Last week’s volume was the lightest of 2008. All the major indexes declined throughout most of the week, yet the VIX barely budged. As the above chart of the Nasdaq shows, the index managed to close right at its 20 day moving average. The charts for the Dow Jones and S&P look very similar to the Nasdaq in that they are all hovering around the 20 day average, with the MACD in positive territory and the RSI(2) nearing a level of previous turning points.
With the Bearish sentiment (41.1%) Â still outnumbering the Bullish (36.7%), and the NYSE short interest ratio just decimals beneath a 5 year high, I feel there is still the likelihood of a substantial rally.
The Dow Jones and S&P have been down 4 days in a row. The RSI(2) is nearing levels which usually result in a bounce. While in the past this has happened near the lows, the indexes are now in a neutral zone. A bounce from these levels will easily take them above the 50 day average, and give them another chance at breaking resistance.
There is always the risk of another bank-ruptcy, and other associated headline risks for the Bulls. I do believe though that every resource available to the Fed will continue to be used to stabilize the markets. Another week or so without any devastating news will likely mean the markets move higher as the average investor has the memory of small ants.
I am still net short, but am getting an itchy trigger finger to harvest those profits.
With the ADP Employment Report on Wednesday and the government’s Employment Situation on Friday, I’m looking for some upside movement early in the week and then stabilization later in the week while everyone waits on the job numbers.
Still wrong.
Rather fitting.
” …. every resource available to the Fed will continue to be used to stabilize the markets.”
Yeah, every resource including bankrupting our country so bad that our economy is screwed up for decades to come and we become a latter-day England, wondering what happened to our previous glory. You couldn’t pay me to trust the Fed (or Paulson’s eventual reorganization plan for Treasury) right now.
Boca, it seems like something from a conspiracy theory novel where the former chairman of the country’s larget investment bank becomes the U.S. treasury secretary. Then, due to actions by his very own former bank, he decides to make broad and sweeping changes to the treasury.
RSI(2) on VIX is now in oversold area. How do you expect the Market up big while the VIX is already in the oversold area? Thanks. http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show%5Bs122111957%5D&disp=P
Here are what had happened with SPX down more than 1% and the VIX was down as well and the 2nd day both SPX and VIX were down again. There were only 5 occasions in the past, all happened in 2000-2003 bear market.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show%5Bs134583058%5D&disp=P
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show%5Bs134585352%5D&disp=P
We had SPX down more than 1% last Thursday and the VIX was down as well, and on Friday, both SPX and VIX were down again. There were only 5 occasions in the past, all happened in 2000-2003 bear market. Would you like to comment about these? Thanks.
Bellow are what had happened with SPX and VIX both down 2 days in a row and the SPX was down more than 1% on the first day.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show%5Be134583058%5D&disp=P
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show%5Bs134585352%5D&disp=P
wood,
you’re starting to sound like me. welcome back from the dark. lol
Peter, RSI(2) at 25 should be ignored. Wait until it is sub 10 or over 90. Also, RSI(2) is going to be your short term indicator, measuring 2-7 day swings. I am not really expecting the markets to be up “big” in the short term, unless we get some kind of monster jobs report. What I am looking for is a multi-week rise, taking us near or to the 200 day moving average.
Right now, momentum is favoring the bulls.
As I’ve noted though, there is likely a piece of news out there that could tank us, back to the lows. It could come tomorrow. However, I’m leaning towards a large amount of bad earnings report and other negative economic data leading to more declines in late spring or early summer.
Peter, I didn’t see your other 2 posts as wordpress had held them for moderation. I have approved them (obviously).
The studies you posted are certainly interesting. I’m not sure that there is enough data available though for them to be significant. Also, I have not thought about it a lot, but I think the action on the indexes drives the VIX. Traders position based on the action. The indexes do not move based on a VIX reading.
Here is what the bulls have working for them:
Going back to 1993, I do not find any instances of the SPY closing down more than 4 months in a row. If the market closes down tomorrow (last day of March) it will be 5 months in a row. Run the probabilities of a six month down.
SPY and DOW are already down 4 days in a row. While there are instances of the indexes closing down 5, 6, 7, 8 times in a row (Dec. and Jan. had an instance), the probability of a reversal grows with every added day down in a row.
RSI(2) on Dow is 11ish. This is getting very close to reversal levels. Granted, recent bottoms have been long and drawn out, due to the nature of the bear. This means the RSI(2) could stay oversold for a day or more. My hunch is it won’t.
As for the VIX reading, I think big money is positioning here for a little run-up, hence, the VIX remains unchanged for almost the entire week last week. However, short interest has changed little, so there is plenty of firepower out there for a squeeze.
Good discussion. We’ll see what happens this week!
Keep in mind, I will make a lot more money if the markets continue sliding than if they go up. However, I cannot ignore what I see.
I would agree with your reply. i.e. Short term there’s still a downside risk.
RSI(2) at 25 is not low enough, I know. My point is that it could reach low enough very soon so right now I’d rather not entering long too soon.
Thanks. We’ll see the next week. My 2 Major Accumulation Days theory (someone else has 90-90 day theory, sounds similar to mine) supports a little run up. I’m just a little confused by the VIX action last week.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show%5Bs133799818%5D&disp=P
9.0.0 to 9.0.5, it never went wrong.
Hey, tell me about this 9.0.0 stuff. It seems interesting.
I also am confused about the VIX action. In this case, I revert to Occam’s Razor- the simplest explanation is usually the best. I think the simplest explanation is that most money managers are not as fearful due to the recent fed intervention and the idea that the BSC bankruptcy marked a bottom.
Wood:
How’s the new header?
The same comment about the VIX I was to make. Young Jedi Peter, beat me to it, he did.
“Off the charts” — his metachlorians, I judge.
Paduan restrooms, your duty again this week I assign.
Fly, the whole thing is really really much better. It rocks.
I would like to have my fortune teller a tad larger, if possible.
Jeremy is the man.
Just if the market has two 9:1 NYSE up:down volume, it usually means an important bottom. I checked all the history available from StockCharts.com, 9.0.0-9.0.5, it never went wrong.
The green bar you see on the background is $NYUPV:$NYDNV.
The 90-90 day theory is here: http://www.tradersnarrative.com/the-hidden-power-of-back-to-back-extreme-up-days-1588.html
Chivas, I’m still not bullish, overall. I find it hard to believe that this will all end with a whimper, and not a bang.
Peter, thanks.
Momo is with the bulls?
How so?
Please, enlighten me.
Last I checked, banks were getting clocked.
Fly, did you read anything I wrote? In my opinion, we will likely have a few up days this week. Nothing major. However, it will keep us in the upper area of our recent range, which will set the bulls up to try and push through resistance. Every day we spend near the upper range, without bad news, is going to draw the buyers out…
Fly/Wood: Posted under last article
Nice new header, Woodshedder!
Some tarot cards or tea leaves would be a nice touch too.
Agee, the fortune teller needs to be bigger. If no room in the header maybe it can be on each article opposite your avatar on right side of article title.
my 1¢ guess – two days early on the bullish call. But we’ll soon see. Stochs are better than rsi(2) which isn’t as oversold as it usually gets.
both 400 pt up days in the last weeks had 2x the buy pressure that that of the subs 300 pt sell offs judging by the number of high volume up and down stocks on those respective days. Also, by some indicators, prices are still quite depressed.
Stocks above their 200-days is low, but not oversold.
Missing the ursine defecating in the arbor, am I.