Tuesday, June 12, 2012

not much has changed ...

Since my last post ... not much has changed in the market.  We closed at the same level on 5/22/2012, 5/24, 5/25, 5/30, 6/6 as today.  We clearly are in a trading range, where the market can't seem to make up its' might as to which way it wants to go.

Price wise today at the very end we had a very strong up move implying higher prices were to come in the next few days, but I think volume (based on preliminary data) still is still showing that the big boys are not participating in this rally attempt.  Certainly the spy, qqq and dj-30 had lower volume than yesterday, too early to see nasd, nyse and spx volume.

I took a very fast look at about 100 charts of companies that lead the market up from December through March and it was quite interesting … almost all of the ones that had an up day today did so on lower volume, and almost all of the stocks that had a down day were on greater volume … not what we want to see in a bullish trend.

I clearly see the market acting better over the last number of days as it seems to be stabilizing, but at this point … this seems more of a bounce to me than a rally.  Now … it wouldn’t surprise me if we continue higher and get slightly over the 50 day moving average, but so far I’m not very convinced on this one from a longer term trend perspective.  I just don’t have a lot of faith in a potential rally at this point.

With that said, I also don’t see any conviction to further downside either, although it would also not surprise me if we go down to test the low one more time and then rise up with more strength.  In fact ... this is my preferred direction as I think this would result in a much stronger rally later this year.

In the last 15 days we have had 3 accumulation days and 2 distribution days, whereas in the last 20 days we had 3 accum days and 6 distribution days.  So things seem to be getting less negative.

If I could manipulate the market (if only …), I would say the market is looking better day by day, but that it needs much more time (sideways movement) to heal if we are going to get a solid rally attempt and get people wanting to invest. 

Yesterday was a big slap in the face to the bulls, but today was a strong recovery attempt … even though it could not get over the 20 day moving average (on the nasdaq) and only recovered roughly ½ of yesterday’s price decline.  Even if volume on the NASD was higher (or roughly the same) than yesterday, that would mean that it took more volume to move the market ½ as much … hmmm … that tells me that the big boys are not buying ... but rather the opposite.

Clearly for now we are stuck in a trading range with a big battle occurring.  Price wise it seems the bulls are winning, volume wise it seems the bears are winning.  This tells me that that big boys are sitting this one out and that the small value investors are pushing this market up.  This is not a recipe for a long term uptrend, but the landscape seems to be improving daily and therefore the outlook could change any day in either direction.

Stay safe and cautious for the time being.

Thursday, June 7, 2012

bulls need to be more convincing if they want this

Today's price action left a foul taste in my mouth.  We opened with a large gap up (roughly 1% up), and spent most of the day falling to close flat (Nasdaq was down 0.50%).  Volume was restrained, so it was nice to see there wasnt a mad rush for the exits as prices fell.

Today could just be a resting day where the market needs to consolidate yesterday's gains, but it pushed me closer to the bearish side and in fact, I started looking for short setups although I am not going live with any trades yet. 

The bulls need to send a very convincing signal to the market that they are in charge if they want this market to go up and they need to do it quickly.  Until that occurs, I choose not to partake as it is a sucker's bet.

For now I sit on the sidelines and wait for direction one way or the other.  My guess is that I will be in the market one side or the other tomorrow (or Monday) as I assume one side will take control very quickly.

Wednesday, June 6, 2012

well ...maybe ... walk for the hills instead??

Today was a stellar day in the market price wise.  All the indexes closed up over 2% on news that Europe is going to finally start taking their financial situation seriously.  Banks leds the race up.  It is a GREAT example that news can change the perception of all players at a moment's notice and that you have to be nimble.  People that were sitting out because of their fear, once that fear was removed ... they have no reason to sit on the sidelines.

With that said, I'm not calling my suggestion yesterday outlandish just yet.  One day does not make a trend, and the volume today although better is still much lower than the down days over the past few weeks signifying that there is not full support by all parties quite yet.

News driven bounces many times can fizzle, and given that most participants were short going in to today ... we could have had nothing more than a short squeeze.  Although short squeeze's certainly create a fast positive move, once all the shorts are out, there needs to be people buying on the long side in order to keep the momentum alive.  If there isn't, we will stall and eventually continue downward.

I am still sitting on the sidelines currently.  Although today's movement was widespread by most stocks, I need a little more reassurance than one day.  If we get a strong follow through day tomorrow OR over the next few days (with accompanying volume), I will be back in the market.  Of course, I don't treat my entrance into the market as an all or nothing event ... I will be wading in with smaller positions until I clearly see what we have in store. 

This very possibly could be a bounce and not a true rally, but the bounce could EASILY go up 4 - 8% (up to the 50 day moving average for sure) before showing signs of weakness again.  We have a lot of resistance to get through and until that is completed, we watch and possibly partake with some skepticism.

I leave you with a reminder that just a few weeks ago, we hit a short term bottom and had a very strong one day bounce (5/21/2012) which resulted in a 2.4% gain for the day in the Nasdaq.  After that we slowly broke apart  and dropped another 3%.  Don't get too excited for today just yet, I certainly like today's action, but we need to continue with the same strength over the coming days and weeks in order to convince the big money to start moving back in.

Tuesday, June 5, 2012

run for the hills

As much as I hate to say it ... the last two days of an 'attempted rally' has shown me that we are in for more downside and probably starting tomorrow.  It is VERY clear looking at the volume signatures in the market that the institutional investors are not interested in buying.  You really don't have to look very hard to see the incredible weakness in this rally attempt.  Some value hunters are out, but without the fuel of the big dogs ... it will be very short lived.  Now with that said ... maybe the institutions will come out over the next few days, but clearly they have no interest in playing in this market at the moment.

I'm very comfortable sitting in cash and waiting this one out.  I would be shocked if we don't have more downside coming and soon unfortunately.

stay safe!

Wednesday, May 23, 2012

reassuring action today

The action of the market was reassuring today.  We spent the morning falling aggressively, and the most of the latter part of the day reversing that down move and closed with a slight gain.  This action was VERY constructive and a good start to a new rally attempt.

Tomorrow and the next few days if we can continue this strength ... I might just change my previous negative bias. 

One day's strength does not make a trend change, but certainly this is one of the first days I have seen some real interest in buying.  Volume was decent in the general markets, not great, but encouraging. 

Too early to decide if we go up from here, but I certainly am more much less bearish today than yesterday.  Caution is still very much warranted at this point.

Tuesday, May 22, 2012

no difference of opinion

The market started the day nicely climbing in the first few hours ... with the SP500 up almost 1% at one point, but by the close of day all the gains were stripped away and we close the day flat.

Volume on the climb up was again ... lacking. 

So far my analysis has definitely not changed over the past few days, the bulls seem to show little interest in driving this market higher.

The latest rally attempt is continuing to look like a bounce and not a rally.  That is ... a bounce to eventually be undercut once the shorts get aggressive again.

Protect your capital, it is looking like we have another leg down coming soon.

Monday, May 21, 2012

Not a very convincing stock market rally today

Although today was a REALLY nice percentage rally in the markets, I left with a foul taste in my mouth.  Definitely very little conviction in the buying.  The volume is just not there.  Obviously stock market movement is based on supply and demand; the market can move up (short term) because there are lots of buyers OR because there are no sellers.  Over the long term though, there must be continual buyers in order to truly move the market up.  Looking at today's action ... the selling stopped (which is good), but the buying hasn't started in force either. 

With that said, it isn't surprising after such a hard decline over the past few weeks that investors are going to be gun shy for a few days, but if we don't have a stronger push up over the next 3 - 4 days, I would suggest selling further before the decline starts again.

As I have been saying over the past week, we are definitely over due for a rally, but I expected it to be short lived, today's story seemed to verify that analysis.

Buying could start and therefore we certainly could change to a bullish perspective, but all in all, I was hoping for more than what we got to.

A large price move says a lot, but without volume behind it ... it signifies that the big guys are sitting on the sidelines, and the big guys move the market no two ways about it...

I definitely left the day with a sour taste in my mouth ...

Tuesday, May 15, 2012

things look broken in the stock market

The market looks very broken.  For the past four days, we have had strong openings following by a weak closing.  This generally equates to bargain hunters seeing a good deal overnight, then at a certain price point large sellers are coming in to unload more of their shares.

A healthy market generally will do the opposite, open down and then close at or near the high of the day.  The big players generally wait until the end of the day to gauge the action of the market in order to put on larger plays.  As a result, end of day action is more important to analyze than the first part of the day.

One could argue that the morning bullish action shows that clearly there is interest in making this market go higher, but this constant eroding is eventually going to wear out the bulls and show them that more downside is coming.

I keep waiting for a solid bounce to occur, but with every passing day of poor performance ... it is starting to look like we need to drop a ways further before a decent bounce could occur.

Looking at the thirty minute chart, we see the the market is really struggling to spend any time above the 50 period moving average.  almost every day it gathers the strength to touch it and even spen a few hours above it, but it never holds long enough (overnight) to show any confidence in the buyers.

Definitely best to be out of this market until a respectable bounce occurs.  At which time gauging the strength and follow through of the bounce will help us to identify if there is any justification to get back in the market.

Monday, May 14, 2012

a wait and see market

Friday's close was a classic example of what I have been seeing and preaching for about a week now.  This is a 'wait and see' market.  The bulls are not willing to assert themselves, and the bears although more aggressive than the bulls, are also not sticking their necks out very far as well.

Certainly we have a bearish hue ... but right now it is better to just be out of the market and wait to see which side asserts itself.  It is just too risky to be on either side (unless you are a very short term trader).  For the intermediate to longer term traders ... we need to let one of the sides gain an advantage before the reward / risk ratio makes sense.

With that said, if my life depended on placing a wager right now as to which way the market will be going ... it certainly looks to be that we have more downside and although I was hoping for a bounce ... it seems like the market isn't interested in that right now.  But, again ... the signs are just not obvious enough to take any risk right now.

As most of you know, I have been slowly moving to a cash position over the past month, and although I am still slightly invested (on the long side), I have adjusted my stops to be tight and fully expect those positions to be stopped in the coming week.  I have no issue with sitting in cash while the market gains clarity. 

Let the bulls and bears duke it out without having to feel the pain they are feeling...

Thursday, May 10, 2012

subtle clues to detect if a change in trend is coming ...

Today was relatively quiet with slow, boring price movements (which I like to see).  With that said, the movement was generally bearish in nature.  We opened up nicely and more or less spent the rest of the day falling.  We did hold nicely above the low from yesterday, but the lack of volume on the upside shows little bullish conviction.  It is understandable that investors are cautious to enter the market, but if the bulls don't take the ball quickly ... the bears will, and we can expect another down leg.

As I mentioned yesterday, I was hopeful we would get a bounce today and move up to test the 50 day moving average, but today's action gives me little confidence in this scenario.  Bulls need to act tomorrow.
SPY 30 minute chart - showing moving average resistance and volume flaws

For today's technical analysis 'lesson', I pulled up the 30 minute SPY chart to try and get a gauge of the market in the short term.