Take a look at this XLF chart (click to enlarge):
Notice the red downtrend line. SPY, QQQQ, and IWM all had similar lines but have broken above them, so the XLF is lagging.
Tomorrow, the red line meets the purple line, which is the October 10th panic low. The XLF has bumped its head at that level for two days in a row now.
The heavy green line is the third “fan line” and the two light green lines are the first two fan lines, which are failed uptrend lines. Breaking the third fan line is a danger signal that prices may be rolling over.
So, there is quite a lot of drama for the XLF tomorrow.
Since SPY, QQQQ, and IWM have broken above their red downtrend lines, I suppose that the XLF will too, even if it has to be dragged kicking and screaming. But I’m not betting on it. Euphoria has officially broken out on CNBC with Kudlow screaming about “panic buying” and talking heads raving about how a giant rally is “in the air.”
Fools. I suppose that the market will keep rallying with each -500k jobs report until nobody in America has a job and the Dow is at 100,000. Makes perfect sense, right?
Notice that the XLF’s volume increased with today’s selling. That is a signal that this Grand Alignment may prove to be too much resistance. But keep in mind that money may have sector-rotated out of financials and into oil, thus beating down the XLF. If oil pulls back, and money rotates back into financials, the XLF may finally get its breakout. But maybe not this week. I think the market is too overbought to push much higher here.
Note: I am aware that employment is a coincident, or trailing indicator. I just don’t think that we are at the end of the trail yet.
so they say but that is impossible
Hey Matt/David,
can one of you expert chartists take a look at the IYR chart and apply your 3 fan rule on that? I drew my version and it seems that it is acting very similar to XLF in that tomorrow will be a big deciding day. Perhaps another weak sector in which money has rotated out of?
IYR has underperformed these past few days and was down significantly in the last big up day on Friday.
Forgot to mention.. Great analysis above..
BTW.. as pointed out K today.. Junk Bonds are up quite a bit today (HYG). Given strength in that as well as the TED spread.. fear seems to be dissipating.. Could this be a sign of complacency??
Anyone have thoughts on this?
Charlie,
People think that when the year changes that things change. Economy sees no new year. it just keeps on going. This is just a mental thing we have as humans. Now we’ll see how it plays out.
Btw am on Windows 7 and I gotta say Microsoft has improved over vista. its about time!!. (this is beta so dont run to the store .. probably wont be out for another 2 years haha)
Hey K,
I’ve used Vista and I must say that it is a big step backwards when compared to XP in terms of flexibility and ease of use. Vista seemed to be dumbed down for a non-tech user with all of it’s GUI improvements and automatons that don’t work. Basically it sucks.. If they can come up with something that is remotely better than Vista, then they have be sold… especially since XP is going out of service soon.
BTW.. I was having a very interesting discussion with some non-financial savy co-workers. They mostly belonged to the buy and hold type of brainwashing mentality. I had some fun with them by showing them the 10 year charts of IBM, MSFT & GM.. and asked if they wanted to have bought and held any of these stocks for the past 10 years.
Out of the bunch.. IBM was the leading performing. It is up about $3 over the last decade. ROFL…
Just found a bug on IE8 (thats right beta + beta). haha
well this one is slicker too but thus far ive had no problems except when accessing google finance from IE8 the flash version chart doesnt show up well.
Again i stood by it 2 years ago before vista came out (or is it 3) that it was going to be used just like Windows ME and then the stable 2000 came right after. now Vista and Windows 7.
microsoft really knows how to make money.
“Fools. I suppose that the market will keep rallying with each -500k jobs report until nobody in America has a job and the Dow is at 100,000. Makes perfect sense, right?”
Yes
I think I have posted this before, but it’s a good read.
Zimbabwe, the best performing stock market in the world – 2007.
http://mises.org/story/2532
If this is the playbook for today bears are screwed:
http://www1.deutsche-boerse.com/parkett/DAX_chart_realtime.jpg
The last trading sessions DAX and DOW went in sync. Actually the DOW showed similar patterns than the DAX before. See e.g. last Friday.
Great XLF chart. Gives me a little bit of hope. If DAX should crash during the day going into negative territory that would be perfect.
Nice Dressguard. Hope springs eternal. Oh, Bama give me hope!
People love these great depressions!
Bank holiday trading in Germany, I’ve to add. Rally should be on very low volume again. The Germans love recessions!