Friday Wrap: This Market's Running on Empty 23 comments
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Investors continue to sell relatively good news - the opposite of previous actions. The market and investors are tired. It’s probably just that simple. With conditions still overbought on a long-term basis, some sideways to down action can be beneficial.
Intel (INTC) provided an initial lift Friday and Dell (DELL) was also strong early after positive results and comments from both firms. That was the good news, easily dismissed later as traders headed for the exits early. They left a few sentries guarding the F-10 keys on their HAL 9000s and then headed to the Hamptons or elsewhere. The custom has been to take an extended end of summer holiday week before Labor Day, but we’ll see if that’s the case in 2009.
Sure, the negative focus was on the Consumer Sentiment but, hey, they beat forecasts but not by enough. It gets silly sometimes since disappointing was the reading for August (65.7), which beat consensus estimates, but was below July’s (66). Talk about picky! Making matters even sillier are those believing positive things about the consumer to begin with! To add to the confusion, XLY (Consumer Discretionary ETF) closed higher on the day by a penny.
Volume was ultra-light, which shouldn’t surprise for a Friday on the last week of August. Breadth was interesting given the split on share A/D for the NASDAQ vs volume A/D which I would read as action favoring just the biggest names in tech.
The McClellan Summation Index is still high and overbought but rolling over slightly.
That wraps up the last week of August with only Monday still on deck. Then, barring any unforeseen news, we’ll probably focus more on “monthly” versus weekly charts for Monday’s post. Doing so once in a while gives us some perspective you can’t gain from daily or even weekly noise.
No, I don’t like markets emotionally but we’re systematic and don’t try to second guess our basic approach and disciplines. As we approach September, you don’t need me to tell you it’s been a rough but entertaining 2009. What will happen next is anyone’s guess. Many pundits expect a serious correction with markets this extended. You hear/read a lot—“prices have outperformed reality”; “prices aren’t justified by the news” and so forth. This seems logical but Mr. Market only does what’s logical with hindsight.
Have a great weekend!
Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, RSP, VTI, MDY, IWM, QQQQ, IGM, SMH, XLB, XLY, XLF, XLI, IYR, XHB, LQD, UDN, GLD, DBC, USL, DBB, XME, MOO, EFA, EEM, EWJ, EWY, EWT, EWA, EWC, EWZ, RSX, IFN and FXI.
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I agree that we appear to be slowing down but oddly enough I just don’t seem to trust “it” for some reason.
Keep the faith. Keeping buying those ETFs.
DOW at 5000 is coming soon ...
On Aug 29 10:01 PM herbert hoover wrote:
> I've been hearing this same sh!t since April. I bought SDS at 60,
> 55, 50 and again at 46. Good luck if you think you can can the top.
> Personally, I ain't fighting teh Fed and their printing presses.
Your best strategy for betting on pullbacks is:
1.) buy puts on the indices
2.) buy CALLS on short ETFs
3.) short individual stocks
I wont go into reasons why every other strategy wont work, but for people still buying the SDS or the SKF, I truly feel sorry for you. If you believe the market is being propped up by whoever (PPT, GS) or just supported naturally by institutions and mutual fund mgrs who are behind, either case leads to a strong S&P since this is the vehicle these players use to achieve their goals: fund mgrs buy mainly within the indices, PPT/GS jack up the futures to move the market etc. So shorting an index or owning the SDS is just absurd at this point. Ask anyone who bought it during the IDENTICAL SCENARIOS as now back in mid-May, mid-June, and again 2 weeks ago in early August. Yea, if you can find them alive
Volume? I'm sick of hearing this as a bearish argument. The short interest just went from hundreds of billions of shares to a 90% reduction...eliminating alot of the shorts who were shorting w/o taking the proper steps to borrow shares to cover. What's happened since? volume has declined across the board. So the only volume missing is short activity and short covering.
Proof? Look at a situation that would involve obvious short covering, and see if the volume picks up to March/April levels. Look at the last time everyone piled into the short side, 2 weeks ago after the Shanghai/Chinese meltdown. Shorts piled in Monday and Tuesday, the ensuing rally especially that Friday, had volume equal to the days back in March. Why? Short covering.
So its not bearish that volume isnt always that high--the volume as not natural buying. the market can still go up w/o short covering because it wont be getting slammed down as quickly during pullbacks.
RIP volume argument.
I can only agree with this wholeheartedly. Be a bear, be a Bull as you choose. But for GODS SAKE don't own leveraged ETF's for more than a day. Do your homework people!
As far as the major indexes are concerned, the run up from March 2009 is a tad slower than the run down during the 6 months prior to March 9. Except for the Tech Sector of course which performed admirably during the initial phase of this rally.
Count the number of weeks of the last leg down from January to March (I counted 9 weeks of sustained selloffs with a pullback). The succeeding 9 weeks after March 9 was not able to surmount the preceding 9 weeks in time. That is a poor recovery performance and not indicative of strenght that usually is needed in order to restore faith and confidence among traders and investors - except for the tech sector, which garnered lots of praise and confidence among traders and investors up to now.
That is the bad part of the equation that persisted up to the 25th week of this rally.
In most cases -- a successful recovery against such massive meltdown requires a rally that should perform faster than the preceding event. Despite most everybody getting a case of vertigo; the "recovery" rally by INDU, SPX, and RUT were simply a tad slower or simply too slow to be able to sow the seeds of confidence. It can still be called a bear rally rather than a recovery rally.
The existence of too much doubts among many market participants as to the strenght and longevity of this initial rally makes it vulnerable to a massive pullback or a capitulation sell-off.
There are bigger hurdles ahead on the monthly charts, specially the Sept and Oct 2008 panic selling that will have to be addressed either by a show of force or by trepidation among bulls OR nothing at all with a grim September coming into the fast lane.
It is rather looking like a DO or DIE situation from here on.
Still, the bulls have a small edge against the bears with the "surprise" rally of the last two weeks. If the remaining traders and investors grab the bull by the horns in September, we might end up breaking the major Spx 1055 resistance in 2 to 3 weeks time. And most probably be in the vicinity of 1070 to 1127 by November of this year.
After that another major correction similar to that of June to July will be needed to sustain the rally -- assuming the rally from March lows did not produce a running correction 2nd wave on the weekly charts in which case we might end up well above 1145 before the end of the year for a 3rd wave rally.
I am long since Feb/March; And I will be cheerleading the bulls on their efforts. That does'nt mean not expecting what the bears can possibly do. They can still do a lot of damage in a very short period of time until faith and confidence among traders, investors, and the general public had been restored.
1145 on the monthly chart for SnP500 is the line in the sand; significantly break that within this year and more than 80% probability this rally can be sustained in the years ahead.
"One day they have no where to store oil and it goes to $69 - the next day someone's highjacking a ship or Opec's cutting production and we're back to $75. I've fallen off cliffs with a more gradual slope."
Did you see FAS go from 40 to 80 this last month. Despite the decay FAS is safer than FAZ, because FAS exists (ed) at record lows. The market was obviously going to go up. FAZ is for losers!! I made 100k on FAS alone in one month. Its risky, but unless you truly believe that a DOW of 9500 is the ceiling forever then you could hold FAS for more than one day. Unless we crash in october and we enter a post-apocalyptic world!
On Aug 29 10:35 PM Warm_Paw wrote:
> It must be the infusion of dollars keeping this market going, because
> nothing else is. The earnings are a joke with the FASB accounting
> changes. Major unemployment, more oil than we know what to do with
> and the price keeps climbing, where the banks are with toxic assets
> is anyone's guess,the dollar should be tanking and isn't because
> the rest of the world has worthless currency (they've already went
> this route).
> Bottom line is the country has offshored the employment and without
> a consumer there's no way this situation is going to buy itself out
> through inflation. The govt has pulled out all the stops without
> realizing this isn't something that's going to get fixed with good
> old fashion brute force or throwing money at it.
> Wall St. continues to manipulate to get a fire going not realizing
> investors are staying on the sidelines because up is down and black
> is white. There's no stability. There's no logic. It's become a crap
> shoot. That does not create confidence.
> Where this ends up - nobody knows.
> I agree with this article in that the market is due for a correction.
> The fact that none is coming just tells me that when that correction
> comes, it's gonna be a whopper!
> For that reason I remain on the sidelines. Who wouldn't. For anyone
> making money in this market right now, I'm happy for you.
> Know this, the S&P grudgingly rises, but when it or the DOW fall,
> they do so with a vengeance.
> Picking up pennies in front of a steam roller.
> What do you invest in?
> One day they have no where to store oil and it goes to $69 - the
> next day someone's highjacking a ship or Opec's cutting production
> and we're back to $75. I've fallen off cliffs with a more gradual
> slope.
> The dollar is what the world's watching. Once the Fed HAS to raise
> interest rates, it's strength is going to wipe the markets out.<br/>As
> if there was ever a currency that would have the credibility of the
> US Dollar.
All the items that created the crash are worse today than they were one year ago! It won't take long for a big correction.
We are destined for failure when our government creates balloon after balloon in the financial, insurance, and auto markets.
we need more charts and cowbell.
Look: If there is a massive correction and the Ponzi economics of the U.S. fails -- we're all dead. The dollar will be worthless. Gold bugs will be happy but so what? It'll be chaos. People will kill you in your sleep and take your gold coins. Best bet is to take some new quality prescription drugs and join the AIG party -- forget reality. The Fed has - and they won't stop. Did someone really say "when the Fed runs out of cash to burn"... lol
It's called a printing press...
If not, then gold, treasury shorts, commodities and every short ETF known to man will make me a printing press type of guy!
On Aug 31 12:30 AM ari5000 wrote:
> you can't short the markets... it's really that simple.
>
>
> Look: If there is a massive correction and the Ponzi economics of
> the U.S. fails -- we're all dead. The dollar will be worthless. Gold
> bugs will be happy but so what? It'll be chaos. People will kill
> you in your sleep and take your gold coins. Best bet is to take some
> new quality prescription drugs and join the AIG party -- forget reality.
> The Fed has - and they won't stop. Did someone really say "when the
> Fed runs out of cash to burn"... lol
>
> It's called a printing press...
here's a flash for you genius traders.. Follow the trend. when criminals and liars are in charge, sell everything. When honest decent people take control-Buy Buy Buy!!!! Right wing ideology will make you poor because right wingers can't see reality(that's why they don't believe in global warming or evolution). I don't follow stupid people and things work out better that way. CNBC was telling us to buy all the way down, then when Obama got in, they turned Bearish.. OOPS wrong move.
Those of you owning SKF are insane. I tried to trade this when the market was collapsing and had to keep getting out every time the market rallied. I made no money even though I was correct on the market's direction. That guy who is buying it all the way down is insane and will be very poor. You have to trade the trend.
Good Luck to you all. Hope you familiarize yourself with reality before you are all bankrupt. For me, I'm glad Bush didn't privatize SS and give all of our money to Wall Street criminals before the fall like the little half-wit wanted to do.