Posted by canadianguy on 26th of Jan 2009 at 04:36 pm
Michael I agree with your assessment of the economy. What I find
interesting and not sure how to evaluate it what is happening in
different sectors of the stock market.
We have seen the financial sector and the Trannies make new
lows this month. We have seen Microsoft, GE and WalMart make
new lows this month. We have seen GE make new lows. I am sure there
are other economy and sector leaders that have also made new
lows.
However, we have seen surprising strength in some sectors. The
Gold stocks just came back up to their 200dma's today, more than
doubling from the bottom despite the USD being near the top of its
recent move. We have seen oil refuse to break below $40 despite
hundreds of millions of barrels of oil floating around the world
with no home. Health care stocks are looking ok. We are seeing many
commodity related indexes like UYM and MOO making nice bases with a
nice gain from the November lows, not to mention some second
education sectors making new all time highs.
Strange bear market, for sure. What does it all mean? How can
GE, MSFT, the trannies, C, JPM and BAC all make new lows but
the market not? Does that mean the economy is ok outside of those
sectors, that the worst of the economic downturn is
housing/financials related, and that the rest isn't that bad? Or
does it mean the other stocks are just stubbornly refusing to
fall?
Nobody knows until this triangle resolves itself.
I remember early in 2002 how some sectors were starting to roll
over like cell phones (NXTL, PCS were almost broke), electricity
producers (Calpine, MIrant, etc), but many other sectors hung in
there for awhile. Eventually though everything went down, which I
suspect will happen here as well. Any thoughts from you smart
people??
This market feels very very wrong. Like watching the tide
go out right before the surge in a hurricane. I think many
stocks and certain sectors are being bouyed as investors shift
funds to what appears to be a port in the storm, only to get
skittish at the first hint of bad news, and then flee somewhere
else. In addition to the volatility, the number of gap-ups
and gap-downs on a given stock is disconcerting. Today's
port is tomorrow's disaster. A lot of indecision, few
trends, large reversals... None of it is being driven by
fundamentals. Optimism, fear, uncertainty or denial...
take your pick.
It's going to get very ugly in the not-to-distant future.
Where's that guy with the sign that says 'The End is Near'? ;-)
Posted by markwes1 on 26th of Jan 2009 at 06:52 pm
Just another observation on the markets (SPY):
The daily SS 5,3 is up which is providing some strength
underneath us.
The weekly SS 5,3 is down (went down first week of January)
thus the brutal overhead resistance.
This "cross-current" historically creates a "chop-shop" like
we're in now. You can see this same scenario (Weekly stoch
5,3 down and Daily 5,3 stoch up) in the end-of May and again
in the end-of-August - both scenario's ended in major market moves
down. There is one small difference in that in the previous 2
cycles (May and Aug), the Weekly SS 5,3 moved down from above 80
area - presently the Weekly SS 5,3 turned down from a high of just
under 80.
Were do we go from here, well Matt and Steve have that figured
out better than I do. However, if the daily 5,3 turns down
while the weekly 5,3 is down then the line-up suggests we go down
with a takeout of SPX 802 taking us to November lows - probably
pretty quickly.
One additional note - I see a pattern on weekly of it taken 3-4
months to swing from top to bottom on crossovers. If this
same pattern plays out we could just go sideways for awhile.
I agree the daily has all signals pointing higher currently and
weekly are pointing still lower HOWEVER its signals MACD (Above
Zero) and RSI are showing begining stages of Poss. Div (Very Weak
but its there). If you also notice the Oct. weekly cross
over on STO was higher then July's. If we turn soon then
uptrend line on weekly has held. If we lose those then for
sure its heading south.
What concerns me is we have a cross up back in July from
below 20 and got like 100-150 SPX points then turned down. Then in
Oct. Same Pattern occured and we got about 125-200 SPX points.
This pattern I believe lines up with Steve's pattern that
SPX could only rally a few 100 pts at most from current levels.
IMHO
Posted by hornsant on 26th of Jan 2009 at 07:20 pm
Fine observation, now I just checked out the VIX to see if
it looks the same as the indices, and now, I has both the week
and daily Stoch pointing down... do you think that that is another
divergence ?. What do you make of it ?
Posted by markwes1 on 26th of Jan 2009 at 05:39 pm
I'm with you - longer term (who knows when) I believe we head
lower. One strategy I'm pondering is covered calls with the
inverse ETFs. The call premiums are very rich.
The way I look at it, if you have a conviction that within 6
months we go either sideways or down, buy the inverse ETF and write
ATM or OTM calls. If you get called out, you make
money. If we go sideways, you should do ok. If we go
up, we have strong resistance. You can buy the calls back on
the cheap or let them devalue (increasing your value) and let the
ETF come back to you.
strange divergences
Posted by canadianguy on 26th of Jan 2009 at 04:36 pm
Michael I agree with your assessment of the economy. What I find interesting and not sure how to evaluate it what is happening in different sectors of the stock market.
We have seen the financial sector and the Trannies make new lows this month. We have seen Microsoft, GE and WalMart make new lows this month. We have seen GE make new lows. I am sure there are other economy and sector leaders that have also made new lows.
However, we have seen surprising strength in some sectors. The Gold stocks just came back up to their 200dma's today, more than doubling from the bottom despite the USD being near the top of its recent move. We have seen oil refuse to break below $40 despite hundreds of millions of barrels of oil floating around the world with no home. Health care stocks are looking ok. We are seeing many commodity related indexes like UYM and MOO making nice bases with a nice gain from the November lows, not to mention some second education sectors making new all time highs.
Strange bear market, for sure. What does it all mean? How can GE, MSFT, the trannies, C, JPM and BAC all make new lows but the market not? Does that mean the economy is ok outside of those sectors, that the worst of the economic downturn is housing/financials related, and that the rest isn't that bad? Or does it mean the other stocks are just stubbornly refusing to fall?
Nobody knows until this triangle resolves itself.
I remember early in 2002 how some sectors were starting to roll over like cell phones (NXTL, PCS were almost broke), electricity producers (Calpine, MIrant, etc), but many other sectors hung in there for awhile. Eventually though everything went down, which I suspect will happen here as well. Any thoughts from you smart people??
re: strange divergences
Posted by rjdst on 26th of Jan 2009 at 06:33 pm
This market feels very very wrong. Like watching the tide go out right before the surge in a hurricane. I think many stocks and certain sectors are being bouyed as investors shift funds to what appears to be a port in the storm, only to get skittish at the first hint of bad news, and then flee somewhere else. In addition to the volatility, the number of gap-ups and gap-downs on a given stock is disconcerting. Today's port is tomorrow's disaster. A lot of indecision, few trends, large reversals... None of it is being driven by fundamentals. Optimism, fear, uncertainty or denial... take your pick.
It's going to get very ugly in the not-to-distant future. Where's that guy with the sign that says 'The End is Near'? ;-)
Just another observation on the
Posted by markwes1 on 26th of Jan 2009 at 06:52 pm
Just another observation on the markets (SPY):
This "cross-current" historically creates a "chop-shop" like we're in now. You can see this same scenario (Weekly stoch 5,3 down and Daily 5,3 stoch up) in the end-of May and again in the end-of-August - both scenario's ended in major market moves down. There is one small difference in that in the previous 2 cycles (May and Aug), the Weekly SS 5,3 moved down from above 80 area - presently the Weekly SS 5,3 turned down from a high of just under 80.
Were do we go from here, well Matt and Steve have that figured out better than I do. However, if the daily 5,3 turns down while the weekly 5,3 is down then the line-up suggests we go down with a takeout of SPX 802 taking us to November lows - probably pretty quickly.
Thoughts?
markwest - very good observation
Posted by dodgerdog on 26th of Jan 2009 at 09:03 pm
markwest - very good observation on the stochastics. Please keep a close eye on how that resolves.
Daily/Weekly 5 / 3 / 3 Crossover
Posted by cspirit on 26th of Jan 2009 at 09:34 pm
Here's the Weekly vs Daily charts.
Weekly- 6 month snap shot
http://stockcharts.com/h-sc/ui
Daily - 10 month snap shot
http://stockcharts.com/h-sc/ui
One additional note - I see a pattern on weekly of it taken 3-4 months to swing from top to bottom on crossovers. If this same pattern plays out we could just go sideways for awhile.
I agree the daily has all signals pointing higher currently and weekly are pointing still lower HOWEVER its signals MACD (Above Zero) and RSI are showing begining stages of Poss. Div (Very Weak but its there). If you also notice the Oct. weekly cross over on STO was higher then July's. If we turn soon then uptrend line on weekly has held. If we lose those then for sure its heading south.
What concerns me is we have a cross up back in July from below 20 and got like 100-150 SPX points then turned down. Then in Oct. Same Pattern occured and we got about 125-200 SPX points.
This pattern I believe lines up with Steve's pattern that SPX could only rally a few 100 pts at most from current levels. IMHO
Apears that in the tug
Posted by hornsant on 26th of Jan 2009 at 07:42 pm
Apears that in the tug of war between the stochastics one of them has an allied...by now
diverting
Posted by hornsant on 26th of Jan 2009 at 07:20 pm
Fine observation, now I just checked out the VIX to see if it looks the same as the indices, and now, I has both the week and daily Stoch pointing down... do you think that that is another divergence ?. What do you make of it ?
I'm with you - longer
Posted by markwes1 on 26th of Jan 2009 at 05:39 pm
I'm with you - longer term (who knows when) I believe we head lower. One strategy I'm pondering is covered calls with the inverse ETFs. The call premiums are very rich.
The way I look at it, if you have a conviction that within 6 months we go either sideways or down, buy the inverse ETF and write ATM or OTM calls. If you get called out, you make money. If we go sideways, you should do ok. If we go up, we have strong resistance. You can buy the calls back on the cheap or let them devalue (increasing your value) and let the ETF come back to you.
Thoughts?
sounds reasonable. I just know
Posted by Michael on 27th of Jan 2009 at 09:16 am
sounds reasonable. I just know nothing about writing covered calls