Friday Roundup: Commodities, Emerging Markets

<< Go back to Page 1: Heavier Volume Sell-Off Again

October ends ugly but it’s often a difficult month. We’re entering what should be the best seasonal time of year for buying (“buy ‘em in the fall, sell ‘em in the spring”). That didn’t really work well this year, now, did it? We’re experiencing unique economic situations, so why not break some old maxims?

One day you look like an idiot and then the next a genius. The only way to have traded this week was to hold plenty of “cash” or to day trade. Even with a few short positions I felt badly yesterday and then today it all reversed. That’s how this week has gone — a yo-yo market.

Next week we should be launching our new website which will try anyone’s patience as much as crazy markets. One member feature will be intraday video chart commentaries which should test my communication skills.

Have fun trick or treating. I’ll be giving out hey pennies like everyone else this year… well, except for the Wall Street bankers loaded with taxpayer money. It does stick in one’s craw doesn’t it?

Have a great weekend!

Let’s see what happens and you can follow our pithy comments on twitter.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, SPXU, VTI, TZA, XLY, FAZ, SMN, SRS, TMV, UDN, DBC, GLD, XLE, EFA, EFU, EEM, EDZ, and FXI.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.

Comments

[Fibozachi:]

Thank you Mr. Fry for sharing yet another cogent and comprehensive analysis of price action across markets, which exhibited some pretty brutal distribution pressure yesterday as the $ADD and $VOLD were singed as the $VIX and $DXY surged higher, all but ushering in the unveiled emergence of Primary wave 3 (circle) back to the downside.

Similar technical viewpoint at www.zerohedge.com/arti...

"Well … the third time certainly proved to be the charm. After yesterday’s anticipated bounce filled an open gap at 1060.25 on the S&P futures (ESZ09) in response to an insanely oversold McClellan Oscillator reading of -381.49, the markets appear to be resuming their impulsively downward voyage back to reality; today’s internals registered even more bearish readings Wednesday’s, which is an extremely negative omen for the future outlook of the markets. While the TICK did not register a reading that surpassed -1400 today (intra-day low of -1396), we did witness the VOLD relentlessly plunge to a new extreme closing low of -1,408,903, which now marks the lowest closing low since that of 9/02/09.

The importance of the VOLD reaching new intraday as well as closing lows is very straightforward; significant changes in volume typically precede significant changes within the underlying character of price action. And while this concept is debatable when it comes to specific equities, it is simply cut and dry when referring to the entire NYSE Exchange. Such a low VOLD reading, which signifies an extreme desire to sell on the behalf of institutions and investors alike, is a definite warning sign that effectively poleaxes any remaining bullish intent .... "

tinyurl.com/yzh6o4u

Oct 31 12:43 AM

[bluebare:]

I really respect you and your work, David, The NYMO and NYSI charts were sensational.

I'm just writing to encourage anyone who owns MOO to please read David's chart carefully today. It's great.

80 years ago this past Wednesday, the 1930 stock market fell off a 90% cliff after reaching a "gap" very similar to the one you've been targeting, David. I'm not saying something similar is happening today, of course, but the coincidence of Wednesday's startling reversal reminded me of the old maxim, "History buffs who don't listen to their canary can't rhyme very well." It was a great relief to get to the sideline in the nick of time this week.

Oct 31 04:59 AM

[mule65:]

Real investors don't run.

Oct 31 09:19 AM

[Lobots10:]

Hi Dave,

Is it time to "Ride the Slide" with SDS??

Or should we "watch and wait" a bit still?

Thanks!

LB

Oct 31 09:45 AM

[Anthony Alfidi:]

The FDIC shut down some more banks on Friday. Factor that into market spookiness for next week.

Oct 31 11:17 AM

[aarc:]

In August 11, 2009, it was almost certain SPX, INDU, and COMPQ would be on the way toward lower lows that would break their last lows of March 2009. That was supposed to be the capitulation sell-off everybody who believes in a final bottom was waiting for.

But then daily chart pattern went as crazy as can be to most traders since August 25.

By Sept 11, a new chart pattern started forming very few TAs know: that of either a running triangle or a terminal triangle and the scenario kept forming up to Oct 21 almost predictably toward the 1090 level for SnP500. Maximum limit run from Oct 2 1020 low was 1108 and it proved that that limit run was not violated with SnP only able to reach 1101 before going down to last Friday

Oct 31 06:41 PM

[NEOCON47:]

didn't you bother to read the BEIGE BOOK from October 21?

You wouldn't need all the charts if you reviewed the report and you would know that our American economy is in depp doo-doo?

Also, it wouldn't hurt for you to publish the percentage of government taxpayers' money was used to pump up GDP to 3.5%.

Oct 31 07:31 PM

[bluebare:]

FYI FOR NEOCON47:

"How much of the rebound in real GDP was due to the fiscal stimulus, and where do we stand in terms of the effects of stimulus thus far? Although precise answers are impossible at this juncture, several aspects of the report are consistent with our estimates that the fiscal package enacted in mid-February as the American Recovery and Reinvestment Act (ARRA) would have accounted for virtually all of the growth reported for the third quarter." - Goldman Sachs

On Oct 31 07:31 PM NEOCON47 wrote:

> didn't you bother to read the BEIGE BOOK from October 21?
>
> You wouldn't need all the charts if you reviewed the report and you > would know that our American economy is in depp doo-doo?
>
> Also, it wouldn't hurt for you to publish the percentage of government > taxpayers' money was used to pump up GDP to 3.5%.

Oct 31 07:57 PM

[aarc:]

We are now at an inflection point since the grueling run from Aug 25 toward Oct 30, 2009.

Either we keep breaking down toward the 992 area for SnP500 as indicated by the volume spike on daily chart by DIA, SPY, and QQQQ last Friday;

Or, we go straight up toward 1270 to 1330 area if a reversal happens by Monday and a strong rally starts unfolding on Tuesday to Wednesday by using the daily chart.

For the bears, they may still try a Head and Shoulders pattern with 957 downside target if the volume spike last Friday failed to sustain a vertical selloff.

For the bulls, a potential Running Flat has formed last Friday on daily chart after the very confusing run from late August has started.

A running flat (as opposed to the most common counter-trend lower-high lower-low flat correction) is a dream pattern for the bulls during the process of recovery rally after an 18-month selloff from 1576 high of Oct 2007 to 667 of March 2009.

Running Flats usually result in a vertical run and mostly found during rallies and much less so during sell-offs. This type of hesitant run before the decisive rally is most likely the main reason why they call recovery rally as climbing the walls of worry. It goes higher highs and higher lows. But then a very precise technical pattern has to be satisfied which Friday has provided and only if we reverse Monday and a vertical rally follows.

For the bulls, the Running Flat that has formed since late August should not worry about a potential bearish HnS pattern. Bigger problem is the 1150 to 1182 area by using the daily chart.

On the weekly chart, a sustained run above 1196 will give considerable high probability of at least 1285 to 1384 run rate before SnP will require several months of correction and go for the last rally toward 1384 to 1542 range.

After that, a year or two of technical correction or a garden-variety type of recession should follow before the next multi-year rally can be sustained.

1573/6 is the triple top for SnP on the monthly chart and is the usual patern that develops after the double top of Oct 2007 resulted in a run down toward 667.

Timeline is still on or before Sept 2013 for a triple top price target after the 667 bottom.

This type of rally is among the less common occurence during recovery rallies; initial bounce off a sustained selloff usually results in a deep pullback before the next decissive rally similar to that of Oct 2002 to March 2003 for which most traders are accustomed to.

This time around, Indu, Spx, and Compq failed to provide more than 38.2% retrace from March to May rally toward July low before going for the 3rd wave using Elliott Waves price and time analysis. The subsequent rally becomes too tedious and hesitant.

But this type of pattern is among the less common type and usually requires pricise chart formations and subsequent price actions to be successful.

We will know by next week if this pattern is dead wrong or has a good chance to succeed after several weeks of price runs if a reversal happens Monday.

Oct 31 08:06 PM

[thotdoc:]

I hope you're right that the market will either go up or down or maybe both.

The key to understanding that you do not understand is your prediction of what will occur in several years.

You may be correct about Monday...I will be watching to see what to do...and I agree Monday will be important this week.

But, predicting what will happen in several years time, under any circumstances and especially when our government is printing money as it is, with the liklihood that it will be printing more money is silly, if not grandiose.

'Man proposes and God disposes' is the best way to remind yourself that you are only human.

Oct 31 11:10 PM

[April May:]

I just learned how to set "stop losses" a few days ago. I'm so depressed because I didn't actually set those sell prices, and lost a bundle. I don't know what to do now. Take the bigger loss on Monday, or hold on and hope the market will recover next week? I just don't understand how so many "experts" make these predictions from day to day--some say 12,000 by the end of the year, others say to bail out now. Who has this crystal ball?

Nov 01 01:22 AM

[User 379671:]

You may consider this: hope is one emotion that needs to be left out of the market. Opportunies are made up more easily than losses.


On Nov 01 01:22 AM April May wrote:

> I just learned how to set "stop losses" a few days ago. I'm so depressed
> because I didn't actually set those sell prices, and lost a bundle.
> I don't know what to do now. Take the bigger loss on Monday, or hold
> on and hope the market will recover next week? I just don't understand
> how so many "experts" make these predictions from day to day--some
> say 12,000 by the end of the year, others say to bail out now. Who
> has this crystal ball?

Nov 01 08:14 AM

[lex:]

BOOOOOO. I lost a fortune after thurs...

Nov 01 10:14 AM

[User 464666:]

this is my first year of trading. i do it only to enrich a bit my income.. so, before i go to office, i enter some orders in future markets, and usually have profit lock-in orders do the rest.

if i am wrong, and orders stay unfileld, then usually market would bound back after max 1 week, as dip buyers take care of the market. this was the regime in the recent months...
stop orders and hedging with puts etc - i started to dismiss this, feeling already very safe and confident in this recovery.

Like this, i traded nicely from april to september, $100K up with mid sized careful trades, usually nifty, dax and sometimes oil futures.

and now this!! got sloppy and greedy, took huge positions in indian market, and within 2 weeks managed to erase most of my 2009 gains. No bounce back. No dip buying. On Thursday i was out of the market, on friday re-entered, i feel like a total fool...!

but what the heck is the altnative? give my money to hedge funds and hope for the best??? (equity funds, no way, ETFs and futures i still can buy myself i guess)

the thing i am fearing worst now is getting out when the market shoots up (that's perhaps called greed) and getting burnt again when i jump in (the called fear perhaps)

*sigh* !

Nov 01 03:23 PM

[ebworthen:]

Put your money in a conservative set of TIPS, some gold, emerging market index funds, and cash. Put 25% in each and split each into two different funds and companies. If you are going to retire anytime in the next 5 years have it all in cash someplace safe. Spread any cash around banks so you never have deposits over the FDIC limit. Get two different tax accountants from different companies and alternate every year; it will keep them honest.

Trying to trade this market with money you need for retirement will get you killed; you may as well go to a casino and get some free drinks and other comps for gambling.

If it's play money enjoy learning, but you sound really upset about this.


On Nov 01 01:22 AM April May wrote:

> I just learned how to set "stop losses" a few days ago. I'm so depressed
> because I didn't actually set those sell prices, and lost a bundle.
> I don't know what to do now. Take the bigger loss on Monday, or hold
> on and hope the market will recover next week? I just don't understand
> how so many "experts" make these predictions from day to day--some
> say 12,000 by the end of the year, others say to bail out now. Who
> has this crystal ball?

Nov 01 05:29 PM

[rick12345:]

Selling volume hasn't been this high since the beginning of September (the little pink bar right at the end). Ordinarily I would expect resistence to crumble but given positive readings in certain areas I would hope that it holds.

Nov 02 05:54 AM

[absolute re...:]

What do you think about this mornings activity Dave? Even for an absolute return guy like me this market has my head spinning. I hedge on both sides for "portfolio insurance". Anxious to see what you and David Brown have to say today on this topsy turvy market. My long calls continue to perform well on up days and my puts well on down days but the whipsaw has me dazed on closing any positions.

Nov 02 12:27 PM