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Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

?- 3/31/20

Up 5/29/20

Intermediate

Up 10/2/20

Up 8/21/20

Up 10/9/20

Sub-Intermediate

Up 10/15/20

? 10/21/20

Up 10/13/20

Short term

? 10/19/20

? 10/19/20

? 10/19/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Tuesday, April 30, 2013

Daily update 4/30

SPX inching closer to 1600.  A new record high close that beat the old record by a whopping 3 points.  Clearly SPX is approaching 1600 with trepidation.  Every time it gets above 1595 it stops in its tracks until they sell it off a bit then they rush in to buy the dip.  My guess is they will gap it up and over 1600 to get through it.  That seems to be the usual ploy when they run into strong resistance.  If that happens we will find out if rally chasers show up or not.  Lets look at the daily SPX chart.


SPX is still hugging the red line.  I guess it is a good thing for bulls it is sloped upwards, LOL.  Volume picked up again today.  Must have been because of the little news induced dip this morning.  Here is a look at the SSO 195 minute chart.


I redrew the up trend line since it was waffling around the other one.  Lets see if it reacts to this one better.  I also added an upper trend line as it looks like price is possibly forming a rising wedge pattern.  That might add a little bit to the bearishness of breaking that lower line.  I think the more important line for bulls is the red line.  You can see selling picked up when we fell back below it earlier in the month.  Falling through a second time could cause even more selling pressure to come in. 

Last night I showed the odd Nova/Ursa ratio chart.  Well here it is again because it got even odder yesterday.

Source

Yesterday it popped back above where it was two days ago.  As you can see this has no comparable move in the last year.  I guess people are having trouble making up their mind what to do. 

Now comes May.  The last three years the market has sold off.  What will it be this time?  From what I see in the media there seems to be mostly two opinions.  We either keep going up with no correction or we have a little correction like 5% that the sideline money rushes in to buy.  I think option two is unlikely.  I think we either keep going up or have a much deeper correction.  Either of those two options are more likely to catch the most people off guard.  I guess we will find out pretty soon.

Bob

More global economic data

This is a look at China's struggling export business.

Source

Export growth excluding Hong Kong is hitting new lows since the last recession.  Overall growth has been sluggish for more then a year now.  I suspect the pick up in the 2nd half last year was helped a lot by the new AAPL products announced last fall.  At the moment there is no sign the global economy is set to pick up.

Here is another chart with more evidence the global economy is slowing again.

Source

The April reading of Goldman's global leading indicator took a big tumble.  The big drop in industrial metals might have played a part in that. At any rate it is possible the global economy is set to slow down more.

Just a reminder that we may already be in a global recession.

Source

We have seen the U.S. data coming in below expectations pretty often for a couple of months now.  The global economy appears to be slowing considerably again.  All this could easily impact 2nd quarter earnings significantly.

Bob

Monday, April 29, 2013

Daily update 4/29

SPX makes a slight new closing high.  Here is the daily chart.


For some odd reason SPX has trouble getting above the upper red trend line from the expanding pattern that developed back in Feb.  Volume dropped way off today on this retest of the early April high.  Lets take a look at the SSO 195 minute chart.


SSO got back above the short term uptrend line this morning.  It ended the day right about on top of it.  Will it bounce off it tomorrow morning or break back below it again?  Price is getting pretty extended from the 18 SMA on this time frame.  Upside may be a little tougher to come by without an intraday pullback. Check out the oddity of the Nova/Ursa chart.

Source

After popping up to one of the highest levels in the last year on Thurs. it went back negative on Friday.  That does not seem like much of a move down to cause such a big move on the ratio.  It went down more then it went up on Thurs.  That suggests to me that traders do not have a lot of confidence in this market moving higher.  Could that be because we are closing in on May?

I have the feeling a lot of people are waiting for SPX 1600 to sell.  There might be significant resistance there.  The bias is still up, but conviction level seems to be low.  Price is getting a little extended in the short term.  What does all that add up to for tomorrow?  Being it is the end of the month it could be pretty much a do nothing day unless there is some news to shake things up.  Today was end of month mark up day.  It seems like a move up to 1600 early in the day in the current extended condition could be met with significant selling.  Other then that, it would be hard to predict.

Bob

Durable goods

The durable goods came in below expectations as a lot of data recently has.  Here is a couple of ways of looking at the data.

Source

 Source

It is really hard to make a case that the economy is getting better.  These charts looks like we are in a recession or about to be.  What happens if the economy goes through the mid year slow down it has been experiencing the last few years?  From this weak of a condition it seems very likely it would go into recession.

To listen to the pundits on TV talk about how good the economy is doing is quite laughable.  There is a lot of data that suggests the economy is the weakest it has been since the last recession ended.  The revenue numbers are coming in light this earnings season.  It is possible the 1st quarter will end up with negative revenue growth.  That will put more pressure on earnings and could be a catalyst for layoffs.  If that happens it would be the final straw in this recovery and will surely lead to recession.

Bob

Friday, April 26, 2013

Daily update 4/26

Last night I showed the similarities to the same time last year.  Curiously the day after the retest reversal was a hanging man just like today.  Here is the daily chart.


It seems hard to believe things would work out the same way as last year, but it is eery how close things look to then.  Not much new information here.  The trend bias is still up.  Lets zoom in to the SSO 195 minute chart.


SSO broke the uptrend line of the recent rally this morning.  It tested it from underneath in the afternoon, and failed to get back above it.  That should mean that up move is over and we are in sideways mode waiting to see if we get a down side reversal or upside continuation.  The Nova/Ursa ratio had an interesting day yesterday.  Check out this chart.



Source

Yesterday it spiked up to the stratosphere.  It has only been up there five other times in the last year.  This kind of stuff cracks me up.  What possessed people to get wildly bullish yesterday?  Was it all the bad economic news out of Europe that has people believing the ECB will do something?  If you look at the chart some of the spikes up were followed very quickly with moves back below zero suggesting a pullback occurred.  Other instances were followed by a number of positive readings suggesting an initial upthrust followed by more upside.  It is pretty hard to get the exact dates of the spikes on this chart.  We have had a shot of bullishness in breadth and in the Nova/Ursa ratio.  Will it power the market higher or provide food for bears in a pullback? 

With today being a hanging man after yesterday's reversal a close below today's low could usher in some selling.   I don't know what happens on the upside.  There has been resistance above SPX 1595.  Will it still be there if we test up there again?

Chart practice has been updated with APOL the stock today.
http://traderbob58-chart-practice.blogspot.com/

The market status and sector status pages have also been updated.

Have a great weekend all,
Bob

Thursday, April 25, 2013

Earnings scorecard

Sometimes you wonder if fundamentals matter or not the way the market acts.  However, over the long term I believe they still apply.  Despite the market retesting its all time highs this week, the earnings reports are not doing well.  Lets look at some charts.

Source

The ratio of negative-to-positive guidance has been above the long term average for four quarters now.  It may change some before this quarter is over, but it seems pretty likely to be at or above the data from last quarter.  Analysts still are expecting a big earnings rebound in the second half of the year.  Is that going to materialize?

Check out the earnings scorecard so far.  Source




There are only three quarters on the chart that had a beat rate on earnings this low.  All three of those instances happened during a recession.




There are only two quarters that had beat rates on revenue this low and of course those also came during a recession.

The global recession is clearly affecting earnings.  There are still quite a few companies to report so things could get some better.  However, at this point we have a pretty good representative sample so the changes are likely to be relatively minor.  I have not seen the revenue growth chart lately, but I heard a guy on TV say that so far revenue was down slightly.  That is going to be key because profit margins are way above historical norms.  That means any earnings growth from here will have to come through revenue growth.  Will that happen this year?  Every year since 2009 we have had a mid year slow down.  The global economy is the weakest it has been at this time of year.  What happens if we slow down again like we have been?  There are quite a few signs that is happening once again.

Yesterday afternoon the guy on Bloomberg TV kept telling me that it was all about earnings whenever he reported on what the market was doing.  As I look at the above charts I would say the current rally is most definitely not about earnings.  This looks like it will be the worst earnings season since 2008.  Many companies are guiding down for the future on top of it.   Many tech stocks are getting crushed on their earnings reports.  It is going to take some brave investors to push prices into new all time highs and above.  I guess we will see if they exist or not.

Bob

Daily update 4/25

This is kind of odd.  Check out these two charts.


The first chart is last spring and the second chart is the current situation.  After Feb. both years the McClellan oscillator (MCO) in the bottom panel spent most of the time in negative territory while the market climbed higher.  When that happened last year I looked back into the 70s and I could not find any other time like that.  I have no idea why it happens.  Last year there was a retest of the prior high in the circle on the price part of the chart that was accompanied with a surge in the MCO.  That was the strongest reading in the MCO in two months.  I thought the market might be getting a shot of energy and was going to climb higher, but it rolled over and headed south.  We have an eerily similar chart today.  We have a shot of energy in the MCO and a retest bar today that had a reversal just like last year.  So the question becomes is that shot of energy in the MCO going to propel the market higher or will it fold again like it did last year.  No wonder the bullish percent indicator I showed this morning looks just like last year.  The market is acting almost exactly the same way.

Here is the daily SPX chart.


The volume increased again for the third day in a row.  This chart looks a bit unstable to me with the sudden spikes up and down.  I don't think you see that very often in SPX.  Lets zoom in to the SSO 195 minute chart.


I think the trend line below the current rally is important.  If we break that it could be an indication of a failed retest of the high.  We are getting close to May.  Will we top or keep on going?

Bob

NYSE bullish percent indicator

I mentioned the other day that a lot of indexes are lagging behind SPX now.  I think this chart of the NYSE bullish percent indicator shows the picture pretty clearly.

 
This indicator dropped rather sharply on the last pullback.  I marked the peaks of this indicator against SPX for the last couple of years.  It appears to have peaked out in Feb./March just like it did in 2011 and 2012.  It looks like a dead ringer to last year at this time right before the correction really got going.  Is that a fluke or is history about to repeat?  In order to sustain an uptrend over the summer without a correction I think more stocks will have to participate.  That would turn this indicator up again.  A failure to get renewed strength most likely means the late spring drop is going to happen yet again.  If that is the case keep in mind that margin debt is higher then it was in the other spring corrections.  That adds to the downside risk.

Bob

Wednesday, April 24, 2013

Daily update 4/24

That was a snooze fest.  SPX ended the day up .01.  Here is the daily chart.


Today was a true doji day as SPY also has one.  That signals indecision at this price level.  One thing odd about today is that despite very strong NYSE tick readings the market did not make any upward progress.  That suggests resistance here was strong today.  We will have to see if that will last or not.  The volume increased today over yesterday and since the market was at a standstill that is slightly bearish.  We did not move up because there were active sellers, not because of a lack of buying interest.  Moving on to the SSO 195 minute chart.


SSO still has not had a bar close above the bar that flipped the bias back to up.  Both of today's candles have upper tails suggesting the bulls tried to push price, but were turned back.  Yet another indication of active sellers at this level.

One thing very odd thing is the Nova/Ursa ratio chart from yesterday.

Source

Despite the three day rally this indicator did not cross back above zero.  With the market flat, I kind of doubt it will have done it today.  So far this bounce from the 50 SMA seems weak.  Will it pick up some steam or roll over?  If it rolls over without a positive crossover it could be a pretty big negative.  We will just have to see what happens over the next few days.


Chart practice has been updated with CTSH the stock today.  That is one wicked sell off.
http://traderbob58-chart-practice.blogspot.com/

Bob

Sign of a top?

How about this for a magazine cover.

Source

That kind of cover is often a good contrarian sign.  However, there is even more to it.   From the article.

The stock market isn't the only thing that has set records this spring. Barron's semiannual Big Money poll of professional investors also is setting a record -- for bullishness, that is. In our latest survey, 74% of money managers identify themselves as bullish or very bullish about the prospects for U.S. stocks -- an all-time high for Big Money, going back more than 20 years. What's more, about a third of managers expect the Dow Jones industrials to scale the 16,000 level by the middle of next year, notwithstanding a dismal week of selling that left the blue-chip index at 14,547.51 on Friday.
A quick trip through history reveals that only 45% of managers were bullish in the spring of 1999, and 54% in the fall of that year, even as the dot-com boom was inflating. Similarly, bullish sentiment was in the mid-40% range in the mid-2000s, as the housing market was on the boil and stocks last were hitting fresh peaks. 

Six months ago, just 46% of managers were bullish, down from 55% in the spring 2012 poll. Stocks have rallied 10% since our fall survey was published on Oct. 29.
This spring's survey is notable, as well, for the dearth of bears: A mere 7% of respondents are pessimists today, down from 27% last fall. The remaining bears looked pretty smart last week, as the Dow lost 2.1%, and commodities prices plummeted. But recent conversations with other Big Money managers suggest they expect stocks to resume rising, despite a litany of concerns -- about fiscal gridlock in the U.S., the debt crisis in Europe, money-printing worldwide, and a still-sluggish global economy.
Professional investors remain well ahead of their clients in bullish sentiment. Sixty-two percent say their clients are bulls on stocks now, while 38% claim their customers are bears.

 A little further in the article was this.

Fortunately, perhaps, only 16% of managers say their investment decisions are heavily influenced by U.S. fiscal policy. But many seem worried about trends at home, and the nation's place in the world. Fifty-five percent of managers don't believe that the U.S. is a waning world power, but 37% do. Small wonder the Big Money folks finger political dysfunction as one of the biggest challenges facing the market, along with Europe's problems, potential earnings disappointments, and a possible deceleration in economic growth.
Even so, the managers aren't just bullish on U.S. stocks, but on equities generally. Some call it the TINA trade, for "there is no alternative" to stocks in a slow-growth, ultralow-interest-rate world. Eighty-six percent of poll respondents are bullish on stocks for the next 12 months, and a whopping 94% like what they see for the next five years. Real estate has similar approval ratings.

We have the most bulls in 20 years of the poll.  Amazingly 86% are bullish for the next 6-12 months and 94% are bullish for the next five years.  Really.  Now.  We are likely in a global recession that appears to be getting worse.  Corporate earnings are clearly deteriorating and everybody is the most bullish in 20 years.  Well that certainly makes a lot of sense to me. 

I know we have made a new all time high in many indexes, but that does not mean the secular bear is over.  Here is the Dow chart from the 70s when it made a  new all time high in 1973 after 7 years.



The next thing that happened was the worst bear market of the entire series of bear markets.

In 2000 individual investors were clearly overly bullish.  That is certainly not the case today.  However, that optimism has been replaced with big money managers being way overly bullish.  Between this magazine cover and the great rotation story we have really good contrarian signs of a major top.

Bob






Tuesday, April 23, 2013

Daily update 4/23

This is pretty strange.  Here is the Nova/Ursa ratio chart from yesterday.


Despite the decent rally yesterday the ratio actually dropped.  The 14 DMA is getting ever closer to a negative crossover.  This site gets updated to late to get into the daily update on the same day.  It will be interesting to see how it moves after today's up day and approach of the highs.  It is starting to look pretty similar to what happened at the top last fall.  Stay tuned.

Nothing like some bad global economic data to spark a rally in stocks.  We all know markets can act irrational for long periods of time.  This one is almost bordering on the absurd.  People clearly have zero fear that anything can go wrong.  What are the odds they will be right?  Here is the daily SPX chart.
 

SPX closed back above its 2007 high and clearly back in the price channel.  Is it going to test the all time high again?  The bias flipped back to up one more time.  Lets zoom in to the SSO 195 minute chart.


The bias on this time frame flipped back to up this morning.  SSO did not get a higher close on the second bar to confirm that yet. 

There are quite a few divergences in the indexes.  Here is the Russell2000 for instance.


As you can see it is lagging behind considerably.  There is no shortage of indexes like this.  The market continues to look like a significant top is forming.  Companies are missing on revenue and lowering guidance.  It actually makes sense for the market to top.  I suspect it will do so, but that does not mean it won't jerk around a while first.

Bob

Monday, April 22, 2013

Strange economic data

I am positive the zero interest rate policy of the FED is causing most economists headaches.  This environment is different then at any time since the great depression.  Yet there sure are a lot of economists that keep using the old ways of analyzing the economy.  I don't think you can do that.  It is different this time.  Here are a couple of charts that might make you go hmm.

Source

This index has done a perfect job of forecasting the last seven recessions when the blue line drops below zero.  In that time frame there are no false positives.  It is currently saying we are nowhere near a recession at this point in time.  Looking at this chart it would certainly make you think the economy is humming along now wouldn't it.  Lets take a different look at the data.

 Source

I am not sure why the author put the recession indicator where he did.  Obviously it is way too low since most recessions did not even get down to that level.  This chart covers one more recession then the other chart.  There is only one time this indicator got  this low and the economy was not already in recession.  That was in the late 50s and it took a few more months before the official recession started.  This makes the economy look extremely weak and we should already be in a recession or are about to enter one.

I am 100% certain the economy is not as strong as the first chart suggests.  However, I cannot say for certain we are in a recession as the second chart suggests.  I am convinced we are in a different environment then at any time since WWII.  I suspect the economic data isn't going to work exactly the same as it has since then.  I think one part of the problem is seasonal adjustments because the last recession was out of the ordinary and yet the data from that time period is used as if it was normal.  This clearly distorts the current data from about Sept. to the Feb.-March time frame.  That was the worst period of the recession.  You may have noticed the data always seems to turn down in the spring and turn back up in the fall.  Is that a result of the seasonal adjustments?  They use data from the previous five years so that problem will be behind us after one more year. 

What is the true state of the economy.  To be honest I don't think anybody really knows for sure.  I can see the global economy appears to be getting worse.  I guess we will see how that affects the U.S. as we go along.

Bob




Daily update 4/22

SPX followed through on its open after a little deeper retracement then I would have expected.  Here is the daily SPX chart.


SPX did not close above the key 18 SMA today.  It touched it, but turned back.  Volume fell off quite a bit today.  The bias indicator flipped back to down today.  I think it is showing some instability here.  SPX closed right about where the lower channel trend line is the way I have drawn it.  When I drew it I used the lowest close in Dec. not the lowest candle tail price.  If the lowest price was used SPX would still be inside it.  It is a bit subjective on how you draw those.  In this case the upper channel trend line fits better with the lower line the way I have drawn it.  It might matter now because SPX is in position to kiss my trend line goodbye today.   Tomorrow could be a key day.  Will it climb back into the channel or get rejected?  Lets zoom in to the SSO 195 minute chart.


SSO stopped at the under side of its 50 SMA.  The bias is still down on this time frame.  I put in a lower trend line for this two day rally.  I would expect a break of that trend line to usher in considerably more downside. 

The breadth was only 56% positive today. When you combine that with the big drop in volume it suggests a rather lethargic bounce off the daily 50 SMA.  I think the ball is back in the bears court now.  We rallied back up to the daily 18 SMA and lower channel trend line.  This would be a good place for them to show up if they have the desire.  I will be watching for a roll over the next two days.

Chart practice has been updated with JNPR the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Current sentiment picture

Here is a look at the latest Nova/Ursa ratio.



Source

The ratio had a significant spike down the last few days into a short term over sold condition.  It bounced back yesterday, but is still below 0.  The 14 DMA is still above the zero line, but is headed south.  Will it cross and suggest a correction is on, or will it turn back up? 

Here is the latest NAAIM survey.


Source

The NAAIM survey has come down to 69 as some people have taken some profits.  It is still high relative to the range of the last two years.  Since they are lowering exposure it probably would take some good news event to get them to pile in again.  If they continue to take chips off the table it would be a drag on the market.

Here is a chart I have never seen before of the NAAIM data.

 Source

This is from the article.

According to the NAAIM survey, fund managers held record net long exposure to US equities in early parts of 2013, exceeding that of 2007 peak. Moreover, when we measure the intensity of these positions (number of managers long including their leverage minus number of managers short including their leverage), we can see that fund managers have been bullishly over-leverged in recent months. Similar conditions were seen in mid 2011, prior to a August market crash.

The intensity of longs as the author put it is quite an interesting way to measure enthusiasm.  Despite the big rally last year the intensity never reached the levels it did in 2010 and 2011.  The biggest move down last year was quite a bit smaller then in the prior two years.  However, this year is different.  It would appear there is some risk of a bigger correction then we saw last year.  The indicator has rolled over significantly already.  That could indicate the market has peaked for now.

Source

This survey shows the number of bulls dropping and bears rising.  The tide of sentiment is turning some, but not enough to say we are in a correction yet.

At this point there is still more fuel on the downside then the upside.  However, sentiment has cooled enough that some really good news could cause some renewed bullish enthusiasm.  It does not look like that good news is going to come from earnings unless they get much better as we go along.

Bob




Friday, April 19, 2013

Daily update 4/19

The bulls were moved to buy a little today as SPX bounced off the 50 SMA.  Here is the daily chart.


The move up today was enough to flip the bias back to up.  Will there be follow through on the upside next week?  Most Mondays this year have been down.  Lets zoom in to the SSO 195 minute chart.


The bias is still down on this time frame.  I have put in a downtrend line to watch.  Price ended the day at the 18 SMA and just below the mid day high.  Had it broke above that high and stayed above it in the afternoon it would have been a better sign for the bulls.  As it is there is a bit of a question whether we follow through on Monday or not.  Lets look at the 60 minute chart.


This chart shows where the down trend line comes from.  The bias is up on this chart so if we start up on Monday we could be in a move up to the 50 SMA.  Since we stopped at the trend line and below the mid day high it could easily roll over from here. 

The bias flip back to bullish after one day down on the daily chart is often the sign of a short term low.  However, look at this chart.


IBM was taken to the wood shed today on earnings.  This is a major bell weather stock and has been one of the first Dow stocks to new highs after every correction.  It also has the biggest influence on the Dow with its price weighted formula.  It did not stop the bounce today, but after reflecting on what happened over the weekend there could be a change of heart on Monday.  I almost think the market could continue whichever way it opens up on Monday.  If we start up we will be above that down trend line with shorter term charts that have a bullish bias.  If we open down the fact we are under the daily 6 and 18 SMAs could be a negative driver especially with the way some stocks are reacting to earnings.  The potential for a decent move either way is there.

Chart practice has been updated with WYNN the stock for tonight.
http://traderbob58-chart-practice.blogspot.com/

Have a great weekend all,
Bob

Margin debt problem revisited

I have talked about the margin debt problem several times since last fall.  Here is a refresher of the long term history.

Source

Something I did not notice before.  Even though the Dow made a lower low then in 2002, the margin debt made a higher low.  If that 2009 low was truly a generational low as many people proclaim I think the margin debt should have been much lower.  The fact that it was higher then in 2002 strongly suggests people did not throw in the towel on stocks as the pundits would like us to believe.  At the final low of this secular bear market there will be a throwing in of the towel, get me out at any price move.  Even though it may have looked like we had that, I don't think that was the case.

I found an interesting chart that looks at margin accounts slightly differently.   Here is what they calculated.

Let’s look at the data another way, focusing on the Net Worth of Margin Accounts. Net worth is calculated by taking the (Free Credit Cash accounts + Credit Balances in Margin Accounts) and subtracting this figure by the overall Margin Debt. At present, Margin accounts have a negative net position.
Again we see a graphic that suggests, at least based upon historical precedent, that when the Net Worth of Margin Accounts is negative, equity prices have struggled to continue their move higher.

 Source

I added the blue lines at the points where the net worth line bottomed out and turned up.  In the prior two instances of going negative the market peaked around the time the net worth turned up.  Currently it appears to have turned up again.  Whether we sell off and retest this high I cannot say for sure, but I believe that a retest would fail.  I don't think the market is going to break out and race higher from this condition.  With the global economy most likely in a recession the downside risk is high.

Bob

Thursday, April 18, 2013

Daily update 4/18

The bulls tried to get the market going on the upside with an overnight push up with the futures, but the bears came out to play right away.  Here is the daily SPX chart.



SPX dropped slightly below the key support at 1538 late in the day, but closed back above it.  It closed slightly below the 50 SMA and the lower channel trend line.  Notice the bias flipped to down today.  The ball is in the bulls court here at key support.  What will they do with it?  A lower close tomorrow would add confirmation on the daily chart of a pullback.  Lets look at the SSO 195 minute chart.


SSO closed below the first support line, but held above the next one.  The last bar closed below the bar that flipped the bias to down adding some more confirmation that a pullback is in progress.

The dip buyers did not show any real desire today.  If they don't come out and support the market here tomorrow it could be a wide range down day.  If we break down everybody that bought since the early March big gap up (circled area on the 195 minute chart) will be underwater.  I think some of them will undoubtedly bail.  I don't see much of anything to go on about tomorrow morning.  The bulls may show up at support or they might not.  We are not over sold enough to give high odds the bulls will show up.  We will have to see if the spirit moves them.  I think there is enough damage that any bounce from this support will be short lived and not make new highs.

Bob

Stocks underowned?

This chart shows how individual investors are positioned in equities.

Source

The chart starts in Nov. of 1987 which was after the big crash that year.  I would have liked to have seen what it looked like before the crash.  It was not until after 1990 that individuals really started to feel comfortable with the market again.  Despite the bigger moves down over longer periods of time in the 2000s, the period of time before people moved back into equities from an aggressively underweight was much shorter.  The crash of 87 did not even take out the 1986 low, whereas the bear markets of the 2000s took out the lows many years back.  And yet people were much more wiling to buy again in the 2000s then they were in the grandest secular bull market of them all.  People keep claiming this is the most hated rally ever.  If that was really the case shouldn't individual investors still be underweight?  Some of the money from equity mutual fund withdrawals went into ETF's and some into bonds because of the aging population.  It has nothing to do with hating the rally.  That aging population is highly likely why individual investors are less overweight equities now then at either of the prior peaks in 2000 or 2007. 

Check out this chart of pension plan allocations.

Source

Pension fund equity allocation is much lower then in 2000 or 2007.  They were clearly way, way overweight in equities for many years.  Every share of stock is owned by somebody.  If individual investors and pension plans hold a lower equity asset allocation then in 2007 who is holding all that extra stock?  My guess would be hedge funds and other traders both large and small.  I would suspect some readers are thinking, wow this is bullish people are underweight equities.  I don't think this is particularly bullish in any special way.  Every share is owned by somebody already.  Will individuals or pension plans bid up prices because they are underweight? I think that will only happen if things take a big turn for the better in the economy.  However, I think this is a problem if we end up going in the other direction.  In downturns traders tend to sell stocks much quicker then investors and pension plans.  The more stock in the hands of traders and less in the hands of long term investors is likely to increase volatility in a bear market. 

Bob

Wednesday, April 17, 2013

Daily update 4/17

The bears did indeed show up today.  Here is the daily SPX chart.


SPX closed just slightly below Monday's low.  It came within 1.5 points of its 50 SMA before bouncing in the afternoon.  It is below the trend line where I have drawn it, but it could be drawn slightly different where price is still above it.  Trend bias is still up on the daily chart.  Lets zoom in to the SSO 195 minute chart.


The trend bias is now negative as it flipped on the first bar today.  However, price did not close lower on the second bar so it is not really confirmed yet.  Notice price held the first green support line today.  Volume was pretty high on the bounce bar and that was also true for SPY.  Is that a setup for a bounce tomorrow morning?  Unless the futures are down in the morning I think that will be the case.  However, there is a problem now for bulls.  Check out the new high/low chart.


There were significantly more new lows then new highs today.  This greatly increases the odds we have started a correction of some kind and not just a 3-5 day pullback.  The bias on the daily chart is still up so the bulls may try again to rescue the market, but I think there is enough technical damage now that it will be a losing battle until we see considerably lower prices then here.  That chart pattern is screaming top and now the internals seem to be confirming it.

Chart practice has been updated with MOS the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Important

The information in this blog is provided for educational purposes only and is not to be construed as investment advice.