Technical Analysis
September 18, 2008 Recap: Almost Like Yesterday Never Happened
These last few days are some of the wildest I’ve ever seen. Right up there with post 9/11 trading and some of the upside action in the 200 bubble. As Jeff Macke attested to tonight on Fast Money it’s just treacherous out there. Even if you chose (guessed?) the right side (long or short) for the day (hour?) you’re likely to get stopped out by some violent move caused by some rumor or headline. Here’s a shot of the Dow over the last two sessions (each bar is 30 minutes) which show the 600 point range with some big, quick bursts which coincided with events on CNBC.
The VIX spiked even higher today and hit 42.16 before reversing and good old T2108 has bounced back over that key 20 level. I think the indices set all-time volume records today but I’m not sure. Does anybody know a site that provides such data? Record or not, the volume was extreme and is exactly what you want to see when you’re looking for a capitulative bottom. I just wonder what options expiration will bring us tomorrow.
Like the Dow, the Nasdaq and S&P regained most of what they lost yesterday. Both indices are perched just below a couple of lines of resistance.
The Russell bested the 4 and 5% moves by the indices above by gaining almost 7%. That puts it back above its 50 and 200-day moving averages. It also broke its September downtrend today. I’ve been hearing a lot of talk about how tech is gonna lead the way up but it seems that small caps are still the place to be.
Trend TableSome upgrades for the Russell today..
Trend Nasdaq S&P 500 Russell 2000 Long-Term Down Down Lat(+) Intermediate Down Down Lat(+) Short-term Down Down Up(+)(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Post from: Trader Mike's Blog
September 18, 2008 Recap: Almost Like Yesterday Never Happened
No tag for this post.links for September 18th
- How Wall Street Lied to Its Computers - Bits Blog - NYTimes.com -
- TREASURIES-US 3-mo T-bill yield falls to 0.02 pct -traders - The 3-month U.S. Treasury bill yield "last traded at 0.02 percent as an actual trade and may have traded negative earlier today,"
- Dead Man’s Switch -
A chess program in less than 5kb of Javascript
I’m really impressed with this chess program in less than 5kb of javascript.
Here is the code:
You Know What, It Doesn't Really Matter Anyway
Honestly, this type of action makes me just want to take all of my money out of my account and just not play this game any longer. It is so rigged it is unbelievable. And I am not saying this because I am about to lose a ton of money or being hurt financially in any way. I am completely in cash and have been successful this year (up close to 90%). We could rally big tomorrow and I honestly just don't want to even participate if we do. The United States Stock Market has officially lost all credibility in my eyes. Maybe it never had any and I was just naive. But the steps today are absolutely ridiculous. As Bear Mountain Bull states, perhaps it is time for a worldwide boycott of the stock market. I am for that.
I haven't even mentioned the plan to give $400-700 billion more of taxpayer money to the stupid banks that caused all this problem that was "leaked" today. From everything I read, the idea proposed today involves setting up a taxpayer-backed fund for banks to dump their bad debt upon. We get to pay for it. Sounds good to me, how about you??? This is in addition to the $80 billion of taxpayer money given to AIG, and the potentially trillions of dollars used to bailout Fannie and Freddie. And we still haven't mentioned the Bear Stearns fiasco among others.
I hate to say this, but I think we may be witnessing the beginning of the downfall of our great nation. I sincerely hope I am wrong. By doing this ridiculous crap, these idiots are basically admitting that things are much worse than they are letting on. They are panicking, and in all likelihood will actually increase the odds that what they are trying to prevent (a total crash) will actually occur. By taking away short sellers, they have just eliminated built-in buyers for stocks. This constant intervention is in no way what our country was founded upon.
I wonder how many times George Washington and Thomas Jefferson rolled over in their graves today. This is truly a shame.
So Is THIS the Bottom???? We'll See in a Few Days
On the plus side, volume was the heaviest its been the past week and looks awfully climactic to me. Combine that with the reversals put in, and the possibility of a bottom is certainly there. The buying interest today in terms of 4%+ breakouts was as high as I have ever seen. The VIX also spiked above 40 today before reversing hard as well. All of these could signal a possible bottom.
S&P 500, Nasdaq
VIX
On the downside, let's not forget just two days ago, when the market rallied a huge amount late in the session on rumors about AIG getting bailed out. A lot of people figured (and I have to admit I was in this group) that we would continue higher for at least a little short-covering rally. The next day (yesterday) we were down instead 500 points. I also don't like the fact that this entire move was triggered based on a RUMOR put out by those fine, upstanding journalists at CNBC. People want to lock up short sellers??? How about locking up Charlie Gasparino, first for the Ambac crap he pulled earlier this year, and now for putting this out there. As long as it is the shorts getting hurt, I guess it's OK, huh? (By the way, I have been in cash for the past two weeks, so I am not biased here)
So overall, I am leaning to more upside here but would not be surprised by anything. Seriously. A 500 point up day or down day tomorrow would not be a shock. The amount of volatility the past few weeks has been staggering, and there is no reason to think that will end all of a sudden. The chart below shows the buying/selling interest that I do as part of my scans each night. Over the past eight sessions, I have had four days of over 1000 4%+ breakouts(1) or breakdowns(3). A normall high reading is around 300, and I have not had a 1000+ day, either positive or negative, this entire year up until the past eight sessions. Because of this, I am expecting more jaw-dropping swings to come. This volatility is also a reason I plan on waiting for a true, IBD follow-through day before getting heavily long in this market. From my perspective, there is still just too much risk out there and I would rather wait for some confirmation of a bottom, even if it means missing out on a few percentage points in a move.
Buying/Selling Interest
Here are some of the charts I am watching from the long side. I wish I had more, and I wish more of the ones I have below had max BOP levels that told me they were really being accumulated, even in this mess of a market. Unfortunately, they don't, and we as traders have to take what the market gives us. I am also not seeing a ton of high quality IBD type stocks setting up. Am I planning on going out tomorrow and buying a lot of these? No. I want the market to prove itself a bit. Again, I am planning on being patient here and not jumping the gun, therefore hopefully avoiding a possible whipsaw that is always a possibility in this market. If this is the bottom, then there will be plenty of time to get fully invested on the long side.
STSI, CRDC
PRAA, CLNE
SAPE, THFF
SMCI, CRD.B
RMG, ROCM
UA, BBBB
ENSG, WBSN, BRKR, AMMD
HA, MED, AMFI, FSYS
VAR, CHS, BECN, CNQR
All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.
Overall, today was certainly a great day for the bulls, but I am going to temper my enthusiasm for the time being until we see if this can be maintained for more than thirty minutes. If we do bottom here, there are so many shorts out there that a rally could turn out to be very powerful, so it pays to be ready for it. I would frankly be all for a rally starting here - I am bored out of my mind right now just sitting and watching, even though I know it's for the best. But we also have to remember today's move took place in less than an hour, was caused by a rumor, and was most likely led by monster short-covering. We saw something very similar two days ago and it amounted to absolutely nothing. All in all, there is nothing from today that I saw that tells me this market is about to get any easier. Oh yeah, options expiration is tomorrow. Be careful and good luck Friday.
Tags: CLNE, PRAA, STSI, CRDC, SAPE, THFF, SMCI, CRD.B, ENSG, WBSN, BRKR, AMMD, UA, BBBB, HA, MED, AMFI, FSYS, VAR, CHS, BECN, CNQR
State of the Market - 9/18/08
Technically, today was a very strong showing once again, much like Tuesday. Let's just remember however what happened yesterday after so many people (including me) were expecting a continuation of the bounce following Tuesday's reversal. The markets closed right near their July lows, which I guess will be heavy resistance. If we move lower tomorrow in a powerful way like Wednesday, then I still think the fear and panic that we have seen recently comes back into play and it gets very interesting. If we move higher tomorrow and follow-through, then maybe we can bottom here.
It is days like today that make me happy I have stayed out of the market the past week or so. I don't think I am arrogant enough to think that I would have traded these massive swings properly and made a ton of money in this volatile environment, especially with me not being at my computer a lot now that I am back at work. More than likely, I would have been chewed up and spit back out by the market, wrecking not only my account but also my confidence so that when it was time to start making moves, I don't know if my mindset would have been where it needed to be. Sometimes cash is the best position for lots of reasons.
I am taking the same approach to today's action as I have the rest of the week - I want Wall Street to prove itself to me. I will follow the IBD method right now in terms of looking to get long. I actually wish the fear and panic would have gotten worse (and who knows, it still may) because the further stretched we get and the more extreme the fear gets, the better the bounce will be whenever it happens. If we bottom here though, that's fine. We will probably get a nice rally, especially going into the elections. But I will wait for a follow-through day as early as next Tuesday. I may miss some of the move if we get one, but at the same time, if we get a huge reversal lower tomorrow and have a mini-crash Monday, then I will miss out on some major losses as well. I do find it amazing that a RUMOR put out by CNBC can make the market move several percent in the course of thirty minutes. That in itself tells me all I need to know about this market and how news-driven it still is.
I really don't have a good feeling either way here as to if this is the bottom or if we still have further to fall. I have been compiling a watchlist of stocks that I would look at if we do get a new rally going (unfortunately it's not that long) and plan on putting some of those up tonight - not as buys, but as stocks to watch. I also continue to look for shorts that might work out if we head lower. Just like I said last night, be prepared for anything.
Tags: CNBC, XLF, Market Rally
Watchlist for September 18, 2008
The futures are up, although well off their pre-market highs, after some more PPT action this morning. Let’s see if the bulls can follow through on this early strength…
On Today’s Calendar:
- 10:00 — Leading Indicators
- 10:00 — Philadelphia Fed
More Calendars: U.S. Earnings | Conf. Calls | Surprises | IPO | Economic
Potential swing trades:
See one of the recent ‘Chart Reading‘ posts for some potential swing candidates. Also be sure to check my typical swing trade entry & exit rules.
Potential day trades:
(From Briefing.com)
Gapping Down
In reaction to disappointing earnings/guidance: APOG -15.6%, PLD -12.8% (also downgraded to Hold from Buy at Deutsche Bank and downgraded to Sector Perform from Outperform at RBC)… Select airlines showing weakness with crude higher: UAUA -9.4% , AMR -7.5% , LCC -6.3% , CAL -5.6% , DAL -4.3%… Other news: SRDX -23.3% (Merck discontinues license and research collaboration agreement with SurModics), CPST -20.0% (announces a ~21.48 mln share common stock offering), MS -6.9% (continued reports regarding a potential merger with WB; CNBC reported that co is beginning official merger negotiations with WB), GS -6.1% (showing continued weakness from yesterday’s 10%+ decline), VRTX -4.0% (announces pricing of its public offering of common stock of 7.5 mln shares at $25.50 per share)… Analyst comments: KSS -1.5% (downgraded to Hold at Citigroup).
Gapping Up
Select financial related stocks rebounding: UBS +17.9%, AIG +13.2% (S&P reports most AIG ratings’ CreditWatch status revised to developing; short-term ratings raised), WM +11.9% (Wells Fargo, Citi have expressed preliminary interest, according to sources - WSJ), LYG +11.5% (buys HBOS in GBP12.2B all-share deal - DJ), RBS +9.9%, AXA +7.3%, MBI +7.1%, DB +6.8%, ING +4.2%, BCS +4.0%, C +2.5%, WB +2.0% (MS considers merger with WB - NY Times)… Select metals/mining names showing continued strength as the dollar weakens and gold rises further: GFI +12.4%, SLV +7.1%, NG +6.8%, AAUK +6.5%, HMY +5.1%, MT +4.4%, GOLD +4.3%, RTP +2.4%, NEM +1.8%, BHP +1.6%, GLD +1.1%… Select oil/gas names showing strength with crude higher: STO +7.4%, RDS.A +2.7%, TOT +2.1%, BP +1.9%, XOM +1.4%… Select China names trading higher following rebound in overseas trading: CHU +11.1%, CN +7.1%, ACH +3.3%… Other news: CEG +5.0% (EDF Considers Taking Over U.S. Joint Venture Partner - WSJ)… Analyst comments: CLR +1.5% (upgraded to Buy at Merrill).
Disclaimer & How I use this list
Interested in the alerts below? You can get a 7 day free-trial of the full-blown, customizable Trade-Ideas Pro service. Note: These alerts refresh/update automatically every 30 secondsPost from: Trader Mike's Blog
Watchlist for September 18, 2008
No tag for this post.Is Your Money Market Fund Still Safely Pegged to $1.00?
There are a lot of good articles around about money market funds possibly losing their peg to 1.00 dollar mark. Fellow blogger Rob from Qunatifiable Edges wrote about how his IRA is frozen due to his cash being affected by the 3% drop in the Reserve Primary Fund. One of the New York Times’ articles, ‘Money Market Fund Says Customers Could Lose Money‘, explains why Rob’s account is frozen:
The fund’s financial records also show that more than half of its portfolio on May 31 consisted of asset-backed commercial paper and notes from a host of issuers besides Lehman, few of them names likely to be familiar to the financial markets.
If these arcane investments had to be sold or cashed out quickly to meet redemptions, it is unclear what prices they would fetch or whether the issuers would be able to return the fund’s money promptly, said Keith Long, of Otter Creek Management, a hedge fund based in Palm Beach, Fla.
The Primary Fund reported that, until further notice, it would delay paying redemptions to customers for up to seven days, as permitted under mutual fund law. That delay will not apply to debit card transactions, automated clearinghouse transactions or checks written against the assets of the Primary Fund, provided that the transactions do not exceed $10,000 from single or affiliated investors.
That article also has an interesting part about how often funds “break the buck” and why they typically don’t do so:
This is only the second time in history that a money market fund has “broken the buck” — that is, reported a share’s value was less than a dollar.
This year alone, big banks and fund management companies have pledged more than $10 billion to rescue affiliated money funds that were caught holding mortgage market securities that were deteriorating rapidly in value. As a result, consumers have felt confident in the safety of money funds, and have been moving assets into such funds as markets have grown more turbulent.
The other NY Times article, ‘Money Market Funds Enter a World of Risk‘ delves into the details of different types money market funds and which ones are truly safe:
And that’s why, in this market, financial advisers agreed on Wednesday, consumers need to become their own chief investment officers, even when it comes to something as simple as finding a place to put their cash.
“One by one, all of my safe havens aren’t so safe anymore, and that’s a bad thing,” said Matthew Tuttle, a certified financial planner and president of Tuttle Wealth Management in Stamford, Conn.
“It used to be O.K. to have money in a CD, but now you have to worry, ‘Is my bank going to go under?’ ” he added. “You used to be able to buy a guaranteed annuity from an insurance company, but now you have to worry, ‘Is my insurance company going to go under?’ Or, you can have auction-rate preferred securities, but now there is no market.”
Before you pull your cash out of your money market fund, you need to understand what you own. There is a big difference between money market mutual funds and the money market deposit accounts at a bank (and banks sometimes sell both).
Folks would be wise to check the details of their money market funds…
Post from: Trader Mike's Blog
Is Your Money Market Fund Still Safely Pegged to $1.00?
Tags: Money Market FundsDeep thoughts: Banks
I thought this quote from Bertolt Brecht was good:
“What is robbing a bank compared with founding a bank?”
September 17, 2008 Recap: T2108 is Finally Sub-20
The bulls had another disastrous day today. The indices were all down between 4 to 5% and the only industry indices in the green were gold and disk drives(thanks to SanDisk’s buyout offer). Broker Dealers nad airlines led the way down today with more than 10% losses. Although volume decreased a little from yesterday it was still very high. One might expect volume to have increased today but I think part of the reason for the slight decline is the way the day played out. A good chunk of the selling came in the last 30 minutes of the day after a failed afternoon rally. About the only good thing (for the bulls) I can say about today is that T2108 has finally breached 20.
Here’s the VIX, which is approaching the levels it hit as the market bottomed in August 2007 and this January…
The S&P and Nasdaq charts look very similar. They both closed under their July intraday lows.
The Russell is giving in to the selling pressure and is part of the reason why T2108 is finally below 20.
Trend TableEverything’s down again
Trend Nasdaq S&P 500 Russell 2000 Long-Term Down Down Down(-) Intermediate Down Down Down(-) Short-term Down Down Down(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Post from: Trader Mike's Blog
September 17, 2008 Recap: T2108 is Finally Sub-20
No tag for this post.State of the Market - 9/17/09
I once again did nothing today, as a huge gap down didn't allow any low-risk positions to be put on anyway. Trading remains difficult here unless you are a day-trader, and I can't be that right now, so I just have to remain patient. It is way too late to short here - I thought we would bounce a bit today - but I would be very careful trying to buy dips. You may be able to play some intraday bounces on the short side, but if you do, I have not done my scans yet, but I would guess we are getting closer and closer to extreme measurements in a lot of areas. The VIX spiked again and is closing in quite quickly on the 40 level that is pretty important in past bottoms.
If you are not already short (and to be honest, I probably would have covered my shorts anyway by now - I don't know that I would have the patience or guts to sit through all of these swings without taking most of my profits), there is nothing to do here other than sit tight and watch history unfold before your eyes. And I do get the feeling that we are witnessing history. It is going to be a very interesting next few days, especially heading into the weekend.
The only good news out there right now is that this type of action will bring us closer to a very nice, tradeable bounce and perhaps even a more serious move higher. I have no way of knowing when that will happen - I will keep an eye on the same measures I normally do - but history shows that when capitulation occurs (and that does look to be where we are headed), markets are usually higher several months afterwards. And if we don't bounce soon after this carnage of this week and possible further carnage ahead of us, well, then, we probably all are screwed anyway. Let's hope that doesn't happen. No charts to put up tonight - no sense in trading right now, at least for my style and from my perspective. If I have any interesting observations or thoughts, I'll post later. Good luck Thursday.
Tags: VIX, Market Crash
Watchlist for September 17, 2008
We’ve got another gap down opening on our hands as the indices give back a lot of yesterday’s late day gains. I just hope the market doesn’t get jerked around by rumors & headlines like it did yesterday.
On Today’s Calendar:
- 10:35 — Crude Inventories
More Calendars: U.S. Earnings | Conf. Calls | Surprises | IPO | Economic
Potential swing trades:
See one of the recent ‘Chart Reading‘ posts for some potential swing candidates. Also be sure to check my typical swing trade entry & exit rules.
Potential day trades:
(From Briefing.com)
Gapping Down
In reaction to disappointing earnings/guidance: VSE -23.4% (also announces that it has commenced a 20 mln share common stock offering; downgraded to Perform at Oppenheimer), NT -17.0%, MS -14.5%, POL -9.1%… Select financial stocks showing continued weakness: AIG -43.2% (Fed to give AIG $85 bln loan and take 80% stake), IRE -11.2%, RBS -6.8%, KEY -6.8%, FITB -5.5%, GS -5.5%, MER -5.3%, WB -4.9%, C -3.2%, BAC -2.9%, CIT -2.6%, HBC -2.3%, JPM -2.2%… Select China names trading lower after the Shanghai Composite ended -2.9% to a new 22-month closing low and the Hang Seng closed -3.6%: ACH -9.3%, PTR -8.3%, CEO -7.9%, CHA -7.2%, ZNH -5.9%, SNP -5.8%… Other news: COIN -6.4% (announces redemption of Class A Warrants), NOK -3.1% (still checking), GILD -2.7% (receives complete response letter from U.S. Food and Drug Administration for Aztreonam Lysine for Inhalation, an investigational treatment for cystic Fibrosis)… Analyst comments: ZION -2.8% (downgraded to Hold from Buy at Stifel Nicolaus), CME -2.4% (downgraded to Market Perform at Keefe Bruyette), BBT -2.0% (downgraded to Hold from Buy at Citigroup).
Gapping Up
In reaction to strong earnings/guidance: ADBE +3.6%, DRI +1.5%… M&A news: SNDK +51.3% (receives $26 bid from Samsung; co’s unanimously rejects Samsung’s unsolicited proposal)… Select European financials showing strength: LYG +9.7% (Lloyds TSB and HBOS in merger talks: Source - Reuters), BCS +5.4% (reaches $1.75 bln deal for a Lehman unit - NY Times), AXA +3.3%… Other news: XIN +18.1% (still checking), ABK +8.0% (confirms limited direct exposure to Lehman Brothers Holdings and its subsidiaries), HOKU +7.4% (Tianwei commits to additional $227 mln of polysilicon from Hoku; also upgraded to Buy at Broadpoint), MU +5.0% (up in sympathy with SNDK), SOL +2.8% (still checking)… Analyst comments: ESLR +5.6% (upgraded to Hold at Citigroup), ACLS +5.3% (upgraded to Buy at Citigroup), NLY +1.6% (upgraded to Overweight at JPMorgan), AA +1.5% (upgraded to Buy at Soleil).
Disclaimer & How I use this list
Interested in the alerts below? You can get a 7 day free-trial of the full-blown, customizable Trade-Ideas Pro service. Note: These alerts refresh/update automatically every 30 secondsPost from: Trader Mike's Blog
Watchlist for September 17, 2008
No tag for this post.links for September 16th
- Ethnio :: Recruiting for User Research :: Index -
- How Memories Are Made, And Recalled - "Ultimately, it was possible for the researchers to know which clip a patient was recalling before the patient announced it."
- The Long Blonde Tail: 2008 Singularity Summit: Stellar Lineup - i want to go
- Program brings Web’s collective wisdom to patent process - CNN.com -
- Google search finds seafaring solution - Times Online -
- Invisibility Undone: Chinese Scientists Demonstrate How To Uncloak An Invisible Object -
- Massive $208 million petascale computer gets green light | NetworkWorld.com Community - IBM "Blue Waters"
- Zen training speeds the mind’s return after distraction, brain scans reveal -
- Robot builders seek a little help from sci-fi - tech - 04 September 2008 - New Scientist Tech -
- Gender differences seen in brain connections - being-human - 08 September 2008 - New Scientist -
- Deep brain stimulation offers hope to people with treatment-resistant illnesses -
- Amazon.com: The Letters of Vincent van Gogh (Penguin Classics): Vincent Van Gogh, Ronald de Leeuw, Arnold J. Pomerans: Books - recommended by Felix Dennis
- Amazon.com: The Essays (Penguin Classics): Francis Bacon, John Pitcher: Books - Felix Dennis recommends
- PHP Design Patterns - FluffyCat.com -
It ALL Depends on AIG
In terms of AIG, it seems like everything hinges on what happens to them. I found this bit on Bear Mountain Bull - he posted it from Financial Sense and written by Frank Barbera. I thought it was a great description of where we are at right now.
"For the last few days, the US Financial system and perhaps, the global financial system, has moved to the brink. Events surrounding American International Group (AIG) seem to have brought this crisis to a head. A global titan with operations in over 130 countries, AIG’s insurance business has counter-party risk relationships with virtually every major institution in the world. Words probably cannot accurately depict how serious a problem the implosion of a company this large would be for the greater financial community. Thus, it is putting it mildly to suggest that at the moment, a great deal depends on whether AIG can receive the funding it needs to avoid a further downward spiral. Such a spiral would undoubtedly trigger a torrential chain reaction of counter party defaults in the CDS market which stands at more then 40 Trillion in notional value. In the case of the demise of AIG, the word ‘melt down’ is of the few terms that would apply with ripple affects spanning the globe.
Thus, as markets wait to see if AIG can bypass its liquidity problems, it is very clear that a large move, either straight up (sigh of relief), or straight down (abject terror) is in the offing."I guess Warren Buffett was right when he said derivatives are "weapons of mass destruction".
So what do we as traders do? Well, for me, I think think staying in cash is still the best strategy here. I mean, really, do you want to be short C and WB when/if it is announced that AIG has been bailed out by the government, which no doubt will cause a large short-covering rally??? In the same vain, do you really want to be long a bunch of stocks when/if the government keeps its recent backbone, doesn't back AIG, and the company files bankruptcy, setting off a chain reaction of let's just say very bad things, causing the market to really tank??? I know I don't. There is still just too much risk out there relating to these news events, so therefore, I think having the discipline to stay out of things until the path becomes clearer is the right move right now.
In terms of my scans, I did see a few more longs pop up tonight but my BOP scans hit a new low for the year on the long side - not really what I want to see if we were really at the start of a new bull market. I see a few that I like the look of - CLNE, STSI, EHBI, ICAD, TACT, NPSP - as possibilities. Overall, the quality of longs I see is not good, however, and until I see more set up, with really good volume patterns, I can't get too optimistic here, even with a bullish-looking reversal put in today on the indices.
It is possible we put in a short-term bottom here, and again, if the news somehow plays out positively the rest of this week, then it probably will be a bottom. However, check out a chart of any major index and look at January 9, 2008. The market was down big the previous day, opened much lower, and then reversed to put in a large gain for the day. Sound familiar? It didn't quite work out for the bulls, however, as it only took four more days for the that reversal bar to be broken to the downside and another very sharp move lower took place. That could certainly happen here, with us getting a true washout that gives us a good, tradeable bottom.
I guess what I am trying to say is be open-minded and be ready for anything. I have a watch list of longs that I will watch, and if we get some resolution of the news issues, I would be OK starting a few positions in them to catch an upswing in the overall market. I am also watching some shorts that I will focus on if we make another move lower. I don't have a bias right now and am ready to go when the market tells me it is ready to go as well. Good luck Wednesday.
Tags: CLNE, STSI, EHBI, ICAD, TACT, NPSP, AIG
September 16, 2008 Recap: Reversal Day on Extreme Volume
This had to be one of the wildest sessions I’ve seen in a very long time. We had some many sharp moves & reversal based on newsflashes — some real and some not so much. The Brady Bunchesque layout of talking heads on CNBC didn’t help much either. If you didn’t see it, they had eight talking heads on in little boxes all chattering about AIG, LEH, the Fed, etc. It made for very treacherous trading, especially in AIG, because they were just spreading rumors all day long. It reminded me of why I don’t trade stocks with rumors swirling around them. But when all was said and done we got what appears to be a pretty good reversal day.
Today’s action didn’t meet the requirements for a key reversal day because yesterday’s highs weren’t surpassed. However, we did have extreme volume and a gap down at the open and the indices made bullish engulfing patterns today. (Note that engulfing patterns only look at the opens & closes, not the highs & lows.) That clearly shows that sellers over-reached. Like I said this morning about all the folks looking to initiate shorts — they stuck their faces right into a buzzsaw. The smart & early bears aren’t done yet though. Many of them were probably covering their positions today and looking to reload higher. The September trendlines, which are still intact, are the first place I’d look for selling to resume. So now it’s all about follow-through.
This action on the Nasdaq is exactly what I like to see on a double-bottom attempt. I want the previous low to be taken out. That should trigger any stops people have set under that first low and thereby shake out the last of the sellers.
We had very similar action on the S&P. (Because of those staggered NYSE opens you’ll have to look at the SPY chart to see the bullish engulfing.)
The Russell is really determined to cling to its 50 and 200-day moving averages.
Trend TableMinor upgrades to the Russell 2000…
Trend Nasdaq S&P 500 Russell 2000 Long-Term Down Down Lat(+) Intermediate Down Down Lat(+) Short-term Down Down Down(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Post from: Trader Mike's Blog
September 16, 2008 Recap: Reversal Day on Extreme Volume
No tag for this post.State of the Market - 9/16/08
Technically, today was certainly not a surprise given the selling from yesterday and some of the fear measurements that hit high numbers. The bullish reversal looks impressive on a daily chart, especially since the Nasdaq broke through its July lows and then recovered. So is this the bottom? Anything is possible, I guess, but I still think we are not done going down here yet. Where are the charts setting up that might tell us a move higher is on the way? Was yesterday really capitulation? Was that the best the bears could do? These are all questions I would ask myself before considering a bottom here, and unfortunately, most of the answers I come up point to more downside. Although the selling was strong yesterday, I don't know if it was panicky where people were just trying to get out of stocks at all costs. Panicky selling would not have produced a bounce ten minutes into the session that lasted for several hours like happened yesterday. There was only one reading last night (put/call) that pointed toward a possible bottom here. That's not enough in my opinion. I would expect more from a true capitulation day. That's my two cents, but maybe I am showing my inexperience here.
I would also point out that the true market reaction to a Fed decision often takes several days to reveal itself, so we'll see if tomorrow is a reversal of today's reversal.
There really isn't much else to say. I still don't know news-wise that anything was resolved with AIG, and this situation sounds eerily familiar to the Lehman and Bear Stearns events. Unless the Fed bails AIG out, then I doubt any loans they get will solve their problems. They will just delay the inevitable fall a little longer, making it even more unpleasant when it happens. And if the government does come to the rescue once again, that opens another can of worms that will affect this economy for much longer than the next week or so. My game plan from last night remains the same - I will be looking to possibly get short a few names as this market bounces as those stocks approach resistance levels, but will not force anything. If my outlook changes after going through my scans, I will let you know, but as of now, I am not expecting any. Good luck.
Tags: XLF, AIG, LEH, Fed
Anatomy of a Stock Selling Frenzy
This article has a nice timeline of the United Airlines stock crash last week:
“Let’s recap… An automated system added an old link to a dynamic Web page. An automated system detected the link as a new story and cataloged it as a current event. Enter a human for the only part of this tale: an analyst picks up the story and passes it on, not realizing that it is old news. Automated trading systems start a massive stock self off based on the old headline…”
Watchlist for September 16, 2008
I was planning to take the day off as I always do for Fed decision days but I’m calling an audible today. There are just too many movers out there today that *should be* immune from what the Fed decides to do with interest rates at 2:15. I’m still most interested in the groups that have just started to crack — some financials, retail and real estate.
(Edit at 10:33 — I just closed a gap fade trade on the SPY. It filled (retraced) about 80% of the gap. I’m taking my 0.8R of profit and taking the rest of the day off.)
On another note, like Barry, my site also had a surge in traffic yesterday. Visits were about 50% higher than the previous Monday. A large part of that were people searching for “Inverse ETFs“. Those searchers continue to stream in today. For folks who aren’t short-term traders that play seems a bit too obvious to be profitable right now. I fear that a lot of folks are sticking their faces into a buzzsaw.
On Today’s Calendar:
- 2:15 — FOMC Policy Statement
More Calendars: U.S. Earnings | Conf. Calls | Surprises | IPO | Economic
Potential swing trades:
See one of the recent ‘Chart Reading‘ posts for some potential swing candidates. Also be sure to check my typical swing trade entry & exit rules.
Potential day trades:
(From Briefing.com)
Gapping Down
In reaction to disappointing earnings/guidance: RBCN -17.7%, LWSN -8.9%, OI -8.5%, GS -7.6%, BBY -6.2%… Select financial-related news showing continued weakness: AIG -32.1% (ratings lowered and kept on CreditWatch Negative at S&P), UBS -13.6%, MS -13.0% (credit default swaps rise 275 bps to 750 bps, according to Phoenix Partners - Reuters), RBS -12.0%, WM -10.0% (downgraded to ‘BB-/B’ (junk status) from ‘BBB-/A-3′; Outlook Negative at S&P), RDN -8.2%, WB -6.9%, NCC -6.5%, SCA -6.3%, ABK -5.4%, ING -5.2%, SNV -4.5% (Fitch downgrades Synovus Financial Corp’s ratings; outlook negative), BAC -2.4%, JPM -1.6%… Select oil/gas names showing weakness with crude lower: STO -3.6%, RDS.A -3.3%, BP -1.8%, TOT -1.6%, E -1.3%… Select solar names trading lower: ESLR -13.2%, JASO -6.1%, CSIQ -5.6%, FSLR -3.0%, LDK -1.9%, SPWR -1.8%… Select tech names trading lower following cautious comments from DELL: DELL -8.3% (sees further softening in global information technology demand), NOVL -5.2%, EMC -5.0%, YHOO -3.2%, INTC -2.4%, MSFT -2.3%, GOOG -2.1%, SYMC -1.8%… Other news: TRGT -40.9% (the co and AstraZeneca announce top-line results from Phase 2b Study of AZD3480 in Alzheimer’s disease were inconclusive), SPNC -6.1% (VIVA has elected to temporarily suspend enrollment in the study after being contacted by the FDA about a potential safety concern), NOK -2.6% and INTC -2.4% (still checking for anything specific)… Analyst comments: WPI -4.3% (downgraded to Sell from Neutral at Goldman- DJ), NBR -3.5% (downgraded to Sector Perform from Outperform at RBC), PTEN -3.5% (downgraded to Sector Perform at RBC), AAPL -3.2% (removed from Conviction Buy List at Goldman - Bloomberg), BRCM -3.1% (downgraded to Sell at UBS), BIG -2.7% (downgraded to Neutral at JPMorgan), MU -2.1% (downgraded to Market Perform at JMP).
Gapping Up
In reaction to strong earnings/guidance: CPSL +5.6%, PLL +3.2%… M&A news: DSCP +5.0% (Getinge agrees to acquire co for $53 per share in cash)… Select airline stocks ticking higher with crude lower: LCC +5.9%, UAUA +5.2%, CAL +4.2%… Other news: LEH +14.3% (in talks to sell assets to Barclays - WSJ), MNKD +5.3% (reports positive data from a Ph. 3 clinical study of Technosphere Insulin in Type 1 diabetes; also the co and Pfizer announce collaboration for certain Exubera patients to transition to MannKind’s inhaled insulin therapy), ASML +3.3% (still checking), SJM +3.3% (announces declaration of one time special $5 Dividend), WFC +3.2% (confirms Q3 non-cash charge for Lehman Brothers structured notes, preferred securities), HRS +2.9% (will replace LEH in the S&P 500 after close on 9/19), PLXS +1.6% (awarded manufacturing contract with Kirby Lester)… Analyst comments: SAP +2.9% (upgraded to Outperform at Credit Suisse).
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Watchlist for September 16, 2008
No tag for this post.links for September 15th
Still Lots of News Out There That Make Technical Trading Difficult
S&P 500
Nasdaq
One reason I think we have further downside to go is that besides the put/call ratio, there are not many signs of extremes in the measurements I follow. My Market Map is nowhere near extreme levels, and the T2108 is just now reaching oversold territory. I would also look for the VIX to get up near 40 or even 50 for a really solid, panic-filled capitulation bottom to possibly be put in. Going through my scans, I was kind of shocked at how little major damage I saw done to charts other than the obvious suspects in the financials. Commodities were hurt, but I really didn't see a whole lot of stocks breaking to new lows on heavy volume. Because of that, I have to assume we have much further to fall before we can even think about looking for a bottom.
T2108 and VIX
With the Fed decision tomorrow and myself having no clue as to how the market will react to it, I plan on sitting things out once again tomorrow. If the financials do rally, I may look to get short a few stocks near resistance points that would give me clear stop loss levels to get out at just in case. I put the XLF below to show where I think it may fail on a rally attempt. I am watching WB, BAC, and C as possibilities as shorts with the same overhead resistance areas as possible entry areas. If they don't get this high or don't rally at all, I will not chase and instead will just stay in cash.
XLF
All Charts from Telechart 2007, Courtesy of Worden Brothers, Inc.
There are a few other setups that I am watching but again am going to wait until some of this news passes and is digested by the market. (WGOV, RBCAA, HOT, MGM, SNDA, BIDU, MSTR, CREE, PENN, OEH, FCFS, FSLR, SQNM, VISN, NETL, GHM, JCG, GTLS, IPHS are on the short list.) We're still in a market where news is trumping all things sensible, including technicals, and it pays to be extra careful in that environment.
Tomorrow will likely be quite volatile once again, so the mantra remains the same. Cash is the best option right now (unless you are already short before today), but if you do have any winning positions, I wouldn't let them run too long without taking profits. Whatever you do, be careful. This is a very dangerous period of time and if you are not careful, you can ruin your account quickly. No need to be a hero. Good luck Tuesday.
Tags: WGOV, RBCAA, HOT, MGM, SNDA, BIDU, MSTR, CREE, PENN, OEH, FCFS, FSLR, SQNM, VISN, NETL, GHM, JCG, GTLS, IPHS, BAC, WB, C, XLF
