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Tag Archives: SPX

Rally Hats! Fat Candles And A Hot Market

Another day another gap higher as investors celebrate the world not blowing up last night with a decent rally.

As of the open this morning the S&P 500 had tacked on a cool 85pts since the lows from last Thursday. The high on February 1st was 1947. Yesterday’s close at 1894 marked a perfect 62% retracement of 147pt 6-day loss.

Which is sort of cool but probably won’t prove critical. More concerning are the crazy trading ranges that have been happening for the last month. Today could be the 14th time intraday and 8th time the 1900 level has been taken by the forces of good or evil.

The idea of endlessly taking on and off S&P500 1900 hats and all the fat candles over the last month got me thinking of Lumiere, the hyper-sexual candle in Beauty and the Best.

I’m sure I’m not alone on that…

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It’s not normal for the S&P 500 to move 2% a day. Not remotely. Here (via Bespoke) is average daily market data from the 2009 lows to 2012.

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During this relatively benign but not uneventful period stocks changed about 9-basis points, or .9% a day.

Here’s what it looks like now:

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The ATR is the the 14 day moving average change of stocks. It’s true volatility in the price of stocks. Right now the ATR is 37.5 or about 2% (37.5pts = 1.98% if the S&P 500 is 1895). That’s more than double the long-term average. It’s not a historically high level but it is elevated.

What has me obsessing about this wonky measure is that this is the longest I’ve ever seen a market grind and reverse with such weird consistency. Stocks have gone nowhere for a month but they’ve done by moving 2% a day.

That’s weird. I tend to think it’s bullish (weak hands getting flushed) but it certainly represents a turnover in the nature of people holding stock. Presumably we have stronger hands in stocks than we did a month ago. If oil drops to $10 tomorrow that won’t matter at all but all things being equal it’s good to have braver money long stocks.

When the market gets healthy the ATR will fall immediately. Bull markets take escalators higher then fall down elevator shafts. We’ve spent 20 trading days shaking furiously in place. That’s generally not great but may not be today’s business.

What matters today is that Tuesday’s close is now nice support. 1947 is huge resistance but there’s supply every step of the way. Today feels “reversalish”… like it wants to start higher and roll-over all day. I’m not trading on that feeling as the feeling could just be me not feeling like I’m long enough. Watch the close. More in a bit.

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China Says Buy! Should You Listen?

Stocks are having their biggest 2-day surge since January 28th and 29th. That would be a much cooler fact if January 29th hadn’t been followed immediately by a 7% plunge.

All of this happened just over the last few days, for those of you kind of spacing out on the markets at this point. Perhaps a picture will help:

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In case you’re new to this, it’s neither normal nor traditionally healthy for stocks to spike and drop 7% in less than 3 weeks of trading. For the S&P 500, 140 index points (I will not use “handles”) is more than a trillion dollars in market cap. That seems hard to justify on a fundamental basis.

When the S&P 500 is getting revalued by more than a trillion dollars every 10 days it’s best to sit back and wait, in my experience. We’ve already gapped into resistance. So you’ve got a ceiling up head and support way below current levels. The risk/ reward blows.

Another concerning omen: The Chinese have declared the Bull back in charge:

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That’s from my favorite government mouthpiece Twitter follow, @XHNews.

The Chinese are exceptionally bad propagandists. Unfortunately their record with stock calls isn’t great, either.

Here’s XHNews’ call from last July (from Jan 21st column):

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I’ll be selling rallies until further notice. Resistance for this one is 1895 (62% retracement) and 1950 (January 29th capstone).

I suspect the Chinese are just a little sheepish about this being the worst Year of the Monkey since 1932. Also, the whole naked currency manipulation, Shanghai Comp Crash, and GDP data tomfoolery. Regarding the last, this is still the best Chinese market cartoon of the year:

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Panic! Stocks Cling To Support

In a time of uncertainty. In a world gone mad. One stock formation stood out as clearly as a shadow-puppet on a cloud: The S&P 500 3-month chart is forming a Brooding Affleck Stubby-Ear Batman Top:

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1820 was the Ebola-Low of October 2014. 1812 was the intraday low on January 20th. Any professional investor who claims to not be aware of those levels is either lying or bad at their job. For our purposes it doesn’t matter which. There are no non-chartists when stocks crash.

Below 1800 is nothing but air and regret down to 1708. A close below 1708 will be an Official Bear Market. There will be a TV special.

Click here for more on the Batman Portent of Doom

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Global Panic! Grim Open For Stocks

Stocks are much, much lower than where they were last night. That’s what air-pocket, overnight risk looks like.

Central Banks are a problem. This whole negative rate thing has equity markets tripping. Deutsche Bank’s “we’re rogered” memo was our tell. Here’s an entire MBA worth of economics for stock investors: The more traders are talking macroeconomics the deeper your bomb shelter needs to be.

Right now everyone is talking macro. The S&P 500 Head and Shoulders pattern has a neckline slice with a close below 1850. The 10yr yield is at 4 year lows (Congrats, TLT longs). Yellen is testifying before Congress.

We’re either going to make a very sharp bottom or suffer a hideous death. There is no in between.

Thank God it’s Friday*.

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For more please see 3 Rules for Bear Markets

* Crap

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Am I Wrecking Your Portfolio? Maybe!

Turnaround Tuesday is failing. Stocks are lower and a new theory from my Twitter stream suggests it’s my fault.

To understand this compelling argument go back to yesterday morning. On my influential and amusing Twitter stream I implied stocks were lower because Peyton Manning is a PED-using beer distributor hogging teammate Von Miller’s spotlight. Most of that was in the subtext of this graphic:


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Clearly I was kidding. Or was I…?

Sharp-eyed Twitter follower @ZagaInvestment quickly saw through my Jedi Mind Trick hi-jinks:


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My accuser was backed up by another follower, who noted the genuine out-sized influence my 26k [sic… it’s almost 27k] followers:


There are a few possibilities here.

One is that I have intentionally used my snarky genius superpower to trigger a $6 trillion decline in the value of global stocks since the start of 2016. In this case you can either oppose me and die or grab a seat and watch me make humanity dance like puppets at the end of my mind-strings.

Another possibility is that I’m doing this accidentally. Like Rae in “Star Wars: The Remake” I am only now discovering my power to control the fate of the world. If so, buckle up because there are going to be some changes made as soon as I get a handle on the Force contained in my blood(?).

I’m not going to lie; I like both of those options. A lot.

Sadly, I suspect the truth is people are losing money and seeking scapegoats. My value-add in that case is largely symbolic. If I am evil then their portfolios aren’t down because of decisions they made but rather due to something I said. They are not wrong, I am just a jerk. (Clearly these are not mutually exclusive but that’s a topic for another note.)

If it makes you feel better to blame me go right ahead and do so. Just know that at best you are surrendering all agency in your financial destiny to a guy (me) who thinks he’s trying to help but is actually killing you. At worst you are making a powerful enemy.

Either way, it seems like you’d want me on your side…



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Facebook Of Death: Charting The Misery

The stock market is busted. You don’t need me to tell you that.

Please review Three Rules For Bear Markets. Rule 1 is Everyone Loses. You’re either losing money today, have lost money for years or will lose money tomorrow. You are not a special snowflake immune to portfolio meltdowns. Bear Market Rules apply to everyone.

Support for the S&P 500 remains 1850 on the close. Below that we’ve got the 2014 Ebola Low at 1820 and the Reversal of 1812 from January 20th. I wouldn’t pin too much hope on those latter levels. All bets are off in Gacy’s Basement

From Jan 14: The dreaded John Wayne Gacy's Basement formation...
From Jan 14: The dreaded John Wayne Gacy’s Basement formation…



Facebook shares were under $95 the day they reported earnings. Said earnings were absurdly good. The stock gapped higher the next day, eventually topping $117. As of this morning Facebook shares were back under $100. For my money, that’s close enough to Filling the Gap on the chart to make me interested on the long side.

Interested as in “Adding to existing long” not “back up the truck”.


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This isn’t advice because I have no idea what your portfolio looks like. If you’ve had cash on hand waiting for dip, well, this is a dip. Facebook filling the gap is textbook. Bull markets are about playing percentages, not swinging for the fences. FB under $100 with a stop at the pre-earnings lows seems like a decent spot to dip a toe into this eddy of pain.



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“Everyone Loses”: 3 Bear Market Rules



Everyone Loses

In the poker game of investing Bear Markets are the rake*. Everyone loses.

Bears are different than crashes. When stocks crash a small but vocal minority of investors get the timing right and make a fortune. The winners in bear markets are the investors who don’t die.


Yesterday the ursine claws of doom targeted the smug with particular relish. The FANGS got killed just because screw that stupid acronym. They were down 10% for the week. GoPro on the other hand was up 1.8% Friday (though it’s still down 45% YTD). And gold was strong. Pathetic holdings up and past winners trounced. The resulting sound of battle was a mash-up of gloating lepers still holding the GLD and robust cries of agony from freshly-killed champions.

It was horrifying.


McDonald’s fell 4.4% on Friday. Seriously… Screw you, bear market.

There are no winners here. It is a level playing field of misery.



“Air-Pockets” Lurk Everywhere

True students of the stock market tend not to believe in any one “system”. The game is fluid. Fundamentals are never as objective as devotees claim. Charts are only voodoo to people who don’t understand them.

Prices are ultimately set by humans. Humans are idiots. Imagine how boring life would be if we weren’t. Which is a nice way of spinning the fact that every morning when you turn on your computer there’s a reasonable chance a stock you own will have imploded.

Forget LNKD. Too Obvious. Here’s a 3 mo chart of Kohl’s:



Kohl’s is a dump. I find the stores maddening and I’ve never owned the stock. But right up until a couple days ago KSS was a very sexy looking chart. Going into earnings the stock was over $50 and looked to have support at about $46.50.

The stock lost $10 overnight on a warning. If you had a stop-loss it was hit $5 below support. Puts may have saved you but you had to be very good. For most KSS holders it was simply an instantaneous 20% loss.

Mr. Market is a Bad Mutha. He can smell hubris and fear. Seek to exude neither.

Bear Markets Are An Emotional Process

Investor moods aren’t binary. We don’t just feel Euphoria or Despair. Investing is deeply personal and entirely emotional. People grieve losses much like they grieve loved ones. Denial, anger, bargaining (eg “Please God, get me back to even”) etc.

Right now investors are starting to get a little pissed off. They’re looking to blame people for the sell-off and no one makes an easier target than the media and punditocracy.

I’ve got some experience with this. I don’t like to talk much about it but I’m kind of a big deal. By any objective measure I’m the 3rd or 4th Greatest Television Financial Pundit of the Modern Era. Really. That’s not a boast. It simply is.

The point is I know what it’s like to be on TV every night when the public starts looking for scapegoats. It’s ugly. People are mean.

Here’s some tough love: No one on financial television is running your portfolio. They didn’t make you buy a stock. They didn’t force you to sell. Some television pundits are good. Some are bad. None of them is paid to do anything other than share their opinion.

If you disagree with anyone in particular do the opposite of what they suggest. Don’t troll them. It’s mean and it makes you look like a whiner.

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Simple Rule of Thumb: Above is the Wong-Baker FACES Pain Rating Scale. It’s used by doctors world-wide to asses a patient’s level of suffering. If your portfolio makes you feel worse than 6 don’t Tweet anything directed at a television personality. I promise you, they are all trying their very best.

And if you make money short keep it to yourself. To paraphrase Brad Pitt in the Big Short, “You’re betting against America. Don’t dance”.

No one actually knows what’s going to happen next. The best you can do is get the odds slightly in your favor. For some perspective on the difficulty of predicting markets, here’s a Tweet from Neil deGrasse Tyson yesterday:

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Economics is the bastard love-child of Calculus and Sociology. It’s Physics for people who couldn’t quite hack the math. Economics is bullshit, is what I’m saying. Do you really think mass psychology can be broken down into a formula? Please.

No one is keeping the answer to this market a secret. We’re all just trying to figure out the same puzzle, some are just doing it in public.


The Week Ahead

In the 220-odd years of formal stock trading in the US  meaningful pullbacks have hit their lows during Friday twice (that I know of). Once in 2001 and again in 2004.

I’d expect the S&P at least retest the lows near 1800 in the next couple weeks. That’s not a trading suggestion. The most likely outcome is I’m right but there’s some sort of brutal, ironic twist that prevents it from being a useful observation. Like we go to 2000 then drop 200 overnight.

I can’t tell you what do. I can only help you learn how to think for yourself. There is a huge difference.


* Rounders reference. The Rake is the house take in poker tournaments. It’s the money that disappears, from the gamblers’ perspective. In Wall Street terms, The Rake = the money lost by longs but not made by offsetting shorts. Plenty of people were short LinkedIn but not nearly as much money was gained short as was lost long. The spread goes to money heaven. Because Bear markets maul everyone.


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Mourning LinkedIn And The Bull Market

LinkedIn picked the wrong night to take down estimates. Shares are off 40% after the spam-mailing job site apparently beat estimates and lowered guidance to negative one trillion dollars for current year.

Or something like that. I owned shares of LinkedIn for years. Finally sold it after the second Q of last year. In 10 weeks LNKD managed to crush shares by lowering guidance, rise after posting earnings in-line with the original number then plummet after slashing estimates yet again.

Which sounds like gibberish but it really happened.  That’s how LinkedIn rolls.  Here’s LNKD chart since it went public. Everyone of those islands was created by LNKD missing or beating estimates dramatically:

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LinkedIn was a trainwreck but if you were truly shocked you just haven’t been paying attention. If Amazon shares can lose 15% on weak guidance taking 40% out of LNKD makes sense, in bear market terms. Being long LNKD was a preventable tragedy. That’s what makes it so sad.

Not even good earnings save stocks in a bear tape. Facebook has gone from the low $90s to $118 and back to $104 since they reported. Google has gone from the highest market cap in America to a house of misery in the last 5 days. Some people traded it but most investors are just getting pistol whipped.

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There’s no hiding from the pain. The S&P 500 is holding up relatively well considering the beating going on under the surface. That doesn’t feel like it’s going to last. This market feels like it needs a flush.

This is how bear markets work. No one gets out totally unscathed. At the bottom investors are strewn across a barren landscape. When the living envy the Nationwide kid it’ll be time to buy in size. We’re not there yet.

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Stocks Test Support. Feel The Churn $SPX $SPY $KORS $CMG

Janus is a Roman god of two faces; one looking forward and one back to the past. Like all gods of human creation, it’s not about divinity but the earthly inventors. The problem with Janus is he’s giving you a false choice. Janus is a god for dreamers and whiners.

Living in the now is how you get all the money and have all the fun. Doing anything else is a sucker’s game. Here’s our field position this year, now, and a few things I’m watching today:


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On January 20 the S&P 500 fell to 1812 intraday, just 8 points below the Ebola Low of October 2014. From there we rallied more than 3% intraday, closing down only 1% (see: “Stocks Rally -1%!“). The ensuing 8 trading days saw 5 higher, 3 lower and each painful in its own way. The S&P is 9% off the highs, 7% off the lows and beating the hell out of just about everyone.

This is healthy. It’s good. Markets are supposed to be hard. That’s why it pays so well to be good at them.

Investors are chasing good news higher. Google (never, ever Alphabet) drove it to the highest market cap in American history. Specialty retailer Michael Kors is killing shorts pre-market, up 17% and pushing $48. The 1 year range on KORS is ~$74 to $35. Long-term investors have gotten killed. Newbie shorts mowed down big.

Watching Chipotle today. The shares have been ripping off a $399 low and are sitting at $475. Fly loves the stock into earnings tonight. I think it has bounce room to $540 but the estimates are still too high. If you want to gauge investor appetite for risk Chipotle is your tell of the day.

More in a bit…


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Bat-Damned: A Portent of Doom Is Confirmed

Yesterday I said Amazon’s chart was forming a “Brooding Affleck Batman; the worst kind!“.

Because this is the Internet someone had to take this the wrong way and start whining. In this case that was awesome because what the person was upset about had nothing to do with Amazon or stocks at all. @Hero_Spin on Twitter was upset at me for besmirching the reputation of the upcoming Batman vs. Superman: Dawn of Justice movie.

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This gave me the rare opportunity to mix film and stocks while using my basso profondo “I’m Batman” hiss for the voice of my inner monologue. I was an accidental film studies and Psych dual major in college. I unwittingly took all the required electives required for a degree, just because I love movies.

I also happen to already have a theory about the length of Batman’s ears and the economy.

@Hero_Spin tugged on the wrong guy’s cape, is what I’m saying.

First I’ll pre-review the film then I”ll share single most important scientific discovery since Calculus: the Batman Ear Indicator.

The Movie

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Screw Superman. Just as a blanket statement. No one likes him. And enough with the Nazi Propaganda visuals. This is a comic book movie. It shouldn’t have the same score as Schindler’s List. Based on the trailers, DC’s twist on the Avengers was to take out the jokes but keep the training staff and pharmacists.


No judgements. He looks great. Affleck’s real Batman body looks like the suit they made George Clooney wear. Ben looks like a professional wrestler delivering a promo in the cuts of him as Bruce Wayne. I’m good with that but let us be clear:  The only way a guy in his 40s can replace 30lbs of dad body with muscle is through both insanely hard work and a wife suffering from human growth hormone deficiency. Finding a Low-T friendly doctor would help as well.

I love Affleck’s movies, for the most part. He’s somehow underrated despite a monster career. But this isn’t his movie. He shares it with Superman and Wonder Woman and the guy who played Zuckerberg and who knows what else. This thing has train-wreck written all over it.

Oh, I’ll go see Ben Affleck as Batman in this ponderous, overwrought piece of garbage, @Hero_Spin. I’ll probably even enjoy it. But don’t tell me it’s good.

Which brings me to the theory:

The Length of Batman’s Ears is Correlated to Future Stock Market Returns

Art reflects the values of the generation that produces it. Just as we build the most garish buildings during times of peak mania, the super heroes which resonate with an era express the values and desires of their day. Batman’s ears are the mercury in phallic thermometers measuring the heat of our national ambition. They are economic indicators.

Which broadly fits if you work backwards from the 1960’s being the nadir of recent existence for both America and Batman. Vietnam. Race riots. Assassinations. And, starting in 1966 just in time for a bear market, the world was introduced to this:

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Stocks fell 22% over 8 wrenching months.

This morning my son and I watched Keaton Batman while I calculated the length of every major television and cinematic Batman’s ears, relative to his skull. I then ran stock market returns during each of the 5-distinct Batman reigns.

As it turns out, the Batman Ear Length Indicator is a balls-on stock market tell for 80 years. The longer Batman’s ears are the better the stock market during the period. Note I’m not talking art. Just size. The most bullish Batman was Joel Schumacher’s nipped Clooney / Kilmer outfits, with their ears like stout Viking horns. Perfect for a run of 30% CAGR in Bill Clinton’s America.

That’s not a trading call. Trading based on Batman’s ears would be insane. Yet it is fact. It’s also fact that Batman vs. Superman hits theaters March 25th. Do with that information what you will.

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