Wednesday, November 29, 2006

Recovery Holding Firm

Today's entry is going to be on the short side, since I've spent most of the day sitting in either airports or on airplanes.

As you well know, the market made an earnest move higher today. Around the middle of the day, it looked like the recovery was softening (the Dow went from up over 90 to up about 45 or so). But then the bulls got their feet back underneath them and pushed it to close near the high of the day. Disappointing. A failed recovery is exactly what we bears need right now, and we didn't get it.

Here's a daily graph of the Russell 2000. The market could easily push into new highs (yet again) in the next day or two. That would make memories of Monday's fall completely vanish.


Here's a closer view of the NASDAQ 100, and you can see here how helpful Fibonacci retracements can be, even on an intraday basis. I've drawn the Fib from the recent high to the low on Monday. You can see today we pushed up to a 50% retracement, fell back down to the 23.6% level (pretty much right on the nose) and then back up to 50%.


The graph of the S&P shows a similar behavior. This graph shows more time - the past ten days instead of the past two - and you can see here how we're at a crossroads. Either we break recent highs and go into full-blown bull party again, or we snap below Monday's lows, in which case - - finally - - we poor, beleaguered bears will get a bit more control over this market.


As you might imagine, the rise up in the market today and (to a lesser degree) yesterday took the air out of the $VIX in a big, big hurry.


I am doing today's entry in a mad rush to get on another plane, but I didn't want to leave everyone high and dry! More charts and analysis tomorrow - - promise.

38 comments:

Anonymous said...

Just wanna thank PB on his pivot point post and to cover my shorts on mondays sell-off.

Good call bud, monday was a severe reaction that was hard to maintain. I think we need the slow grinds lower, 50 points here and there and before the bulls know it, they have no balls left and are living in a cave somewhere!

Also tahnks to trader2006 I scraped a nice 10% off of AAPL puts!

Just as an aside to show how screwed up things are, some people are actually believing that we have banished recessions for good! Only at a market top do you find such fools!

Our day will come bearz, and it will comne BIG!!! Just keep some cash handy 'till then, as going long is the biggest dis-service I can do to my account at this point. Go ahead, run away with the next 2-3%, but I know that the next 20-30% is DOWN!

Barry R.

Anonymous said...

Food for thought ...

Kelley Wright, managing editor of Investment Quality Trends observes, "While we generally don't engage in forcasting," he said, "there are some troubling trends we are seeing in our internals that we track at IQ Trends.

"First, since 1966, we have tracked the percentage of stocks that make up each of our categories of value; Undervalued, Rising Trends, etc. When the percentage of stocks in our universe that are Undervalued drops below 17%, it has been coincident with major market tops. Currently our Undervalued category represents about 10% of our universe.

"Secondly, the number of stocks that meet our Criteria for Select Blue chip status only totals 300 stocks; significantly off our long-term average of 350 stocks. In fact, the number of stocks that meet our quality parameters has been declining steadily since 2004.

"It will be interesting to see if either of these indicators change their recent trends."

Jim

Anonymous said...

All you have to do is buy!

Anonymous said...

Buy a market that is overpriced on every timeframe since the mid 20's; Yeah right what are you smoking..

Anonymous said...

Looking at individual issues, I see chart after chart now sporting negative MACD's and other early signs of weakness. This is especially true with NASDAQ tech issues.

I do not underestimate the ability of the boyz to frequently jerk this thing around and get it to run their way. At the same time, there is no doubt that things are really technically strained here.

If the Fed suddenly decides to protect the dollar and not take any additional action to support the stock market by constantly pumping up liquidity, we will then perhaps see things begin to unwind.

Nothing is certain.....the markets could go up forever and never go down again.....as long as a seriously devalued currency is what the government wants. Come to think of it, inflation is a really neat way to tax all of those who are stupid enough to save and avoid debt.

Wouldn't it be amazing if Bernanke and the governors (and the U.S. Treasury)took action to stop the decay of the currency? If they do, this market is a dead skunk. Until we see further signs of decay, however, we should not expect any weakness.

Anonymous said...

the last post ... very astute.

CR

PB said...

The stock market is an odd place for a decaying currency to take solace in. They will protect the currency to protect the markets, right? A weak currency will begat a weak stock market.

Also, I had a look at a decade old trendline on the SP500, and guess what, we're right at the top of it. It's not '95 all over again, it's 2004!

Buckle up bearzz! We are going for a ride to the bottom of this channel!

Anyone for a Santa CORRECTION?

Anonymous said...

some shorties ...

DELL to $16
BBY to $46
REV to $0
NT to $0

some long johns ...

FCX to $88
TCK to $94
TLM to $24
COP to $84

Nobiri-San

h. lovil said...

Hey fellow bears want to see an uggllyyyy picture:

Could the naz be in a large cup-and-handle. Just retested the line and ready to blast off??

Comments.


http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID897936&cmd=show[s77837455]&disp=O

z-stock said...

If the spy is breaking, 140.84
I’d like to see some major players, like Gs Xom Icf Intc Rth Goog Ibm and Wmt breakout from their recent highs.
Oh, that’s right, Wmt, took itself out. It’s not breaking out higher. Wmt 50 day= 48.48
I guess that takes care of Rth breaking 101.
I think it’s possible the bulls may have had their hats handed to them, on the Wmt news.
I think it’s reasonable that the 06 high has come and gone.
z-stock

Anonymous said...

Most dangerous day!Today...
If the market surges it would have avoided the death. Tomorrow, also important, but less so.
Tune in for intraday updates
Good Trading
To read more go to
http://borisc.blogspot.com

Anonymous said...

It is not even 2004, it is 1973-4
that is what it is.
Bulls are the ones who do not travel abroad. So they do not know
what our belowed $Dollar buys there.
But who cares, to see how to make
the worthless Dollars in market everyday ( you own private ATM )
just tune to http://borisc.blgospto.com
Go short and long with me, forget the year, live by day.
Regards

Anonymous said...

Barry R im glad you took my advice on the AAPL short...Glad to see you made 10%, very nice...

MArkets getting yet another lift, another 40 points and the dow has erased all of its lossed from monday.

Trader 2006.

Anonymous said...

zstock about 3 weeks ago the guy from I think Bulls and Bears made a prediction that RTH would be up around 120 around end of DEC early Jan on strong retail sales. I dont think RTH goes to 120. Tops 102-106 but thats even pushing it.


TRADER 2006.

PB said...

RTH has topped out, little use in chasing it.

PS. WMT keeps slipping, as well GS doesn't seem to have strenght left. Slowly this market keeps painting a darker picture. I still think we'll get a weak rally for another 150-200 points and then this thing will really shut down!

Anonymous said...

thank the PMI for this decline...

wonder if i should go long some qld


trader 2006

Anonymous said...

wmt isnt posting good numbers.

trader 2006

Anonymous said...

The old clunker is struggling this morning. Da boyz are trying to get every last bit of travel out of it and she's getting old.

I wonder where they will abandon it.....and when....???

Anonymous said...

you can't win in this fucking market, you go long the shit drops, you go short the fucker rises!

Gimme a break bitches!!!

Anonymous said...

CFan anyone recommend a good mental institution? This market has made me crazey!!!

Anonymous said...

I could see the dow back at 12200 soon. Just seems they will buy it back up.


We need the nasdaq to lose some more steam, only down 7.

Retail dropping across the board.


Watch the transports, there down again today. Iyt closing is on 84

Trader 2006

PB said...

the transports are signalling a slow down, but the retards on Wall St. are too busy in coming up with new schemes to explain all the negativity away. Barry Ritholtz had a good blog on the Truck-load index and how it's at it's lowest level since since Mar '01 --- we all know what happened after. Also, this index has been declining y-o-y and is definitely not a good sign heading into the christmas season when trucking shd pick-up. You need to get those items to the stores, but shipping has been down in that area.

Not to worry, the idiot bulls shd wake up soon enough and find that they are standing on quick-sand.

Anonymous said...

so close to my 12200 prediction...I hope we get a late day triple digit loss. Nasdaq holding up extremely well today.

TRADER 2006.

Anonymous said...

nasdaq up again, what else is new, markets going back into the green for the third day in a row. This economy is screammmming RECESSION yet the markets trade up.

Trader 2006.

Denver_Investor said...

We're having a classic short squeeze in the home builders. Bank of America upgrades the sector and it's up over 3% today DESPITE THE AWFUL and WORSENING NEWS for the sector.

The home builder's biz in turning around? BULL.

arrgh...
but my gold miners are FLYING....

Anonymous said...

unbelievable!!!!!

bsi87 said...

re: GDX.

It's getting back to its past high on 9/6. If you look at weekly charts, GLD is rallying on declining volume. Everyone knows the dollar is sucking air. Be nimble.

Bonds broke support in mid Oct but are trailing up under the broken support line on lower volume. Bounces day to day based on events. Could be interesting for bond John and others when/if they break down. I'm short bonds in the last week or so.

Having more success using paired trades and buying dogs that are down 15-20% on the day with volume 10X the daily average. Keep positions small.

JMO.

PB said...

the 10 year bond is yielding 4.5% or below. No wonder stocks look so attractive! But the reason bonds are this low is due to the bond guys fearing a recession. How this fear is not translated into the stock market is really something.

No one ever said that the bulls were smart!

Anonymous said...

up and away we gooooooooooooooooooo!!!!

I knew that 60 point drop was going to be erased...Didnt think though it would lead to DOW 12238. Amazing. You would think the market could have tanked the rest of the week after seeing that great decline.


TRADER 2006.

Anonymous said...

Tim is going to bring the bad news tonight....this is what we did not want to see in these markets today. We have erased nearly every loss these markets have seen since monday and look to be moving higher...



Seems no matter what the economic news is the markets only mover higher. Many have said time and time over trade what you see. Its not as easy as it looks. I was trading on the long side a few times on monday and everytime I did I felt as if the markets were going to drop off a cliff and this is while the DOW was off more than 120 points. Just cant trade the long side.

Trader 2006.

Anonymous said...

Trade just closed....I see the action today as being important.

What we see is a VIX that closed positive for the day. Also, the NDX closed down after an attempt to reverse up, as has been normal for a long time. This is a tired tape. MACD is negative and moving average fast-lines are starting to turn towards slow lines.

This behavior is weak. It appears to have every potential to be a forming top. With the age of this market, it is possible that the elderly bull may be about ready to become a breeding ground for flies.

Keep a positive mental attitude. There is no such thing as a one-way market.....even if there is manipulation by corrupt government or private parties.

PB said...

Alrightee!!!

Beautiful market action today!! Left us with a nice doji candle, a top is near. But don't be fooled just yet, these sneaky bulls will probably pull one more rally out of the bag. The USD is still getting kicked around so the stock markets are on the defensive. Economic news continues to be soft, is the message finally getting home??

downosedive said...

Trader 2006 - spot on with your comment about not being able to trade long. Same with me. Today I went long in 2 positions on dja and ohhhh was i so wobbley. I closed both at a loss because I couldnt stand it, it just felt soooo wrong. As you say, it just feels so much as if its going off the edge of a cliff. I dont want to be the mug caught up with the mad bulls hurling themsleves off the edge when the crash comes. Today should real signs of instability despite the enormous rally. I sense a change in the mood. Probably wrong and still have those short positions running to prove it. Now, how much shall I loose tomorrow??

Anonymous said...

Having problems with Longs? VIP and MLM sure were NICE!!!! Guess you need a chart refresher course for Longs? Been waiting on that "Down" move for so LOOOOOOONG you forgot how to read them.

Back to basics people - Up, Down or Sideways!!! Who cares?

Oh well, what will I trade Long tomorrow.........

JJ

Anonymous said...

down, are you a daytrader down or swingtrader?

I took a position in QLD the other day and as soon as I bought it it dropped about .25-.36 in a few seconds and I thought here we go. Just the thought of going long and seeing things reverse as soon as you buy in gets you sick as if this huge rally has ended as soon as you decide to take a position on the long side.

As you talked about the real signs of instability showing up in todays trading, that is true. I walked away from my computer around 3:45 when the dow was up about 40 then I checked the closing at 4 and noticed we were down which put me in somewhat of a better mood. Tomorrow is a new day with construction spending being on the list of important economic data due out at 10am eastern time. If its weak im going short some homebuilders or maybe just the XHB. The upgrade on them today by B of A is too funny.

TRADER 2006.

Anonymous said...

The homies have been the performers since this summer 'rally' began. There is something 'fundamentally' wrong with holding them on their descent.

Gonna look for money elsewhere.

GERMANY RULES!!!

Anonymous said...

THE BEST PERFORMERS!!!

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....