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Last week, I said that Summation and ITBM are both looking pretty iffy, and the set-up for a decline was manifest. During the week, the message board FL/FS flashed a very strong Sell with essentially an infinity reading. It is now spent, but that said it may have some Bearish impact. The Summation is Bearish but unconfirmed as is ITBM. The big problem here is that despite having a great set-up from all the sentiment, our trend indicator has not turned down and in fact improved on Friday. Further, ISEE fell big and hard on Friday night triggering a ST Buy. Since every support level has held so far, I'd say that if we get some weakness, it will stop at support and then we can look for another rally attempt. The daily MACD has also issued a "Best Fade" Buy signal as well. We know that this market has structural buyers, but all the caveats from last week still hold. If this market comes apart for some reason, it could get really ugly. Watch for support that should hold breaking (of course, expect it to hold until it doesn't). My call for the week is for a decline on Monday (if support levels don't hold, "Katy, bar the door!") into Tuesday and then a rally into Thursday and chop sideways through Friday.
Last time, I said that thanks to the ISEE jump to north of 200 we were on a Sell and a ST Sell. We said that the odds approached 90% for a decline of some sort and we got the measliest of pullbacks. That's not really enough. Today is about it. The problem is that the trend is still rather positive, and while breadth was iffy, nothing is confirming the sentiment Sells. Momentum is back positive. ISEE pulled back quite a bit, but that is likely just a function of huge jump on Tuesday. I think that the ST Sell is still in force as ISEE is still high, despite the drop. The FL/FS Sell is also still in force. All the $-weighted P/C's were Bearish last night too. That suggests that we can get some selling, but as before, it's likely to be contained. I'll go on record as saying that the downside has been a little TOO contained. It's not healthy for a market to have NO downside action. Participants leave. I suspect we'll get a spike in volatility here soon.
The Sentinels remain on a buy, but yesterday BPCOMPQ crossed over into a sell condition, which triggers a caution flag for the system. Based on several sources that I follow along with my own analysis I believe we are forming a top, which can peak at any time, but one that may also last a few more weeks. I'm ready to bail in any event.
Last time, I said that we were surprised by the comeback, but we figured that it was probably a function of three things: Trend Momentum, Liquidity, and widespread Bullishness. I was still looking for a bit of selling but then I was looking for things to hold together. They not only held together, but they rallied. So, now what? It's demoralizing for even a VST Bear. Still, we have some very good stuff suggesting extreme care. AAII shows a ton of Bulls and few Bears and ISEE jumped 101 to north of 200 which is both a Sell and a ST Sell. The odds approach 90% for a decline of some sort today or tomorrow. The trend is positive and the worst we can say about breadth is that it's "iffy". We need to remember yesterday's analysis and expect any decline to be generally contained for a bit. It's when sentiment gets a bit more normal that we need to really start worrying.
Last time, I said that our message board poll had ZERO short Bears and that such had never been seen before. This was exacerbated by a large partially long Bull reading. For whatever reason, this seems to represent weak-handed Bulls and they love to shake them loose with a quick decline. We got it. We also got a come back. Frankly, I'm surprised. This is probably a function of three things. Trend Momentum (not our Momentum indicator which is Bearish), Liquidity, and widespread Bullishness. This is to say, while folks are "too Bulled up", there's nobody Bearish enough to sell, and Mo and Liquidity are enough to push the market higher. This will change, to be sure, but it may take a while. I'd expect a bit more selling today, but we should probably not get creamed. Now, things may change quite a bit later on, but that's another story. Bigger picture, we've seen this before. The crazy Bullishness gets a some folks all Beared up, the market declines a bit, and they get short. Then the market rallies, bagging them. Later, after Bullishness has waned a bit, we'll get a decline and Bearishness will rise enough to ally Bull fears. THEN they'll absolutely kill this market. So, for now, we're looking lower but not for too much, nor for too long.
Last time, I said that Momentum had tipped and crossed over, confirming a Sell and that the earliest signs of a nascent sell off were/are present and the set-up for a decline was manifest. Essentially all the sentiment was Bearish and the message board FL/FS was on a very strong Sell from Thursday. I advised that the market could hold together, but if and when it sold off, it could get ugly due to no natural Buyers. Well, this morning, we have ZERO short Bears. We've never seen that. There are also a lot of partially long Bulls and they love to shake them loose. I'm looking lower and I doubt that there will be any easy entries for the Bears. By the time they bounce it, it'll be time to buy again, I suspect. I'd say that speculators can position short anywhere in here with a wide stop. The current sentiment is nuts but chances are, while this is likely a marker for something important, the real top will be weeks away. We actually need more Bears to get a good decline going.
As a reminder, the Seven Sentinels are still in buy mode.
We are back in the saddle again. Last week, I said that chances were, there'd be a generally higher bias, but that it was not a lock. We got a little selling, but mostly we just traded sideways. Oddly enough, it was still a profitable week for day trading. Other than that, we've not changed a whole lot. TSP moved to a Buy for this week but it's not a strong one by my read. The fact is, the trend is still up and so are many breadth measures. I note that the Common Stock Only Summation and ITBM are both looking pretty iffy, however. Momentum has tipped and crossed over, confirming a Sell. The earliest signs of a nascent sell off are present and the set-up for a decline is manifest. In fact, the message board FL/FS flashed a very strong Sell on Thursday. That is still in force for Monday and maybe Tuesday. The rest of the major sentiment indicators all are Bearish: AAII, II, and Tickersense, and NAAIM isn't showing ANY shorting at all going on. This can bring some selling. Now, I'm not expecting a ton. There are a lot of Amateurs in the surveys who are Beared up and that means that we could easily still hang together for a bit. The one thing to remember is that there are no natural Buyers if we start trading down. If folks get a scare, we can fall a long way before enough folks get short to support this. I'm not saying we WILL fall, either. The market can hold together with a ton of Bulls. I'm saying that if it does, we'd better be darned careful. My call for the week is for a rally on Monday into Tuesday and then a sell off. I'm guessing into a low on Thursday and a bounce on Friday.
Last week, I said that we could look for a one day decline but with the short week, it was not likely to be much and might be reversed in the afternoon or quickly the next day. That's about it. The sentiment is very, very Bulled up. The market can stay this way and grind higher too, but if weakness develops, and triggers any stops, things can get ugly fast. Now, it's the end of the year, so chances are, there'll be a generally higher bias, but it is not a lock. TSP is saying we ought to get some selling and so is the OEX PC and the message board stuff. AAII got very Bulled up again and that's a ST Sell too. Basically there's nobody not Bullish save a few Bears in my surveys. My call for the week is for a sell off early, then bounce on Monday into Tuesday and then a decline into and a reversal on Thursday and sideways on Friday. Reminder: Given the low premiums and the higher than normal risk of any decline getting surprisingly ugly, if we turn the trend down OTM January puts might make some sense here, just as a hedge or insurance policy. They'll likely expire worthless, but if things do get ugly, they could end up being a home run.
I can't argue with it. It takes an awful lot of faith to look past all the negatives in the global marketplace. But I tend to avoid fundamental discussions too, because the powers that be can make the market stand on its head at any given time. Like now.
BTW, the Seven Sentinels issued a confirmed buy signal yesterday...finally.
Last week, I said that despite the massive shift at ISEE and the 10-day Sell and the need for care, I was thinking that we would get some weakness but that it wouldn't last long, again. That was the case. It's just very hard to get the market to go down much around Christmas. That doesn't mean that it can't happen, but the odds just don't favor anything like a sustained decline. This week, we are in about the same shape. ISEE is on a Sell, but it is also looking at a short-term Buy. The rest of the sentiment is showing more than a few too many Bulls. We've got at 2X Sell from the message board folks. I'm really looking for some sort of pullback, but I have to accept that the powers that be are not likely to let it fall much and furthermore, the trend is up. I think we can look for a one day decline but with the short week, it's not likely to be much and it may be reversed in the afternoon or quickly the next day. My call for the week is for up early, then a fade on Monday and a decline and reversal on Tuesday, then chop higher thru Thursday.
Last time, I said that there might be more down side, but that it's just hard to get too much going in this market. You can see that in the action. A sharp correction is looming, but it may take some time. I expect some chop but nothing too exciting before the new year. Remember that next Friday is a holiday. If there is a change in trend, we will advise by special alert, as this could be important in the current sentiment environment, though we know that trading gets kind of slow from here until 1/3 or so.
Very interesting conversation here...
http://www.traders-talk.com/mb2/index.php?s=ede3561a9a05bdd1bdb3de20efdca408&showtopic=126257
Last time, I said that the message board pollees were suggesting a possible market top, and Momentum was negative, and if this were not such a seasonally strong period with such an accommodative Fed, I'd be super Bearish. As it was, I was just trying to pick off a quick, short-term decline. I got some of it yesterday. Is there more? Maybe, but it's just hard to get too much going. The powers that be do not want a scary market before Christmas. They seem to think that it matters to the Mom 'n' Pops out there shopping. That may be foolish, but it's plausible. We could use a good correction and when we get it, it could be steep, but I'll not get too terribly Bearish until we turn the trend back down. I'm also aware that the Fed may be planning on using the market to sop up excess liquidity. If that is the case, it will be a while before we see a bad or deep decline. If you're a Bear, be very careful and disciplined.
The sentinels will probably issue a repeat sell this evening if today's action holds. If this market is being propped up deliberately (as many seem to think) then no signal can be taken seriously. I'm with you though. Risk is risk regardless.
That's what I'm thinking. CNBC is telling everyone to buy, buy, buy right now too.
Last time, I said that I was open to a one-day-wonder on the downside, thanks to even more Bulls among newsletter writers and Bloggers. I noted that message board pollees were heavily Beared up, but that they aren't always such a good fade when they get leaning, and in fact, they are uncanny about getting positioned PERFECTLY at market tops. They're pretty heavily short now and we have to accept that such might not be Bullish. Momentum is negative, if only just barely. There's no real Bearishness anywhere, though there may be a few top pickers out there. Were this not such a seasonally strong period with such an accommodative Fed, I'd be super Bearish. As it is, I'm just trying to pick off a quick, short-term decline. I'll not get too terribly Bearish until we turn the trend back down (which could happen pretty quickly).
Last time, I said that despite everyone and their brother being Bullish, I doubted that they can do too much damage to the market before Christmas. I was and am, however, open to a one-day-wonder on the downside. So far, that massive shift at ISEE has been a bust. I suspect that we may have witnessed an op-ex and end-of-year-related artifact. Of course, it could play out today. There are even more Bulls among newsletter writers and Bloggers. Big picture, that's still more of the same. ISEE took a big fall last night and that could support a bounce today or tomorrow. Message board pollees were also heavily Beared up. That said, I've noticed that they aren't always such a good fade when they get leaning. In fact, they are uncanny about getting positioned PERFECTLY at market tops. So, play it by ear but take your Sells.
Last week, I said that thanks to "Weird Wolly Wednesday", I was looking for wild day of trading. We sort of got it on Tuesday, but it was all over quickly. I had noted that while seasonality was a lot less positive going into this expiration, I figured that it would be hard to take the market down too hard or too far. That's pretty clear. The market is pretty darned resilient. The trend is now back up. The problem is, we've got every bit of sentiment showing no hedging and few Bears. This means that a bit of bad news can take the market down more than many expect because there won't be any of the "natural buyers" covering shorts and the like. Now, I doubt that they can do too much damage before Christmas, but a one-day-wonder is not at all impossible. The real story in here is the massive shift at ISEE. On Friday, we went from near Buy territory to solid Sell territory and the 10-day went to a Sell too. That's a big shift and they're even more Bulled up this weekend. Meanwhile all the polls are showing tons of Bulls save the weekend Fearless Forecaster poll. One has to be careful here, but I'm thinking that we get some weakness but that it won't last too long, again. My call for the week is for a sloppy Monday and a decline on Tuesday, then chop higher thru Friday. One last note: Given the low premiums and the higher than normal risk of any decline getting surprisingly ugly, OTM January puts might make some sense here, just as a hedge or insurance policy. They'll likely expire worthless, but if things do get ugly, they could end up being a home run.
Two weeks ago the Seven Sentinels flashed a buy signal on two consecutive days. The signal was never confirmed as NYMO failed to hit a new 28 day trading high. Downside action has been very, very limited however, and confirmation may not happen in a timely manner. In fact, it may not even be necessary this time as the market seems to be bent on breaking out to the upside in a big way. Couple that with the sell-off we're seeing in bonds and treasuries along with a tax relief package and POMO and it's tough to bet against higher prices. I am now inclined to view those Seven Sentinel buy signals as valid at this point unless proven otherwise.
Last time, I said that though the VIX was low, the $-weighted options said "Sell", and the market's momentum was down, the big drop at ISEE into Buy territory was a ST Buy. I noted the serious risk to the market, but due to seasonality and persistent price strength it was hard for me to be too Bearish. Fair enough, though the market did react very well at resistance, and that was telling. Last night, we got no improvements in sentiment. The options are almost uniformly Bearish for the market. We got a FL/FS 2X Sell too, implying a decline starting today or tomorrow. The big story was ISEE swinging all the way to Sell territory in one day. That's a ST Sell too. Also, the 10-day moved to Sell territory too. That implies a weak or more of weakness. Now, the trend is still up, but momentum is still down and that's good enough to give us some trades on the short side, and maybe if something ugly happens, we'll be positioned for it. Otherwise, the market is resilient. As a rule of thumb, here, short resistance, and buy good support. One major caveat--if some really bad news does hit, the downside could be magnified due to the utter lack of hedging. That doesn't mean we WILL go down, but it does mean that there's more downside risk (not probability of downside, per se). OTM January puts might make some sense here.
Last time, I said that the odds strongly favored more weakness yesterday and perhaps even today. Well, we got a little weakness and a come-back. We were up big in GLOBEX, but gave some of that back too, today. The VIX is still so low that it is reasonable to look for some selling. The $-weighted options still show some folks paying up for calls. The market's momentum is still down, but it has not confirmed. The real rub for the Bears is the big drop at ISEE into Buy territory. That's a ST Buy too. I will take Sells and Buys in here. There's risk to this market, but short term, it's hard to be too Bearish. The market is resilient. Short resistance, and buy good support.
I'm doing well 1Best. I hope all is well with you too. Next couple of years are going to be interesting to say the least.
Last time, I said that ISEE suggested a bounce and then the big jump implied a sell off. We got something like that. The market may bounce a bit today, but the odds strongly favor more weakness today and maybe tomorrow at the latest. The VIX is so low that we really need to get some fear into the market. The $-weighted options in general show folks paying up for calls. As we had feared, the market's momentum has turned down, but the Bulls can hang onto the fact that it has not confirmed. It's hard to be too Bearish in here, and we can see how resilient the market is, but we still see a bit of weakness ahead. Short resistance, and buy good support. Don't forget, we have a "Best Fade" Sell in force still.
Last time, I said that ISEE was problematic as we were still on a strong sell from Friday, but we also had a pretty strong ST Buy too. I expected a wild day of trading. I was looking for a sloppy Monday and a bounce today and so far, that's where we're at, as the market is up in GLOBEX trade. Today, all the sentiment is pretty sell Bearish except Tickersense which is the least useful poll anyway. The OEX nominal finally rose up into Sell territory, joining the $-weighteds. Newsletter advisors got much more Bulled up too. As soon as the market's momentum turns down, we can expect some weakness. It could be pretty hard too. ISEE and the FL/FS Sell suggest near 90% odds of weakness by tomorrow's close.
The Sentinels flashed all buy signals twice last week, but NYMO has so far failed to confirm the signal as it has yet to hit a new 28 day trading high. I advised folks following the system on TSPTalk that if they're risk tolerant they may want to buy now. Risk averse folks may want to hold off. Futures are up big so far this morning, which may indicate I'll get confirmation today, but any advance in price would have to be significant to get that confirmation.
Last week, I said that bigger picture, NAAIM was still suggesting weakness as was II and AAII wasn't far off a Sell either. We also noted that huge spike in the 10-day OEX and how it might be a sign that the tide had turned and the the character of the market may have changed. I also stated that near term, it was going to get harder and harder for the Bears to make much hay. Well, this week, we've seen essentially no change in the sentiment. There are still a ton of Bulls. The trend, by my measure, is still barely down. The Options suggests weakness, though ISEE is problematic-- we are still on a strong sell from Friday, but we also have a ST Buy too and a pretty strong one. The $-weighted options are Bearish for the market. It is worth noting that this is the week before the week of expiration. That means we have a "Weird Wolly Wednesday" coming up. A wild day of trading is likely ahead. Seasonally, things are a lot less positive going into this expiration, too. I'm thinking that we get some chop lower and there's room to fall, but I think it will be hard to take it down too hard or too far. My call for the week is for a sloppy Monday, a bounce on Tuesday, then down hard on Wednesday and then a rally into Friday.
Last time, I said that while the OEX smart money is still strongly looking for a rally today I was thinking we'd get a little retracement thanks to ISEE flashing a ST Sell. No such luck. Today, the ISEE Sell is still in force AND we have a repeat strong Sell from this measure. Also it's quite high, implying intermediate-term weakness as well. The $-weighted OEX, NDX, and RUT P/C's are very Bearish. We also have a FL/FS Sell and a Sell from the opinion poll. They may try to hold it today, but they have an excuse to take it down a bit and there are profits to take. There's a trend line below that I'll bet that they want to test. The trend has still not turned back up by our measures and neither has breadth, but both are trying. Next week is statistically pretty weak.
Hi 1Best, I've been very conservative in this market; taking a shot here and there as my indicators dictate, but I've lost my appetite for risk in this volatility. The comments come from Wall Street Sentiment Daily. Yesterday I saw where IBD declined to call Thursday's action a follow-through day due to low volume in the NAZ.
I was non-comittal this morning. And this rally is still odd from what I'm hearing from some pros. Haven't been around a computer all day so this is late:
Last time, I said that while the technicals were not at all Bullish for the market it was hard to argue with seasonality, and we knew that they like to rally the market on the first day of the month. Sentiment is still interesting here. I see some smart money Buying Puts, and some dumber money paying up for calls again, while the OEX smart money is still strongly looking for a rally today. This time, however, ISEE is flashing a ST Sell as is the $-weighted OEX and RUT options. I have to think that we retrace a bit of that rally. The trend has not turned back up by our measures and neither has breadth, but both are trying. Next week is statistically pretty weak. The rally is a funny one.
Currently, my short term system went to a sell yesterday, while the Seven Sentinels remain on a sell. Yesterday's bounce, while impressive, was not enough to "launch" this market into another sustained rally. That may still happen, but the market has more work to do. I went back to all cash yesterday since risk is still elevated (IMO).
Last time, I said that I was looking for a rally for the first, and we're up big this morning. Momentum is still negative, but we're still on that ISEE ST Buy. The technicals are not at all Bullish for the market. It's hard to argue with seasonality, though. We know that they like to rally the market on the first day of the month. Sentiment is interesting here. I see some smart money Buying Puts, and some dumber money paying up for calls, but the OEX smart money is strongly looking for a rally today. I have to think that at least some of the strength holds today. I'd not be surprised by some considerable chop into Friday, however.
Judging by futures this morning, it's possible the sentinels may issue a buy signal depending on where we end up at the close. I took a 30% position yesterday between C and S. I'll hold off on I for now.
Last time, I said that the OEX P/C took a big drop that could only be viewed as a major heads-up and might be Bearish. Ideally, I was hoping we'd see some chop lower that brings out even more Bears. We may yet get it, but it's early still. My call for the week was for a decent open on Monday, but then a fade and then a rally for the first with strength into Friday that fades. We're still fading this morning, but I have to think we bounce. Momentum is negative and we don't have that much help anywhere else, but ISEE took a big drop and that, to my eye, is the important reading. Big drops are short-term Bullish and big drops into Buy territory are even more Bullish. I don't think that this decline is done, but a bounce is coming and it could start today.
Last week, I said that while the fact that some breadth measures had turned back up was good news for the Bulls, the bad news was that our trend indicator and the sentiment still indicated lower prices. We got them, but we already knew that they liked to sell the market down for Thanksgiving. I'm not at all convinced that we're done with the weakness, but the options allow for a bounce in here. So does the message board sentiment. Bigger picture, however, NAAIM is still suggesting weakness as is II and AAII isn't far off a Sell either. Our trend indicator is still negative as is our breadth. Of some interest is the huge spike in the 10-day OEX. This is obviously related to a couple big days, but it is nonetheless meaningful. During this entire rally, the OEX P/C has been quite low and we viewed that positively. This drop can only be viewed as a major heads-up. The "smart money" bias may well have changed to Bearish. Ideally, we'll see some chop lower that brings out even more Bears. We may not get it, but that's the hope. Soon, it's going to get harder and harder for the Bears to make much hay. My call for the week is for a decent open on Monday, but then a fade and then a rally for the first with strength into Friday that fades.
Last time, I said that while the FL/FS was Bullish and allowed for a push higher for a bit, the polls and surveys had a lot of Bulls and I was not seeing a completed corrective pattern. Given that they like to trade the market down for Thanksgiving, I was looking lower, despite some indicators looking more Bullish. We got some weakness but came back, but this morning we're down hard in GLOBEX. The FL/FS Buy may mark a low today and a bounce, but the real story is the options. The "Smart Money" traders in the OEX and SPX were really Buying puts, while the NDX speculators had the $-weighted P/C about as low as it can go. If I didn't know better, I'd think that somebody big was tipped off that N. Korea was going to start lobbing shells. In any case, we've had plenty of warning of lower prices and the trend is still down. I'm OK with looking for a bounce, but the serious money needs to remain safe. We have nothing that suggests that this decline is over.
My friend Don has opened yesterday's market analysis to non-subscribers of his website. Very interesting stuff and perhaps timely?
http://sevensentinels.com/issue/4th-quarter-2010/article/november-22-analysis
Amazing how many cross-currents there are Fred.
Last week, I said that we had all manner of sentiment telling us that we needed to be careful, but our trend indicator had not gone Bearish, now it has. The good news for the Bulls is that some breadth measures have turned back up. The bad news is that our trend indicator and the sentiment still indicate lower prices. The FL/FS is Bullish and I think we can push higher for a bit, but the polls and surveys have a lot of Bulls. Also, they like to sell the market down for Thanksgiving. Furthermore, I'm not seeing a completed corrective pattern. Now, we can turn everything back up and push higher, but the odds say, right now, that we ought to trade down next week. I'm going to look for a rally out of the gate but then for the decline to resume, then we ought to bet a bounce on Wednesday and into the half day Friday. I don't think that will be it for the weakness, but that's the call for the week.
This is late, but I was flying all day today. Boy am I tired now.
Last time, I said that we were relived to see that we were in for more rally yesterday morning. I was getting worried. I also said that whatever rally we were to get was probably an opportunity to lighten up. That's still my view. I was really worried by Investor's Intel complacent dip-buying. and the latest from TSP and NAAIM both are consistent with more selling. Intermediate-term, I view the market as a sell, though I don't think we're going to collapse nor are we likely to decline for too long. Short-term, we can bounce some more as we have another FL/FS Buy. My gut suggests that we'll sell down, and then rally back. I'm also sensing that we'll sell off to honor the Ernie Kiehne's Thanksgiving Day approach (buy good value stocks on weakness around Thanksgiving). We'll have to see after that. For now, the trend is still down.
I was also taking into consideration that the sentinels were on a sell as well as the TSPTalk sentiment survey. Their survey is up well over 20% this year, so I take it seriously. ;o)
Thanks Fred. Given sentiment is decidedly on the bullish side, I'm going to view that in a contrarian context.
Hi Fred, of course I can't really elaborate on those comments too much, but I would view it more in the context of having a seven sentinels sell signal, which was triggered last Friday. It's OPEX this week, so anything can happen. Sentiment is pretty bulled up at the moment too, so I'm not expecting to much more upside after today, but all I can do is follow the charts as the signals dictate.