Bill L.'s  Instablog

Bill L.
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Methodology: setups require certain criteria to be met before trades can be executed, which include weighted statistical studies on several indicators of price, breadth, volume, and sentiment . Amount of risk taken is proportional to how many indicators are aligned. I mainly trade market... More
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  • Wednesday Morning, November 28, 2012 - Premarket Short Term Update 7 comments
    Nov 28, 2012 4:48 AM | about stocks: SPY, SPXS, SPXL, DIA, QQQ, SDS, TLT, IEF, FXE, UUP

    Bottom Line:

    The last time we spoke the market looked setup up to rally; indicators were very oversold, sentiment had dropped off a cliff, and seasonal patterns were generally positive. But that was then, and this is now. Now, the situation has almost completely reversed.

    Short Term Indicator Summary:

    • Bullish: 0%
    • Neutral:15%
    • Bearish: 85%
    • Aggregate Interpretation: Indicators have gotten extremely overbought, sentiment has recovered (according to some indicators, covered below), and seasonally, we're in a sort of gray area until closer to Christmas. In short, the exact opposite situation from one that prompted me to get bullish just a few weeks ago.

    Indicator Snap Shot:

    Percentage of Stocks Above their 20 DMA:

    (click to enlarge)

    Notes: Not quite overbought yet, one of the few "neutral" readings.

    NYSE McClellan Oscillator:

    (click to enlarge)

    Notes: From very oversold to overbought in just a few days.

    NYSE Advance - Decline Line:

    (click to enlarge)

    Notes: The most overbought reading since early July. While that didn't lead to a long term decline, the SPX did fall nearly 5% in 5 days.

    NYSE Up - Down Volume:

    (click to enlarge)

    Notes: Peaking; near levels where most short term reversal occur.


    (click to enlarge)

    Notes: Similar to the AD line, the TICK has a very overbought reading. The last time the TICK was this high, the SPX fell from 1375 to 1325 in 5 trading days.


    (click to enlarge)

    Notes: A very overbought TRIN.

    Put / Call Ratio:

    (click to enlarge)

    Notes: From scared witless to complacent in just a few days.


    (click to enlarge)

    Notes: The MACD and RSI both look negative. Furthermore we're right under two important psychological levels; the EU "we will do anything takes" remarks, and the QE Infinity announcement. If we break lower from these levels, that could really shatter the confidence the market has in the Fed's ability to manipulate the market higher.

    Good hunting!

    -Bill L.

    Disclosure: I am long SPXS.

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Comments (7)
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  • basehitz
    , contributor
    Comments (1541) | Send Message
    A number of indices bounced back into a consolidation range of a few weeks ago. Given above indications suggesting the Kool-Aid is already spent, would be a trick to push through.


    And since the uber-printers are all-in, where will the next boost come from. . . Oh I know, Greece was "saved" . . . again.


    Readers may want to view what those who got it right before the last crisis hit. Jeremy Grantham was cited by Hussman and referenced by CNBC’s Josh Brown who tweeted “makes Hussman sound like Mary f***ing Poppins”:


    When the guys who got it right last time start talking in scary terms, bulls might want to recall how betting against them last time worked out.


    Marc Faber is also speaking in dire terms but qualifies that if the Criminal Reserve opts to destroy the currency, the crisis (which is certain per Marc) will just take a different form. Link to full report found here:
    28 Nov 2012, 06:14 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9906) | Send Message
    Some great charts in the Faber link. Thanks for posting, as had not seen them before.
    29 Nov 2012, 07:42 AM Reply Like
  • sundate36
    , contributor
    Comments (291) | Send Message
    Thanks, Bill! I find it too stressful to go short in this QE-ed market so I didn't go short this time...better to just sit on piles of coffee and uranium and wait for price appreciation :)
    28 Nov 2012, 11:33 AM Reply Like
  • Bill L.
    , contributor
    Comments (691) | Send Message
    Author’s reply » Not much has changed from this morning's update other than 1) some indicators such as the McClellan became even more overbought 2) I became closer to getting stopped out. But that's what stops are for. To stop small losses from becoming big losses.


    This is an interesting juncture to me regarding the longer term. So we had a pretty good trade on both the down side and the up side. But I tend to find that the main trend is the side that goes further than you would expect it to go. So if we hold here for the next few days, the indicators settle, and we start moving higher, I would expect new highs in the indices. If the previously successful long trade we just enjoyed gets erased, then watch out. The Bernake put may have just expired.


    Good hunting out there,
    -Bill L.
    28 Nov 2012, 06:33 PM Reply Like
  • sundate36
    , contributor
    Comments (291) | Send Message
    That's a tough juncture, not too far away from Christmas and the politicians haven't failed to disappoint the markets during this cycle (since last August, that is). Heck, even Germany has toned down its stance. I've been very sympathetic to the bearish side of the trade but these sharp reversals, like today, have really exhausted my patience (for now) :).


    BTW, Bill, if you want to increase your readership I would participate every now and then in other SA authors' comments section. That's how I discovered your blog. I think you commented on one of contributions by Chris Giovacco.
    28 Nov 2012, 10:56 PM Reply Like
  • sundate36
    , contributor
    Comments (291) | Send Message
    Started building a position in TRQ today, partly out of boredom, partly because the potential is huge...have coffee/uranium now mixed with copper/gold. Will buy some SPXS at the close today as a hedge...

    29 Nov 2012, 03:35 PM Reply Like
  • Bill L.
    , contributor
    Comments (691) | Send Message
    Author’s reply » Trading out of boredom... be careful.


    30 Nov 2012, 12:10 PM Reply Like
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