JP Morgan Shows Signs of Fatigue

Those of you who have been following my posts know that I have been reluctantly going along with the trend even though there is no concrete evidence of economic growth other than the fact that governments world wide have had the currency printing presses going 24/7. All anyone has to do is look at our nation's 17% unemployment rate as evidence that the consumer will not be able to hoist the economy on his or her back as in decades past. That leaves more government chicanery and spending initiatives to stimulate growth, which is always temporary and leaves us worse off than if they had done nothing.

The financials have been the darlings of this rally, especially the large banks. Regardless of what they or the government say, they have an endless supply of taxpayer dollars at their disposal along with their ability to move the market with their trading divisions (JP Morgan and Goldman Sachs especially). When the odds are so tilted in the bank's favor, they should be rocketing to the moon, unless there is trouble ahead.

In the chart below, I am taking a technical look at JP Morgan (JPM), which has rallied 217% off of its March low. I have also plotted three volume based indicators. The top indicator is a 21 day normalized version of intraday intensity (an indicator developed to track institutional block trading), the middle indicator is standard 14 period money flow, and the bottom indicator is an 8 day volume rate of change smoothed with a 3 day simple moving average.



I have shaded the area in yellow where volume was healthy as demonstrated by the expanding volume rate of change in the bottom window. That meant that there was ample participation to push JPM shares sharply higher. Following the initial push higher off of the July lows, something happened to the level of participation. Notice in early August (the end of the yellow shaded area) how the peaks in the volume rate of change (bottom indicator) began to turn lower accompanied by drops in intraday intensity and money flow even as prices pushed higher. That was the first sign of trouble. As prices pushed out to their September high, only money flow confirmed that move. Prices have since corrected, and have pushed out to their latest round of highs, but volume rate of change continues to contract while the other two indicators are showing very prominent bearish divergences.

These types of negative signals are all over the market now as volume is drying up and momentum wanes. I am not saying that we are headed for a crash here, but I believe at the very least a healthy correction may finally be ready to unfold. Let's see if the market can continue to be propped up or if some semblance of reality sets in.

Comments

[apppro]

I'll tell you what I'm tired of, and that is all these pundits out there that want Armageddon to be revisited. I still find it deplorable that we allowed a few shorties and option traders/traitors to drive us off a cliff this past year, but now that we have climbed out of their slime maybe it's time for them to.. well.. as Archie B. used to say, "Styfle it!"
Don't like current U.S. situation, go join Jimmy Rodgers in China. I'll help you pack.

2009 Oct 18 03:15 PM

[frdm45]

Whoa! To the comment above, of course no one wants to revisit Armageddon. But please don't try to come off like a patriot, or make like someone is not a patriot for speaking their mind; if I'm not mistaken many heros of our country have given their lives for our most fundamental rights, and one of those is free speech. There have been a multitude of scams and frauds perpetrated on the American people by the people who should have our backs. Or do you think the SEC did nothing wrong by never investigating shills like Bernie Madoff, even though they were warned about his activities many times, those charities and widows deserve no pity. There was nothing wrong with all those mortgage brokers giving people mortgages who had no business having them, come on, the brokers were only being greedy capitalists. Or idiots like Dick Fuld who thought they could continue to take idiot risks and the govn't would bail them out...........and there are hundreds of other examples...........come on read some of the blogs, the American people have been fkced over, and just by pointing this out doesn't mean your not a patriot or don't love America. But wake up and smell the coffee, the days of America being a manufacturing powerhouse have gone, taken over by Asia, just as the US once took it over from England and Europe. This economy is in for some pain, and the longer it's delayed the tougher the medicine is going to taste.

2009 Oct 18 09:02 PM

[apppro]

While I do love this Country, I am no 'gun toting' fanatic. I do however feel that no one has yet appreciated the harm that a few pundits, naysayers, short sellers, and short-term option traders/traitors caused this Nation. You can condemn me all you want for wanting these so-called patriots to get their condemnation, but please take your head out of the sand and stop blaming ALL THE WRONG PEOPLE.

BTW: no where in your comment do you blame ALL OF US for all of our abuses.. needs.. and wants.


On Oct 18 09:02 PM frdm45 wrote:

> Whoa! To the comment above, of course no one wants to revisit Armageddon.
> But please don't try to come off like a patriot, or make like someone
> is not a patriot for speaking their mind; if I'm not mistaken many
> heros of our country have given their lives for our most fundamental
> rights, and one of those is free speech. There have been a multitude
> of scams and frauds perpetrated on the American people by the people
> who should have our backs. Or do you think the SEC did nothing wrong
> by never investigating shills like Bernie Madoff, even though they
> were warned about his activities many times, those charities and
> widows deserve no pity. There was nothing wrong with all those mortgage
> brokers giving people mortgages who had no business having them,
> come on, the brokers were only being greedy capitalists. Or idiots
> like Dick Fuld who thought they could continue to take idiot risks
> and the govn't would bail them out...........and there are hundreds
> of other examples...........come on read some of the blogs, the American
> people have been fkced over, and just by pointing this out doesn't
> mean your not a patriot or don't love America. But wake up and smell
> the coffee, the days of America being a manufacturing powerhouse
> have gone, taken over by Asia, just as the US once took it over from
> England and Europe. This economy is in for some pain, and the longer
> it's delayed the tougher the medicine is going to taste.

2009 Oct 19 07:20 AM

[apppro]

And fr just look at this article on David Einhorn. Tell me you find this acceptable?

www.marketwatch.com/st...


On Oct 18 09:02 PM frdm45 wrote:

> Whoa! To the comment above, of course no one wants to revisit Armageddon.
> But please don't try to come off like a patriot, or make like someone
> is not a patriot for speaking their mind; if I'm not mistaken many
> heros of our country have given their lives for our most fundamental
> rights, and one of those is free speech. There have been a multitude
> of scams and frauds perpetrated on the American people by the people
> who should have our backs. Or do you think the SEC did nothing wrong
> by never investigating shills like Bernie Madoff, even though they
> were warned about his activities many times, those charities and
> widows deserve no pity. There was nothing wrong with all those mortgage
> brokers giving people mortgages who had no business having them,
> come on, the brokers were only being greedy capitalists. Or idiots
> like Dick Fuld who thought they could continue to take idiot risks
> and the govn't would bail them out...........and there are hundreds
> of other examples...........come on read some of the blogs, the American
> people have been fkced over, and just by pointing this out doesn't
> mean your not a patriot or don't love America. But wake up and smell
> the coffee, the days of America being a manufacturing powerhouse
> have gone, taken over by Asia, just as the US once took it over from
> England and Europe. This economy is in for some pain, and the longer
> it's delayed the tougher the medicine is going to taste.

2009 Oct 19 03:14 PM

[frdm45]

Fair enough. I agree that there seems to be enough circumstantial evidence that some of these shorts last year engaged in rumour mongering which may have precipitated some of the collapses; I think that is blatantly illegal and should be punished. I also agree that some of these people/companies are parasite-like, as the one mentioned in your link, attacking companies or currencies when they are at their weakest, contributing nothing to the solution and reaping massive rewards at others expense. I guess I have the simplistic view that if you are not part of the solution you are part of the problem. I would definitely agree with the jist of what you are saying and that is these people are not helping the situation. But unfortunately it is part of capitalism, and you have to take the good with the bad, and regulations like banning naked shorts help a little I think to mitigate the "pile on" shorting that happens to some stocks. Also, I think the markets have been manipulated for so long by the rich and powerful and lobbyists, and the main stream media does little to expose this, because, of course, who owns the mainstream media? The question is do you want to know the truth and know things that are being hidden and do you think the masses can handle that info? Check out zero hedge, they have some really good info and articles. Here's another good link to some recent craziness that is happening:

harveyorgan.blogspot.c...

2009 Oct 19 05:40 PM

[frdm45]

Fair enough. I agree that there seems to be enough circumstantial evidence that some of these shorts last year engaged in rumor mongering which may have precipitated some of the collapses; I think that is blatantly illegal and should be punished. I also agree that some of these people/companies are parasite-like, as the one mentioned in your link, attacking companies or currencies when they are at their weakest, contributing nothing to the solution and reaping massive rewards at others expense. I guess I have the simplistic view that if you are not part of the solution you are part of the problem. I would definitely agree with the gist of what you are saying and that is these people are not helping the situation. But unfortunately it is part of capitalism, and you have to take the good with the bad, and regulations like banning naked shorts help a little I think to mitigate the "pile on" shorting that happens to some stocks. Also, I think the markets have been manipulated for so long by the rich and powerful and lobbyists, and the main stream media does little to expose this, because, of course, who owns the mainstream media? The question is do you want to know the truth and know things that are being hidden and do you think the masses can handle that info? Check out zero hedge, they have some really good info and articles. Here's another good link to some recent craziness that is happening:

harveyorgan.blogspot.c...

2009 Oct 19 05:41 PM

[frdm45]

Oops.....

2009 Oct 19 05:43 PM

[frdm45]

And for your last comment, of course you are right, we are all to blame........no one needs three cars, a vacation house in Florida, trips to Europe every year; if you can afford it great, but doing it all on credit is just insane......why are we all so materialistic?

2009 Oct 19 05:47 PM

[frdm45]

A truly great and insightful article on naked shorting:

www.rollingstone.com/p...


..

2009 Oct 19 07:16 PM

[apppro]

I know, the makers of Stock Shock sent it to me and I posted its' link on my website a few days ago.


On Oct 19 07:16 PM frdm45 wrote:

> A truly great and insightful article on naked shorting:
>
> www.rollingstone.com/p...
>
>
>
> ..

2009 Oct 20 08:24 AM