Breakdown then Upswing
Let's face it. Nobody likes this market. Not bulls. Not bears. Nobody. And why is that? Because nobody owns this market! It's in this exasperating no man's land of equilibrium. This market has been trendless so long that I don't think people even remember what a trending market feels like!
Early today, the $INDU looked like it was nicely on its way to some downward action. It was down about 60 points and had clearly busted beneath its short term ascending trendline. Then it spend the rest of the day firming up with an over 100 point reversal. It closed up about 31 points. Bummer.
If you look at the graph below of the $INDU, you can see its meandering nature recently. My hope is that the sloppiness marked at point "A" which preceded a big decline is similar to what we're seeing now with "B". After all, the ascending trendline was broken today. There's no doubt about that. So there's been some damage done. But the bears didn't stay in charge.
The $NDX presents a possibly more bullish scenario. It seems to have been hammering out a bit of a short term base recently. It certainly appears that there would have to be some pretty hefty bad news (nasty earnings from a major name, for example) to break the $NDX out of its funk and push it even lower. Barring that, it may have shored itself up for a short-term rally.
Lastly, the $SPX (S&P 500) has a pattern similar to the $INDU, with the difference being that the recent uptrend hasn't been broken. I've highlighted this general uptrend in blue.
I've provided a lot of individual charts lately, so I'm going to leave my commentary as-is at this point. I want to see at least some semblance of direction before getting more concrete.
My hat is off to those of you who post regularly in the comments section. It keeps this place jumping!
24 comments:
WOW - what a day, set some of my puts at the open (an hour or so in when it was not too much into the frey or is that fray?).
Happy all day, came back at 2:30 to see this skyrocket the other way. WOW - these reversals count in my book as big bull days (but not sure either bulls or bears agree).
Interesting to see DNA shoot earnings like AA and in the AH go down like a rock. What is up with that.
Personally, think we are seeing selling into strength, but not sure yet. Will keep watching - as Healthcare is nicely touted, think it is up for the next fall. Just my opinion - seen it happen too often to fall into that trap.
Cash it is then!
Cya on the board!
Tim - keep up the posts and get that day job stuff straightened out so we can see ya more!!!
Like your stuff but suggest you look at other side of the crazy mkt. If you are interested give me a call. I also live in Palo Alto. 8571119 Jerry Lamb
VWO, EEM, MSF all good ETFS
DOW will hit 11218. Sharp turndown mid-morn and/or in the afternoon. Expect more meandering for the next few days. If not a day-trader, sit on the sideline, wait for a breakout.
It is just as likely to do the opposite of what I say just to spite me.
Scalpers market! With the wild volitility and swings, in/out at support and resistance levels can make you some cash! Patience will cost you! Remember to have FUN!
Big E.
I'm getting a hang of this, post opposite of what I want the market to do and it does it! :-P
oil down on less supply. amazing !
Oh boy, here we go again..... markets tank and then to the rescue......
This is frustrating. I'm finding that alot of support levels have been useless lately...which makes it hard to execute trades...
is this the crack we have been waiting for?
Oil is running up on its resistance at $75.... I don't think it will run through yet, but the interesting thing is stocks (oil+drillers) don't seem to be following suit.... signs of topping
I wouldn't be surprised to see commoditties sell off when Japan raises rates tomorrow....
S&P below 200 day MA....
This is all very good.....
Here's a thought: why would commodities sell off tomorrow on the rate raise? Wouldn't it more likely be a matter of "sell the rumor, buy the news" in this case, since the rate raise is so widely anticipated anyways??
I'm just not sure who would be hanging onto their positions in this market if they were fairly certain that the BoJ was raising rates come Friday morning.
Anyways, even though the liquidity crunch that tanked the global markets back in May/June brought commodities back to reasonable levels, I'm just not sure how much further they will drop this time around. They still seem to have incredible momentum.
Don't get me wrong, I'd love a major pullback, because I'm still on the outside looking in on gold.
11020 appears to be the current support level with 1 1/2hrs to close. Wonder where on earth this is going, as has been said today.....may be the start of a sustained breakdown?
And everyone was saying yesterday that the rally would follow through into today, ha. Market is something else, Dell has their earnings trimmed, analysts say google will have a soft quarter and the semiconductor sales are slowing, what else can push the nasdaq higher, nothiinggggggg, nasdaq headed to 2000 by august.
NASDAQ 100 at a new 52 week low!!!
Last time it was at these levels was around JULY 7/8...
Another down day, some analyst came out saying AAPL may warn on revenue etc. Can someone tell me why people still listen to analysts in 2006.
Nasdaq breaking down, I think we may go down a bit further but could be looking at short term oversold conditions around 2040-2050 area.
Let me just say that today's action was very positive for the bears. But once again, the volume was unconvincing.
Also, while we're all licking our chops at the prospect of making money on the downside, the one question that remains in my mind is: how do we actually MAKE the money??
I know Tim has listed a ton of put options that are making him some good money right now, but I'm still stunned and unresponsive as a result of the tremendous whipsawing action of late.
Bottom line is: I haven't made a penny off of this supposed "downturn." And the fact remains that the S&P is still above that pesky short-term trendline, even though it finally closed below its 200-day SMA.
The Naz is hopeless. The DJIA is still breathing, but it's on life support.
The US dollar rose sharply today, yet gold also soared. Something is definitely wrong there. I'm afraid that gold is trading in the Twilight Zone right now. Very high risk and low reward in the short term. Gold never has really stabilized since bouncing off its 200-day SMA. Sure, it spent a few days in the $590 range, but a quick glance at the charts immediately tells you that it's dramatically overbought. There's absolutely nothing holding it up right now.
A couple of bombs go off in India and gold jumps over $15?? Oh please. Go back to 9/11/01 and see what happened to the price of gold. (Answer: not a thing).
-Tony
Indices summed up well Anon, as usual. Agree, volume is worryingly low to suggest this is the start of a sustined downturn. Them again, its that time of year plus overall the DJA has been trending on the downside recently it was about 11250 sometime last week (?). It could all change with a couple of good big name results, even if its only in line with estimates as they (the bulls) consistantly live in denial of the myriad of negative economic data and would just love to find a common excuse to go charging into the market...again
Here are some points to keep in mind....
Next week the CPI and PPI data are coming out... I'm not sure how that will turn out, although they are typically higher #'s in the summer.
Oil is now at $75.... lets see if the fed is going to let energy get out of control...like they aren't already..... I still see no reason for oil to be this high.
CREE just warned about their profits...... I think there is no question that the economy is slowing rapidly.... and this is the damage from the rates 6 months ago @ 4.75%. It will only get worst.....
The only thing that might keep the DJIA afloat in the long term is the fact that the components pay dividends. In this type of market, people will shift to the large caps for the divvys. Health care started to get some rotation yesterday and actually fared quite well in today's selloff. Might be a couple of good long candidates there -- easing into positions on pullbacks.
As for CREE, sheesh. -25% after hours. Absolutely killer. If that's a sign of what's to come, then look out below.
Keep up the good work, Tim, and let us know what charts look juicy for shorting opportunities.
-Tony
Many think this market is easy to trade, to me it sometimes is and sometimes not. Im not going to lie my portfolio is about flat for the year, its basically stuck, one week ill do great the next week ill do poorly. I think alot may have to do with my commissions. I trade with Scottrade and do on avg 15-30 trades a month which is cutting into my profits, im sure many of you are using IB or Mbtrading to trade. I also trade in 100-500 share lots depending on the price of the stock. If anyone has any idea of a better broker or a better way to trade this market let me know, any info is great. This blog is also great, keep up the good work.
Joe.
pb: I disagree on gold. You'd be surprised what shenanigans the Fed/government is up to regarding the dollar. And with the BoJ news coming tomorrow/Friday, it could mean some more liquidity being pulled out. And since gold hasn't really "based" anywhere since $590, it could be in a bit of trouble short term.
I've read reports from people in India (who will be the biggest consumers in the next couple of months) and they say that nobody will buy gold because it's too expensive. Yes, buying gold as a currency hedge is one thing, but don't forget that the biggest price shifts have traditionally come during Indian Wedding Season. Also consider that the US dollar has lost less than 10% in depreciation over the last year or so, yet gold has doubled. It is not being traded as a currency hedge, it's being traded as a stock (and a speculative one at that).
Look at the speculators come out in droves when those bombs hit. They're using any event as an excuse to buy gold. Not as an anti-inflation hedge, but as a speculative "bet" against global collapse.
Also consider that the banks aren't buying gold at these levels, either. The physical delivery of gold is way down.
Just my opinion, of course. But I think there's still another shoe that has to drop on gold before it becomes a stable buy.
-Tony
Deere, CREE, 3M, APPL , NTAP
All have warned .... A GE FUBAR and Bears will be in charge.
The volume needs to pick up for an accelerated downward price spiral. I am short DRIV, APA & ET. The price breaks on these stocks are not significant compared to the previous sell off. We all need to watch the volume, if it does not pick up, it will turn up.
That's actually a sweet looking short. Thanks, 'cane!
Hey guys,
I think today is a bunch of things... technicals, bad earnings warnings, world tensions, High inflation, Oil @77.
Interesting how the OIH and all those stocks are acting in particular RIG.... cant get above its 50 day MA.... GOOG is another stock (key word CYCLICAL) that will fall out of its sym triangle... after earnings I suspect....
This is the worst possible environment for stocks... I bet it gets worst this fall.
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