of fits the theory by happening all in the last 3 days. Not to mention, from my perspective, the market is clearly in distribution---mainly based on these three things: volume increasing as price does, low put/call ratios, and dip buyers becoming VERY hard to come by (giving us the low volume selloffs that take the whole market down like we've seen three times in the last nine trading sessions or so).

the put/call ratios being so low especially in individual stocks really concerns me, and marks a transition from dip buying long positions to speculating with long calls instead. The implication of such a transition should make any bull nervous--clearly suggesting that something has changed strategically for hedge funds and other institutions. And just from watching the tape and trading this market, I have witnessed the conviction of buyers disappear . The staple of this rally has been institutions protecting with puts instead of selling, but now it seems like being long is more speculative than being short, even though all the green lately may confuse people and hide this transition.

The price action itself has just been soooooo bearish in my POV. goldman sachs' resurrection last week, and prompt reversal today, reeks like a distribution joy ride for the big banks still holding the bag. So much buying and conviction in GS for 3-4 days, but one little dip today takes the stock nearly to an outside reversal day? Seems more like shorts covering and/or stopped out rather than the next leg up for financials. The failure of names like MS or JPM to break above resistance sort of confirms the fraud of the move. Same goes for Apple, though I've admittedly traded some 220 and 230 calls the last few days for some uber gains--and in fact I played it that way for the very reason that I dont believe in the move--stock is too overowned and too "mainstream" to be anything different. Or I could believe that AAPL is going to $300 and its just the easiest 40% move in the history of the stock market for every retail investor who has a brokerage account. Hmmm tough call? lol


and this all leads me to an interesting question. Just what will the "end" of this rally be like?? Sharp move down? how far? Or do we sort of slowly slip into a "new normal" with the VIX below 20 (almost below 17 now) and yearly 8% gains? Hard to believe a run like this doesnt end in debauchery. just my humble opinion though.

just to be clear--This is not a doomsday SPX 400 by next Friday call here, and I'm not even sure which way we go yet. If the next big move is down, then its exactly that--and not a short term panic or sell signal. We could drift around between 1134 and 1150 for two weeks, then eek down to that quicksand level between 1090 and 1112 and sort of hang out there for MONTHS. and on the flip side, we could make a new SPX rally high tomorrow and I still wouldnt be longer term bullish just like that. I went from more long than short to about 60/40 short today just before that reversal, and the action confirmed exactly what i feared. I have not made a decision yet on whether the "end" is definitely here or not--but as someone who has been long term bullish since Feb 2009 when I bought my first stocks, and bearish only for a few days at a time, I now find myself wondering if the next move down is more than 8-9%.

Any thoughts appreciated, and I'll update when I've done more work and come up with my theory on direction and how to position accordingly.


PS--taking a step back to the here and now technicals, we went above the 78% retracement level from the January-feb move down on the SPX but have not reached the 99%, and/or made a new high yet above 1151. Another bearish signal especially if we dont close above Tuesdays reversal point before this Friday

[voltaire]

Todays afternoon reversal was all too predictable--for anyone who's studied the tape carefully during the last few weeks. I've been a buyer on weakness nonstop since Feb 2009, but this last run up after touching the 200 DMA on the spx has not been the same action we saw before. Before I get into details, I want to point out two things which I've been waiting for since last Fall, the occurence of which would be the warning that dips are no longer buyable. First, Apple - almost every institutional investor, and every US market maker like JPM and Goldman have large positions in Apple including calls at or above $220 for March or later in 2010. Lets face it, if the indices begin to retrace a significant portion of the bull run, it wont be easy for anyone to pump Apple back up over $210 so they can unload shares. Second, and for a similar reason, is the action in Citigroup today. Again, if Citi ends up finding a home closer to its normalized EPS potential for 2010, the govt will take quite a loss on their common shares holding. So long story short, I've been waiting for Citi and Apple to make "breakout" moves before seriously considering a significant correction as the next market move. Apple has made new highs recently but This is the first time we've traded Apple up to the end of the range call buyers have hit up the last 6 months--the high volume areas being 200-230 or so. Sure enough, now that we're there, I'm not seeing the same sort of volume extend to 250, 260 etc. in coming months, signaling this could be the end of the road and as high as institutions take ApplNot only did we get both but it sort of fits the theory by happening all in the last 3 days. Not to mention, from my perspective, the market is clearly in distribution---mainly based on these three things: volume increasing as price does, low put/call ratios, and dip buyers becoming VERY hard to come by (giving us the low volume selloffs that take the whole market down like we've seen three times in the last nine trading sessions or so).

the put/call ratios being so low especially in individual stocks really concerns me, and marks a transition from dip buying long positions to speculating with long calls instead. The implication of such a transition should make any bull nervous--clearly suggesting that something has changed strategically for hedge funds and other institutions. And just from watching the tape and trading this market, I have witnessed the conviction of buyers disappear . The staple of this rally has been institutions protecting with puts instead of selling, but now it seems like being long is more speculative than being short, even though all the green lately may confuse people and hide this transition.

The price action itself has just been soooooo bearish in my POV. goldman sachs' resurrection last week, and prompt reversal today, reeks like a distribution joy ride for the big banks still holding the bag. So much buying and conviction in GS for 3-4 days, but one little dip today takes the stock nearly to an outside reversal day? Seems more like shorts covering and/or stopped out rather than the next leg up for financials. The failure of names like MS or JPM to break above resistance sort of confirms the fraud of the move. Same goes for Apple, though I've admittedly traded some 220 and 230 calls the last few days for some uber gains--and in fact I played it that way for the very reason that I dont believe in the move--stock is too overowned and too "mainstream" to be anything different. Or I could believe that AAPL is going to $300 and its just the easiest 40% move in the history of the stock market for every retail investor who has a brokerage account. Hmmm tough call? lol


and this all leads me to an interesting question. Just what will the "end" of this rally be like?? Sharp move down? how far? Or do we sort of slowly slip into a "new normal" with the VIX below 20 (almost below 17 now) and yearly 8% gains? Hard to believe a run like this doesnt end in debauchery. just my humble opinion though.

just to be clear--This is not a doomsday SPX 400 by next Friday call here, and I'm not even sure which way we go yet. If the next big move is down, then its exactly that--and not a short term panic or sell signal. We could drift around between 1134 and 1150 for two weeks, then eek down to that quicksand level between 1090 and 1112 and sort of hang out there for MONTHS. and on the flip side, we could make a new SPX rally high tomorrow and I still wouldnt be longer term bullish just like that. I went from more long than short to about 60/40 short today just before that reversal, and the action confirmed exactly what i feared. I have not made a decision yet on whether the "end" is definitely here or not--but as someone who has been long term bullish since Feb 2009 when I bought my first stocks, and bearish only for a few days at a time, I now find myself wondering if the next move down is more than 8-9%.

Any thoughts appreciated, and I'll update when I've done more work and come up with my theory on direction and how to position accordingly.


PS--taking a step back to the here and now technicals, we went above the 78% retracement level from the January-feb move down on the SPX but have not reached the 99%, and/or made a new high yet above 1151. Another bearish signal especially if we dont close above Tuesdays reversal point before this Friday

JHoe

Very astute and I agree 100%.

From an Aussie and US market perspective there are some interesting aspects.

The main thing to centre around is the equinox.

In Aussie land it is 5 years to the day (actually 1 day off) since we had 8 days up. That caused a 2/3 day sell off and final rally into equinox.

Of course 5 years before that was the NASDAQ and SP500 euinox tops on Mar 24 2000.

This year should be some what like 1990 and downunder we had a top on Jan 12 1990. This year Jan 11 2010. The final rally was equinox.

Yes VIX is the lowest since mid May 2008 and Oct 9 2007 (top and last major rally). Put/call for the last 3 days is 52/52/43 and enough to scare anyone.

Day Fib count is 21 from the low and 34 from the top.

Etc., etc.

[dasein]

Thanks Jhoe - you put much more eloquently what i tried to indicate in my post yesterday. Voltaire, merci pour the time marker history lesson.

[arbman]

SPX is either completely done here, or we dip FIRST and then rally another 100 points up. Obviously, we won't go far with this speculative trading in place. It is almost certain that if we dip 30-40 points, the bears will come back with their drums claiming victory for the next 150 points higher!

[thespookyone]

A well thought reasonable take.

[Jhoe]

So lets review whats happened on the SPX since I had this humanoid bearish reversal last week: - somehow, we've become even more overbought, closing the day exactly on RSI 70 - bearish outside reversal day on high volume in couple commodities, including crude oil on Friday which has correlated very highly to the SPX since march 2009. So far plenty of follow through to confirm the bearish outlook for crude (same as the SPX even though our new closing high wouldnt suggest that) - out of four trading days, three days where the high volume volume thrust of the day was down--Wednesday afternoon trading, Friday had selling throughout, then today was mostly down before the short covering combined with an inverse head/shoulders short bottom to erase a pretty glum 4-5 hours of trading - gold rallying WITHOUT miners following along. Might be my lack of experience, but looking through recent history, theres only one stretch I can find where the GLD and physical gold are making new highs while gold miners cant even close in the black. I'll give you a hint, it was after 2007 and before 2009 - a fiery arms race between S&P puts and FAZ calls to see which open interest can reach 1 trillion first - 2 very forgettable, and equally unimpressive, new closing highs--the first of which actually was .08 points short before getting a little "nudge" in overtime to set the mark by a razor thin 1/100 of a point at 1150.24. Whats that? Its totally normal and happens in the first few minutes after 4 as trades settle? I thought I had finally reached through to a higher being with my whining, because at 4pm I said "aah crut just short, this sux" only to see the desired higher close pop up on my phone a few min later. - countless "breakouts" mostly on "un-breakoutlike" volume, that seem to last just long enough to shed a few million shares. Then mysteriously theres no followthrough.... (AAPL, CSCO, GE, C, et al) - a 52 week high list that seems to get longer and longer, but always contains repeat offenders, while I'm not even sure if anyone still tracks 52 week lows. Sounds strange to hear that term right? lol - frequent days w/ higher highs and lower lows, or just lower of both. In fact, since march 1, despite rallying almost 50 points, only 2 out of 11 trading days have featured a higher high and a higher low. A weak tape IMO. As someone who frequently, almost daily, trades both sides of the tape, I will admit one bullish indicator that I use: its still trickier to time trades from the short side than the long side. To me, that has a bullish feel to it, seems like plenty of successful, easier long trades are out there while being short can feel more like an uphill climb, or a downright head on collision. When that inbalance starts to even out, I'll move to 90% or more short. Currently 65/35 short.