On this day 10 years ago, money markets started to seize up as BNP Paribas closed three funds linked to US mortgages, requiring heavily-coordinated central bank action that launched an extraordinary period of central bank activity that is still in full swing today.

The SPX hit a high of 1503.89 that day (8-9-07) and then fell back to an intra-day low of 1370.60 on 8-17-07 before starting an ECB/Central Bank fueled rally that carried it to a then all time peak on 1576.09 on Oct 11th - some 16 months later the SPX would bottom at 666.79 on 3-5-09 - a 57.69% decline. It would then take until 4-10-13 to surpass that 1576 peak once again.

Not counting dividends, the current SPX level of 2470 this morning means that the SPX has averaged 5.0867% a year over the last 10 years. With dividends CNBC reported this morning that this 10 year annualized return was over 7+% a year. The commentators used this data to once again pronounce that investors need to just "hang in there" as this 10 year period again proves that "the market always comes back". According to these 'experts" trying to go in and out of the market just doesn't work.

I would suggest that there are very few "investors" who could psychologically take a 57% hit to their account, and would "just hang in there" and have enough faith to wait 4 years for the market to break even again. 

A fascinating statistic about the current no-vol state of the market, courtesy of Deutsche's Jim Reid, who points out that  the last time we had 13 consecutive days in which the S&P moved less than 0.3% in either direction was... never:

 

 

... all you really need to know about markets at the moment is that yesterday's move in the S&P 500 (+0.16%) added to the record daily run of less than 0.3% moves in either direction . It’s now 13 days since we had a larger move using daily data back to 1927. The second longest streak of this length was of 10 days which has happened twice in history. The most recent time was in England's solitary football World Cup winning year (06 Jan 1966 - 19 Jan 1966), and the other between 15 Nov 1961 and 29 Nov 1961.  So these continue to be remarkable financial times we are living through.

To put the steady but relentless rally in the S&P in context,  it is now 73 trading days since the S&P increased by more than 1% in any one day. Give it another 7 days and we will beat the prior record set back in November 06 and March 07. Although, given the current lull in the activity (VIX now back to below 10), we might even get close to the 100 day record set back in mid-July 1995 to early Dec 1995.

Earlier this year,  the Dow recorded its lowest one-month trading range since 1900, and last summer the S&P traded within a 1.77% range for 42 consecutive days, the tightest such streak in history (the lull was ultimately broken on 9-Sep-16, when the S&P 500 dropped 2.45% on ECB policy, North Korea, and a fear of higher rates in the US).

https://pensionpartners.com/markets-dont-crash-from-all-time-highs/

At 3:50 pm the Russell 2000 index 60 minute chart has both RSI-14 and RSI-21 values below the lower 30% line. The RSI-21 value that low is a relatively rare occurrence and is indicative of the index being extremely oversold on a short-term basis.

Thanks

An addendum to yesterday's comments about going long so far in 2017 when the last day of the month is a down day. Going Long XIV at the end of Dec, Feb, April, June, and July for one day is up 15.48% YTD. The trade on the last day of June was a modest loser for XIV. So far today the XIV is up slightly more than 1% on the day.

Shorting UVXY in a NQ acct on those same  five days would have upped the return to more than a 30% gain YTD

Can you provide more detail please into what ideas you have. Thanks

Good to know - Thanks

So far in 2017 when the Russell 2000 index has been down on the last day of the month, there has been a gain on the following first trading day of the month. Using the 200% leveraged funds that I like to trade with, this approach is up +11.96% going into tomorrow. Employing no leverage for these trades would be half of that - not bad for being in the market for just five days. The 200% Mid Cap funds are up +9.66% on those same days. TNA is up +17.48% on these five days.

The RUT months involved are the first days of Jan, March, May, June, and July.

This is likely a result of new pension money contributions entering the market on the first day of a new month, and especially when the underlying trend in the market is positive. At the moment, the RUT is closing the month with four down days in a row within an underlying positive trend. Without actually checking yet, I'm going to guess that the odds of tomorrow being a positive first day of the month are pretty good.

So far in 2017, the SPX and NDX have seen declines on the last trading day of the month for every month. The only first day of the month loss for SPX occurred in April - NDX lost very modest amounts in both April and in July. The 200% RYVYX fund is up +7.065% on the year taking these first day of the month trades.

At the moment, my short-term 60 min chart would certainly indicate an oversold market today, and daily RSI-2 levels are in single digits for the RUT and Mid....the NDX is right around 10. SPX is around 25.

Of course, just writing about this today could jinx the whole idea!!! LOL

After three straight months of declines, Consumer Confidence saw a solid rebound this month, rising from 117.3 up to 121.1.  July’s reading also handily exceeded the consensus forecast of 116.5.  While the headline reading in Consumer Confidence is still off its cycle-high of 124.9 from March, it still sits at levels that have rarely been seen in the last seventeen years.

At just past 12:15 am the S&P 400 Midcap index has a 60m RSI-21 value of more than 72.60% along with a 60 min RSI-14 above 78.3%. This same pattern just recently occurred on July 19th, and led to a short-term pullback of almost 0.90% by the morning opening range on the 21st.

This is the 7th time this combination has occurred in 2017 - all of the previous patterns led to at least a short-term decline in the Index within a short period of time.

The NDX has closed today with an RSI-2 value of 99.94% (I saw 99.95% just before the close) The NDX is in a 13 day low to high consecutive day pattern which ties the longest such consecutive day move for the NDX that I have recorded in my data.

Back in mid July 2013 the NDX hit 99.99% for two days in a row within a five day pattern that all remained over 99%. Today is also the 5th day above 99% for the NDX. In contrast the other major indexes have a much lower RSI-2 with the Dow down at 9.88%. Back during that run in 2013 the NDX barely pulled back, and then moved higher in the short term by another 2.25% or so over the next 3 weeks before finally experiencing a more substantial pullback

http://www.marketwatch.com/story/this-is-the-biggest-myth-about-the-faang-stocks-2017-07-20