Yet Another CNBC Bottom Call

Matt Nesto thinks the bottom may be in once again. His reasoning? The consumer staples were a lagging sector today. (He made comments to that effect on CNBC around 4:10pm) Seems like flimsy reasoning to me. The last time he called the bottom it was because the month began with an “O”. That call was on October 31st when the S&P 500 closed at 969. The S&P then rolled over and plunged more than 200 points over the next three weeks.

Note to Nesto: don’t make bottom calls at the end of the month. There is this thing called “month end window dressing.” Look into it.

Wednesday’s Trading

Hanging Men
Many daily charts now have bearish hanging-man candlestick patterns. Take a look at the XLF and IWM for especially good examples, and QQQQ and SPY fit the pattern pretty closely too.

Grantham Says the Bear Ain’t Done
In this interview, famed value investor Jeremy Grantham who manages $100 billion gives 2-1 odds that the market will go down a lot in 2009, and wouldn’t be surprised to see the S&P 500 at 600. He says that earnings will be mercilessly crushed for the next year or two. In the account that he manages for his sister, he has her in 80% cash. He also said that making Greenspan Fed chairman was a dumb idea because he was a follower of Ayn Rand.

Russia Preparing to Take Alaska Back?
After the USA collapses and splits into six new countries in the spring, Alaska will be left high and dry and ripe for the plucking. So says a Russian scholar.

BKX Death Spiral in Store for SPX?

Take a look at this monthly BKX banking-index chart (click to enlarge):

Notice that after plunging through the 2002 lows, the BKX staged a “throw back” rally back up (blue arrow) to those levels in September. The BKX failed to recapture the 2002 lows, rolled over and plunged hard. This may be a good template for what the S&P 500 may do in the next few months. I will be betting that way.

Screaming TRIN Sell Signal

The TRIN sell signal that I wrote about on Monday has intensified. Since it is a three-day average, Thursday’s selling has dropped off and Tuesday’s buying has been added on. So the average now stands at 0.68 and is the most overbought reading since February 26, 2008 when it hit 0.62 during another month-end mark-up period. Funny how that works, right? By March 10, 2008, the S&P 500 had dropped over 100 points (click chart to enlarge):

Probably the only way that this signal could be wrong would be if the masses were stampeding back into stocks. And since SPY’s daily volume has dropped for three straight days, I’m guessing that is not the case. So, I added to my short positions on Tuesday and will keep selling into strength until I have a huge mound of triple-short ETF’s on hand for when this month-end markup is done.

October’s month-end markup gave us a fantastic shorting opportunity, and this month’s chart pattern isn’t looking too different. As I mentioned back then, the SEC is probably giving the wink to the big funds to run up stocks, which is normally against the law on the last day or two of the month. It’s a huge gift for a short trade.

Thanksgiving Day Massacre

For those of you playing for a seasonal rally, take a look at this 15-minute SPY chart for the three days around Thanksgiving 2006 (click to enlarge):

SPY plunged from 141 down to 138 – and that was during an egregious bull market with an historic lack of volatility!

Note: I chose 2006 because it stuck in my memory.