First of the month today, which means we get to analyze mutual fund activity in terms of redemptions/deposits.
Jeff Saut wrote this yesterday:
The call for this week: A few weeks ago I said I was not concerned with China’s wrongly named “devaluation” and its potential to start a currency war. Over the weekend China stated there is no basis for the renminbi’s continued depreciation. Speaking to China’s impact on the U.S., Gluskin Sheff’s David Rosenberg notes that China’s economy has only a 16% correlation to the U.S. economy and is therefore insignificant. Bank of America Merrill Lynch writes that $19 billion of mutual fund redemptions occurred last Tuesday, the second largest since 2007, which smacks of capitulation. Of course, capitulation was also registered by two consecutive 90% Downside Days (August 21st and 24th), which were followed by last Thursday’s 90% Upside Day. Such capitulation is typically followed by a two- to seven-session “throwback rally” and then a downside retest. If that pattern plays, it should tell us over the next few weeks if ignoring last Monday’s Dow Theory “sell signal” is the correct strategy. And this morning our late week “call” to not expect much more upside above the 1970 – 2000 level on the SPX appears to be playing with the S&P preopening futures off some 16 points. Stay tuned .
Most of what I am reading here is how far down the market is going. Sentiment flipped hard thus far this week. Pain trade up tomorrow?
If you enjoy the content at iBankCoin, please follow us on Twitter
Down another 3% tomorrow would be painful for a lot of folks, no?
Did you buy stocks today?
No. > 70% cash.
Then I don’t think the pain trade is down. Are people actively buying this? If anything, late conviction buyers are getting fucked today. The guys that didn’t start til Thursday or Friday. They all stopped out today, and bears aren’t covering here.
I think up. I’m going to be up trying to buy everything tonight.
Interesting point. Some people I talk to that are my “tells” were buying on Thursday and Friday. Also, now they are conditioned to hold through the pain in anticipation of v-shapes. Just another perspective.
Also, if the market rips up tomorrow, I would not be in “pain”. That’s just me.
I’m guessing we get a candle like we did last Tuesday the 25th but smaller and end the day down.
LET’S RETEST THOSE LOWS MEN, THEN WE MAKE LOTS OF MONEY…
Jeff – I listen to Saut fairly regularly on his daily commentary. He mentioned there is a Dow Theory Sell Signal but he’s ignoring it unless the lows from last week break. He doesn’t think they will. I kind of side with him in that it will take a lot for those to break.
here’s a link to his daily notes:
http://www.raymondjames.com/multimedia2.htm?url=Saut_Daily.wma&player=wmp&target=int&width=300&height=0
Nobody has a clue.
Bought CHK into the close today. I think that has the potential to rally substantially here.
Lows will be taken out this week. These fund managers are in denial of what is happening around them. The bounce off this leg down will be very tepid. Wait till March 2016 to start buying stocks again.
If the lows get taken out then I agree its worth being extremely cautious. I’ve moved to mostly cash since we broke down below the 200DMA but I really don’t see a big bear market coming now.
Markets can rebound very quickly too and I hate chasing stocks and paying up for them, so if we did bottom and I have little exposure, it will be tough to get back to a full portfolio from a mental standpoint.
Watch for the trap if lows get taken out.
Can’t blame you for being cautious. If we somehow ramp to a new high then there will be plenty of time to catch the melt up move. I REALLY don’t see it. McClellan’s sell signal has been money going back to before QE era. There is data both sides can point to, but I prefer the bearish argument.
Only thing that scares me is QE intervention. ECB can throw a wrench into everything this week. I keep reading that what China has done is effectively wipe out 60% of QE3 liquidity. FED and their friends won’t give up so easily.
I’m still very bearish. Who knows what kind of toxic assets China is holding.
I have too much conviction on my trade lower, which is why I went 100% cash, lol..
You are the only bear I read that covered.
I went 100% cash. Watching NKD futures tonight for a possible double bottom trade.
Gap and go – kill everyone who shorted into the hole. Prob fade the rally after lunch. No evidence, just speculation. This market seems to love screwing with deep-seated conviction.
Into the hole? We’re coming off a 7% up move.
Lol. Sorry – “shorted into the hole today.” That up move was reflexive, something to do with a 1000 pt gap down that didn’t get answered. Let’s see in a week.
I positioned for the aversion thesis. I bought the 2nd 1/3rd of XIV and 1st 1/4th TNA towards the close.
The remaining part of the position I plan to accumulate doesn’t happen unless we go into discouragement.
Bought $iwm calls today when it felt like the fear was kicking in. Also look at the comment traffic you’ve been getting lately. So negative. I feel like up is where the pain lives.
I was especially shocked at the fear since we haven’t touched last week’s lows.
Still holding SH – we retest last week’s “bottom” this week, which I think determines our short/near-term fate barring worse news.
No webinar today?
I have no colleagues or friends talking about the stock market going down yet. One colleague was thrilled to be up 50% on a leveraged ETN and knows little about the risk on these. To me, that means more down side because average joe has not really experienced pain just yet. I think we are on our way to discouragement yet. once there, I figure FED says or does something in September and we rally through December then continue dropping thanks to China or whatever.
Interesting way to put it.
Crude report came out, not good…
From the technical voodoo I look at, it looks like we’re going to keep tracing out a pretty big bear flag on the hourly ES chart, with a bottom having been hit near the end of the regular session on Monday. I’m looking for at least ES 1964 by Thursday, and it very well could come on Wednesday.
I wouldn’t even be surprised to see this whole thing play out with a move over the next couple weeks to 2068 on the ES (78.6 retrace of the entire move), thereby creating a massive lower high.
Interesting, that’s exactly what happened in 98. Big double bottom that hit its last low in October.
Bingo.
Tomorrow’s headline, “China fears overblown”.
Good action in AH…I would be buying every share of AMBA in sight with 80 handle.
Got long ES at 1919
We recapture 1960 in short order
Already sold at 1929, lol — fuck it.
Long NQ 4160, NKD 17865, CL 44.35.
Risk.thefuck.on.
No doubt, I panicked and sold after 10 pt jump in 10 secs.
This is such a perfect market move here. Fucking perfect.
Yeah man, looks good with China closing Thurs & Fri.
How do traders reconcile this tomorrow? SO crazy.
NKD so strong!
NQ back above 4200. Like the CL entry. Sellers are out of ammo.
Isn’t Buy the dip here too obvious? everybody watched that 1000 point drop and then immediately watched as the market rallied 1000 points while they sat in the corner with their dick in their hands. So now that we get a 500 point drop, everyones knee jerk reaction is that tomorrow and Wed are easy rally $. pain trade is that these guys trying to replay the exact playbook from last week are gonna be SOL. JMHO
1
Nobody talked how high the market could go today. Every single comment was to the lows or beyond the lows. That’s why I said pain trade was a gap up. What they do with it tomorrow is up to them. Day to day assessment.
Still got wood?
Long dick style
NIce AHWOA tonight.
Which part?
The whole thing?
Me? Ya, I mostly have EEM puts plus a little QQQ puts.
When did you start betting against the market if you don’t mind sharing?
Started buying EEM puts around 38 up to 40 based on $ carry trade unwind thesis. Added some Friday. Also bought a little QQQ puts Friday. Plus still have an old legacy position in PM miners = 1 fuck ton too much underwater
If you’re going to use me as a contrarian indicator I only ask that you share with me so that I can bet against myself if the thesis is convincing. Haha
Lol…no. I only ask to see where your confidence comes from…and where you were converted.
I joined this “real vision” financial TV type site a few months ago…..one of the theses was by raoul pal, he laid out a $ carry trade unwind based upon the $ breaking out of important trend lines. Seems overly simplistic as I write it out, but that’s basically why I took the trade.
Great trade.
Raoul Pal was the guy that was screaming apocalypse at the bottom of the 2012 lows, for what its worth:
http://www.businessinsider.com/raoul-pal-the-end-game-2012-6
??? Are you saying he is consistently wrong? Or just that you keep a weird record of him being wrong three years ago? what’s significant about the 2012 lows? Did Raoul Pal piss in ur Cheerios at some point? Either way, thanks for sharing #coolstorybro
-1
@funluvin I got caught up in AHWOA this morning. What I read on $sune / $terp is basically that the business model is for SUNE to build these projects using high rate debt and then lay it off to TERP and the global yield co to hold long term using lower rate financing and yield. Unless yield co costs of capital go down, then SUNE is stuck laying off there projects at lower prices. Hence the destruction in value.
Thank you. This was on my to-do list.
There is a thorough explanation of SUNE/TERP in the Exodus under SUNE notes.
thinking we rally thru rest of the week. no china = no crash
I could see that, if so.. $ZG is looking good.
Just thinking about Monday makes be bearish. Hard to see a strong Friday close.
What’s Monday? Aside from the holiday…
I did forget about Labor Day. Another reason to rally. Market bias generally to the bulls going into holidays.
Agreed. The silence this morning is marking a change in sentiment. 2 day rally.
I loaded the boat this morning for what I think is a solid run to close the gap down above. My conviction after that is cloudy at best.
I’m taking it day to day myself. Probably stays that way for a week or two at least. I won’t bother looking out beyond two days in these environments.