A Thoroughly Exhausted Bull Market

Yet someone (or much more likely something) keeps pushing it higher. A chart of the market's divergence index indicates the most exhausted uptrend witness in years. Divergence Index: ((10 Day Momentum * 40 Day Momentum)/Variance 40 Day Price Changes). Not surprisingly, large positive values indicate an exhausted trend.

click to enlarge

Comments

[RiskReturnOptimizer]

This could all change in few days as solar eclipse marks turning point in the market psychology.

My VIX-based oscillator is also signaling danger zone like the May, July tops.

SPY 96.1 Intra-day High pull mean double-top.

Tradeable pullback starting today -- use SDS hedged with selling upside calls (August $51 @ around $2 premium looks pretty good) for more riks-reward oriented investors to get 4% yield while market takes a breather.

2009 Jul 22 03:26 PM

[Joseph L. Shaefer]

‘Tyler,’ I certainly hope the rest of the investing world catches on quickly to the simple truth represented by your Nasdaq Divergence Index above. Otherwise, the shorts we have laid on via inverse ETFs – as a hedge against a pullback – could one day become an anchor!

“Trees do not grow to the sky, though they may seem to from inside a redwood forest.” And markets are cyclical, not linear…

2009 Jul 22 03:28 PM

[Bill L.]

I believe most trend following systems will probably stop and reverse from short to long with a close at these levels plus the news highs today, that said I believe it more probably that this sets up a bull trap rather than a new leg up; something like a specialist rally, but on a larger scale, made possible by these low volumes.

Once people are drawn in by new highs and trend system reverse... look out below, Goldman just made their quarter.

2009 Jul 22 03:29 PM

[Swashbuckler]

Humpty Dumpty sat on a wall.....

2009 Jul 22 03:42 PM

[tunaman4u2]

Nice shout out you got on CNBC today, congrats

2009 Jul 22 03:46 PM

[I need more cowbell]

More like a "shout at" , which is far better in any event. Being ridiculed by the village idiot is like a doulbe negative, hence positive ( you need to know stuff like this for captcha )


On Jul 22 03:46 PM tunaman4u2 wrote:

> Nice shout out you got on CNBC today, congrats

2009 Jul 22 04:11 PM

[Bill L.]

Ha yea.

How many times has Charlie Gasparino said, "no need to raise capital" in the last year? Shill.


On Jul 22 03:46 PM tunaman4u2 wrote:

> Nice shout out you got on CNBC today, congrats

2009 Jul 22 04:12 PM

[tunaman4u2]

Very true, a total LMAO moment.
Tyler Durden is not a "moronic" ill informed blogger...
CNBC cheer leading based on the market being up & down is

On Jul 22 04:11 PM I need more cowbell wrote:

> More like a "shout at" , which is far better in any event. Being
> ridiculed by the village idiot is like a doulbe negative, hence positive
> ( you need to know stuff like this for captcha )

2009 Jul 22 04:55 PM

[WhoisJohnGalt]

The reckless jump in Caterpillar's price after its earnings release really tipped me off on how irrational investors are when double digit revenue losses (and the details are only uglier) are swept under the rug by lenient earnings expectations. If anything, I'm expecting emotion and volatility to shake up the markets soon.

2009 Jul 22 04:59 PM

[Dave Dorgan]

As always, more good info TD. My concern is GS. The majority don't want to complain when the market is going up, but if the market goes down, how is GS going to make it's money? No doubt they can make money in either direction, but on the bear side they become first in line at the witch burning. And, they probably know this all too well.

2009 Jul 22 05:18 PM

[Missing_Link]

Mad Hedge Fund Trader: I've begun to see the stock market at least as much as something that "writes" to the economy as it attempts (or pretends) to "read" it. No one in the US wants to buy when their 401(k) is in the dumps. The evil, mustachioed, tying-innocent-women-t... investment bankers who run the world realize this, and are working hard to pump up both confidence and consumer spending through the stock market.

Tyler: for once, my technical indicators agree with you. The rally's over, at least for now.

2009 Jul 22 07:19 PM

[BullnBear]

Mad Hedge...I'm an idiot, I accidentally clicked on the report abuse tab under your name....I apologize and I will flog myself....


On Jul 22 03:24 PM Mad Hedge Fund Trader wrote:

> I'm certainly exhuasted. Let me tell you that I, and the rest of
> the hedge fund industry, are highly suspicious of the global stock
> market rally that has ensued over the past week. Companies lowered
> earnings expectations so far they were easy to beat, and could be
> achieved by laying off a few more workers. The question this raises
> is how the economy moves forward with skyrocketing unemployment.
> Now that we have double topped in the S&P 500 at 956, even the
> bulls are saying we only have another 4% to go. This on a day when
> we are all wondering if commercial real estate loans will be the
> stick that breaks the back of the banking industry. Mike Mayo, a
> banking analyst with Clayon Securities, says that the industry may
> have to write off a quarter of its $7 trillion loan book over the
> next three years, levels greater than seen during the Great Depression.
> While banks are making a lot of money trading, they are losing it
> even faster in loan losses. It’s like trying to fill a barrel with
> water that has been perforated with a shotgun blast. If you are playing
> from the long side here, keep one foot in the exit, and a finger
> right on your mouse.

2009 Jul 22 08:10 PM

[BullnBear]

Mr. Durden this is top notch as always and as usual you are way ahead of the curve with your information.

I kind of take it from the posts here that you were verbally kicked around on CNBC a little bit today? If so then that should be worn as a badge of honor.

2009 Jul 22 08:14 PM

[fed_alchemy]

The banks got their 2Q's of fluff, now take a time-out and let the free market have 2Q's. Let the pieces fall ,everyone seeing these great earnings, feel used... like a Taco Bell toilet seat

2009 Jul 22 08:19 PM

[RonaldReagan]

Dennis Kneale and CNBC are part of INGSOC. Tyler keep hammering away brother.


www.cnbc.com/id/158402...

2009 Jul 22 09:51 PM

[Roger Knights]

There was a beautiful "hanging man" candlestick on SPY yesterday, which marked the closing high so far of this rally. "The turn of the tide," I think.

2009 Jul 22 10:07 PM

[Gary A]

I think that Goldman Sachs has its evil eye on Citibank, and Rubin knows Citibank inside out. Goldman will pick at the carcass if there is a major downturn, that GS itself causes.

2009 Jul 22 11:00 PM

[Gary A]

In addition I remember those guys talking about how the commercial real estate crash would be less difficult than the Alt A and subprime. I recall those folks have disappeared like the cockroaches they are. Perhaps weakened banks won't do so well with the meltdown of commercial real estate. I wonder how Wall Street would do with a crowd of small businessmen with torches and pitchforks descending on the street. Hope it doesn't happen but they are breeding a lot of ill will and they really need to warn the people that the crap is about to hit the fan.

2009 Jul 22 11:03 PM

[MarkitWacha]

Good article. There are other forces at work, though, that are skewing all kinds of statistics. For instance, there's a trillion extra dollars floating around at the banks, courtesy of the Fed's purchases of asset backed securities. Inflation vs. deflation is precariously balanced. Unemployment has caused many companies to slash to the bone, sacrificing future growth for present efficiency. The companies that re-invent themselves to survive this time around might just create a valuation quantum leap in p/e ratios.

Overall, the market is balanced, volatility is down. It would take a major unknowable event to trigger another crash from these prices.

2009 Jul 23 02:44 AM

[Maxe Paul]

"This could all change in few days as solar eclipse marks turning point in the market psychology. "

Give me a call (only $9.95 per second), i will tell you your long drawn out horoscope!

"Mad Hedge...I'm an idiot, I accidentally clicked on the report abuse tab under your name....I apologize and I will flog myself...."

Well done i have been wanting to do that myself to the "mad hedge spammer"!

2009 Jul 23 07:45 AM