Thursday, November 30, 2006

Isn't It Epic?

What a day! The bulls and bears are in an epic battle. First the market went up. Then it lost its footing and fell. Then it was down nearly 60 points. Then it erased all those gains and pushed up nearly 50 points. Then it fell yet again for the Dow to have a loss for the day! It's just getting shoved all over the place!

The market definitely "feels" different. I think this Monday's tumble has freaked the bulls out a bit. Our bullish friends aren't quite as cocksure as they were before. It's a nauseating battle for control.

The candlestick graph of the S&P 500 shows a big honkin' spinning top for the day, which is the very essence of the uncertainty going on. Neither side is in control. Know this: if we take out the lows from Monday, the bears are going to have the upper paw.


The purported reason for any recent weakness has been the U.S. dollar, which has tumbled again lately (take a look at the highlighted area below). I've drawn a horizontal line indicating the support level which, if taken out, will really start to freak people out.


Just to drive the point home, the S&P 500 has played the "I'm falling! No, I'm moving to new highs!" game before. Take a look at the areas I've highlighted below which shows quick tumbles recently. We saw what happened last night. Let us pray to the ursine gods above to have mercy on us sinners.


Like I said above, the market feels different. I think the chart below shows why. The unrelenting, horrible uptrend we've been burdened with was snapped Monday. As the lines indicate, this could be the day where the uptrend ended and the downtrend began.


A closer look just shows how fierce the battle is being waged. These is a minute bar graph. Just look how wild these swings are!


A daily graph of the Russell 2000 ($RUT) makes me think it would take a supercharged rally to elevate the market into new high territory again. The psychological damage done by Monday was pretty bad on the bulls.


One short that's been getting bludgeoned has been gold. In my defense, I never said this was a slam-dunk pattern. It was on the fence. But recent strength has been staggering. This position is close to getting shuttered.


Just one stock today - one I've shown before - Lehman Brothers (LEH). This continues to be weak. Nothing sensational. No collapse. Just a nice, steady weakening.

28 comments:

h. lovil said...

Tim

better make sure that LEH doesn't turn into a cup-and-handle.

They either fly or water-fall.

Anonymous said...

Well, if it breaks above the trend line, stay out or go long.

zqrxkgda

Anonymous said...

All I have to say about yesterday and today is that sometime, someday, the fundamental picture of the weakening economy, the over-printing of US dollars, and the housing recession WILL start to matter. It's not a question of if, but when.

Could the bulls continue to push the markets higher and higher through the rest of the year? Sure, anything's possible. But they can't push it up forever. The falling dollar has started to show us what happens when you keep printing money, even without anyone REALLY knowing how much (M3? What's that??).

When the fundamental picture starts to show up in the markets, then look out below. Whether that's next month, January, February, or whenever. The time will come. If you want to go short, be patient. I think the bulls knew this market was finished, so they pushed for one last run, trying to suck in as many weak buyers as possible, before they cash out and go home, leaving retail investors holding the bag.... yet again.

All I can say is that I'm patiently waiting for confirmation of a turnaround. My gold positions are doing well, and although I'm missing out on some energy plays right now (man, did you all see the rotation from tech to commodities and health care today??), I'm sure we'll all do just fine when the collapse begins.

-TonyB

Anonymous said...

watch the 10am construction #'s tomorrow. Those will be key.


Trader 2006.

z-stock said...

I finally took Tim’s advice from last week, and has been revisited, today. I shorted (bought puts) Gdx. I may get burned, I may get char-broiled, The bulls may crush me. It’s nuts to short, one day before the ISM report. My inner voice says next Tuesday. Nevertheless, gold stocks look like they are running out of steam. Especially, Gg. Gg is an interesting put. It recently lost 17% on it’s eps activity. Glg acquisition, or such.

z-stock
Wmt support 44.1 / 44.5?
Rth support at 200 day = 94.8?

wincity said...

With all the bad news we had today, SPY almost made a new high. I wouldn't sleep well as a bear. Disappointing retail sales, worst Chicago PMI #s since 2003, bad PCE deflator #, bad initial claims, surging crude oil. In normal times, you'd definitely have a sell-off of at least 1%.

Anonymous said...

Get ready for a kiss! The majors will bid one last farewell kiss to the upper-trend line, then it's soyonara!

kkycrfx

Anonymous said...

Thursday's market action has been a bit concerning from a bullish perspective. Friday's action will determine whether I'll switch off from being bullish to being bearish.

This market has a tendency to do the unexpected, so I believe the Dow MIGHT make one last burst up above the trend line (perhaps the santa rally?) to touch maybe 12400/500 (over several days) before tumbling.

Brendan said...

With the dollar in free fall, I wouldn't want to be short (long puts) anything gold-related.

Anonymous said...

Its all about the hedgies. And on November's final day there was an heroic attempt to goose the etf's and paint as much of the tape as they possibly could, especially the smaller caps. Rosy month end statements are critical to these guys right now. Today is the first of the month so all that hot pension fund money has to get deployed asap. Give it til 10am and look (hope) for a reversal.

Anonymous said...

Could anyone please tell me what the DOW will close at today?

my guess is down 38-48

We're gonna have one last one mad dash to new highs, it will probably be a shooting star, so watch the charts, it will not be sustainable and will be a key reversal day.

zszdwfs

Anonymous said...

Anonymous said...

watch the 10am construction #'s tomorrow. Those will be key.


Trader 2006.

7:14 PM

Did anyone wait for these #'s...Numbers were not good at all. Market selling off at the moment but with 2 hours left who knows whats left. Bulls may get a chance to push it back to 12175++ that wouldnt be good. We need a huge selloff into the close to keep this in the bears court. Lets see if we get another monday closing.

Trader 2006.

Anonymous said...

get ready for the 3:00pm pump!!

Anonymous said...

This drop looks a bit suspicious. If the SPY futures can't break below 1380 in the next few days, then the market will again touch its new highs.

Anonymous said...

DAMN IT. DAMNNN it. S & P needs to break 1380, this is not good.

Anonymous said...

1380 doesn't need to happen today. Tops take time and this market loves keeping everyone off balance.

Anonymous said...

The market looks like its sucking in some shorts. The short covering will likely keep this market alive.

Although I'm extremely bearish on the economy, I can't still can't say the top has formed. The domed house formation described by Carl Futia is still what I believe will likely occur:

http://photos1.blogger.com/x/blogger/3426/1040/1600/174063/120106%20domed%20house.jpg

Anonymous said...

WTFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF

Anonymous said...

Hey, hedgies got the new month cash to burn and shorts cant take the heat of another wrethched weekend. Whatta market.

Anonymous said...

"my guess is down 38-48"

Nice guess. I was thinking down 65 or so.

Anonymous said...

Up 100 off the low, closing tick +1400. Yeesh. Thats a lotta offers hit in the final hour!

downosedive said...

JUST UNBELEIVABLE, THE SECOND VOLATILE DAY IN A ROW AND THE BULLS MANAGED TO RECOVER YET AGAIN. wHILE SUCH FALLS MAY BE SEEN AS A KIND OF WEAKENING........THINK OF IT FROM THE ENEMYS VEIWPOINT, THE PLUNGES HAVE HAPPENED 3 TIMES THIS WEEK, BUT TWO OF THOSE ENDED WITH JUST A NOMINAL LOSS AND THE MAIN PLUNGE WAS FOLLOWED BY OVER A 50% BOUNCE. NOW THAT TO A BULL MAY ACTUALLY GIVE STRENGTH BECAUSE IT SUGGESTS THAT WHATEVER IS THROWN ON THE DOWNSIDE IS LIMITED BY THE BULLS. CONFIDENCE MAY ACTUALLY BUILD FROM HERE......UNLESS THERE IS ANOTHER SLAMDOWN BUT WITHOUT THE NEXY DAY BOUNCE. I RECKON THIS IS JUST A BIT OF PROFIT TAKING.........BEWARE OF THE BULL. I THINK THERE NEEDS TO BE ANOTHER DICKHEAD ALL TIME HIGH RALLY BY YEAR END AND THEN, JUST MAYBE, JUST MAYBE.....

Anonymous said...

Frankly, I'm a bit shocked to see how the losses in every index were pared in the last hour of the day. Honestly, I expected to see exactly the opposite: lots of people selling OUT of positions before the weekend.

After today's horrible numbers (ISM index shows CONTRACTION for the first time in 4 years?!?!), the market's STILL didn't sell down. I guess when the entire economy is driven by consumer spending, then manufacturing and construction spending (also down a record amount, even worse than expected) really don't mean much at all, eh??

Simply incredible.

That being said, the markets still ended DOWN for the week. I guess that's something for the bears to hang their hats on.

-TonyB

BTW, I'm starting to scale into some short positions via DXD and QID. I'm expecting to possibly endure some short term pain, but I feel that the upside potential is much less than the downside at this point. Besides, the bulls are looking less confident (considering that they've had to contend with two triple-digit losses this week alone), especially as the bad news continues to pile up.

downosedive said...

TRADER 2006 - YOU ASKED DAY OR SWING TRADER. I HAVE 2 PATTERNS - WHEN IM AT HOME DURING TRADING TIME, IM LETHAL (BUT IN THE WRONG DIRECTION) AS I REACT TO WHAT I SEE AND THINK INSTANTLY. NORMALLY IM AT WORK AND SO WE ARE BARRED FROM SPREADBETTING WEBSITES, SO MY BEHAVIOUR IS MORE CONTROLLED AND I END UP JUST PATIENTLY WATCHING BY SHORT POSITIONS CLOCKING UP LOSSES.........OHH I HAVE MADE SUCH A MESS OF TRADING THIS WEEK. IVE ENDED UP JUST ABOUT $70. ONLY ANOTHER $11930 TO RECOVER FROM THE LAST QUARTER AND I WILL BE BACK AT BREAKEVEN. WHOOOOPY! HEY - YOU SUMMED IT UP, AS ALWAYS. SEEMS LIKE WHATEVER WE DO, THINGS GO THE REVERSE. BUT I WOULD NOT SHORT HOUSEBUILDERS. NO NO NO NO. IVE SEEN AND DONE IT HERE IN THE UK DURING LAST REALLY BAD HOUSING RECESSION. IN THE END I JUST WATCHED THEM GO UP AND UP AND UP THROUGH ALL THE BAD NEWS. HOUSEBUILDERS SEEM TO FOLLOW THE SAME PATTERN HERE AND THERE. AVOID THEM UNLESS YOU CAN PICK THE REAL REAL WEAK ONES THAT ARE REALING IN DEBT OR HAVE PAID TOO MUCH FOR LAND - THOSE ARE THE ONES THAT GET HAMMERED. THE REST JUST RIDE THESTORM AND COME OUT THE OTHER SIDE SAFELY. SEE YOU MONDAY....

Anonymous said...

Watch the NASDAQ. It is a likely leader. On the NDX chart, notice that momentum is falling off.

This top will take time to build. It is certainly the desire of influential forces to see things decline in an orderly way. These forces are inclined to manipulate this market in ways that should be illegal, but since they represent the ones who make the laws, only world markets can confront them.

The last hour's trade demonstrates that they have not yet lost control of things. It is a shame and an enormous risk that they are not willing to let the business cycle act normally. Their manipulation will only exaggerate the severe way in which the business cycle will reassert itself in the end.

Anonymous said...

we were hitting the day's lows around 2:45pm after that a very slow drift upwards, by 3:30PM the recovery was fully underway. The market does a very good job of taking the most money from the most people. Having said that, today definitely shows that this bulls still has power, we will take out the thanksgiving week highs on the YM contract at 12370.

The lows in the USD might actually start attracting foreign money ... once this flow is absorbed in the market, we can then look for a meaningful top. Sorry to say, but that might not come until the spring.

uecrtjn

Anonymous said...

The USD won't be "cheap" until it reaches the mid to low .70 range. Don't even THINK about foreign buyers coming into the USD until then.

Magic number for the $XEU is 1.50. That will be when the foreign buyers look for cheap US dollars.

Just my opinion, of course.

-TonyB

Anonymous said...

Brett Steenbarger wrote on his blog to 'know who is trading'. We all know that it is the institutions who control the equity markets. As a consequence, they will try to protect as much of their gains from the past 4 months before letting the market fall of the cliff.

Like 2:26, I think we are yet to see a top, although this week is certainly an early warning sign of what's to come in later weeks or months. But for now, those who short before confirming a signal deserve what they get ie. getting steamrolled by the institutions.