Wednesday’s Trading – 5/19/2010

When the market is going up, bears who are losing money criticize CNBC for cheerleading the market up. But when the market goes down, they do not thank CNBC for sowing panic. CNBC commentators are just as happy to “pass along” the rumors of short hedge funds as they are long funds.

For example, will any bears send a thank-you note to Jim Cramer for saying that “Lehman Two is coming” while the market was open on Tuesday? Cramer said that at 2:33pm and the SPX immediately dove 5 points while he kept talking, and didn’t bounce until they went to commercial.

And that’s only one example of many of CNBC coming through for the shorts.

In other news, the A/D line on the chart that I posted back here finally cracked on Tuesday.

Hammer Time?

The market formed a bullish hammer candlestick today. Have we seen an important swing low just as we did with the February 5th hammer? I don’t know, but I will be watching to see if the chart develops the same way as it did back then. Here is a 5-minute SPY chart showing the Feb-5 Hammer (click to enlarge):

Look at the blue arrows. Notice how the low point of the hammer morphed into the head of an inverted head-and-shoulders reversal pattern. The test of the left shoulder came at the close of the next trading day, February 8th.

Now let’s look at today’s hammer:

Did we already test the left shoulder in the last hour of trading? Film at 4pm on Tuesday. In any case, the 3:23pm low is likely to be an important level if the market heads back down to it.

If you shorted “into the hole” of today’s hammer, look back at the Feb-5 hammer. Notice that anybody who shorted “into the hole” back there is STILL underwater. Right? They couldn’t get out even even when NYSE market makers pulled their bids in a panic during May 6th’s historic crash!

The moral of the story is that a hammer candle such as today’s is often an important, long-lasting development. However, a powerful bear market could steamroll this candle, so the rest of this week should give us an important glimpse into the character of this market.

Monday’s Trading – 5/17/2010

On Friday, everybody and their mother was repeating the “France will be downgraded” rumor. The market put in its low a few minutes after CNBC itself broadcast the rumor via the mouth of Art Cashin, which you can see a couple of minutes into this video (sorry CNBC took the video down). And with that climax of ultra-bearish sentiment, it is logical to expect the market to make some sort of bounce today – unless there is some real disastrous news as opposed to rumors.

Expanding Economy vs. Sinking Sovereigns

The US economy is expanding while sovereigns in Europe are tottering, and sovereigns in the USA and Japan aren’t in much better shape. The economists say that you never get a bear market while the business cycle is pointed upward. Is this time different? What do you think?

Cast your vote: New Bear Market, or No New Bear Market.

Friday’s Trading – 5/14/2010

Gap Drama
If Monday’s giant gap is to be filled, the XLF and SMH may be the vanguard since both of them closed below Wednesday morning’s up-gaps. SPY, QQQQ, and IYT all successfully tested and held their Wednesday up-gaps, so that is still a support level for them. And the bulls should pin their hopes upon the IWM which didn’t even come close to testing its Wednesday up-gap. Will the financials drag the market down? Or will the small-caps hold it up? Film at 4pm.

Detroit R.F.D.
No Enumerators are needed in Detroit. No need to count ghosts for the census, right? And even the ghosts will soon be homeless as the great Demolition of Detroit gets underway and tears down their haunts. Look at this quote from the Wall Street Journal:

“Mayor Dave Bing has pledged to knock down 10,000 structures in his first term…”

Some of the cleared land will be used for farming. Under NAFTA, they will be able to export their crops to Mexico tariff-free. Isn’t that great? Of course, if NAFTA hadn’t sent all the factory jobs down to Mexico in the first place, Detroit wouldn’t need to return to rural status now would it?

Thursday’s Trading – 5/13/2010

Enumerators Beware
Crazy people don’t like being “enumerated” and are prone to attack census workers. The story also sez that an army of 600,000 Enumerators has begun work. This will be a nice stimulus for the economy when they get their first paychecks. Joe Sixpack finally has a job. To celebrate, he will by some extra beer. The liquor store owner will spend his extra profits on lap dances at the strip club. The stripper will spend her money “wisely” – on shoes, of course. The shoe store owner will order more stock from the factory – in China. The Chinese slave children will spend their extra wages on Marlboros and Pepsi, and the grand cycle of the global economy will be complete.

Wednesday’s Trading – 5/12/2010

The SPX rallied about 25 points from yesterday morning’s down-gap to its afternoon peak. It topped out when Gorden Brown came on TV and resigned. Of course, the market knew that Brown would be resigning, but the market rolled over at that point because the shorts were simply waiting for it to fire their cannons. It was a beautifully timed play, and they erased the rally, but weren’t able to crack the market.

And due to the ridiculously extreme breadth levels from Monday, a mostly-flat Tuesday has to be scored as a win for the bulls who can claim that they were just consolidating Monday’s gains. However, breadth is still pretty stretched to the upside, so the bears may be able to use that overbought condition to retain the initiative today. In order to win the day, they have to at least close the SPX below Monday’s low of 1147.24.