Today was a unique day for the markets.
Today’s Overall Hybrid score in The PPT closed under 2.50 for the first time since May of 2012. More than that, breadth closed at an atrocious 6.98%– the 11th lowest breadth number in PPT history (2008). Although we are not Oversold on a historical basis, we are oversold on the 3,6 and 12 month algos, truly a rare occasion.
As you can see, the track record is near flawless for this signal, over 9 previous occasions.
Today’s rout in the markets has confirmed the Hybrid Overbought signals that were flagged last week.
Now what?
Construction ETFs are flagging very reliable OS signals and silver/gold are showing record levels of stress. Both signals are highly accurate, especially a historically high score for ZSL, which comes with 18 out of 21 down periods and an average loss of 11%– after the signal is registered.
Enough of what the fortune cookie people are saying on the teevee and internet. The market, as a whole, especially commodity stocks, is deeply oversold.
Over 640 stocks were considered to be oversold today. I can firmly say the market will bounce soon and hard. Those who are shorting now for profit are late. However, if you are shorting to hedge, I support that position.
The stocks that have underperformed most will bounce the hardest. I will provide a short buy list tomorrow, as I suspect the market will open lower.
As a composite, raw commodities are now trading at late 2009 levels, essentially erasing the entire move up since 2010. This is a significant development that marks the end of the commodity bull run. Jim Rogers is playing with his bowed ties right now, not his money.
The Commodity Index inside The PPT is at its lowest point ever, at $82. It hit a high of $147 in April of 2011. So much for long term investing.
The precious metal trade is fairly straight forward at this juncture. It’s either going to fall back in line and respect previous levels of stress, or it’s going to behave like a hedge fund filled with gold bullion just blew up. As of now, consensus supports the latter. However, keep in mind how fast fear can transform into greed and prepare for that eventuality.
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This is a significant development that marks the end of the commodity bull run.
2 days is not the territory [sic]
Idiot
The Nikkei going full nuclear sushi godzilla housewife gap fill. V shaped recovery anyone? Crazy.
The EWJ barely dipped today as well. I would like my Top Ramen hot, fully rigged with extra spice packet. Wtf?
Just a short note to say – “thanks”. Times like these are problematic for market participants and your concise words of wisdom and analyses are very welcome.
I’m curious as to why TLT was only up a buck-and-change on all this selling. Like Fitz always says, let someone else jump out of the foxhole first.
TLT suffers from costs and slippage. but perhaps most importantly the index it’s tracking is not static. Looking at just the Long Bond over the last couple of years, it looks like TLT is fairly closely matched to prior pricing (considering Long Bond yield) – doesn’t look like much slippage and no arb ops.
FYI: CME is increasing the margin requirement for FX, Metals, and Natural Gas Outrights; Natural Gas Intra-Commodity Spread Charges; FX and Metals Volatility Scans- Effective end of trading, Tuesday, April 16, 2013.
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