Thursday’s Trading
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.
September 4th, 2008 at 1:31 am
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.
September 4th, 2008 at 1:55 am
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.
September 4th, 2008 at 6:17 am
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.
September 4th, 2008 at 6:26 am
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 ????
September 4th, 2008 at 8:17 am
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.
September 4th, 2008 at 8:36 am
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.
September 4th, 2008 at 9:13 am
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
September 4th, 2008 at 9:16 am
Baltic Dry Index -4.4% to 5,874. Now down 50% since peak in May.
September 4th, 2008 at 9:47 am
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?
September 4th, 2008 at 9:49 am
Nasdaq down another 26 points. Anyone going long on the Q’s?
September 4th, 2008 at 9:52 am
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.
September 4th, 2008 at 10:05 am
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.
September 4th, 2008 at 10:05 am
yeah charlie you are right.
SKF is getting Hammered
September 4th, 2008 at 10:12 am
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.
September 4th, 2008 at 10:13 am
I’m long for a trade in the futures at 1266.50.
September 4th, 2008 at 10:14 am
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.
September 4th, 2008 at 10:15 am
That was for SKF, SDS, etc.
September 4th, 2008 at 10:17 am
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.
September 4th, 2008 at 10:19 am
so the kids know what they pay taxes for…
September 4th, 2008 at 10:19 am
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.
September 4th, 2008 at 10:26 am
Rotation from tech into finance?
September 4th, 2008 at 10:26 am
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.
September 4th, 2008 at 10:26 am
that’s all folks SKF went down in fibio retracement past 111.09 and is now back over 38.2% retraement. hmm $116 here we come?
September 4th, 2008 at 10:30 am
Right now, it looks like all time frames from 1 min to 60 minute are going positive on SKF. It can stay that way for quite a while, but if it follows through, that would be a “Mother-of-all-Reversals”.
September 4th, 2008 at 10:32 am
5 green candlesticks in a row in 5 min intervals. time to come down a bit for SKF?
September 4th, 2008 at 10:33 am
Wow,
that is quite a move!
September 4th, 2008 at 10:33 am
Charles;
On intraday, keep an eye on the 5 minute chart stochastic and MACD. It will tell you what’s going on in the immediate time frame. The 15 minute is the “pappy” and if it agrees, all is well.
Check it out.
September 4th, 2008 at 10:34 am
George,
did you get an entry?
September 4th, 2008 at 10:35 am
I just barfed up my futures position and am back to 100% cash.
September 4th, 2008 at 10:36 am
tere is resistance in 113.60 range though so might juggle around here now. then shoot up
September 4th, 2008 at 10:36 am
I see that now George.. cool!
September 4th, 2008 at 10:40 am
F$%#, I can’t believe i completely missed out on this move.
September 4th, 2008 at 10:41 am
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
September 4th, 2008 at 10:41 am
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.
September 4th, 2008 at 10:44 am
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.
September 4th, 2008 at 10:44 am
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.
September 4th, 2008 at 10:46 am
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.
September 4th, 2008 at 10:46 am
It’s like Matt-gic.
September 4th, 2008 at 10:47 am
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.
September 4th, 2008 at 10:50 am
oops.. should wait till the candle closes before I speak..
September 4th, 2008 at 10:50 am
haha i think we all contribute to each other’s trade values.
i wonder if i should get a margin account.
September 4th, 2008 at 10:52 am
The last time SPY dropped to $125, it bounced. So, that is a potential support area.
September 4th, 2008 at 10:53 am
Thanks George.
September 4th, 2008 at 10:54 am
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.)
September 4th, 2008 at 10:55 am
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.
September 4th, 2008 at 10:56 am
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.
September 4th, 2008 at 10:57 am
Matt, what did we miss by taking off our shorts? the positive end of day action really fooled me yesterday.
September 4th, 2008 at 10:57 am
Prices are stabilizing a bit, but the TRIN and TRINQ are not letting up. LOTS of selling pressure below the surface.
September 4th, 2008 at 11:00 am
`Financial Tsunami’ to Engulf Markets Unless Treasury Steps In, Gross Says
http://bloomberg.com/apps/news?pid=20601087&sid=aDXbHi9QRUgE&refer=home
awesome?
September 4th, 2008 at 11:01 am
Tony G,
Homebuilders and retailers reported bad results. Unemployment claims increased. It was a pretty big barrage of bad news this morning.
Matt
September 4th, 2008 at 11:01 am
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.
September 4th, 2008 at 11:03 am
i regret averaging down the 123 SKF at 112
would have gone to $117 average and would now be able to almost get out
September 4th, 2008 at 11:11 am
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.
September 4th, 2008 at 11:16 am
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.
September 4th, 2008 at 11:17 am
SPY $125 is the last line of defense before the July low.
September 4th, 2008 at 11:21 am
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.
September 4th, 2008 at 11:23 am
Congratulations Larry.
Pooch, do you still have those QQQQ puts?
September 4th, 2008 at 11:27 am
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.
September 4th, 2008 at 11:30 am
Yes Matt the Lord works in mysterious ways…Hey were is that RICH guy he hit this right on the head.Great blog Matt
September 4th, 2008 at 11:33 am
Also, VIX is up big again today. Downtrend is broken.
September 4th, 2008 at 11:38 am
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.
September 4th, 2008 at 11:38 am
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
September 4th, 2008 at 11:41 am
just added to my apple position at 164.21
September 4th, 2008 at 11:47 am
@K, you can add more at $150
September 4th, 2008 at 11:52 am
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
September 4th, 2008 at 11:52 am
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.
September 4th, 2008 at 11:59 am
To $168??? That’s a long way to go!!!
September 4th, 2008 at 12:01 pm
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
September 4th, 2008 at 12:04 pm
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.
September 4th, 2008 at 12:09 pm
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.
September 4th, 2008 at 12:11 pm
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…
September 4th, 2008 at 12:14 pm
Pooch,
Rich said that he was going on vacation, so maybe he will be back next week.
Matt
September 4th, 2008 at 12:15 pm
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.
September 4th, 2008 at 12:19 pm
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!
September 4th, 2008 at 12:19 pm
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.
September 4th, 2008 at 12:19 pm
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
September 4th, 2008 at 12:22 pm
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.
September 4th, 2008 at 12:32 pm
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.”
September 4th, 2008 at 12:35 pm
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.
September 4th, 2008 at 12:36 pm
The IWM has not snapped yet. In fact, it is still above its old $72 breakout level.
September 4th, 2008 at 12:40 pm
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
September 4th, 2008 at 12:42 pm
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?
September 4th, 2008 at 12:45 pm
and there it is below 165 again. lol
September 4th, 2008 at 12:45 pm
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
September 4th, 2008 at 12:51 pm
VIX at 22.95 +7%
September 4th, 2008 at 12:54 pm
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.
September 4th, 2008 at 12:56 pm
Matt, thanks for the insight. will you participate on the short side if we don’t rally back to 126.5?
September 4th, 2008 at 1:00 pm
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
September 4th, 2008 at 1:00 pm
The market may be selling off in front of tomorrow’s jobs report like it did in July, if memory serves.
September 4th, 2008 at 1:01 pm
Tony G,
Yes, I just made a few bucks on a short scalp, George-style.
Matt
September 4th, 2008 at 1:09 pm
looks like i will be picking apples at $150 after all
September 4th, 2008 at 1:09 pm
Matt,
IWM is testing that $72 level you mentioned.
September 4th, 2008 at 1:19 pm
Paul,
Yes, and if IWM’s bear-flag plays out, it will fall through.
Matt
September 4th, 2008 at 1:22 pm
As high as the TRINQ was yesterday, it’s even higher today. And the TRIN is going parabolic.
September 4th, 2008 at 1:24 pm
Scary day today.. good for shorts though
Too many people were talking about trading in the channel to continue.
September 4th, 2008 at 1:24 pm
Beaking news from CNBC! It’s a bear market!
September 4th, 2008 at 1:27 pm
WOO HOO
September 4th, 2008 at 1:27 pm
July low coming up!
The first test should hold…
September 4th, 2008 at 1:28 pm
Don’t tell Dennis Kneale. He is still in fantasy land.
September 4th, 2008 at 1:30 pm
Could be big trouble ahead just broke 44 Q’s and dow broke 11240
September 4th, 2008 at 1:31 pm
Oops, I was looking at my chart wrong. Still a ways to go to the July low. SPY bounced at $123.50 on July 29th, so that’s a potential support area.
September 4th, 2008 at 1:34 pm
The reality of a bear market WITH deflation. History is being made boys. We have only just begun.
September 4th, 2008 at 1:37 pm
TRINQ is over 4! That’s double what is considered an extreme oversold reading.
September 4th, 2008 at 1:41 pm
Matt, loved the comment at 1:24
- Holding XHB puts, TWM, SKF, and SDS at the begining of today: $$$
- Listening to Cramer’s explanation later on: Priceless
September 4th, 2008 at 1:41 pm
Matt, et al
What do you consider the July low? The SPX actually hit 1,200 or are you looking at a close basis? Or the SPY at $123.50 as you mentioned?
September 4th, 2008 at 1:43 pm
this is an interesting site
http://smartstops.net/Default.aspx
September 4th, 2008 at 1:46 pm
Looks like bear flags setting up again on the SPY and Q’s 5 min intraday chart.
September 4th, 2008 at 1:48 pm
My VIX reading is off the chart. This is going to be a hella capitulation soon.
September 4th, 2008 at 1:49 pm
The VIX is reading like it did at the capitulation in January. And it hasn’t even cycled back on this move yet.
September 4th, 2008 at 1:49 pm
I don’t remember when the VIX was up 10% before 2pm…
September 4th, 2008 at 1:52 pm
Target for VIX is 35. But today is wild.
September 4th, 2008 at 1:58 pm
eli,
I was miss-reading my chart earlier. SPY $120 is the July low, though SPY bounced at $123.50 on July 28th, so that may be the last support area between here and $120.
Matt
September 4th, 2008 at 1:59 pm
The really scary thing is, you can’t really have capitulation after such a short down leg (1 wk).
I expect a strong bounce at SPY 120, but we are falling so fast, the final destination is a lot lower. It looks like SPY will test 120 before XLF tests 17, so perhaps they will bottom out at the same time.
September 4th, 2008 at 2:02 pm
lets see were our 1:00 bounce takes us
September 4th, 2008 at 2:07 pm
CNBC (Erin): “Is oil’s drop the problem?”
Of course it isn’t. That’s rediculous. It’s a symptom of the problem: slowing global economy + deflation.
There’s some lieing jack*ss on TV (Bill something, not Bill Gross):
“There’s no anxiety in the market” VIX anyone?
“Homebuilders are outperforming the tape” XHB down 6%
This is why I listen to CNBC but don’t value the actual opinions much (except Rick Santelli, Jeff Macke and a few others)
September 4th, 2008 at 2:08 pm
$43.30 key support level for Q’s
September 4th, 2008 at 2:13 pm
Bill Gross just crashed the XLF on CNBC.
September 4th, 2008 at 2:13 pm
Thanks Matt, that $123.50 may be just around the corner.
Maybe the jobs number drops us there tommorrow and then we bounce.
September 4th, 2008 at 2:15 pm
first he crushed them on bloomberg now on CNBC.
if only i hadn’t bought apple today i’d be making big.
September 4th, 2008 at 2:18 pm
QQQQ testing its July low, though that was a higher low than the March low.
September 4th, 2008 at 2:18 pm
Gross has big power, like him or not.
September 4th, 2008 at 2:19 pm
What did Bill say?
September 4th, 2008 at 2:22 pm
Gross said that he wasn’t interested in putting any more money into banks. He said that Wells Fargo came to him with an offering and he rejected it. He basically said that he was tired of losing money by investing in banks. Lehman took a dive too.
September 4th, 2008 at 2:22 pm
I’m charting $43.86 and a line in the sand for the Q’s. May be broken as I type this?
September 4th, 2008 at 2:23 pm
Wow, it looks like it’s my turn to say that my portfolio is having its best day in a while.
Cramer is funny. He was talking with Gross who said he doesn’t want anything the banks and GSEs have to offer (at the current prices), and he whined that the Treasury has to do something (I guess now it Paulson that “knows nothing” instead of Bernanke now), yet he still ended with financials are in a bull market. Let’s be clear: financials are not in a bull market, but Cramer wants the Treasury to create an artificial bull market for the financials at the expense of the USD and everyone else.
September 4th, 2008 at 2:43 pm
lol.. Bill is so funny. Kick them in the nuts while they are down.
September 4th, 2008 at 2:45 pm
Are you guys locking in any of your short profits today? Looks very ugly out there with multiple supports across multiple indexes broken today.
Wondering it there is a chance for a bounce so I can get more short than I am now.
September 4th, 2008 at 2:46 pm
Hi Larry
Wondering if you can give me some feedback on how you maitain your discipline in maintaing a long-term position when you see the market moving against you short-term?
My problem is getting tempted in to short term gyrations sometimes rather than just staying pat, e.g. went out of my short positions (thought market would re-test highs) at late 1260s but didn’t re-enter until market broke 1260 (came back in at 1258ish) so actually paid more for the same position! Are you never tempted to trade in and out? Even today I’m thinking this thing has to bounce!!
thanks
September 4th, 2008 at 2:58 pm
Charlie,
I will probably hold most of my positions until October (unless we see to bottom earlier). If I was a better timer, I could get in and out. As it is, I don’t see much upside to the market. As long as the market goes lower sometime (doesn’t matter when), I can hold the ultras inverses. Most of my option positons are long Oct puts and short Sep puts, so near term rallies don’t hurt as much. If we are rallying 3-weeks from now, I may change my tune.
I think we should bounce, but who will do the buying? Shorts covering maybe.
September 4th, 2008 at 2:58 pm
Taking profits on shorts here is probably not a bad idea for short-term trading. If the jobs number doesn’t disappoint tomorrow, the market can bounce hard. I’m sure that the jobs situation has not improved, but of course, that’s not what the report is about. It’s really about what crazy birth/death number they will come up with and how many phantom jobs will be manufactured. I won’t be making any bets in front of such BS.
September 4th, 2008 at 2:59 pm
I cashed all my shorts and will reload if I get the chance
September 4th, 2008 at 3:00 pm
I’m keeping all my puts. The next 4 months show nothing but gloom on my radar.
September 4th, 2008 at 3:03 pm
Also, as a side note, there is value to buying an ultrainverse (SKF) rather than shorting the ETF (XLF). However, if you want to leverage your gains, options on the ultrainverse are not a good idea. I ran the numbers and you get more bang for your buck buying Puts on the XLF rather than buying Calls on the SKF.
September 4th, 2008 at 3:03 pm
2:00 rally attempt
September 4th, 2008 at 3:10 pm
The only buyers in the rally attempt will be shorts taking profits. I predict it closes at the lows for the day, especially with the payroll number tomorrow. That will be at 7:30am CDT, Pooch.
September 4th, 2008 at 3:12 pm
The TRIN and TRINQ may be rolling over, so the selling pressure may be receding. It might just be daytrading shorts ringing the register, but the tape has improved since the Bill-Gross storm.
September 4th, 2008 at 3:14 pm
Matt are you closing your positions before close rather than hold through jobs number?
Paul F, my current thinking is that the market has broken major support and is headed down, so I am sitting on my hands and not giving up my position (still won’t make it any the more likeable when the market rallies a bit from here and, as Matt said earlier, may even go back to test its breakpoint around 1260).
September 4th, 2008 at 3:15 pm
Alex, I have a busy day job and I’m terrible on trading and timing. But I’m learning a lot in here. Thanks to Matt&Co.
My rules are:
1. Austrian economics and narrow money supply, M1. Bernanke is still not inflating the world reserve currency so the credit crunch created by Alan G and ‘his fractional reserve banks’ is giving us a global recession.
2. In a bear market take profit when VIX hit above 30. This time I’ll wait for 35.
I am short in ETF in Oslo now (obxbear), but volatility in USA guides all markets.
I’m really a novice with only 4 years experience in the market. Find a system and stick to it. Even then I will get humiliated, e.g. israel attacking iran next week, or an oil embargo from Opec or Goldman screaming oil to 150.
September 4th, 2008 at 3:26 pm
With Gross’s comments, the next market rally will probably be driven by the Fed and/or the Treasury giving into his mild rant.
“Ain’t too proud to beg…”
September 4th, 2008 at 3:31 pm
I’m kinda liking this slight rebound off the lows of the day. It gives the market more room to fall
Any other thoughts?
September 4th, 2008 at 3:34 pm
Everyone (yours truly included) seems to be hyper-focused on the strength of the financials. If XLE and the Q’s get a little bounce here then that could trigger the market back up to test broken support.
September 4th, 2008 at 3:41 pm
Bill Gross wants to demolish houses and for gov’t to bail him out. It’s Keynesian madness.
September 4th, 2008 at 3:46 pm
Alex,
I’m back in cash ahead of the jobs number. Like I mentioned earlier, there is no way to predict that number.
Matt
September 4th, 2008 at 4:02 pm
That was a nasty close.
September 4th, 2008 at 4:09 pm
I know I’m not the only one who frequents this board that cleaned up hard today. Matt your commentary has been spot on. Thanks again.
September 4th, 2008 at 4:10 pm
nice day today.. Love the action!
September 4th, 2008 at 4:14 pm
The last time Qs saw 200M volume was July 15.
Why does that date ring a bell?
Spy hit 335M: July 17
DIA: 35M July 15
This, my friends, is volume. Do not get that confused with capitulation, as this down leg is < 1 week old. We will be going far and deep, IMHO.
The jobs number will not be good, but it may “beat expectations.” If it does, I think the market will go down anyway, and CNBC will comment how the birth/death model added extra jobs (~100k). I could be wrong, but this has happenned before this year.
September 4th, 2008 at 4:14 pm
Alex,
the question you’ve asked Larry that’s a good one… I do it by keeping two portfolios. My intraday trading ranges from perfect to disaster so I commit only some funds to it. I was stopped out of two long positions today (I’m still upset that these moderated markets did not go up to 1320). Mid- to long-term I build up positions following the market trend. Timingwise I don’t care much when I enter (see intraday performance). I see something and then sit it out. I got a BAC put this morning because I don’t see the bottom in that stock yet the same time I was expecting the market to rise… Kind of split personality approach I guess, but it helps with ignoring the losses ;-o
Larry,
Bill Gross (and the Fed / Greenspan) are perfectly aware of Austrian economies and bubbles. It is just that they are not in a position to short the system. And hope can only come from the government and trying to sit out the mess.
Matt:
Well said
September 4th, 2008 at 4:15 pm
I seriously hope for a bounce b/c the downtrend is confirmed.
September 4th, 2008 at 4:20 pm
FYI, explanation of the job birth/death model:
http://www.bls.gov/web/cesbd.htm
September 4th, 2008 at 4:42 pm
You’re welcome Danny.
September 4th, 2008 at 4:43 pm
Paul, I agree with you. mkt sentiment is so bad that even if the number is better than expectations, the mkt will still go down. I do hope for a bounce but i dont have much confidence.
September 4th, 2008 at 4:50 pm
Paul,
Congratulations on your day. I’m sure it wasn’t easy being short the XLF and XHB recently, but they lead the way down today.
Matt
September 4th, 2008 at 4:52 pm
Today was another all-sectors-red day. I think this is the third that we’ve had recently. Does anybody recall how the market did on the following day of the previous such days? I should have kept a list of the days because it’s a bit of a pain to go back and find them.
September 4th, 2008 at 4:58 pm
hi all, still staying with 9 % allo to QID, and a smidge of SKF. i have an order to sell the skf somewhere ‘ween 122,123 or so…
i did buy some gold stock etf shares tdoay (iif they aren’t at 52 week lows they gotta be pretty close to that), but fearing further short term declines i hedged them by selling oct calls…
September 4th, 2008 at 4:59 pm
Thanks, Matt. Tuesday morning was the worst, but I decided to wait until the end of the day before adjusting my positions and by then the bears put the smack down (so I left them open).
In terms of all-sectors-red days, why don’t you just check all of the 2.5% down days? That should limit your search.
Good trading tomorrow, guys (and gals?), and have a good weekend. I’ll have to miss the action.
September 4th, 2008 at 5:05 pm
after,
I think UNG will outperform gold in the near term. It is near (or at) a 52-wk low, I think it will work better as an inflation hedge. If we have DEflation, then I’ll simply point out that gold was down today… I think I’ve ranted about industrial commodities vs. gold before.
Good luck, though.
September 4th, 2008 at 5:54 pm
Everybody needs to check out TWM. It is the 2x inverse ETF for the Russell 2000. The Russell has been the strongest index lately and is hanging on to support. If TWM is purchased at $70, there is 36% upside if it hits its prior high of $95. Year to date, TWM has not traded below $62 so your downside is 11% with a stop in place. We have seen what has happend to each index as they break support (see QQQQ, SPY, and the Semiconductor index)
September 4th, 2008 at 6:18 pm
The S&P futures just dropped about 8 points. Anybody know why?
September 4th, 2008 at 6:33 pm
Let me float another idea from the fundamentalist wacko corner for somebody here to poke at. If you look at a 6Mo chart of some key sector ETFs, say XLF, XLP, XLY, XLI, XLE, XLK a couple of things strike me. It appears that only the Financials have really been the action. Everybody else’s flat…ish. If you believe an economic recovery is around the corner o.k. pass on. If you believe we’re just starting into the real downturn then the reat of the market’s not reflecting that, whatever the strength of the downturn. You can tell stories: XLE/XLB - worldwide slowdown discovered = demand destruction. Works for me. Ditto XLI. XLK - oops, technology’s not immune and currency conversion gone. XLP, XLY, XLV - this is a downturn. Strikes me there’s some other trading opportunities that ought to be hoving over the horizon for you guys. Whaddyathink ?
September 4th, 2008 at 6:35 pm
….oops, that was supposed to be “THIS is a downturn ???”
fat fingers, slow keyboard, network response time….
September 4th, 2008 at 6:43 pm
Re: futures. Interesting. I’m not seeing any news. Somebody thinks tomorrow is going to be scary. Bill Gross & PIMCO is the big news today. If PIMCO is saying they are backing away from the market, that could cause other big players to back away as well. A liquidity implosion? The odds of Crash getting his crash are growing.
Tomorrow will be interesting, not so much for the employment numbers but for a continuation of the PIMCO theme. I feel sorry for Hank Paulson. January 20th cannot come soon enough. He’s had time to look under the hood of Fannie and Freddie and I suspect he has found a lot more nasty stuff. He’s got nothing but crappie choices and now Bill Gross is going to force his hand. I suspect Paulson intends to do exactly nothing until the markets close the liquidity window on the GSE. We live in interesting times.
September 4th, 2008 at 6:58 pm
Matt, I have your answer about all sectors down here
September 4th, 2008 at 7:07 pm
The September NASDAQ 100 closed sharply lower on Thursday as it extends this week’s decline. The low-range close sets the
stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain bearish signaling that sideways
to lower prices are possible near-term. If September extends this week’s decline, July’s low crossing at 1765.25 is the next
downside target. Closes above the 20-day moving average crossing near 1905.80 are needed to confirm that a short-term low
has been posted.
The September S&P 500 index closed sharply lower on Thursday and below the reaction low crossing at 1261.00 confirming a
downside breakout below August’s trading range. The low-range close sets the stage for a steady to lower opening on Friday.
Stochastics and the RSI a bearish signaling that sideways to lower prices are possible near-term. If September extends today’s
decline, the reaction low crossing at 1231.60 is the next downside target. Closes above the 20-day moving average crossing at
1282.37 are needed to confirm that a short-term low has been posted.
The Dow closed sharply lower on Thursday and below the reaction low crossing at 11,290 thereby renewing the decline off
July’s high. Today’s bearish economic data sent the Dow into a tailspin as traders see further slowdown in the economy as a
real possibility. The low-range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are turning
bearish signaling that sideways to lower prices are possible near-term. If the Dow extends today’s decline, the reaction low
crossing at 11,128 is the next downside target. Closes above the 20-day moving average crossing at 11,525 are needed to
confirm that a short-term low has been posted.
September 4th, 2008 at 7:47 pm
Danny,
Beautiful work.
Since the market peaked back on August 11th, we can probably expect a replay of the “two days of rest and then more losses” pattern. So, it looks like shorting bounces will be the thing to do at this point.
Thanks,
Matt
September 4th, 2008 at 8:09 pm
Don’t know if i have the guts to roll puts into calls on a bounce,because of the debockle that actually was a blessing in disguise.So at this point I may just sell puts hold cash and look for a re entry point.Hat is off to Rich were ever he is,his call for this week was awesome,last night I thought the chances were nil to none,maybe we need to take up a collection for him to buy a lap top when he is vacationing.
September 11th, 2008 at 5:43 pm
For some strange reason days when the McClellan Osc. shows little change are almost always followed big market moves the next day.
With the Oscillator virtually flat today despite the big jump in the averages the odds are at least 10 to one that another big move is coming tomorrow. With the Osc still somewhat depressed the odds favor another big rally rather than a big drop IMHO.