S&P 500 (SPY @ 181.99 mid-day 2/11/16) sell-off may end and reverse soon

February 11, 2016
2:00 p.m. EST

There are several factors lining up that indicate that the market might be nearing at least a short-term bottom:

1.  The market (SPY @ 181.99) is approaching a point where it found support three times before in the 180-181 area.
2.  After breaking the downtrend line at 1 in late January, the market formed an intermediate peak at 194.58, then sold back down to the low point of the recent sell-off.   This is what Vic Sperandeo calls a "2b buy point", so-named for being the second of three signs of a trend reversal and an extremely low risk entry point (one could go long, putting a sell stop just below the 180.38 support).
3.  Volume on down days is lower than in the past, indicating that bears are less committed.  The most recent up day had better volume than yesterday's sell-off day (it's too early to determine how it will compare to today's volume).
4.  The 13.55% sell-off from recent peaks is beyond the normal point at which the S&P 500 tends to turn around.   Caveat:  this is the weakest piece of evidence and should never be used alone!!  There is no such thing as a market that is too low to sell or too high to buy!


Bottom line:  if you have money to commit to the stock market (a 70:30 stock:bond portfolio could be strategically re-balanced here), you will probably be grateful if you did so now.  If you are a trader, this is a good, low risk entry point with a stop less than 1% away.
Caveat emptor:  if the market decisively violates support at 180, the sell-off could be quite ugly, but trading is a matter of probabilities and right now the probability favors going long equities at least for the short to intermediate term.  

May 4, 2012 S&P 500  (SPY @ 137.00) looks top-heavy


The S&P 500 issued a sell signal on April 9 locking in a nice 8% profit so you should be flat or short.   The market failed to follow-through on the downside following the April sell signal which is usually bullish, meaning the market should be watched closely for a re-entry point, but the fact that it failed to either trigger a new buy signal or take out its 142 high (which are essentially the same thing) and now sold off on heavy volume are bearish.  A break to the downside is likely.  Plus, we are now in the historically weaker May-October period.  

The Bear Market Continues

Monday 9/22/08 SPY @ 121.31.

There is nothing reassuring in the government-mandated short-covering rally that occurred at the end of last week.  We remain in a dire financial situation, the extent of which no one seems to know.  The smartest guys in the room (whose compensation seems to remain politically untouchable) managed to blow up firms that have survived wars, depressions, crashes, disaster, but could not survive an incompetent Republican administration whose contempt for government became a self-fulfilling prophecy.   The systematic defunding of our public infrastructure, from the people who inspect and maintain our levees and bridges to the people who are supposed to be enforcing our securities laws, is now coming home to roost.  

The closest we have come to this crisis is at the end of another corrupt Republican regime that lied about about a land war in Asia:  the end of the Nixon administration ushered in an enormous loss of confidence in all things American - check out the 1973-4 bear market.  

Will it be as bad today?  I don't know, nor does anyone else.  I just follow the trends.  

Keep selling the SPY.  Shed any speculative long positions.  

Buy GLD.

Buy DOG (the inverse of the Dow).  

The fed clearly does not know what it is doing, and has abandoned any principle, bailing out one institution one day, letting another fail the next.  This Suharto-style of short-selling-banning is the kind of economic idiocy I thought those Street-savvy Republicans were too smart to fall for... oh, well, on yet another front, these guys are proving an enormous failure. 

You can't spin a war, a hurricane, or a financial meltdown.  It's time for grown-ups to be in charge.  Let's send these clowns home in November and let our government be run by people who understand what Lincoln really meant by of the people, by the people, and for the people.  Not the lobbyists, or the neocons, or the Abramoff-Delay-Cunningham-Bush-Cheney-Libby-Chalabi (remember Chalabi?) crowd, but the people.  That's us.  It's our country and it's time we took it back.  You can't spend it if you didn't earn it, and yes, government costs money and if you make more, you should be prepared to spend more in dues for living in a civil society.  Freedom isn't free.  We can't just go shopping to get out of this mess.  

If anyone votes for More of the Same McCain or Thanks but No Thanks Palin, then you really have not been paying attention to the damage their ideas have caused.  Insanity is just doing the same thing over and over again and expecting different results.   By that definition, a vote for McCain is truly insane.  

Send these guys home.

Don't Panic... But Quietly Move Toward the Nearest Exit...

Monday 9/15/08.  SPY @ 120.00.   Today, the market got hammered, with the Dow selling off over 500 points and the S&P 500 off almost 5%.    A chart of the S&P 500 Depository Receipts (SPY) indicates why the trend is your friend and bottom-fishing is an expensive sport (click on the chart to enlarge it).  

  The market peaked at around 144 in May, then issued a sell signal at 137 and change when the 20 day trailing low was punctured to the downside. This short trade was profitably closed when the 20 day high was taken out in August at 129, an 8 point short sale.

  Had you reversed (as you should), you would have been stopped out at 126 when the 20 day low was violated.  

Stock charts update

Stock charts update

9/8/08
SPY @ 127.27:  Spiders are in a sell state since a sell stop was hit at 126 only two trading days ago and 1.3 points away.

The market surged 2% today but closed off of its highs and is in the middle of its four-week range between 131 and 122.

Note that the volume on today's surge was less than that of the selloff of only two days ago.

The July low of 120 was approached; the low of the most recent move was 122.

Buy stop is at 131.5 but will soon dropped to the 131 area.

Spiders trade above the 50 day moving average (127) but far below the 150 day (132). 

Spiders sold off from a high of 144 in mid-May to 120 in mid-July, a decline of 17%. A sell signal from 137 would have been profitable with an exit at around 129.5, a short profit of about  6%.

This would have been followed by a3 point loss to be stopped out at 126.

Gold ishares (GLD) @ 78.9 remain in a sell state since 90. They are currently at 78.9 after a recent spike high to above 84. They gapped up and then gapped down and looked headed toward their recent lows of 76.61. A buy signal would not be given until 86.9, their 20 day trailing high.
The 50 day is below the 150 day moving average (87 below 89).

Homebuilders ETF.   On August 22, I wrote that "homebuilders ETF is looking bullish. At 19, it's punched above its recent 20 day high of 19.24 only to settle back to 17.5, before rallying the last 2 trading days to 19.. Note it is in a buy state since 18.75 in mid-July. After exceeding this amount, it pulled back into its trading range, formed a flag in the upper end of it, and seems to have broken out again."

Since then, the home builders have broken out on huge volume at  22.8 but then closed back in their trading range at 22.6 up 3.8 percent for the day.  The sell stop is at 19.6.

 The most recent low is at 18.5.  
The 4 week low jumped to 17.5 and should head higher soon. 

XLY, consumer discretionary spiders @ 31.7 have stalled a bit following their decisive breakout, pulling back from a high of 32 to a recent low of 29.4 before closing today at 31.7, near their twenty day high of  31.9.

Current buy state is long since 29.9 or so, following a protracted decline from a high of 33.5 as recently as May. It declined from 33.5 to 26.0, its mid-July low. 

Sell stop is at 29.0, 3 points (10 per cent) away.

XLP, consumer staples spider, continue to surge higher after breaking out at 27.5, now at 28.9 with a 20 day low of 27.8 after a pullback to below 28 last week. 

XLV, health care spiders @ 32.3,  hit a sell stop last week at about 32.4, closing a profitable trade from 31.4 in early July. 

4 week high is at 33.7. 

XLF, the financials @ 22.7, broke out after a dramatic past two months.  They stalled three times in the 23 area. They sold off to below 20, where they tripped a sell stop in mid-August.

They surged 4.3 percent today, breaking out above their 20 day high of 22.8, but then settled back to close in their trading range.  

There was a dramatic 6-day surge from 17 to 23 (35% rise) in July, following a plunge from 28 in May to below 17in July.

 
XLB, the materials spiders @ 37.2 remain in a sell state and downtrend since their high over 46 in May. Their sell state is short since just below 43 with a buy stop just above 40.2, but they look headed lower, closing down .19% on a strong up day for the rest of the market.

XLU, utitilities @ 36.3, are also in a down state after triggering a false buy signal at 38.4 that led to a 2-point loss in three days, closing out at 36.5!  

They were at 41.5 in June, but a sell signal was given at just above 40. 

XLI, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.7.

RSX, Market Vectors Russia @ 34.5, remains very bearish, since a short signal from 54.5, representing a 37% open profit.  it is noteworthy that since the sell signal was generated in June, RSX has never traded above even the middle of its 20 day range. Buy stop is at 42.6 and plunging.  

Bottom line:  the trend remains your friend.  Don't try to guess a bottom!  Just adapt to what the market is telling you and let it ride...

SPY Update 8/5/08 (SPY @ 128.36) buy stop if market exceeds 129.15

8/5/2008

Market update: SPY remains in a sell state at 128.36 since a 136.5 sell signal in mid-May (6% open profit). The market has had a nice run down (if you were short) and l The action remains sloppy, however, with a sell stop just above 129.15. ooks as though it's trying to form at least an intermediate term bottom.

Positives: the market is probably short-term oversold, sentiment is very negative, volume on up days has recently been somewhat stronger than volume on down days.

Negatives: the fundamental situation remains atrocious although it often does until 6 months after a bear market bottom, the market has failed to make a 20 day or 4 week high and there is the possibility that the action since mid-July has been a wide, sloppy flag pattern, which is more often a continuation than a reversal pattern.

At any rate, the market does not require clairvoyance, only adaptability. If the market closes above 129.15 and follows through, buy. Often the first buy signal following a protracted decline is a fake-out, but that's OK since risk is pre-defined - I would sell if the market broke below 125.

S&P 500 Update 1/18/08 1:33 pm SPY @ 132.40

01/18/08 1:33 pm: The S&P 500 continues to get clobbered. This is the worst start of the year in decades. In my last post, I posited that the market would probably retest its spike lows for the summer, but unfortunately, it failed this test, taking out not only the summer lows, but closing well below the lows formed in early 2007.
A weekly chart (see above) reveals a worrisome technical picture:
- the intermediate term and longterm uptrend lines have been decisively violated;
- a breakout attempt (as noted last post) has failed;
- an attempt to hold the spike lows then make a new high failed, causing the market to collapse well shy of its past highs;
- the market has had multiple days in which it closed down over 1% with much of the selling coming in the final hours of trading;
- the volume on declining days or weeks (shown here) has been very high, much higher than on up days.

The fundamental backdrop remains horrible, with the dollar in free fall, many signs the consumer is tapped out and pulling back on spending, and continued unwinding of the mortgage market and real estate bubble. At a household and government level, we are spending more than we are taking in, running huge deficits to buy things today we can't really afford until tomorrow, if then. Iraq continues to drain us of national blood and treasure; instead of honestly paying, we continue to live with the fiction that tax cuts and the deficits they have created don't matter. Well, they do, and as Johnson and Nixon found out (the most analogous period I can think of), you can't have a war in Asia prosecuted in the face of international condemnation without expecting some payback, not just political. Our dollar, then as now, lost an enormous amount of spending power and we suffered horrible stagflation. 1973-4 was one of the worst years for the stock market, a year that also saw the demise of an intensely unpopular, once popular, Republican President.

All the solutions being tossed around are missing the point: an economy based 70% on consumption of things we don't really need by people who can't really afford them, financed by people whose main interest is generating fees and shunting the liability to someone else is not sustainable in the long term. Just as we went through much pain as we transitioned from a manufacturing to a technology based economy, I imagine we will go through much pain as we move away from an America-centric, carbon-based economy to whatever the next phase of the game will be.

Stay tuned. The possibility of a sharp, snap-back rally, maybe one that gets everyone to sigh a breath of relief and say, Thank God that's over, is high, but don't believe it until the charts tell you it is.

How to play this market? Consider hedging your long positions with puts, although they have become more expensive. Sell down to your sleeping point, dumping any speculative plays. If you love a stock and think it will turn around, why not sell it, then immediately turn around and put a buy stop in place above its recent relative highs? If the stock continues to decline, you can move down your stop to an even lower price. If it it rallies immediately, the most you have given up is a few points of gain. It allows you to sleep better and for me is great, cheap insurance. With ETFs and tax-deferred accounts, you can move hundreds of thousands of dollars with the click of a mouse for negligible transaction costs. Anyone with a moderate portfolio exposed to stocks has lost the equivalent of a new car since the start of the year; wouldn't a $14.95 commission be worth avoiding too much further carnage?

Don't try to guess a bottom here. In fact, prepare yourself psychologically to buy back whatever you are selling at a higher price. That's OK. If the stock surges 100% over the next 5 years, who cares if you gave up 2 or 3 or even 10% in an attempt to limit some of your losses?

Stay tuned....

SPY Update 12/3/07 (SPY @ 133.15): Intermediate Term Bottom May Have Formed

Click on image to enlarge.
12/3/07: The SPY has been in a clear downtrend since my last post ("The Ugliness Continues") but that maybe about to change. Stay tuned.
The market violated first its trendline on 10/17, then 3 days later its 4 week low. It attempted to rally, ran into resistance exactly at its July peak of 140 (funny how these support and resistance levels seem to really work out), then sold off straight down to 127, a point above the 126 spike low of the August sell-off.

Now the clear 4 week trendline has been broken with a strong, wide-ranging day and 2 days of trading after in a narrow range.
It look as though the bulls are setting up to run the market higher. Seasonality is on their side - December is a strong, safe month for the S&P 500 and we are entering the bullish stretch that usually lasts from mid-late November through January. Interest rates are lower on a year-over-year basis, and valuation is not outrageous (but questions about the E part of the PE remain given the subprime mess).
Fundamentally, things remain pretty awful, with the dollar having lost 40% of its value peak-to-trough, an economy that is 70% dependent on the consumer to leverage himself so he can buy some more thing she can't really afford, combined with profligate government deficit spending...
But then again, they say to buy when blood is on the streets.
They also say not to try to catch a falling knife or it'll be your blood in the streets.
I anticipate the market will retest its recent lows, maybe not get quite down the 127-128 range, form a double bottom, then surge back to the 140 level or beyond.
We shall see...

SPY update: the ugliness resumes...

10/19/07 4:37 pm (SPY 149.6): Today's 300+ point plunge was no doubt heavily distorted by options expiration but may reflect some fundamental reality. The dollar's decline, oil's rise, and the great uncertainty over the extent of the credit damage were all cited as reasons for the decline, but of course those factors were present during the recent almost 20% trough-to-peak rise in the SPY.
Technically, one does not have to know the fundamental why of a market's movement to make money or protect profits. This market seems in a sloppy 20% range characterized by broken uptrend lines, false breakouts, then surges back to new highs. This is the third such break by my count, the first being in February, the last during the summer, and now.
Things to note: an uptrend line was broken at 155 last week. The market traded below this line all this week then broke decisively below its 20 day trailing low.
It will be interesting to see how the market behaves on Monday once the options overhang is gone and people have had time to digest CAT's pronouncements on the economy, etc. If the July-August script is followed, we are only halfway down if that, but the dollar has crumbled since then and the Turkey-Kurdish conflict has surged and represents a potential meltdown in the only part of Iraq that was starting to resemble something close to success.
Extremely bullish seasonality is just around the corner, during the November-January stretch in particular, so if there is a sell-off, the opportunity to make sharp gains in the next few months will increase.

S&P 500 Breakout - Buy at 152.44

The S&P 500 - I will use its depository receipts or SPY from now on - broke out decisively yesterday to the upside. Around midday it was forming a high, tight flag, indicative of a potential explosion to the upside. A stop could have been placed just above 140 or so. It is unclear if it would have been filled near that range however as the market exploded up immediately after the fed announced its interest rate cuts.
Only a few weeks ago I was bearish and net short the market. Then I was flat; I spent the last 45" of trading (an excellent time to enter the market, by the way - the first 30" are the worst) getting long.
I bought SPY at prices from 151 to 152, as well as XLE, XLU, and the Dogs of the Dow, namely AT&T, Verizon, GM, GE, Citigroup (a phenomenal value right now, me thinks), JP Morgan. A full list is available at www.dogsofthedow.com. I also picked up some Target.
Any 3% surge on good volume across major trendlines and the 20 day high must be taken seriously. Historically, most followed through. The dangers remain, of course, but the willingness of the Fed to perpetuate the bubble if need be means investors should adhere to the old adage of not fighting the Fed. They seem serious about doing whatever it takes to restore liquidity and confidence.
I would expect some choppiness but an equal likelihood is a market that never comes down to "reasonable" levels, so starting to move in aggressively any cash on the side is critical to long-term performance.

S&P 500 update 9/13/07 spy

The S&P 500 appears to be setting up for a breakout. Although it has not yet breached its 20-day high, the market has been forming higher lows and challenging its recent highs, holding in the upper end of its recent trading range, after breaking a downtrend line from the false breakout high. A trend line, properly drawn, should only connect the highs preceding lower lows.
Volume on up days still appears weak, but support appears to have moved up to the 144 area.
It the market decisively breaks above 150, then another leg, perhaps to the 156 high, could follow. This would surprise everyone which is what the market tends to do most of the time.
Individual sectors that look interesting include energy (XLE) which has broken out again and is perhaps short-term over-extended, technology (XLK), and basic materials (XLB). Financials (XLF) remain in a downtrend, but the 31.5 climax low may hold for awhile at least. A close above the down-sloping 50 day, currently at 34.29 could be good for a nice trading swing.
The macro economic picture remains horrible and we are in a seasonally weak spot, but pre-election Novembers are usually strong. The market may breathe a sigh of relief if the President indicates he is finally changing course in Iraq, which would eliminate a major financial and credibility hemorrhage to the United States. We currently spend about 12 billion dollars a month there, so any sign that this might be the beginning of the end could be greeted positively, particularly by the credit markets.

S&P 500 Update 9/4/07 12:55 pm (SPY 148.78)

S&P 500 update midday: Well, things are starting to get interesting. This is why it is so important as a trader or investor to be agnostic (literally: not knowing) rather than wedded to one position all the time (long or short). The market has now broken its downtrend line after looking like it was going to make another leg down last week. This could represent a change in trend, but for confirmation, I would like to see the 20 day trailing high taken out (currently at 150.59 on the SPY).
Negatives remain. No pronouncements by the Feds or by Bush about bailing out some homeowners at the margin changes the macroeconomic uncertainty or the overall credit crunch. Nevertheless, the idea of not fighting the Fed remains in place.
Volume is low on up days, the market's action has been distorted by light pre- and post-Labor Day trading (when dramatic moves, usually to the upside, are not uncommon), and if you are bullish, this would be an over-extended entry point. A pullback to at least 144-145 if not the 138-139 range would be a normal and orderly development.
More later. Watch closely. September is a horrible month, but maybe we got some of the carnage out of the way in August... I'm still flat to short the S&P 500 (via puts).

S&P 500 Resuming Decline

After a counter-trend, low volume rally, the S&P 500 (SPY 144.69 intraday) today gapped down across a short term uptrend line, and showed several signs of a resumption of the decline:

1. Gap down.
2. Higher volume (so far intraday (3 pm)) on this down day than on the prior up days.
3. Wide-ranging day;
4. Holding (for now at least) near the lows of the day.
5. Violation of the lows of not just the past 3 days but apparently the past 4 (Vic Sperandeo's 3 day rule).

If the market does not turn around and take out the relative high made yesterday, it will have stalled out at the intermediate term downtrend line as would be expected. A retest of the recent lows is likely.
The news from the housing market continues to be bad. The news out of Iraq is beyond horrible and the fact that the scandal-ridden AG is resigning sets us up for a nasty confirmation fight which may paralyze our government or even create a Constitutional crisis. Many of the illegal activities of the President were not investigated or aggressively pursued because of Gonzales' loyalty to his boss, but you can bet whoever is confirmed to replace him will attempt to re-establish the rule of law, or at least not to stand in the way of Congress, which seems intent on demanding accountability on a host of abuse of power issues from illegal wire-tapping to the firing of the US attorneys for political reasons.
Whether the market is starting to discount some of this nastiness or not is unclear. Expect also the dollar to continue to get pressured since the Fed is lowering rates to cover subprime lenders at a time when the ECB is talking of raising rates!

S&P 500 Rally Unconvincing

Thursday 8/23/07: The S&P 500 (I show the SPY depository receipts here) rallied about 10 points from its spike low of 137 set intraday during the panic sell-off last week, but has rallied only about up to its downtrend line. It has had some strong days, but the volume has been very weak on the upside, much less than on the downside, and you would expect snap-back rallies, some ferocious and impressive, even in a bear market. Note also that the market violated then rallied back to its 150 day moving average, which is now resistance. It breached the 150 day today then settled back to close down. The 20 day trailing high is approaching 150 which would be about the level where the bear thesis has to be seriously questioned, although in such a choppy, nervous market, some head fakes will no doubt keep everyone guessing.
The fundamental backdrop is not certainly terrible but is terribly uncertain. Valuation is average based on reported trailing earnings, but no doubt many of those will blow up going forward, contracting the E part of the PE ratio. This credit crunch is much more pervasive and serious than the LTCM debacle or the Asian currency meltdown and the market's decline has been dramatic but so far quite modest. We live in a country in which our government spends about a third more than it makes, including $12 billion a month in Iraq alone, and has to borrow a billion dollars a DAY to keep operating. Our currency has gotten a 20-30% haircut depending on what other currency you look at, meaning that the real spending power of all Americans has undergone an invisible bear market. Had the dollar remained constant against the Euro but the stock market lost a third of its value, every pundit would be bemoaning the financial crisis, but if the stock market was (until recently) making new nominal highs in a devalued currency, no one really notices.
Households are in poor shape, viewing their homes as ATMs and buying today what they really could not afford until tomorrow. I continue to believe that the bubble in equities never really popped; it was simply transferred into housing. Rising prices begat expectations of even more exponentially rising prices, and people apparently made marginal purchasing decisions based on this rising equity. Since over 2/3 of our economy is consumption, any massive slowdown in individual marginal spending because of the pain of the mortgage blow-up and resultant credit crunch could have very dire consequences. Eventually we, at the individual and government level, must pay our bills, but the adjustment although healthy long-term could be very painful short-term.
The Fed's pumping liquidity into the system so aggressively makes me think they understand things are worse than the public yet realizes. At any rate, the case for a sustained bull market in this environment is harder to make.