Thursday, March 23, 2006

Make Up Your Mind!

Friday: Up.

Monday: Down.

Tuesday: Down.

Wednesday: Up.

Thursday: Down.

Can I buy a trend, please? Man!

So the Dow was down today, which brings the change over the past five days to basically nothing. It would be really sweet if we could get some clear direction here, people!

Anyway, here are a few charts to chew on. First up is the Amex Major Markets, symbol $XMI. This is actually a pretty hefty inverted head and shoulders pattern (not shown here) which, if broken to the upside, would be very bullish (yes, bullish) for this market. Indeed, the price did cross above the neckline: but it took the very bearish behavior of slumping back below the line and, since then, sinking further still.

The Dow Transports (The Dow 20 to those really in the know.....) has been profoundly strong, but it, too, lost its grip on its ascending trendline and took a dive (these are intraday charts of about the past ten days).

Next is the S&P 500. Same deal. Ascending trendline. Couldn't keep the momentum. Started falling. It's going to have to punch through Wednesday's low, however, to get exciting for the bears.

Lastly, the NASDAQ 100 ($NDX). Considering the weakness today, this one was stronger than I'd like to see. As with the S&P 500, this index has to punch below recent lows (in this case, March 10) to get serious about a downfall.


Kapil Khanna said...

Although the averages were down today, they were on lower volume. The 9% jump in Googles price after market, is going to have a positive effect on the market opening tomorrow.
Looking at the market action for past 5 sessions, the dow has barely moved 150 points, but the volume has been above average. This is usually a sign of distribution. Very high probability we have an intermediate top.

Des said...

Mr. Knight.. Who knows what the heck is going on? Everything I see - in a broad sense - points to market decline, widespread and long-lasting, but the price action refuses to cooperate. Friday will tell us nothing. Have a great weekend.

bsi87 said...

I don't want to fall in the conspiracy camp or look for things to confirm my thinking but the markets have acted strangely. Usually you see the 1st hour move faded by the end of the day. The big boys like to gap them open up or down to gun the buy/sell stops and then fade the initial move. Seeing initial moves down faded into midday and then the move reverses back down by day's end. Or you'll see a pretty good point move to the upside but on poor volume/breadth. JMO.

PB said...

The markets are acting strangely 'cause they are ready for a tumble. You truly have to be one big moron to be buying equities here. All risk no reward. The same can be said for long term bond investors, why take on a 10 to 30 year risk for the same reward as a 2 year bond? Risk is not properly accounted for in the current markets. Just ask the bright money managers who think it is wise to buy IRAQi 20 year bonds that yield only 500 bps over US treasuries (and actually yield less than GM bonds) Anyways, it all goes back to the massive liquidity the fed injected into the system since 2000. This money has found a home in the most riskiest assets, and also created a housing bubble. The more one thinks about the current situation, the gloomier the outlook. Also, a USD crises will not be good for US equities

NO DooDahs said...

Looks like another strong day to me. Ho, hum, another week, another five days of the SPX trading above key resistance that was met twice in the last three months before being climbed over, another five days of the DJI trading above 11200, and the Nas, well, let's just say its ascending trendline goes back to 2004 and it has key support at 2200 and 2150.

When commenters resort to insults, it usually means they don't have a factual argument. I'm long, and I think it would be unwise to be short the overall market in this current bull, but should you choose to do so, I won't be calling you a "moron." Reasonable people can disagree without being unreasonable about it. Or can they? You decide.

There's no right or wrong side of the market, only a profitable side and an unprofitable one. Which one, long or short, has been profitable over the last three days, three weeks, three months, and three years for the three major indices? That's fifteen good reasons to trade bullishly, even if you're a permabear.

I think a falling dollar might be good (or at least not too bad) for U.S. equities. What did the dollar do in 2003? What did the S&P 500 do in 2003? Hmm ...

bsi87 said...

I believe that the markets have the potential to tumble. I also know they've done well with the seasonality trade at their backs. One has to trade what they see, not what they believe. And make sure the trade carries the proper risk/reward.

Kapil Khanna said...

opinions opinions opinions. Study the market action, not what you think the market ought to be doing :).

bsi87 said...

Let's take a look see at the charts to verify what we're talking about. The SPX bottomed in March, 2003 around 800. First peak was 1175 in Feb 2004. So we made about 375 SPX points in a little over a year. Since the Feb 2004 peak, the SPX has made 125 SPX points in a little over 2 years. So we've been in the market for about a 10% return over a 2 year period while incurring market risk. A 10 year bond is still yielding about the same during the same time period so the SPX returned about 1% over a risk free instrument.

There have been shorter term panic selloffs with subsequent buying opportunities but a buy and hold seems ill advised to me.