Sobering Stat: ARMS Index Indicates Market Is at Peak, Not Bottom 57 comments
-
Font Size:
-
Print
- TweetThis
A few readers have asked this question, noting recent low TRIN values. (TRIN is also known as the ARMS Index). Of course, what this means is that a high proportion of daily trading volume has been concentrated in rising stocks.
But is TRIN low?
To address this, I looked at the median 20-day TRIN values going back to 2000. I used the median because the TRIN ratio is constructed in such a way that you can get much larger readings above 1.0 than below. With the median, I wanted to capture whether the average day was showing greater concentration of volume to the winning or losing stocks.
Guess what? The current 20-day median TRIN is the lowest value we've seen since 2000 at around .75.
I'm not exactly sure what to make of that. What I can tell you with certainty is that two of the past historical occasions in which we've had 20-day price highs and ultra low median 20-day TRIN readings have been March 2000 and late May/early June, 2007. Both corresponded more or less to bull market peaks.
The ultra low TRIN seemed to capture frothiness in those markets: lots of volume going into a few speculative, rising issues. Might we be seeing the same thing with the recent pops in such low priced stocks as AIG (AIG), Citigroup (C), Fannie Mae (FNM), Freddie Mac (FRE), CIT (CIT), and Bof A (BAC)? I note that about 2 billion of NYSE volume was concentrated in C, FNM, and FRE alone. Seems like lots of money chasing low-priced volatile financial stocks.
Just like lots of money chasing volatile tech stocks or emerging market stocks. Not something you'd see at market bottoms. A bit of a sentiment caveat for this market shrink.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 57 comments:
I'm mostly in cash and physical Gold bullion but will continue to hold selected energy stocks and corporate bond fund.
Are we beginning to witness the demise of TRIN and other technical indicators that many analysts have relied on?
they've changed the game. they've turned an imminent implosion into an imminent explosion.
On Aug 29 02:11 AM Michael Clark wrote:
> This is not a surprise -- but I appreciated reading it. We are near
> a top and we will test March lows. Denial is not a fundamental strength.
> And companies with declining earnings are not necessarily a good
> value. I'd rather own a company with a high PE and rising earnings
> than a company with a low PE and declining earnings. In the case
> of this market, we have mostly companies with a high PE and declining
> earnings. That's a very dangerous market condition.
The market is clearly overbought and has risen to unsustainable levels. It was first better than expected earnings, then it was the growth of China, then it was about housing and other reports, then it was we sold a few more cars through the clunker program and now we are starting to take stock of the basics. They have remained unchanged and over the long-run these cannot be abrogated by either liquidity or complicity.
Growth in China is in serious jeopardy and central authorities are genuinely concerned about creation of excess capacity and speculation in commodities, casino's and equities. Recent policy actions, designed to mute some of the excesses, has been initiated over concern of these excesses and the larger unspoken concern over the financial health of the economy. Corporations with deteriorating earnings are borrowing more money; under usual conditions they would be denied additional credit. In parallel, banks are concealing non-performing loans through rolling them over. Some smart people, including Micheal Grant, think China is a ticking time bomb.
Meanwhile, stateside, the core problems of underemployment, consumer spending and bankiing sector health remain unchanged.
To an extent consumer spending and underemployment are intertwined; but even if consumers, who have jobs, were not frightened by the economy and the administration's policies they would still want to save and liquidate debt therby containing spending. Prospects for the unemployed are miserable and, unfortunately, government and the apparatchiks of MSM do nothing to either clarify or correct the resports released federal departments and agencies. The bottom line is hiring is still trending down amid a growing potential labor force.
If China follows the path of Japan, the model country that could do no wrong until 1989, and the US consumer spending continues to contract, what will be the catalyst to spur growth and profits? Many times people when confronted by such a question will resort to bromides that touch upon ingenuity, creativity and innovation but it is easy to forget that these essential qualities must be nurtured.
A solid investment environment depends on a strong and stable currency, restrained federal spending, less harmful legislation, dependable contract law, limits on taxation and countercyclical capital regulation.
In my humble view things, when looking around the corner, appear rather bleak.
On Aug 29 10:23 AM CautiousInvestor wrote:
> A host of the technical indicators I use have been warnings but this
> market is being driven by historically unique forces, including massive
> deficits and proportionate liquidity injections, or is being supported
> my the machinations of the Fed. In either case, what in the past
> have proven to be useful tools are being compromised, if not castrated,
> in the current setting.
>
> The market is clearly overbought and has risen to unsustainable levels.
> It was first better than expected earnings, then it was the growth
> of China, then it was about housing and other reports, then it was
> we sold a few more cars through the clunker program and now we are
> starting to take stock of the basics. They have remained unchanged
> and over the long-run these cannot be abrogated by either liquidity
> or complicity.
Thank you Cautious Investor for hitting it on the head and writing in such an articulate manner.
On Aug 29 10:23 AM CautiousInvestor wrote:
> A host of the technical indicators I use have been warnings but this
> market is being driven by historically unique forces, including massive
> deficits and proportionate liquidity injections, or is being supported
> my the machinations of the Fed. In either case, what in the past
> have proven to be useful tools are being compromised, if not castrated,
> in the current setting.
>
> The market is clearly overbought and has risen to unsustainable levels.
> It was first better than expected earnings, then it was the growth
> of China, then it was about housing and other reports, then it was
> we sold a few more cars through the clunker program and now we are
> starting to take stock of the basics. They have remained unchanged
> and over the long-run these cannot be abrogated by either liquidity
> or complicity.
>
> Growth in China is in serious jeopardy and central authorities are
> genuinely concerned about creation of excess capacity and speculation
> in commodities, casino's and equities. Recent policy actions, designed
> to mute some of the excesses, has been initiated over concern of
> these excesses and the larger unspoken concern over the financial
> health of the economy. Corporations with deteriorating earnings are
> borrowing more money; under usual conditions they would be denied
> additional credit. In parallel, banks are concealing non-performing
> loans through rolling them over. Some smart people, including Micheal
> Grant, think China is a ticking time bomb.
>
> Meanwhile, stateside, the core problems of underemployment, consumer
> spending and bankiing sector health remain unchanged.
> To an extent consumer spending and underemployment are intertwined;
> but even if consumers, who have jobs, were not frightened by the
> economy and the administration's policies they would still want to
> save and liquidate debt therby containing spending. Prospects for
> the unemployed are miserable and, unfortunately, government and the
> apparatchiks of MSM do nothing to either clarify or correct the resports
> released federal departments and agencies. The bottom line is hiring
> is still trending down amid a growing potential labor force.
>
> If China follows the path of Japan, the model country that could
> do no wrong until 1989, and the US consumer spending continues to
> contract, what will be the catalyst to spur growth and profits? Many
> times people when confronted by such a question will resort to bromides
> that touch upon ingenuity, creativity and innovation but it is easy
> to forget that these essential qualities must be nurtured.
> A solid investment environment depends on a strong and stable currency,
> restrained federal spending, less harmful legislation, dependable
> contract law, limits on taxation and countercyclical capital regulation.
>
>
> In my humble view things, when looking around the corner, appear
> rather bleak.
>
>
>
now im telling them to sell, as most of the plays we found value in are now 2,3 500%+ higher and not looking so cheap anymore, p/e, p/s, p/book for many stocks are very high now and the financials... hell they dont even have to report an honest balance sheet, many are borrowing at no interest and some like AIG and FNM are not even paying interest on certain obligations, so no reason to take on risk with those...
the only thing to continue to speculate on is energy, one of the few sectors where there is still somewhat steady consumer spending... if dollar goes where it should (down), if oil can break 75 and nat gas can put in some kind of bottom, this mkt will be worth trading higher... otherwise protect the gains you should have made off this great rally!
Is all of this money pouring into stocks and commodities (think especially oil here) because da boyz know the dollar is sinking like a rocjk could be seriously devalued very soon and they do not want to be caught holding US dollars.
Just a thought, when markets act so irrationally and it may nor all be because of media hype about green shoots.
Have been aware of and watched TRIN for many years and found it to be a fair to middlin tech indicator. Too bad the originator flipped the indicator upside down and made it counterintuitive - an easily avoidable mistake. Also, as the author noted, the indicator is not symetrical which adds to the difficulty, at least until one becomes very familiar with it.
It used to be that one could watch TRIN, together with a lot of other volume related indicators and get some feel for the market direction. And one could watch the big market traders seperately for some indication also.
NOT ANYMORE. Why? Because the big traders are high speed flash TRADING using program trading (algorithmic trading), risk arbitrage with options combined with short selling, and other hedging techniques, etc. all at virtually the same instant with the aid of high speed massive computers and billions of dollars to apply which makes it all very moot and academic for the typical retail investor, who has none of this at his disposal..
This means, in part, because of the speed and power and the "offsets" in their trading that we have no idea really, of what the big guys are actually thinking and doing, or very little anyway.
Until things get straightened out and improved , honesty, fairness, and transparency- wise, the stock markets shall remain "The Big Casino in the Sky", and the world's largest rolling crap shoot.
It is now worse in this regard than I have ever witnessed it, and, without some honest improvements to level the playing field for the small citizen investor, the Golden Shark techniques can only improve and become even more ruthless and effective. Heads they win, tails we lose, except moreso.
And its usually (almost always) table stakes for the small players, meaning the small citizen investor can get squeezed out at just the wrong time - for him or her.
How anyone other than the unbelieveably wealthy and powerful movers and shakers of the markets thinks this is a good system, is far beyond me.
Generally agree with many of the comments relative to the economy, financials, markets, problems and difficulties etc. made by previous commenters.
Our our financial system had an implosion prior to the administration's policies taking effect. Now that we are effectively at 16% unemployment, deflation continuing, people buying only the essentials (because they have no money not because they are "saving"), etc., the current government will help us descend farther then we had on our own.
There are no proactive/growth policies in place. Silly programs like "cash for clunkers", "bank bailouts/to big to fail", TARP, etc. are sucking the life blood out of Americans. Until we get pro-growth policies in place, instead of hand outs & redistribution of wealth, the current recession/depression will exaserbate into a full blown depression.
Unfortunately, our congress, administration and FED are to corrupt and self serving to actually take their oath of office seriously.
This market has been "pumped" by liars & cheats in collaboration with their willing accomplices in the media. The average investor placing many in the market long term is going to get crushed worse then they did in March.
To not recognize the above basic and fundamental facts is at best naive and at worst incompetent or criminal. Seperating Americans or any individual from their hard earned assets is disgusting.
And yes, I have entered significant short positions over the last 3 weeks. Days the market have significantly gone up, I have have taken significant short positions. What is truly facinating is that market volume is decreasing, the daily highs are lower and the activity of the "fall 2007 & fall 2008" crashes are clearly in place as a model for the "fall 2009" crash.
On Aug 29 08:56 AM Balderdash wrote:
> we will not nominally touch March lows. March lows priced in a collapse
> of the American financial system. the government has drawn a line
> in the sand. they will destroy the currency before they let the too
> big to fail crowd go down.
>
> they've changed the game. they've turned an imminent implosion into
> an imminent explosion.
I tossed the coin for the coming week and the coin came up heads. Obviously that is rubbish so I kept tossing. On the fourth attempt the coin came up tails.
I declare that my methodology (which is close to the ARMS approach of evidence based analysis) suggests the market will go down this coming week.
Please note: the tossing method described in this posting should not be confused with simple coin tossing using a hand. All coin tosses were done using the proprietary Mafeking Tossometer that removes human 'thumb' bias.
TRIN reading aside; the technical picture on both daily and weekly charts have significantly improved with the rally of the last 2 weeks.
Momentum indicators on both daily and weekly charts are indicating they can support further rallies. Short-term Elliott waves analysis also supports further upsides. Longer-term,; EW analysis points to lower lows. But that is the nature of TAs; short term can be bullish but long term can be bearish until proven wrong -- and vice versa.
The monthly chart is still significantly bearish and is still trending down using the basic ADX indicator.
The SnP500 is now projecting a target of 1063 to 1075 within the next 2 weeks if the bulls can sustain the rally using Elliott waves analysis.
Minor resistance is at 1043 which is the 2x fibonacci price projection on the daily chart of the June to July correction and a major resistance at 1055 which is the monthly 20ema that is trending to the downside. We don't know if those resistances will work or not until the bull/bear battles had been completed at those levels.
For the bears; it is very hard to make a reasonable technical analysis since there are lots of strong supports below such as the daily 20ema support which is now trending; the 1018 support which was tested last Aug 27; 956 which is the last high of June. We can also add the daily 50ema, the daily 100ma, the daily 200ma supports, etc. There are also a plethora of fibonacci retracement levels down there that can provide supports on both daily and weekly charts not to mention their own moving average supports. And the monthly chart has the 10ma which is being used by some TAs as initial support for long-term position holding in situations such as we had these last 2 years.
At the current stage; the highest probability is that any selloff or correction will be bought by the bulls or by those who failed to buy at the bottom and/or failed to fully or partially participate with the recent rallies since March 2009. Whether or not their combined efforts will prevent a potential meltdown and sustain the existing 6 months of rallies nobody knows for sure. But we can be sure, lots of those who had been left behind will take advantage of any pullback or correction.
For the armagedon'ers; here is the scenario just in case we drop like a rock from here: a normal target range of from SnP 721 to 635 with a maximum target of 524 under extreme conditions. These targets will have to be adjusted depending on when and where the expected "big" correction actually start to happen and sustain, if at all.
So the possibility of SnP going to 500 or lower as the major doomers have been "preaching" goes into the low probability scenario.
There is a very small window of opportunity for the bulls as of Friday or Aug 28 to execute the next rally, so they will have to do it early next week. Until then, we don't know what the next move will be for the bears. The bulls are holding the ball right now.
Please hold a little longer so I can complete the last phase of my SDS purchase. And we don know what he next move is. It's called heading south. Come on bulls make my day hold this dog meat market up for just a few more days.
Please Please
Your post touches many of the issues that also make me very suspicious of mere optimistic bromides. Bromides supplement an expanding economy, they do not jump-start a dead cat.
On Aug 29 10:23 AM CautiousInvestor wrote:
> A host of the technical indicators I use have been warnings but this
> market is being driven by historically unique forces, including massive
> deficits and proportionate liquidity injections, or is being supported
> my the machinations of the Fed. In either case, what in the past
> have proven to be useful tools are being compromised, if not castrated,
> in the current setting.
>
> The market is clearly overbought and has risen to unsustainable levels.
> It was first better than expected earnings, then it was the growth
> of China, then it was about housing and other reports, then it was
> we sold a few more cars through the clunker program and now we are
> starting to take stock of the basics. They have remained unchanged
> and over the long-run these cannot be abrogated by either liquidity
> or complicity.
>
> Growth in China is in serious jeopardy and central authorities are
> genuinely concerned about creation of excess capacity and speculation
> in commodities, casino's and equities. Recent policy actions, designed
> to mute some of the excesses, has been initiated over concern of
> these excesses and the larger unspoken concern over the financial
> health of the economy. Corporations with deteriorating earnings are
> borrowing more money; under usual conditions they would be denied
> additional credit. In parallel, banks are concealing non-performing
> loans through rolling them over. Some smart people, including Micheal
> Grant, think China is a ticking time bomb.
>
> Meanwhile, stateside, the core problems of underemployment, consumer
> spending and bankiing sector health remain unchanged.
> To an extent consumer spending and underemployment are intertwined;
> but even if consumers, who have jobs, were not frightened by the
> economy and the administration's policies they would still want to
> save and liquidate debt therby containing spending. Prospects for
> the unemployed are miserable and, unfortunately, government and the
> apparatchiks of MSM do nothing to either clarify or correct the resports
> released federal departments and agencies. The bottom line is hiring
> is still trending down amid a growing potential labor force.
>
> If China follows the path of Japan, the model country that could
> do no wrong until 1989, and the US consumer spending continues to
> contract, what will be the catalyst to spur growth and profits? Many
> times people when confronted by such a question will resort to bromides
> that touch upon ingenuity, creativity and innovation but it is easy
> to forget that these essential qualities must be nurtured.
> A solid investment environment depends on a strong and stable currency,
> restrained federal spending, less harmful legislation, dependable
> contract law, limits on taxation and countercyclical capital regulation.
>
>
> In my humble view things, when looking around the corner, appear
> rather bleak.
>
>
>
I think bulls and bears have exchange identities: the bears are now the mental element; and the bulls have become the emotional factor.
On Aug 29 01:53 PM aarc wrote:
> --------------
> TRIN reading aside; the technical picture on both daily and weekly
> charts have significantly improved with the rally of the last 2 weeks.
>
>
> Momentum indicators on both daily and weekly charts are indicating
> they can support further rallies. Short-term Elliott waves analysis
> also supports further upsides. Longer-term,; EW analysis points
> to lower lows. But that is the nature of TAs; short term can be
> bullish but long term can be bearish until proven wrong -- and vice
> versa.
>
> The monthly chart is still significantly bearish and is still trending
> down using the basic ADX indicator.
>
> The SnP500 is now projecting a target of 1063 to 1075 within the
> next 2 weeks if the bulls can sustain the rally using Elliott waves
> analysis.
>
> Minor resistance is at 1043 which is the 2x fibonacci price projection
> on the daily chart of the June to July correction and a major resistance
> at 1055 which is the monthly 20ema that is trending to the downside.
> We don't know if those resistances will work or not until the bull/bear
> battles had been completed at those levels.
>
> For the bears; it is very hard to make a reasonable technical analysis
> since there are lots of strong supports below such as the daily 20ema
> support which is now trending; the 1018 support which was tested
> last Aug 27; 956 which is the last high of June. We can also add
> the daily 50ema, the daily 100ma, the daily 200ma supports, etc.
> There are also a plethora of fibonacci retracement levels down there
> that can provide supports on both daily and weekly charts not to
> mention their own moving average supports. And the monthly chart
> has the 10ma which is being used by some TAs as initial support for
> long-term position holding in situations such as we had these last
> 2 years.
>
> At the current stage; the highest probability is that any selloff
> or correction will be bought by the bulls or by those who failed
> to buy at the bottom and/or failed to fully or partially participate
> with the recent rallies since March 2009. Whether or not their combined
> efforts will prevent a potential meltdown and sustain the existing
> 6 months of rallies nobody knows for sure. But we can be sure, lots
> of those who had been left behind will take advantage of any pullback
> or correction.
>
> For the armagedon'ers; here is the scenario just in case we drop
> like a rock from here: a normal target range of from SnP 721 to
> 635 with a maximum target of 524 under extreme conditions. These
> targets will have to be adjusted depending on when and where the
> expected "big" correction actually start to happen and sustain, if
> at all.
>
> So the possibility of SnP going to 500 or lower as the major doomers
> have been "preaching" goes into the low probability scenario.
>
> There is a very small window of opportunity for the bulls as of Friday
> or Aug 28 to execute the next rally, so they will have to do it early
> next week. Until then, we don't know what the next move will be
> for the bears. The bulls are holding the ball right now.
On Aug 29 10:23 AM CautiousInvestor wrote:
>.....unfortunately, government and the apparatchiks of MSM do nothing >to either clarify or correct the reports released by federal departments >and agencies.
When garbage starts to float, it is time to get out of the pond.
A .1-.25% tax on every trade would solve the computer, other spec trading problem by slowing down the market by taking the profits out of them and making long term bets better. It would also cut out much of the bubble problems.
Only by curbing such abuse will the market be worth real investing again. Now is a crap shoot.
It's being manipulated to enrich the ruling class.
So, if I try to think like an oligarch, I'd have to think that a sustained climb into November of 2010 is not possible. Therefore, I'd take it down to 666 again and buy it up through election day next year.
I'd gun it up to 1050 and really have my stooges at CNBC suck in the retail investors first.
In a real world, before fascism, we'd be at S&P 400 right now.
What is not being priced in is the fact that inflation and Fed rates are as low as they can go. Unless we believe that these rates are the new order of the universe, they will go up, and pull equity valuations down.
The market will begin its rise before the economic activity actually turns, just as the MSM has told us is happening today (but isn't really). The sad thing about all this is that the Fed, Administration, and MSM probably all know the truth but have elected to just blatantly lie to America in order to tout their own agenda. And the rich just get richer along the way and keep making political contributions to both sides to keep their agenda safe.
But I digress. I believe, like you that the near-term market support will swoon and reach a new bottom in a hurry (by early spring at the latest) where the likes of GS and BoA will plow heavily into their support role again to keep the market from finding a new, more dramatic bottom. Then the MSM Touting Heads will explain that a retest of the March lows was probably inevitable and certainly healthy for the economy and off we will go again to the races. But this time they will have more of "us" on board from the beginning (or nearly so) and the boat will be floated by a broader sea of investors. That will make the manipulation game much easier. Of course, GS and gang will profit enormously from both the collapse and the resurgence.
But, somehow, after the next election cycle has come to a close, I suspect we will have another correction of magnitude. When manipulation runs rampant supported by such enormous levels of funding (unlimited perhaps with Fed backing) all the normal measurement tools of use to us in the past are useless. We may just have to try to read the minds of those with the money this time.
When I ran the screens to drive buys I was unable to replace the sells or fill existing open slots in three of five sub-portfolios which means they stay as cash. The other two were able to stay fully invested, but there was very little (3) on the buy lists that I didn't buy -- very thin pickings.
Since the 8AUG2009 review the portfolio has moved from 6% cash, where 8% is normal, to 21% cash on Monday. In the past this type of move has correlated with either a market decline or chopping sideways (base building) for a while until new leadership with reasonable fundamental characteristics appears on the screens. It has not resolved in a healthy bull.
I'm agreeing with the author -- not a market bottom.
The market has been powered by the tremendous flood of newly printed money and cheaply borrowed money. Along with no fair returns in the bond markets, pushing that money all toward stocks. That source of easy money is still in place so stocks could be bid even higher, bubbles are unpredictable. That is why I am reluctant to cash out completely until I see more signs of a breakdown. The one advantage a small investor has is the ability to move quickly.
Could these institutions be buying their own stocks with their TARP funds?
"Historically, two factors have made important contributions to stock market returns in the years following U.S. recessions. One of these that we review frequently is valuation. Very simply, depressed valuations have historically been predictably followed by above-average total returns over the following 7-10 year period (though not necessarily over very short periods of time), while elevated valuations have been predictably followed by below-average total returns.
Thus, when we look at the dividend yield of the S&P 500 at the end of U.S. recessions since 1940, we find that the average yield has been about 4.25% (the yield at the market's low was invariably even higher). Presently, the dividend yield on the S&P 500 is about half that, at 2.14%, placing the S&P 500 price/dividend ratio at about double the level that is normally seen at the end of U.S. recessions (even presuming the recession is in fact ending, of which I remain doubtful). At the March low, the yield on the S&P 500 didn't even crack 3.65%. Similarly, the price-to-revenue ratio on the S&P 500 at the end of recessions has been about 40% lower than it is today, and has been lower still at the actual bear market trough. The same is true of valuations in relation to normalized earnings, even though the market looked reasonably cheap in March based on the ratio of the S&P 500 to 2007 peak earnings (which were driven by profit margins about 50% above the historical norm).
Stocks are currently overvalued, which – if the recession is indeed over – makes the present situation an outlier. Unfortunately, since valuations and subsequent returns go hand in hand, the likelihood is that the probable returns over the coming years will also be a disappointingly low outlier. In short, we should not assume, even if the recession is ending, that above average multi-year returns will follow".
On Aug 29 02:11 AM Michael Clark wrote:
> This is not a surprise -- but I appreciated reading it. We are near
> a top and we will test March lows. Denial is not a fundamental strength.
> And companies with declining earnings are not necessarily a good
> value. I'd rather own a company with a high PE and rising earnings
> than a company with a low PE and declining earnings. In the case
> of this market, we have mostly companies with a high PE and declining
> earnings. That's a very dangerous market condition.
On Aug 29 01:53 PM aarc wrote:
> --------------
> TRIN reading aside; the technical picture on both daily and weekly
> charts have significantly improved with the rally of the last 2 weeks.
>
>
> Momentum indicators on both daily and weekly charts are indicating
> they can support further rallies. Short-term Elliott waves analysis
> also supports further upsides. Longer-term,; EW analysis points to
> lower lows. But that is the nature of TAs; short term can be bullish
> but long term can be bearish until proven wrong -- and vice versa.
>
>
> The monthly chart is still significantly bearish and is still trending
> down using the basic ADX indicator.
>
> The SnP500 is now projecting a target of 1063 to 1075 within the
> next 2 weeks if the bulls can sustain the rally using Elliott waves
> analysis.
>
> Minor resistance is at 1043 which is the 2x fibonacci price projection
> on the daily chart of the June to July correction and a major resistance
> at 1055 which is the monthly 20ema that is trending to the downside.
> We don't know if those resistances will work or not until the bull/bear
> battles had been completed at those levels.
>
> For the bears; it is very hard to make a reasonable technical analysis
> since there are lots of strong supports below such as the daily 20ema
> support which is now trending; the 1018 support which was tested
> last Aug 27; 956 which is the last high of June. We can also add
> the daily 50ema, the daily 100ma, the daily 200ma supports, etc.
> There are also a plethora of fibonacci retracement levels down there
> that can provide supports on both daily and weekly charts not to
> mention their own moving average supports. And the monthly chart
> has the 10ma which is being used by some TAs as initial support for
> long-term position holding in situations such as we had these last
> 2 years.
>
> At the current stage; the highest probability is that any selloff
> or correction will be bought by the bulls or by those who failed
> to buy at the bottom and/or failed to fully or partially participate
> with the recent rallies since March 2009. Whether or not their combined
> efforts will prevent a potential meltdown and sustain the existing
> 6 months of rallies nobody knows for sure. But we can be sure, lots
> of those who had been left behind will take advantage of any pullback
> or correction.
>
> For the armagedon'ers; here is the scenario just in case we drop
> like a rock from here: a normal target range of from SnP 721 to 635
> with a maximum target of 524 under extreme conditions. These targets
> will have to be adjusted depending on when and where the expected
> "big" correction actually start to happen and sustain, if at all.
>
>
> So the possibility of SnP going to 500 or lower as the major doomers
> have been "preaching" goes into the low probability scenario.
>
> There is a very small window of opportunity for the bulls as of Friday
> or Aug 28 to execute the next rally, so they will have to do it early
> next week. Until then, we don't know what the next move will be for
> the bears. The bulls are holding the ball right now.
1. The fist shoe to drop....all the sub-prime junk may be washed out and quantified by now but.......the prime mortgage market, I suspect, is going to take a huge hit because the "good folks" who were credit worthy are facing continuing job losses....and one must have income to pay the mortgage. Also, many frustrated homeowners may decide to just stop paying on a home that will never be worth again what they purchased it for. They will probably decide to walk away and use the money to place into some form of savings and try to at least partially recoup their investment losses. All the cash on the sidelines suggests that equities will not have the opportunity to burn them again.
2. The well-known fact that the US economy has been fueled by the consumer to the tune of app. 70% should be a warning in itself. Spending habits of the past are gone forever for most. Discretionary purchases need discretionary income. No jobs, low paying jobs, lack of credit, and the final realization that credit is cancer for the average spend thrift who has now third degree burns translates into purchasing only the essentials......a death knell for all the companies that produce and/or market "nice to have" but "not needed" items.
3. Americans who have thus avoided losing their homes, cars, and other big ticket items due to utilizing their last lines of defense (tapping savings, IRA'S, selling toys, etc) will ultimately exhaust these last avenues of cash.
4. Those who have some discretionary income after all is said and done will hunker down into the cave and adopt a "panic" mode of savings.....socking away every dime they can after having learned the hard way that negative equity via credit.....was their biggest life's mistake....and will desperately attempt to secure some form of future nest egg.
5. All those commercial buildings, strip malls, mega malls, etc will continue to realize risiing vacancy rates since so many of the previous occupants were merchants of non-essentials and specialty stuff.....just what folks will not spend on anymore...either because they can't or they got religion.
6. The somewhat encouraging home sales data of late has been fueled by folks who had the common sense to realize they were priced out of the market and would not put themselves in jeopardy even when they could have gotten no-doc loans on dwellings with ridiculously inflated values. Now they are stepping up and are in a prudent position to make that purchase....but these folks will not be there forever. I suspect the wisest ones are still holding back waiting for prices to drop further as the other two legs of this real estate fiasco unwind and wreak total havoc in every facet of the economy.
7. The Federal Deficit.....well, I won't even go there.
If that holds true here, we won't get much past 20%. Let's see.
On Aug 29 08:56 AM Balderdash wrote:
> we will not nominally touch March lows. March lows priced in a collapse
> of the American financial system. the government has drawn a line
> in the sand. they will destroy the currency before they let the too
> big to fail crowd go down.
>
> they've changed the game. they've turned an imminent implosion into
> an imminent explosion.
We are going much higher (after a small pull back to get all the shorts sucked in)......
:o))
Take a look at this total debt chart of the last credit recession (all since then have been inventory recessions) and now.
www.financialsense.com...
That is what we face. But, we, unlike then, also have a weak dollar and continued bad government policies to contend with. This could be much worse in many ways this time.
1) the economy='s the stock market. no it doesn't!!!! it was never the case
2) that valuations are high. even when you can still find dozens of reasonable quality going concerns at under book value
you also do NOT think tangentially. if the market is crashing that means the value of FIAT (CASH) is rising. Why should fiat buy you more shares on a value creating entity tommorrow? Makes no sense as they are PRINTING it. Stocks are reflating as US dollar deflates. It is long over due. Remember we are still trading at nominal levels of the the late 1990's. Go run the S&P in euros or gold and tell me how expensive it looks. You guys need to think 3-d and not one dimensional. Most of you have been losing your arse, for good reason.
Many are bearish over the VIX /TRIN and foresee the retest of March lows, a second group sees an exception to any predetermined formula and points to the 50/68% retracements, a strong third groups sees a lingering bull since there is not time limit on how low it can go up: forget the indicators. The last group loves to hate the market and most of the participants andexcitement is their cup of tea. They don't care how it comes out.
I think we can feel some confidence that we have a good horse race of opinion that can go on for a while with just modest good news.
It has a core of buy side support that is not eroding that I can see.
The Bull is in danger of dying, long live the bull market!
---
Come on Anthony. Your post is FUD at its worst. Please list for me some REAL WORLD S&P stocks on 140x. Let's see Pfizer on 7x (generational low), Cisco on 16x (decade low), IBM 12x etc. That's the REAL S&P buddy. It's a market of stocks. Including a bankrupt bank or whatever in your multiple doesn't mean anything. You need to take a mean.
On Aug 29 02:11 AM Michael Clark wrote:
> This is not a surprise -- but I appreciated reading it. We are near
> a top and we will test March lows. Denial is not a fundamental strength.
> And companies with declining earnings are not necessarily a good
> value. I'd rather own a company with a high PE and rising earnings
> than a company with a low PE and declining earnings. In the case
> of this market, we have mostly companies with a high PE and declining
> earnings. That's a very dangerous market condition.
Look at my post on the Coppock guide.
seekingalpha.com/insta...
Also as one previous poster suggested high quality companies like IBM, CSCO, P&G, J&J, Pfizer are trading at decade lows.
You guys have already missed half of the cyclical bull market, don't miss the half still to come. Stocks across the board are strongly bullish.
seekingalpha.com/insta...
You will get your bear probably some time in 2010 or 2011 - just not this year. Meanwhile don't get in front of this road-roller.
Too much in the economy is continuing as usual, including tv predictions about the mkt, but too much change has been set in motion. Old yardsticks about PE and debt might not be as reliable today. First of all....do we really know or trust the financials from the banks? They get bailout money A N D they get some accounting holiday from reality..........but the numbers look good. Look at the prices of these companies people, treat it like a trade and no more.
Agree that a move down through March is possible. Look at it this way, if next Feb. we all look back at the charts....will it really look like some horrific surprise that we fell back and made another low? Lets get back to the creative destruction that got the country to where it is today. Encourage business to come up with new stuff, and let others fail. Before we enact an entirely new set of laws...which ones can we ACTUALLY START ENFORCING to keep people honest?
TRIN aside, there is a lot to be nervous about up here.
what other alternatives are available 1 year CDS are 40% of what they were last year at this time
Hedge funds havea ton of money on sidelines ready to be deployed by year end or face possible withdrawals
Chinese will continue to keep our 10 year t bills low which will keep interest rtaes down and more investors into stocks
certain sectors are overbought no doubt,but overall the market is inexpensive sorry