NASDAQ Way Oversold
As kevin mentioned yesterday, the three-day moving average of the TRINQ shows that NASDAQ stocks are dramatically oversold. If you missed the post where I discussed this technical indicator, you can read it here. In that post, I used the TRIN and SPY, but of course, you can do the same thing with the TRINQ and QQQQ as kevin has done.
Wednesday afternoon, the market shrugged off some terrible auto-sales numbers, and an unpleasant Beige Book. So, it looks like the technical oversold bounce should continue today.
Hovnanian Takes a Hit
Homebuilder Hovnanian (HOV) took a hit in the after-market after reporting a bad quarter. Let’s see how well the XHB holds up today as the “turn” in housing that Jim Cramer keeps shrieking about remains somewhat elusive. HOV’s conference call is at 11:00am this morning.
Speaking of the XHB, it came in at #5 on Bespoke’s most overbought ETF list.
BB&T Rocket
George’s BB&T (BBT) pick jumped in the after-market when Cramer touted it on his TV show. George is on a hot streak, to say the least! BBT even shrugged off news of problems with construction loans yesterday. Though the construction loan problem looks to worsen.
Cramer’s “Early Cycle” Idea
Cramer thinks that financials (XLF), homebuilders (XHB), and retailers (XRT) are strong because they are “early cycle” plays. That means that they are sectors that typically do well when the business cycles begins to turn upward. I don’t believe that the cycle is turning up. In fact, I think we are only about halfway to the bottom, and we are experiencing a bear-market rally.
Strong Dollar Already Punishing Stocks
Companies with lots of overseas operations are already getting hit by the strong dollar. Take a look at Bespoke’s chart.
What if Oil Bounces?
We now have two days in a row of falling oil and falling stocks. We have seen oil and stocks fall together before, but as I recall, it was only when stocks were overbought. On Wednesday, stocks were oversold and still couldn’t rally on falling oil. That is very ominous. The Super Spike in oil contributed greatly to the end of the March-to-May bear-market rally, and now the current bear-market rally looks vulnerable to a retracement upward in oil.
Watch the comments section for updates throughout the day.
This may be OT or way off approach for you guys but I just posted a long analysis of HD and it’s turn-around that starts with a dissection of consumer spending and retail sales. For you purposes the gist is that Cramer’s nuts and we’re about to move from a slowdown over the tipping point into something more serious: http://tinyurl.com/5ts9rs Earlier on in the same blog btw you’ll find a 3-part discussion of the Tech outlook starting with the business cycle and investment and taking apart IBM’s earnings in terms of currency conversion effects, buybacks and finding that most of them were accounting not organic growth. If you’ll look at the NDX vs IBM you’ll find that a whole lot of folks have suddenly figured that all out.
Hi Matt,
thanks for your post. Regarding the Nasdaq: it is way oversold but it is also way overvalued. People were flooding into tech the last weeks now they want to get out to save their profits. So we could get even in more oversold territory.
Another top-notch ‘heggie’ has blown up, according to this mornings FT.
Sofaer star Whyte forced out by losses
One of the best-performing London hedge fund managers of the past few years has abruptly left Sofaer Capital after losing almost half of last year’s profit in a month. Tim Whyte, the 34-year-old manager of Sofaer’s Natural Resources hedge fund, left at the end of July after being caught out by plunging commodity-linked stocks. The fund fell 17.4%, Whyte’s worst month. His exit came amid steps by Sofaer – including the recruitment of a new UK chief executive –to stabilise the group and position it for expansion. The hedge fund manager is among the world’s oldest, having been founded in 1986 in Hong Kong by British owner Michael Sofaer, a director of Rothschild family investment trust RIT Capital and co-manager of the Natural Resources fund.
Strange mkts this morning, FTSE acting bullish and up 20pts while US pre-mkt futures are down and Dax is down over 70pts.
BoE interest rate decision due soon at 12pm, will there be a surprise rate cut ????
I’m keeping an eye on UNG, the natural gas ETF, for a move towards the 50 DMA. Bought some OCT 34 calls for a seasonal play that could have some legs
as the inventory reports will begin to show big reductions as the Gulf shutdown continues (most likely with next weeks’ report.) Using yesterdays’ low as a mental stop. There is no strategic reserve for natural gas and seasonality may become a factor soon.
Matt,
I’ve been short XHB for a few days now, so I’m happy to know that I’m not crazy.
On the Bespoke chart, I think it is too broad (two categories) to make any assumption about the dollar’s effect on international sales. For example, almost all commodity companies have international exposure, and these were slaughtered since July 15. The chart could just have easily read commodity stocks vs non-commodity stocks. I have been a pusher of stronger dollar-weaker stocks since April, so the theory is fine, but the evidence will take more time. The dollar has strengthened quite a bit, but is still historically weak.
I think 4Q GDP is where we see the exports take a big hit and continue dropping for at least 6 months. This will be interesting because we will have a new president right when exports (and corporatea earnings) take a dive.
Looks like i live for another day. NAZ100 Starting to remind me of the spring of 2000 when day after day was down and evryone said don’t worry it will bounce back,just a correcton..ect,ect
Baltic Dry Index -4.4% to 5,874. Now down 50% since peak in May.
all we have to see today is a -200 day i’d think and high volume. BEAR !
GO SKF should I buy more to average down my 123?
Nasdaq down another 26 points. Anyone going long on the Q’s?
Hey K,
I was averaging around $118, but sold @ $113 this morning. Will reenter a bit later. With SPX dipping below 1263, it didn’t look good that SKF was dropping off.
Will try and get back in around $110 if I can. The ticker is showing crazy strength for financials.
You all must be buying BBT. If so, THANKS!
It’s getting long in the tooth, but still has some goodie remaining.
Let’s make some money.
yeah charlie you are right.
SKF is getting Hammered
K,
from what I’m seeing, there is a good chance we continue in the current trading range on the SPX for a few more trading days. It has to break sometime. It is just not looking good that SPX is at the bottom of it’s trading range while XLF is at it’s top.
5 consecutive up days on XLF doesn’t make any sense right now, but the market never makes sense. The fact is that it seems people are piling into financials right now and keeping it up even though the Q’s and SPX to a lesser extend were tanking. I would consider anything for SKF under $110 a good buy from a risk reward, but I since since I was under water a bit and saw the opportunity to sell.. I did. In hindsight, I should have sold a few days ago.
I’m long for a trade in the futures at 1266.50.
I believe there is gap filling going on. I am watching for a possible reversal once that’s reached, intraday on the 5 minute.
I’ll watch the 1 minute stochastic along with the MACD to turn up together as long as the 5 minute is positive, i.e., either the stochastic turns up or the MACD histogram does not go negative.
That was for SKF, SDS, etc.
Keep me posted on that George
Looking to get back short into financials.. The troubles started there and I believe the troubles will end there too.. in either a meltdown, huge dilution or something nasty that we’ll tell our kids when we are old and grey.
so the kids know what they pay taxes for…
I should have gotten out of SKF near $135-140 range but i was being greedy.
we all do it i think.
Apple should be a decent play right before the Sept 9 event.
Rotation from tech into finance?
Me too K,
I guess when everything thinks that the financial world goes through a meltdown, it never happens. It’s like a thief in the night.. If everyone can see it coming, no one would be robbed. Wallstreet boys need to sucker as many people into one direction in order to turn it the other way for maximum profit.
BTW.. Max Pain for SKF Sept options is $115 so you’ll be sure it hangs around this area for a while.
that’s all folks SKF went down in fibio retracement past 111.09 and is now back over 38.2% retraement. hmm $116 here we come?
Right now, it looks like all time frames from 1 min to 60 minute are going positive on SKF. It can stay that way for quite a while, but if it follows through, that would be a “Mother-of-all-Reversals”.
5 green candlesticks in a row in 5 min intervals. time to come down a bit for SKF?
Wow,
that is quite a move!
Charles;
On intraday, keep an eye on the 5 minute chart stochastic and MACD. It will tell you what’s going on in the immediate time frame. The 15 minute is the “pappy” and if it agrees, all is well.
Check it out.
George,
did you get an entry?
I just barfed up my futures position and am back to 100% cash.
tere is resistance in 113.60 range though so might juggle around here now. then shoot up
I see that now George.. cool!
F$%#, I can’t believe i completely missed out on this move.
Was July 15 the bottom for S&P? I don’t think so. So if S&P hasn’t bottomed, I don’t think the financials have bottomed either, since they started this mess. Take GS for example. They haven’t even had a losing quarter yet. Maybe they are just that good, but I don’t think so. That is what the stock price was telling us as well. Last I heard, they are still forecasting $150 oil this year.
Stock prices are based on forecasting, so stocks can rally while a company has negative earnings. However, the underlying fundamentals while negative, should still show some sign of improvement. Has anything actually gotten better? Housing is still falling, residential loan default rates are increasing, and commercial loans are starting to be a problem as well. Lower inflation should help the consumer, but inflation also helps keep housing prices up. The FED is running out of options to help the banks. The dollar is strengthening while the global economy is weakening, which will hurt our current-export driven economy.
All-in-all, while it may not be sexy holding SKF, I’m quite comfortable at these levels.
Um….while I was typing this WTF just happened? The market is tanking big
Charles;
Yes, I got in when the 1 minute crossed around 10:15 when I wrote that post.
I sold most at that 113.15 area and left a core in to ride. I will continue to swing the 1 and 5 minutes.
We’re not in the clear until the 15 minute MACD trend line crosses the zero area, but there will be ample opportunity to swing several time frames.
I’m also out of my BBT.
SPY has cracked its lower trading range around $126.50 on heavy volume – and while being short-term oversold. That’s nasty. A throw-back rally back up to $126.50 to test the breakdown is probably a good shorting point.
Charles;
Once you get used to this (using two or more time frames), it becomes natural. It almost “tells” you when to get in and out.
The best thing is, it removes those “false” moves that fake us out all the time. We know when it is a real-deal move.
Beautiful.
I have to admit though, with Matt’s analysis, indicating market direction, it really does help my bias as to what is happening. That has added a lot of value to my trades.
It’s like Matt-gic.
Nice trade George!
I have a lot to learn. I should have been watching the charts vs. playing with my kid
Anyways.. if I am reading correctly, stoch cross on the 1 and 5 right now.. so pull back seems in order.
oops.. should wait till the candle closes before I speak..
haha i think we all contribute to each other’s trade values.
i wonder if i should get a margin account.
The last time SPY dropped to $125, it bounced. So, that is a potential support area.
Thanks George.
Charlie;
Well, with all those time frames lining up, this is a powerful move if it continues, naturally.
It also creates powerful counter-rallies where lots can be made.
Just use the same technique – watch the 1 minute stochastic and the 5 minte. Remember though that if the 5 minute MACD is above the zero line, that IS positive, so all that’s needed is to swing the 1 minute.
Will it continue? It doesn’t have any predictive value that I’ve noticed. We don’t care anyway. We just want big moves one way or the other.
Works great.
(I’m probably not explaining this well.)
Hi Matt,
Would you consider getting long SPY around 1250 ? It is difficult to short as the market is getting in the oversold territory short term. Thanks.
You can day-trade any stock, any time with this method. May have to wait 15-30 minutes, but the next trade is just around the corner.
Matt, what did we miss by taking off our shorts? the positive end of day action really fooled me yesterday.
Prices are stabilizing a bit, but the TRIN and TRINQ are not letting up. LOTS of selling pressure below the surface.
`Financial Tsunami’ to Engulf Markets Unless Treasury Steps In, Gross Says
http://bloomberg.com/apps/news?pid=20601087&sid=aDXbHi9QRUgE&refer=home
awesome?
Tony G,
Homebuilders and retailers reported bad results. Unemployment claims increased. It was a pretty big barrage of bad news this morning.
Matt
Actually George,
I think you’re explaining it very well. I just need to be more focused in trading vs. doing other things while reading the charts.
i regret averaging down the 123 SKF at 112
would have gone to $117 average and would now be able to almost get out
Charlie;
It’s just a simple method and it does have its limitations. Certainly those who have more market knowledge and experience could improve upon it or have a better style they use.
I suppose I found something that works for me personally and others may not like it. I know it took me several years to find out how I wanted to trade.
I needed something to take the guessing out of my trading which got me into trouble early on.
2 days ago skf went from 109-114 early on then retreated but ended up going to $116+ by 3pm.
hmm maybe i’m being too optimistic but if that happens again we should see at least $116 today.
SPY $125 is the last line of defense before the July low.
I’m in awe. Wow I’m raking in. Not taking profits before VIX at 35 in October.
The market will probably turn short-term as I write this.
Congratulations Larry.
Pooch, do you still have those QQQQ puts?
George,
Good job on your day-trading. There are definitely positives to that style when you get good at it. I’ve been short XLF and XHB for the last few days and taking a drawdown for it. Stocks go down faster than they go up, so I’m willing to wait.
Long term, I think that we have one more bottom this year which will be a lower low. I’ve been planning for an October low, so while straight down would be nice, I knew it wouldn’t be that easy.
The market cut through the 1260-63 support on the first try like a hot knife through butter. I advise short-term traders to short the rallies and cover at support, rather than buy at resistance and sell at support. Of course, I’ve had my bear-goggles on for a while.
Yes Matt the Lord works in mysterious ways…Hey were is that RICH guy he hit this right on the head.Great blog Matt
Also, VIX is up big again today. Downtrend is broken.
K,
Thanks for the Gross link. Like him or not, the guy has a great track record. When the dollar was at $1.60 against the Euro, he called for a 30% move. That would put it at $1.12.
Deflation is tightening its death grip around the world. Dropping markets, strong dollar, bonds strong, gold tumbling, asset prices cliff diving. Oh, and that oil thing too.
Paul F;
Thanks for the advice.
One area I’m weak in is support and resistance. I see what you mean though, because the moves will be greater going in the market direction. Good tip.
I need to look and see if stochastic and MACD have support/resistance kind of built in. I don’t know. I do know there are traders that rely upon those areas exclusively. That would certainly help my trading.
Thanks
just added to my apple position at 164.21
@K, you can add more at $150
George,
In terms of market direction, I used to trade almost exclusively on the bull side. I would pick stock based solely on fundamentals, but would get stopped out during market downturns. One thing Cramer has right: sector and market direction determines more of a stock’s movements than the underlying fundamentals of a company.
It is quite easy to use buy and sell triggers based solely on price, but many systems can’t trade based on oscilators and momentum indicators. As a result, there are definitely a lot of traders using support and resitance levels. As long as those traders exist, the momentum oscilators will probably trigger at those same points. I would stick with what works for you, maybe using price as confirmation. Good luck.
Paul
hehe all i need is for it to go back to $168
then i’ll think about adding at $150. very short term it looks like i can make a few quick bucks.
To $168??? That’s a long way to go!!!
damn man help me out haha.
stupid sept 9 couldn;t come sooner
in other news tropical storm hanna will visit me in massachewsetts.
and ike will hit florida as a cat 4 hurricane or worse EEEEEK
any idea what this will do to the oil prices? GAAAH
K,
Are you adding AAPL on the long side…? I’d say shorting at $168 and closing at $165 is a much safer bet. It may be a good compnay, but no one wants to own it right now.
i don;t know what has gotten into me with apple Paul,
i sold at 173 a while back and wanted to buy lower. seems like $164 is a decent support and upwards maybe i’ll sell at $167
maybe i’ll close my position with minor losses and wait it out.
I just think that the sep 9 announcement will surprise people even though they expected a new ipod of some sort.
On Gross: “About 61 percent of the holdings of Gross’s Pimco Total Return Fund were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or Ginnie Mae”
Smart guy, but just a tad biased…
Pooch,
Rich said that he was going on vacation, so maybe he will be back next week.
Matt
K,
It looks like there is good support in the $160-164 range. However, I believe that the markets are entering a major bear leg. AAPL won’t be spared. Also, AAPL has a lot of space under that support if it does break. The downside risk is greater than the upside risk. As i mentioned to George, I’ve been down that road before…
I’ve been eyeing Google, but won’t go long for the same reason.
Here’s what Yerk posted yesterday:
“XLF was up even 7 days from Sept 27 until Oct 5 last year. You should have shorted it on the last day…”
Nice call Yerk!
Matt, the retailers are actually trading pretty well (see RTH) and the jobs data was not that much off from expectations. Data-wise, i don’t think the morning was that bad. I’m just trying to figure out if there were any clues in the technicals that could have gave us some warning. I want to get short again but not at this level.
i had google way back. sold at $580 and it never saw $580 again
i know what you meand that’s why i sold my positions at $173
I break even at $166 so might get out just a little above it if i see it fitting.
am not that far off this time since i bought it at almost it’s lowest price for the day
Guys,
what is a good way to tell if a stock is rolling over vs. just consolidating?
I’ve always had trouble telling the difference.
K,
Well, the Qs have been hammered, and SPY will probably test $126 again, so you will probably see $167-$168. You had good timing on your buy, so you can still make money on the trade. Sep 9 may turn out to be a dynamite day for AAPL as well, but I think everyone is planning on that and will sell the news.
I didn’t want to be a downer, but I just thought I’d lend another perspective. I lost money shorting oil at $135 because the fundamentals were cr*p. I was technically “right” but I fought the market and paid for it. Now I like to remind myself, “the market can stay irrational longer than you can remain solvent.”
Charlie,
I’m no expert, but volume can give you a clue. Dropping on increasing volume is rolling over. Dropping on weakening volume is consolidating.
If the volume changes aren’t that significant, than you have to look for patterns (wedges, triangle etc.). Matt could help you out on that.
The IWM has not snapped yet. In fact, it is still above its old $72 breakout level.
Paul that is why i’m in this blog actively commenting because i like different opinions.
I had left the 164.21 buy price in case it ever hit it as i know at 164.19 there is plenty of resistance.
I checked and it had executed so it wasn’t as if i was trying to time the market. I know what you mean about the Q’s they’re getting smashed.
heck it might go past $164 oh well this is why i hate being home all day sometimes when markets are at work. lol i get carried away
We are half way through the day and SPY has traded 164 million shares. Last Thursday we had 167 million shares: all day. You want volume? Here it is.
Honestly, it is best to trade with a open mind, so can someone tell me what it would take for this rally to continue?
and there it is below 165 again. lol
Tony G,
Well, the textbook says that the third drop to a support area usually falls through. And that’s exactly what happened with SPY at the $126.50 level.
In the near future, SPY should be able to rally back up to $126.50 to test the breakdown and make sure that that is really what it wants to do. And of course, the “third approach” rule would apply there too. That is, if SPY eventually moves above $126.50, it would probably require three shots at that resistance level. So, the textbook way to play such a “throwback rally” would be to short SPY on its first approach to $126.50.
Of course, the fundamentals often have a way of intruding on the technicals. So, if the jobs number torpedoes the market tomorrow, we may never get the throwback rally to short.
Matt
VIX at 22.95 +7%
SPY is testing $125. The last time it was there, it only stayed for one day, August 4th, and there wasn’t a lot of volume on that day. So, who knows how strong that support will be? Maybe we will be testing the July low today.
Matt, thanks for the insight. will you participate on the short side if we don’t rally back to 126.5?
we are certainly testing something.
this is ridiculous
SKF will need to stay above 116.54 for us tohave a shot at closing upwards at $120+ today, this is weeeee fun
down one stock up another
The market may be selling off in front of tomorrow’s jobs report like it did in July, if memory serves.
Tony G,
Yes, I just made a few bucks on a short scalp, George-style.
Matt
looks like i will be picking apples at $150 after all
Matt,
IWM is testing that $72 level you mentioned.
Paul,
Yes, and if IWM’s bear-flag plays out, it will fall through.
Matt
As high as the TRINQ was yesterday, it’s even higher today. And the TRIN is going parabolic.
Scary day today.. good for shorts though
Too many people were talking about trading in the channel to continue.
Beaking news from CNBC! It’s a bear market!
WOO HOO
July low coming up!
The first test should hold…
Don’t tell Dennis Kneale. He is still in fantasy land.
Could be big trouble ahead just broke 44 Q’s and dow broke 11240