As seen the attached S&P 500 report is still below resistance at the 876 level having stalled there now on three separate occasions over the past three months. For prices to extend this rally that level needs to be taken out as it will show buyers are more aggressive and additionally comfortable with paying up for equities.
Volume on the S&P 500 is average and is reflective of indecision after the large rally. However, even with the market chopping around the last week and a half the S&P 500 still remains above its uptrend fan lines. The uptrend falling to the third fan line suggests while the market is moving higher its’ pace of ascent has slowed, which is not necessarily a bad thing. Only a moved back below the fourth fan line (Under 800) would suggest a retest was more likely rather than a rally extension.
On the sentiment front; the CBOE Total Equity/Index put to call ratio, the AAII Bearish Sentiment Survey and the VIX’s deviation from its 50-day moving average have all moderated from constructive levels to more neutral levels. This moderation is expected given the rally, however these indicators are not at levels that would suggest sentiment is overly bullish yet so at present these indicators are not flashing any sell signals.
posted by Peter Greene
Friday, April 24, 2009
An easy way to understand the AIG Debacle..
Two couples were playing poker one evening. Jim accidentally
dropped some cards on the floor. When he bent down under the
table to pick them up, he noticed Bob's wife, Sue wasn't wearing
any underwear under her dress! Shocked by this, Jim upon trying
to sit back up again, hit his head on the table and emerged
red-faced.
Later, Jim went to the kitchen to get some refreshments.
Bob's wife followed and asked, 'Did you see anything that you
like under there?' Surprised by her boldness, Jim admitted that,
well indeed he did. She said, 'Well, you can have it but it
will cost you £500.' After taking a minute or two to assess the
financial and moral costs of this offer, Jim confirms that he is
interested.
Sue told him that since her husband Bob worked Friday afternoons
and Jim didn't, Jim should be at her house around 2 p.m. Friday
afternoon.
When Friday rolled around, Jim showed up at Bob's house at 2
p.m. sharp and after paying Sue the agreed sum of £500 - they
went to the bedroom and closed their transaction, as agreed. Jim
quickly dressed and left.
As usual, Bob came home from work at 6 p.m. And upon arriving,
asked his wife: 'Did Jim come by the house this afternoon?' With
a lump in her throat Sue answered 'Why yes, he did stop by for a
few minutes this afternoon.' Her heart nearly skipped a beat
when her husband curtly asked, 'And did he give you £500?' Sue,
using her best poker face, replied, 'Well, yes, in fact he did
give me £500.' Bob, with a relieved, satisfied look on his face,
surprised his wife by saying, 'He came by the office this
morning and borrowed £500 from me. He promised he'd stop by our
house this afternoon on his way home and pay the money back..
' As applied to the current financial crisis, the characters in
the above story are represented as follows:
Jim
= Goldman Sachs
Bob
= AIG
Sue
= US taxpayer
posted by Peter Greene
dropped some cards on the floor. When he bent down under the
table to pick them up, he noticed Bob's wife, Sue wasn't wearing
any underwear under her dress! Shocked by this, Jim upon trying
to sit back up again, hit his head on the table and emerged
red-faced.
Later, Jim went to the kitchen to get some refreshments.
Bob's wife followed and asked, 'Did you see anything that you
like under there?' Surprised by her boldness, Jim admitted that,
well indeed he did. She said, 'Well, you can have it but it
will cost you £500.' After taking a minute or two to assess the
financial and moral costs of this offer, Jim confirms that he is
interested.
Sue told him that since her husband Bob worked Friday afternoons
and Jim didn't, Jim should be at her house around 2 p.m. Friday
afternoon.
When Friday rolled around, Jim showed up at Bob's house at 2
p.m. sharp and after paying Sue the agreed sum of £500 - they
went to the bedroom and closed their transaction, as agreed. Jim
quickly dressed and left.
As usual, Bob came home from work at 6 p.m. And upon arriving,
asked his wife: 'Did Jim come by the house this afternoon?' With
a lump in her throat Sue answered 'Why yes, he did stop by for a
few minutes this afternoon.' Her heart nearly skipped a beat
when her husband curtly asked, 'And did he give you £500?' Sue,
using her best poker face, replied, 'Well, yes, in fact he did
give me £500.' Bob, with a relieved, satisfied look on his face,
surprised his wife by saying, 'He came by the office this
morning and borrowed £500 from me. He promised he'd stop by our
house this afternoon on his way home and pay the money back..
' As applied to the current financial crisis, the characters in
the above story are represented as follows:
Jim
= Goldman Sachs
Bob
= AIG
Sue
= US taxpayer
posted by Peter Greene
4-23 post market comments from firm
The S&P 500 slipped back intra-day but still managed to move back into positive territory. So far, ex the sell off on March 20th, the tape has not stayed negative for long when it does move down. We suggest these draw downs have been relatively shallow because sideline liquidity (even after the large rally over the past 30 days) still remains robust. As long as the skew of decliners to advancers and down volume to up volume remain in check the this tape isn't in any serious danger of correcting aggressively.
Below current prices on the S&P 500 there are several support levels with 825 and 814 being the two of closest proximity, while 877 is the upside resistance area the S&P needs to move above to extend the rally.
Sentiment remains neutral but is less constructive than say 30 days ago. We reiterate that techs have the best basing and chart patterns of all market sectors.
EBAY is one name that scored a bullish gap today and on pullbacks looks capable of working higher as the company reported better than expected results and is spinning out its Skype division and refocusing back on the core business.
We will post a list of constructive charts in a pdf for tomorrow morning along with a few new research reports.
Also of note DV shares are very close to breaking critical support near $ 40.00. We highlighted this chart yesterday and shares were down over $ 2.00 today.
Stay tuned ...
posted by Peter Greene
Below current prices on the S&P 500 there are several support levels with 825 and 814 being the two of closest proximity, while 877 is the upside resistance area the S&P needs to move above to extend the rally.
Sentiment remains neutral but is less constructive than say 30 days ago. We reiterate that techs have the best basing and chart patterns of all market sectors.
EBAY is one name that scored a bullish gap today and on pullbacks looks capable of working higher as the company reported better than expected results and is spinning out its Skype division and refocusing back on the core business.
We will post a list of constructive charts in a pdf for tomorrow morning along with a few new research reports.
Also of note DV shares are very close to breaking critical support near $ 40.00. We highlighted this chart yesterday and shares were down over $ 2.00 today.
Stay tuned ...
posted by Peter Greene
Monday, April 20, 2009
S&P thoughts from firm
As seen above, the S&P 500 ran into another spot of resistance (orange lines and purple arrows) at the
875 level. The index still remains above its’ up trend line (green dotted lines), though a trend line that is
less accelerating in nature. A close back below the 850 level is likely put the market on the defensive a bit. On a
violation of 850 the market may look to stabilize at the 825 level, which would be a test of the recently broken
downtrend line (red line).
Volume was better on Friday, however the CBOE Total Equity/Index Put to Call Ratio (not seen here)
slipped back under 0.72. Typically levels near or below 0.70 are short-term negatives. Additionally the AAII
Bearish Sentiment Survey has seen the number of bear’s contract from 70% just 5 weeks back to 35.86% in the most
recent survey. Given the contraction in bears and put/call we would expect some softness to work into the market in
the next few days.
Unlike just several months ago where all stocks were correlated with the market, many stocks are now
not correlated. Thus there is no reason to indiscriminately sell stocks across the board just because the
market may weaken a bit. We would apply unique risk management techniques to each of your names and let
them be taken out (ie. stopped to cash) or not naturally.
posted by Peter Greene
875 level. The index still remains above its’ up trend line (green dotted lines), though a trend line that is
less accelerating in nature. A close back below the 850 level is likely put the market on the defensive a bit. On a
violation of 850 the market may look to stabilize at the 825 level, which would be a test of the recently broken
downtrend line (red line).
Volume was better on Friday, however the CBOE Total Equity/Index Put to Call Ratio (not seen here)
slipped back under 0.72. Typically levels near or below 0.70 are short-term negatives. Additionally the AAII
Bearish Sentiment Survey has seen the number of bear’s contract from 70% just 5 weeks back to 35.86% in the most
recent survey. Given the contraction in bears and put/call we would expect some softness to work into the market in
the next few days.
Unlike just several months ago where all stocks were correlated with the market, many stocks are now
not correlated. Thus there is no reason to indiscriminately sell stocks across the board just because the
market may weaken a bit. We would apply unique risk management techniques to each of your names and let
them be taken out (ie. stopped to cash) or not naturally.
posted by Peter Greene
Thursday, April 16, 2009
s&p Levels
The S&P 500’s minor trend is still moving up within the confines of an up sloping trend channel. Only a close below 835 would violate the lower channel line and put a corrective wave on the table. That said until such an event occurs we have to respect the trend is still up and its upper target of 935 is still the projected forecast.
For the time being dips are still being bought, which suggests liquidity is still ample. We would continue holding long bias with protective trailing stops. Volume trends, while moderating, remain strong enough to maintain upward prices given selling resistance is minimal after six months of continuous distribution prior to this advance.
The combination of deeply oversold conditions resolving themselves with a back drop of strong liquidity continues to be the overriding market theme still. We believe monitoring sentiment will be the best way to determine when the advance may stall and at present sentiment is a neutral factor not a negative one.
posted by Peter Greene
For the time being dips are still being bought, which suggests liquidity is still ample. We would continue holding long bias with protective trailing stops. Volume trends, while moderating, remain strong enough to maintain upward prices given selling resistance is minimal after six months of continuous distribution prior to this advance.
The combination of deeply oversold conditions resolving themselves with a back drop of strong liquidity continues to be the overriding market theme still. We believe monitoring sentiment will be the best way to determine when the advance may stall and at present sentiment is a neutral factor not a negative one.
posted by Peter Greene
Wednesday, April 15, 2009
Why you never Question a Drunk
Why you never Question a Drunk
I was shopping at the local supermarket the other day where I selected:
A half-gallon of 2% milk
A carton of eggs
A quart of orange juice
A head of lettuce
A 2 lb. can of coffee
A 1 lb. package of bacon
As I was unloading my items on the conveyor belt to check out, a drunk
standing behind me watched as I placed the items in front of the cashier.
While the cashier was ringing up the purchases, the drunk calmly stated,
"You must be single."
I was a bit startled by this proclamation, but I was intrigued by the
derelict's intuition, since I was indeed single.
I looked at the six items on the belt and saw nothing particularly unusual
about my selections that could have tipped off the drunk to my marital
status.
Curiosity getting the better of me, I said:
"Well, you know what, you're absolutely right. But how on earth did you
know that? "
The drunk replied, "Cause you're ugly."
posted by Peter Greene
I was shopping at the local supermarket the other day where I selected:
A half-gallon of 2% milk
A carton of eggs
A quart of orange juice
A head of lettuce
A 2 lb. can of coffee
A 1 lb. package of bacon
As I was unloading my items on the conveyor belt to check out, a drunk
standing behind me watched as I placed the items in front of the cashier.
While the cashier was ringing up the purchases, the drunk calmly stated,
"You must be single."
I was a bit startled by this proclamation, but I was intrigued by the
derelict's intuition, since I was indeed single.
I looked at the six items on the belt and saw nothing particularly unusual
about my selections that could have tipped off the drunk to my marital
status.
Curiosity getting the better of me, I said:
"Well, you know what, you're absolutely right. But how on earth did you
know that? "
The drunk replied, "Cause you're ugly."
posted by Peter Greene
Tuesday, April 14, 2009
Firm's morning note
the S&P 500 is well above its’ intermediate term down trend line and still within the confines of an upward sloping price channel. Both of these are positive conditions. However, the index is currently stuck in a bit of a resistance zone with the 873 level coinciding with a 2/3rds retracement of the last peak to trough sell off. Since the whole crystal ball thing is a scam (Lol !) trialing stops and risk management techniques give investors the best ability to do the following here; patient here, keep the upside potential of the market (should it keep rallying) and also lock in gains in the event the market stalls here.
Volume has moderated at present S&P 500 levels, which while not alarming, suggests buyers are being more discriminating and patient about new purchases (versus say just 2 weeks ago). The CBOE Total Equity/Index Put to Call Ratio (not seen in this report) has slipped to under 0.70, typically a short-term negative. Near term these resistance areas may present a minor challenge to overcome, particularly with the CBOE Total Equity/Index Put/Call ratio so low. We would watch closely here how stock’s trade today/tomorrow on this Goldman news to repay TARP. Part of the rally the past few weeks, in addition to other factors, may have been predicated on select investors catching early wind of Wells Fargo’s (WFC) strong quarter as well as Goldman’s (GS) and positioning ahead of it.
Best.
Kevin Lane
FusionIQ
posted by Peter Greene
Volume has moderated at present S&P 500 levels, which while not alarming, suggests buyers are being more discriminating and patient about new purchases (versus say just 2 weeks ago). The CBOE Total Equity/Index Put to Call Ratio (not seen in this report) has slipped to under 0.70, typically a short-term negative. Near term these resistance areas may present a minor challenge to overcome, particularly with the CBOE Total Equity/Index Put/Call ratio so low. We would watch closely here how stock’s trade today/tomorrow on this Goldman news to repay TARP. Part of the rally the past few weeks, in addition to other factors, may have been predicated on select investors catching early wind of Wells Fargo’s (WFC) strong quarter as well as Goldman’s (GS) and positioning ahead of it.
Best.
Kevin Lane
FusionIQ
posted by Peter Greene
Monday, April 13, 2009
Market note from Firm
Another stellar day for the markets on Thursday as up to down volume ratios on the NASDAQ and NYSE were 12.36 to 1 and 14.78 to 1 respectively, while their advance to decline ratios were also correspondingly bullish at 5.10 to 1 and 7.28 to 1 respectively. We always say these metrics are the best gauges of confidence and conviction behind the markets move and help to better handicap a rally's likely staying power as it reflects more participation and commitment by the market largest aggregate buyers; institutions. When a market is up but these metrics aren't as positively skewed it is typically more a sign of short covering, which is not a long lasting liquidity event (buying) to drives stocks markedly higher. However days with internal readings like today's or the ones we highlighted back in early March (when the index was about 17+ % lower than today's close) are signs of significant buying and commitment which suggest a good (i.e. durable) rally is at hand.
For the last few days we have been saying the obvious and easy call was to say the market would stall as the S&P 500 approached resistance. From a common sense as well as a technical perspective even we had to respect that this resistance may be a factor after a 26 % gain from the lows. Playing devil’s advocate in our head and knowing nothing is certain or has to act a certain way we did hold out an alternative and equally likely thesis; a continuation of the rally. We also suggested several blueprints on how to navigate this call of stall or rally.
We suggested that being prepared and then executing a game plan makes one less emotional and makes for better results. Along the vein of being open to the idea that the game changes constantly and like a good coach, a trader/investor needs to adapt (or change) their game plan as new wrinkles occur. In this case the wrinkle was the market could possible move higher and evidence was growing to suggest that.
That evidence we suggested that was altering the original game plan of a likely stall near 850 (after we suggested investor investors buy just above S&P 500 @ 700) was growing anecdotal observations of everyone echoing disbelief in this rally's staying power. We suggested it was pervasive and growing louder and as more and more naysayers and doubters said things such as; "I am in cash and can sleep." or my favourite "I am not worried that I am missing this up move it's not a real move." Pardon my naiveté (Lol !), but the last time I checked a 26+ % rally in several weeks is pretty damn real.
Hearing those "safe in cash" comments now, not after the first 20% or 30 % correction but after a 50 % correction from the peak then adding to the equation negative sentiment towards equities, individual investors and fund managers with lots of cash on the sidelines, a ton of bad news discounted into prices and a global push to aggressively stimulate it made for a pretty compelling backdrop to buy stocks (if not for the long haul at least for a good cyclical rally).
As further supportive evidence to a rally extension theme being likely Thursday we highlighted (see our Sentiment Note under the Research tab then select US Equity Review) that sentiment had not become excessively bullish yet (typically a rally killer) even after the aggressive move off the lows. Therefore we suggested stocks weren't in danger because liquidity (buying power) was not tapped out yet.
Techs, high beta and growth style investing outpaced the market today and continue to be the place and style bias producing the best returns.
Kevin Lane
posted by Peter Greene
For the last few days we have been saying the obvious and easy call was to say the market would stall as the S&P 500 approached resistance. From a common sense as well as a technical perspective even we had to respect that this resistance may be a factor after a 26 % gain from the lows. Playing devil’s advocate in our head and knowing nothing is certain or has to act a certain way we did hold out an alternative and equally likely thesis; a continuation of the rally. We also suggested several blueprints on how to navigate this call of stall or rally.
We suggested that being prepared and then executing a game plan makes one less emotional and makes for better results. Along the vein of being open to the idea that the game changes constantly and like a good coach, a trader/investor needs to adapt (or change) their game plan as new wrinkles occur. In this case the wrinkle was the market could possible move higher and evidence was growing to suggest that.
That evidence we suggested that was altering the original game plan of a likely stall near 850 (after we suggested investor investors buy just above S&P 500 @ 700) was growing anecdotal observations of everyone echoing disbelief in this rally's staying power. We suggested it was pervasive and growing louder and as more and more naysayers and doubters said things such as; "I am in cash and can sleep." or my favourite "I am not worried that I am missing this up move it's not a real move." Pardon my naiveté (Lol !), but the last time I checked a 26+ % rally in several weeks is pretty damn real.
Hearing those "safe in cash" comments now, not after the first 20% or 30 % correction but after a 50 % correction from the peak then adding to the equation negative sentiment towards equities, individual investors and fund managers with lots of cash on the sidelines, a ton of bad news discounted into prices and a global push to aggressively stimulate it made for a pretty compelling backdrop to buy stocks (if not for the long haul at least for a good cyclical rally).
As further supportive evidence to a rally extension theme being likely Thursday we highlighted (see our Sentiment Note under the Research tab then select US Equity Review) that sentiment had not become excessively bullish yet (typically a rally killer) even after the aggressive move off the lows. Therefore we suggested stocks weren't in danger because liquidity (buying power) was not tapped out yet.
Techs, high beta and growth style investing outpaced the market today and continue to be the place and style bias producing the best returns.
Kevin Lane
posted by Peter Greene
Wednesday, April 8, 2009
S&P note from this am
Not much new on the S&P 500 ...
As seen in the attached research note over the last few days we suggested and then watched the market stall (Monday), then get pushed back down off resistance (Tuesday) near 850. My astute trader suggested after the close we may still be in a bearish down sloping trend channel. While it is true the S&P 500 is currently locked in this down channel the jury is still out on whether or not it can break above the upper channel line before testing the lower. If we do indeed test the lower channel line it would undercut the current bear market low. Conversely a move beyond the April 2nd high would restore the bullish trajectory of the current rally.
posted by Peter Greene
As seen in the attached research note over the last few days we suggested and then watched the market stall (Monday), then get pushed back down off resistance (Tuesday) near 850. My astute trader suggested after the close we may still be in a bearish down sloping trend channel. While it is true the S&P 500 is currently locked in this down channel the jury is still out on whether or not it can break above the upper channel line before testing the lower. If we do indeed test the lower channel line it would undercut the current bear market low. Conversely a move beyond the April 2nd high would restore the bullish trajectory of the current rally.
posted by Peter Greene
Nasdaq 100 levels and note
As the year to date return numbers indicate the NASDAQ down only - 0.98 % through 4/7/09 versus the S&P 500 down - 9.71 % (same time frame) acts better than the rest of the market.
From a technical perspective we see this same outperformance with the NASDAQ 100 retesting and holding in line with its’ November lows, scoring a minor double bottom, while at the same time the S&P 500 dropped to new lows.
Similar to the S&P 500 we view the current action in the NASDAQ 100 as a pause/consolidation. This would only change if market internal skews got more negative and more persistent. So like the S&P 500, we would watch the NDX over the next few sessions and track the skew of decliners to advancers and down to up volume. As long as we don’t get ratios of 5 to 1 or better on both indicators then the likelihood of a deep retest becomes lessened. Below we look at a 31-day chart of the NASDAQ 100 for micro levels of support.
So the NASDAQ 100 is pretty cut and dry, the tone remains bullish and this only changes if the double bottom lows near 1,050 are broken.
posted by Peter Greene
From a technical perspective we see this same outperformance with the NASDAQ 100 retesting and holding in line with its’ November lows, scoring a minor double bottom, while at the same time the S&P 500 dropped to new lows.
Similar to the S&P 500 we view the current action in the NASDAQ 100 as a pause/consolidation. This would only change if market internal skews got more negative and more persistent. So like the S&P 500, we would watch the NDX over the next few sessions and track the skew of decliners to advancers and down to up volume. As long as we don’t get ratios of 5 to 1 or better on both indicators then the likelihood of a deep retest becomes lessened. Below we look at a 31-day chart of the NASDAQ 100 for micro levels of support.
So the NASDAQ 100 is pretty cut and dry, the tone remains bullish and this only changes if the double bottom lows near 1,050 are broken.
posted by Peter Greene
4/7 post market note
From the firm, here is last nights post
After stalling yesterday and rallying back some today the market pushed downward, deeper from resistance near 850. I am sure the media will cite Soros calling this a bear market rally or Marc Faber calling for a 10 % correction or Citigroup's Chief Strategist saying to be underweight U.S. equities. For the first two gents I wonder if their funds are currently short and they are trying to jawbone the market in their direction … shocking thought I know lol ! … As for the Citigroup chap thanks for the underweight US equities recommendation after a 50+ % two year thrashing ... nice timing !
Anyway as those of us who follow unbiased market evidence we know the following; the market rallied 27.00 % and slammed into stiff resistance. Clearly this is the more likely reason we witnessed some profit taking/selling interest the last few days. But that wouldn't be sexy enough to say on TV I guess.
Realistically it is too premature to call it a new bull market given the macro landscape, conversely it is probably too premature to say this rally is done/over as well. Remember it is not the point drop (or gain) that matters, rather how they go up or down (internals) that counts. That said while internals were skewed negatively today they weren't nearly as negatively skewed as the positive skew we saw in Mid March which catapulted this current rally. So while there has been some selling of late, the buyers still have control at this point.
In tomorrow's S&P 500 and NASDAQ 100 notes we will look at levels of downside support on the two indices.
If today's action was unsettling we suggest revisiting yesterday's S&P 500 note where we suggested several tactical trading strategies to remove the emotion such as locking in some gains or set trailing risk stops. Being prepared is what makes one comfortable with risk as well as reward. Its' when you don’t lay out a game plan that emotion creeps in and you end up reacting (as opposed to being proactive) and watch like a deer in headlights that you should worry.
FusionIQ
Kevin Lane
posted by Peter Greene
After stalling yesterday and rallying back some today the market pushed downward, deeper from resistance near 850. I am sure the media will cite Soros calling this a bear market rally or Marc Faber calling for a 10 % correction or Citigroup's Chief Strategist saying to be underweight U.S. equities. For the first two gents I wonder if their funds are currently short and they are trying to jawbone the market in their direction … shocking thought I know lol ! … As for the Citigroup chap thanks for the underweight US equities recommendation after a 50+ % two year thrashing ... nice timing !
Anyway as those of us who follow unbiased market evidence we know the following; the market rallied 27.00 % and slammed into stiff resistance. Clearly this is the more likely reason we witnessed some profit taking/selling interest the last few days. But that wouldn't be sexy enough to say on TV I guess.
Realistically it is too premature to call it a new bull market given the macro landscape, conversely it is probably too premature to say this rally is done/over as well. Remember it is not the point drop (or gain) that matters, rather how they go up or down (internals) that counts. That said while internals were skewed negatively today they weren't nearly as negatively skewed as the positive skew we saw in Mid March which catapulted this current rally. So while there has been some selling of late, the buyers still have control at this point.
In tomorrow's S&P 500 and NASDAQ 100 notes we will look at levels of downside support on the two indices.
If today's action was unsettling we suggest revisiting yesterday's S&P 500 note where we suggested several tactical trading strategies to remove the emotion such as locking in some gains or set trailing risk stops. Being prepared is what makes one comfortable with risk as well as reward. Its' when you don’t lay out a game plan that emotion creeps in and you end up reacting (as opposed to being proactive) and watch like a deer in headlights that you should worry.
FusionIQ
Kevin Lane
posted by Peter Greene
Monday, April 6, 2009
Post Market Comments
Unlike the market of months past, where stocks rallied and the sellers quickly materialized to push stocks lower, we are now seeing the exact opposite for the last several weeks as buyers emerge very quickly on dips to push stocks up. This suggest liquidity on the part of buyers remains robust. As we said in this morning’s S&P 500 note many investors we met on our recent west coast trip echoed sentiment such as "glad to be in cash" or "I don't feel like I am missing much not partaking in this rally."
While observed sentiment should never override objective technical indicator evidence there is some value when you open your ears and listen to what perceived novice investors are saying. For instance on the way down I heard many comments such as "this is the bottom" as we dropped lower and lower. Finally at the real lows the constant chorus of "This is the bottom choruses" completely dried up and we really were at the bottom !! So now to hear it is almost a foregone conclusion by many that this rally is not real and the McClellan Oscillator is so overbought that the market has to go done. Love that one every time I have ever said in my career the market "has to do something" like clockwork it never complies.
My point is although it is logical to look at a big rally and an overbought technical condition while running into resistance as a good stalling/selling point, it is not set in stone that it will work. Like any battle/sporting event you have to game plan and reassess strategies as events unfold. As I suggested in today's S&P 500 note there are several strategies that may work in case this market works higher though resistance (and again given that observed sentiment thinks this rally is done, I am leaning towards we may go a tad higher).
One strategy is to make strategic trims (reduce exposure), the second and my favorite is to remains fully invested with trailing stops set on lower cost basis positions (this give you the upside if the market continues higher but also takes you out and locks in profit if in fact we go lower on a re-test scenario) and the last scenario combines making strategic trims and holding a portion of the portfolio with stop losses then if we break above resistance moving back into names trimmed to remain invested. The idea is to pick a strategy your comfortable with, remove the emotion and then have a contingency plan should the market move unexpectedly in a direction you hadn't anticipated.
Kevin P. Lane
posted by Peter Greene
While observed sentiment should never override objective technical indicator evidence there is some value when you open your ears and listen to what perceived novice investors are saying. For instance on the way down I heard many comments such as "this is the bottom" as we dropped lower and lower. Finally at the real lows the constant chorus of "This is the bottom choruses" completely dried up and we really were at the bottom !! So now to hear it is almost a foregone conclusion by many that this rally is not real and the McClellan Oscillator is so overbought that the market has to go done. Love that one every time I have ever said in my career the market "has to do something" like clockwork it never complies.
My point is although it is logical to look at a big rally and an overbought technical condition while running into resistance as a good stalling/selling point, it is not set in stone that it will work. Like any battle/sporting event you have to game plan and reassess strategies as events unfold. As I suggested in today's S&P 500 note there are several strategies that may work in case this market works higher though resistance (and again given that observed sentiment thinks this rally is done, I am leaning towards we may go a tad higher).
One strategy is to make strategic trims (reduce exposure), the second and my favorite is to remains fully invested with trailing stops set on lower cost basis positions (this give you the upside if the market continues higher but also takes you out and locks in profit if in fact we go lower on a re-test scenario) and the last scenario combines making strategic trims and holding a portion of the portfolio with stop losses then if we break above resistance moving back into names trimmed to remain invested. The idea is to pick a strategy your comfortable with, remove the emotion and then have a contingency plan should the market move unexpectedly in a direction you hadn't anticipated.
Kevin P. Lane
posted by Peter Greene
S&P levels from firm this am
The S&P 500 is rallying back into its’ upper resistance zone and minor downtrend line ... The market has now moved 26.37 % off the intraday low set on March 6th 2009. The easy call here is to say, “ Sell everything and lock in the gains from this trading rally and wait for a re-test then buy back in ! ” However as we all know the easy calls are the ones that are so obvious they never seem to work out. As the old traders saying goes, “ The market is here to reward the minority and confound the majority. ” After meeting a lot of investors recently in meetings many feel and I quote “ Safe ” in cash and also “ Do not mind having missed this move.” So anecdotal sentiment observations are this rally is not real. When I hear that from a lot of people it makes me think resistance or not we may have a shot to work higher still. That said we explore a few charts to gain more perspective.
As you will see in the attached research report the S&P 500 is at its’ minor downtrend line as well as its’ upper resistance level near 850. Support and resistance, while not an exact science, do provide us back drops as to where markets are likely to stall or bounce. However when looking at support and resistance one must gauge what buying (and selling) power look like to give them an idea of whether those support(s) or resistance areas are likely to hold. Right now liquidity is strong as evidenced several times of late by the market dipping and roaring back. So while the market could stall here near 850, if liquidity is strong it could pop up to 881, the first Fibonacci retracement level from the 2007 highs to 2009 lows.
posted by Peter Greene
As you will see in the attached research report the S&P 500 is at its’ minor downtrend line as well as its’ upper resistance level near 850. Support and resistance, while not an exact science, do provide us back drops as to where markets are likely to stall or bounce. However when looking at support and resistance one must gauge what buying (and selling) power look like to give them an idea of whether those support(s) or resistance areas are likely to hold. Right now liquidity is strong as evidenced several times of late by the market dipping and roaring back. So while the market could stall here near 850, if liquidity is strong it could pop up to 881, the first Fibonacci retracement level from the 2007 highs to 2009 lows.
posted by Peter Greene
Quick thought on mkt right now.
This 850 level in the S&P is a level that the market has been bumping up to, as you saw in the piece Kevin put out this morning. For a trading account in cash I would hold off until we broke above that level with real volume. With a tight stop.
The scary thing is that there is so much money on the sidelines (institutional as well as the Fed keeping rated at 0 ) this along with the Obama stimulus + budget spending + TARP, TELP, TARP II etc (whether you agree or not with the policies) cannot be ignored. If we do get some bad earning to suppress the market it will not stay low too long- We would still love to see the massive selling to "call the bottom", but after a long recession and the indices still down 40ish% many people have given up already.
posted by Peter Greene
The scary thing is that there is so much money on the sidelines (institutional as well as the Fed keeping rated at 0 ) this along with the Obama stimulus + budget spending + TARP, TELP, TARP II etc (whether you agree or not with the policies) cannot be ignored. If we do get some bad earning to suppress the market it will not stay low too long- We would still love to see the massive selling to "call the bottom", but after a long recession and the indices still down 40ish% many people have given up already.
posted by Peter Greene
Wednesday, April 1, 2009
The Quiet Coup
Good article on The US financial crisis. A big long but really worth the read...
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
http://www.theatlantic.com/doc/200905/imf-advice
posted by Peter Greene
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
http://www.theatlantic.com/doc/200905/imf-advice
posted by Peter Greene
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