I just started a short position in the S&P futures at 912.
The 3-day average of the TRIN is more overbought than it has been since July 13, 2007 when the market closed at 1553. One month later, it was at 1407.
The 10-day TRIN is also overbought. The last time it hit this level was on September 18th of this year – not a good time to be long.
The 5-day TRIN is not so extremely overbought, but it is at a level that is an excellent sell signal in itself.
This overbought condition doesn’t mean that the market can’t go up. But if it does, the odds couldn’t be any better for it to fall back to this level within a few days. I might not make any money on this trade, but the odds of losing very much are as low as they can get.
I am tempted to ride my 45% annual returns into year-end to lock-in my bragging rights, but I just can’t watch a setup like this go by.
If there is a gap-up Wednesday morning, I will short some more. If Detroit gets its bailout, I will short even more. At that point, I just might be all-in short.
Add to this the fact that big FOMC moves are almost always quickly reversed, and I like my chances!
If you are new to the TRIN, I explain about it back here.
The TIKQ (the NASDAQ’s counterpart to the NYSE’s TICK) closed at 1013 today. That’s the highest reading since February 21, 2003, after which the SPX fell about 48 points over the next three weeks into the March 11, 2003 bottom.
Today, the market may have burned off the last contingent of shorts that piled-on at the end of November. The market may not be able to rally much further until it declines again and builds up a new supply of shorts.
I call 6% crash one day very soon
I hope so for the sake of my SRS calls
Doom to REAL ESTATE!!!
Thanks, Matt. Good stuff.
charlie i tried getting some SRS in AH but failed to do so at the price i wanted 61.75
I almost didn’t get them myself. I was still waiting for my broker to process the order @ 3:59:50.
I didn’t place my order until 3:59 as I usually want to get as close to the close as possible.
My bullish comments on junk bonds were premature.
The junk ETFs –JNK and HYG– did rally nicely — but most of the gain seems to reflect a widening of premiums over asset values.
The key Fidelity junk funds — FAGIX and SPHIX — which always sell at net asset value — did not move today despite the surge in stocks and the plunge in treasury yields. Hard to imagine more bearish action than this.
I’m 22% short now, the rest is cash. Hopefully we can get $95 & $99 on the SPY to get to 33% & 50%. short. I expect the big hammer to hit with earnings in Janurary, but I learned my lesson and will take lots of profits at SPX 820 if occurs before then. Looking for a 6 handle in early Feb. We’ll see what she does…
Matt;
“I am tempted to ride my 45% annual returns into year-end…”. Thata’s a super return!
Matt, did you make most of your 45% in October? If the 1% club is people who broke even this year you are in rare company. Lots of people ‘called’ this down turn, but few of them acted with conviction to make a big profit. Nice job!
I am tempted to ride my 35% annual losses into year-end…. That’s a super LOSS
first year trading for myself and I had to pick the crappiest year. A lot of lessons learned with that money lost now I got to change.
@ K the worst thing that can happen to a new trader is to start out making ‘easy’ money
Here is a bullish thought, I bet the FED doesn’t cut more than 0.25% in the next FEW FOMC meetings
That should read a TOTAL of 0.25%
i think they will cut another 0.5%.
they will PAY banks for borrowing money to lend to people. HAHAHA
and here i was thinking i want to visit japan. It’s coming to me.
Those last comments are pretty funny K, Newbie… rofl…
I always wanted to go Japan too
Charlie, When the FED pays us to go wanna buddy up so we dont get lost?
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Here are some snippets I gathered trolling around the net:
Reatil sales from spending pulse
Clothing down ~20%
Electronics down ~25%
Luxury down ~27%
In another story, some analyst reduced semiconductor sales forecast for 2009 to down ~16%. Yes these are the same semi’s leading the rally.
DRAM makers in Taiwan are looking for a bailout.
Toshiba to cut flash production by 30%. Same for Sandisk.
And more gloomy news on every front.
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There appears to be no fundamental reason for the market’s rally. The only thing I can think of is that people are expecting the economy to rebound in the second half, OR some brilliant people think that inflation is good for stocks. Recovery in 2nd half 2009 is difficult with the consumer dead. And wage inflation, which is the only kind that would reduce debt levels and allow consumers to consume, is facing 10:1 wage arbitrage from China.
But when the market gets this way, there is no arguing with it. Best for us if they actually drive the S&P to 1000 or even higher. Should be a nice place to short for a ride back down to 750 and below.
Thanks for the summary Gigi. It ain’t pretty.
Newbie. Good allocation there. There will be many opportunities to go short in 2009 also.
@ Gigi, Too funny!
Semi’s down 16% in 2009 or down 16% in CQ1 2009 alone? The latter is wishful thinking the the first demands a drug test!
@ Larry thanks, will see how it goes. I mispriced the FED and sold a buck early on each buy. I don’t feel too bad who forecast 0%???