Market Hits Extreme Oversold Levels for 16th Time, October 2nd, 2011

Based upon a majority of the gauges I use, the market went into extreme oversold mode on Friday, marking the 16th time this has happened since the May 2nd highs. The simplified version is that volume into declining issues made up 96% of Friday’s total volume, $NYUPV closed at 79.21, and $NYUD:$NYUPV dropped to -14.64. I use several other gauges but because the market is flip-flopping so erratically many of these gauges don’t have the necessary time needed to drop for several days and then finally hit a climax number.

For instance, at many bottoms, $NYSI will drop by 70 + digits, but it arrives at that climax level by dropping incrementally day after day and as downside momentum builds, then $NYSI will finally flash a climax number. This past Friday, $NYSI dropped by  only 16pts.

$NYSI warns that breadth has little improved over the past several weeks.

There was a time when the market signaled bottoms when things like $NYUPV closed below 80, but not right now.  It just seems to me that we’re watching a major distribution phase in the market and that when the Big Boyz have off-loaded as much as they want, then THEY’ll stop the prop job and let the indexes go where they will. Look what THEY’VE done to PCLN, BIDU, QCOM, SBUX, VMW, and other tech darlings in the last few days. Tech investors were certain they were immune to the ails of the rest of the market, but this is never the case.  Could be that savvy tech investors were buying into a distribution pump only to get a taste of market reality when the pump turned into dump.  And I am probably completely wrong about this but a skittish, paranoid trader doesn’t rule out anything.

While I am watching several key sectors and indexes, like $TRAN, $RUT, $SOX, $CRB, XLI, SLX, XLB,  and the German $DAX, I continue to monitor the weekly $SPX chart and the movement of my chosen MA’s. By this past Thursday, the 52MA looked to be turning up slightly on the week, but by the close of trading Friday, the 52MA had dropped slightly. While the drop may seem insignificant, this past weeks drop marks only the second time the 52MA has dropped since October 2009.

Charts courtesy of StockCharts.com

The bullz are now trying to talk up earnings, which they expect to be…much better than expected. Maybe they’re right. Maybe not. When you look at important transport stocks like JBHT, CSX, , NSC,  and FDX, you have to wonder if maybe the bullz might be hittin’ the crack pipe. Imean, if people and institutions are dumping FDX, an important bellwether stock , then how does that bode for upcoming earning’s season.

As an old friend of mine used to say, “Paranoia is just a higher form of awareness.”

Stay on your toes.

When the sirens call, don’t answer.

Me, I’m just going to watch from the cheap seats.

GL in the week ahead.

 

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Weekly $SPX Chart Says Let the Children Play, September 24th, 2011

Let the shortz pile on and then get squeezed.

Let the longz pile on and then get shaken out.

This is a market strewn with the carcasses of bullz and bearz where day traderz can make a killing. My personal preference is to just wait out all the thrashing about because I just do not see any reason to put anymore money at risk. I do have a couple of long positions, UPRO & TQQQ. The TQQQ is doing okay, but the UPRO is not looking so hot.  I’m also approximately 75% in cash. That cash is just going to sit there until my analysis says the time is right.  I have no idea when that will be.

Bear markets? They’re everywhere.

French Cac 40: Down 32%

German Dax: Down 31%

Japanese Nikkei: Down 25%

Shanghai: Down 30% from a high made in the late summer of 2009.

Hong Kong: Down 29% and down 9.18% this week.

Local Bear markets:

$SOX: Down 20.2% based on Friday’s close so I’m giving it the 24 point gain made from its late August low and it’s still….gone bear.

$CYC: Down 32% and down 11% this week.

$TRAN: Down 25% and down 9.56% this week.

XLF: Down 31% and down 9.49% this week.

SLX: Down 42% and down 16.34% this week.

XAL: Down 31% and down 5.86% this week.

$COPPER: Down 28% and down 15.61% this week.

$NYA: Down 22% based on it closing high of 8671 on April 29th and this past Friday’s closing number so I’m giving it 44pts and it’s still gone bear.

$RUT: Down 24.6%  and down 8.66% for the week.

On the brink of their own respective Bear markets:

$INDU: Down 15.9%

$SPX: Down 16.6%

$FTSE 100: Down 17%

Everything will be a ll right, though, as long as no one starts selling AAPL. Seriously.

I don’t have a TV, but let me guess what all the talking heads on TV are saying this weekend. “The market is oversold.” “Never a better time to buy.” “Investors need to calm down.” “Prices this low can’t be overlooked.” And meanwhile they are telling their trading desks to create a pump and then sell to the gullible retail crowd. That’s you.

Meanwhile, in another part of town:

$VIX broke out of the falling wedge pattern with gusto and did so a lot sooner than I thought. $VIX at these levels, and even in the 30’s, means volatility is not leaving the building. Until the $VIX makes a decisive move to the downside, then you can expect major swings in the market both ways.

$OEX Put/Call Ratio has now pushed into the 1.4’s which just means that the smart money crowd is placing their bets on the downside of the table.  This crowd is rarely wrong and Robert McCurtain knows them well.

While I have been focusing on the weekly charts of late, I have also been keeping an eye on the monthly chart of the $SPX, and others. All I can say about the monthly $SPX chart is that it resembles December 07′ more than the May/June/July period of 2010. This is a slow turning worm and it isn’t likely to turn north for quite some time as this worm isn’t swayed or fooled by the gyrations in either the daily or weekly charts.

The weekly chart of the $SPX started looking pretty good last week, but all of that mmm goodness was erased, and more, this week. The chart below is telling investors that the best seats are along the sidelines.  Or, as Brian Shannon says from time to time, “It’s better to be out wishing you were in rather than to be in wishing you were out.”

This is not a happy chart.

 

Chart courtesy of StockCharts.com

Be careful getting sucked in by the siren call of a convincing four or five day rally. Personally, I’m just going to watch from the cheap seats and let the pro’s with their big computers have at it until the weekly chart of the $SPX says it’s safe to get back in the water.

GL in the week ahead.