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Thursday, July 31, 2014

The Market Was Flashing Red Lights, Now It's Oversold

Following up on recent positions this week posted below that we have closed out, Recent Positions This Week, we can add a few more winners along with a number of short positions that are doing great and a lot more that are nearly ripe to enter.

We closed some AAPL Puts, a bit too early, but a gain is a gain...


We closed a 2-day old trade in FSLR for a decent gain, 
"The cost basis for FSLR puts was $3.13 and the fill was $4.26 for a gain 2-day gain of +36%."

And entered a new position today that should fly.

Our HLF Equity short is now at a +19% gain, talk about a trade most people don't want to mess with.

We also had nice gains in UVXY, NFLX, IYT, UGAZ, BIS and DUST.

I can't post these too often, but I do try to keep readers up on major events, today was another pivotal day that we've been warning about for a while, but it should also trigger a response that is worth trading, more than that its useful to enter new trades. Here's our member's site, Wolf on Wall Street's Daily Wrap.





I wasn't initially going to post a Wrap tonight because I've shown you everything that has led up to this day and today shouldn't be a surprise at all if anything it's surprising it didn't happen sooner. That being said, we are positioned for longer term (most of us), we are positioned for the very short term and we know which assets we still want and have excellent set-ups to get in to them with a little patience.

However after going through my nightly rounds, I just couldn't not let you in on what I'm seeing.

I've been posting breadth charts and credit charts as well as bonds for months and last night I showed you some breadth charts I've watched for 15 years and only seen them look like this twice, the last time was the 2007 top, well if you think last night's charts were scary, wait until you see today's.

3C has been telling us this market is hollow, smart money that supports the market and the F_E_D have left town and are leaving town, there's nothing else, look at volume since 2009 and that's with a F_E_D balance sheet over $4 trillion, probably a good $3.5 trillion added since the Financial Crisis and that's about to go bye bye according to some F_E_D officials who don't want to let assets mature and roll off the balance sheet, but rather sell them and shrink the balance sheet which may be a need considering how much the banks have had to borrow from the F_E_D for window dressing, Q2 set a new record for the F_E_D's 1-day repo from which we can extrapolate from the record setting use the last day of the quarter that banks are about 1/3rd of a trillion short in assets/collateral.

In case you are wondering, the Dow had its worst day in 6 months today breaking the 50 and 100-day moving average, we know what that means and we prepared for it late today. The Russell 2000 ended July down 7% from July 1st and -6.11% from June 30th. Remember, the Russell should always lead the market.

Transports and our timely short last week, Trade Idea: (Longer Term) IYT Shortare down -3.4% on the week, the worst week in 11 months.

I showed you how bad High Yield Credit was yesterday (well almost every night, but specifically yesterday in this post), High Yield Credit (HYG) Heavy Distributiontoday stocks caught down to the red flag HY credit was flashing.

 SPX (green) catches down to HY Credit (blue), but if you think that's bad, look how much more it has to go "if" HY Credit stopped selling and stayed where it is...

Remember this? And most of that extreme selling has been since July 1st.

Here's another measure of HY Credit...
 The market has been warned....

Here are some of the VERY interesting breadth charts that I had to post, you recall last night's and how bad they were and my comparison to them as of yesterday vs the 2007 top in yesterday's Daily Wrap, well hold on...

 Percentage of NYSE Stocks Trading 1 Standard Deviation Below Their 40-Day Moving Average... This was at 38.8% yesterday and shot up over 42% today to more than 55% of NYSE stocks trading below that measure...

  Percentage of NYSE Stocks Trading 2 Standard Deviation Below Their 40-Day Moving Average...These are stocks that have already seen significant declines, they were at 19% of all NYSE stocks yesterday, they nearly doubled today to almost 37%.

  Percentage of NYSE Stocks Trading 1 Standard Deviation Above Their 200-Day Moving Average... These are stocks significantly above their 200-day and were at 41% yesterday, they declined to just over 30% today.

 Percentage of NYSE Stocks Trading 1 Standard Deviation Above Their 40-Day Moving Average... , these were 21% of NYSE stocks yesterday, just over 10% today, that's coming from 55% last month!

And the best for last,  Percentage of NYSE Stocks Trading Above Their 40-Day Moving Average... This is a pretty standard measure, yesterday less than half of the NYSE were above their 40-day at 40%, that was nearly cut in half today to a mere 24%of NYSE stocks above their 40-day, again THIS COMING FROM NERLY 75% LAST MONTH!

As for the VIX bullish candlestick pattern I've been showing every day for over a week...
The Rising 3 Methods Bullish consolidation/continuation pattern did exactly what it should and continued higher today.

All 9 S&P sectors closed red, the best performer was the Defensive Utilities, but they were even sold down to -1.57$, the worst was energy (Recall our USO short set up on July 22nd, Second Half of USO Trade Setting Up), Energy was the worst performing at -2.16%.

Of the 239 Industry and Sub-Industry groups I track (Morningstar), a mere 5 of 239 were green today!!!

The Dominant Price/Volume Relationship Among all the majors was Close Down/Volume Up which is a 1-day oiversold indication and we usually close up the next day, however who knows what tomorrow's NFP  and Options Expiration (weekly) max pain pin will bring.

The one thing I see for sure in breadth and the S&P/Morningstar performance is this market is now, very oversold on a breadth basis, so I think out position taken up today was the right thing to do and we did it based on the signals which just happen to fit the breadth oversold condition.

We'll piggy-back that trade and when we get to a little correction there are numerous shorts (some of which we have calls in now) that will be at beautiful set-ups if you need short exposure, I think most of us have been ready for this day.

Wednesday, July 30, 2014

Recent Positions This Week

This week at Wolf on Wall Street we've been trading around and hedging some shorter term positions while adding to some longer term positions.

Our HLF Short was added to on 7/22 as it broke to its largest 1-day gain ever, but there was clear distribution in the move...

HLF...

"The HLF position (short) we've had open and in the green is seeing a bounce on Ackman's presentation day of his "Knockout" evidence HLF is an Enron like scam or so he says, I really don't care, but I do know Icahn doesn't like him and this bounce is more than likely Icahn trying to humiliate Ackman on the day of his HLF knockout presentation as I showed earlier this morning.

I said I'd use higher prices to add to the half size partial position which I'll bring up to 75% of a normal position size and I'll show you what I'd like to see to add the final 25%."



Z...

Our "Z" weekly short was closed yesterday (opened Monday) for a +90% gain for a day...

Tuesday July 29th...

"Yesterday I put out an "Add-to" or new Put position idea for Z using August monthlies, Adding to Z Aug $155 Put.

I also opened a weekly put for this Friday's expiration in very small size as the 5 min chart wasn't as bad as the 3 min chart which was horrible yesterday, I usually have a 5 min standard for most trades. I closed that small position (ultra speculative) at 10:30 for a +90% gain. I think there's a pretty good chance we get another Z entry set up here shortly, which is why I closed the weekly put so quickly this morning, but at the right time as it (the Put) has drifted a bit lower since."

And today we closed the larger August Puts...
"I see a change in character and some divergences, this isn't a hedge and it's not quite the short I want yet, so this was meant as a counter trend move or fading the move in Z on the rumor of the Trulia purchase.

The original position from last Thursday, Trade Idea (Speculative Options) Z and the add to on Monday, Adding to Z Aug $155 Put

Thus far Z is at a gain of about +30%. I'd prefer exit the position before any bounce or lateral consolidation and re-enter on such a move."


NFLX

"This morning NFLX just broke under prior support (head fake/stop run) which is where I often like to trade these if I'm looking for a particular move. The gist of the post linked above was to use the bounce to short in to (I already opened a full size NFLX short and will be leaving it as is), however for anyone wanting to open or add to a NFLX short this could be a great opportunity.

The smaller trade and a bit more speculative is a swing-trade long for the bounce, I'll be playing that with an August (standard) $420 call which will also hedge the NFLX equity short which is down about 0.50%."

The NFLX Call position is still open with a nice gain since starting it Monday...

We have about 6 other positions just entered and a number we are looking to enter. I'll update those as we start to work our way out or in to them,,,,

Tuesday, July 22, 2014

What a Wall Street Manipulated Trade in Gold Looks Like

From Wolf on Wall Street this morning...
(Don't miss yesterday's post below or HERE)

Gold Update


Yesterday I updated Silver and some newer theories I'm toying with, but if anything seems to be clear (as it was before and again this morning)  it is that inflationary data seems to be driving precious metals which are starting to act like they use to before the F_E_D intervention, which is to say, move opposite the $USD.

I still have concerns about an all out asset class sell-off as the catalyst for stocks would be the same that would potentially hedge back inflation, therefore precious metals, but there's a very large base to be unwound if that's the case and it can't be done this quickly (year or so long base).

As for this morning, if you want to see what leaked data or smart money making a decent bet looks like (which if not leaked was certainly based on the inflationary trend that Yellen calls "noise"), look at gold futures below.

As mentioned earlier, just about 10 minutes before the CPI data was released this morning there was a dump of nearly $400 mn notional in gold futures, at "B" CPI was released and gold jumped 12 points to $1316, a nice pay day if you facilitated and then accumulated the pre-CPI dump.

 It looks like that's exactly what happened, gold futures were accumulated in to the pre-CPI dump and rode 12 points higher and then distributed for a quick morning trade.

 Here Gold futures are moving inversely against the $USDX as is their normal correlation that we haven't seen while the Bernanke put has been in place.

As for GLD itself, it looks like it will be coming down, there was a clear negative divegrence in to yesterday afternoon so this morning's action isn't too much of a surprise.

The 5 min chart shows a larger negative divegrence along the lines of a pullback divergence and a flag in GLD, the bottom of the flag is what I'm interested in now to see whether Gold is accumulated there or not.

The larger 30 min chart is similar to what we saw in Silver yesterday so one of the primary questions I'm looking to answer is whether the initial GDX base and higher trend we expected is still on track or whether the cure for inflation (rate hikes) will see an across the board asset class sell-off in both equities and the PMs.

Monday, July 21, 2014

If You're Not Worried About The Stock Market, Here are Some Reasons YOU SHOULD BE

This isn't really a concern for us, as they say, Bulls make money and BEARS make money, it's knowing when to move from one to the other as to not become the PIG that gets slaughtered.

Just a few charts that should raise the red flags...

 It took a while, but the mainstream media finally caught on to the elevated SKEW Index...


 The Russell 3000 A/D line (green) vs the Russell 3000 (red)

The NASDAQ COMPOSITE (red) vs the NASDAQ Composite's A/D line (green)

These are the Percentage of NYSE Stocks Trading Above their 40-day, 200 day or 1 or 2 standard deviations above their 40-day or 200 day moving averages.
 %> 40-day moving average (green) / SPX (red)

% Stocks > 1 standard deviation above 40-day

% of Stocks trading > 2 standard deviations above 40-day moving average

% of stocks trading above 2 standard deviations above their 200-day moving average.

Seeing red flags yet? Unfortunately for most traders, Wall Street never makes it that simple...

 New 4 week Highs/Lows

10-year Rates vs the SPX (green)

High Yield Corporate Credit vs the SPX (green)

Junk Credit vs the SPX (green)...

Wednesday, July 16, 2014

The FED is Shouting "RATES ARE GOING TO RISE SOONER AND STRONGER THAN YOU THINK"

BE SURE TO SEE OUR PROPRIETARY 3C INDICATOR USED AT OUR MEMBERS' SITE, WOLF ON WALL STREET,  COMPARISON BETWEEN THE 1929 TOP AND NOW.


We picked up on the changing F_E_D tone at 2:26 p.m. on September 13th of 2012, when Bernanke gave the first hint during a press conference on the day the F_E_D announced QE 3 of all days, that the F_E_D was changing metrics that would allow them to create an exit (although he didn't say it, it was clear) from accommodative policy which sent the market down for the rest of the year -8% from the F_O_M_C meeting's high at 2:26 p.m. September 13th, when Bernanke was asked a question about inflation and the market DID NOT like his new "tone".

If you didn't get the message when the F_E_D changed guidance from quantitative to the arbitrary and easy to manipulate, "Qualitative, you can be forgiven, although we did point this out at the time that the only reason to do such a thing was to allow the F_E_D to find an exit from their $4 trillion plus expansion of their balance sheet.

However, if you didn't get the message when St. Louis F_E_D president James Bullard said , "The Markets are Wrong, the market doesn't appreciate how close we are to our goals" which should be read as tightening rates, then you didn't want to get it.

However if you missed Yellen's 180 degree turn yesterday, chronicled last night in the Daily Wrap.. Don't Want to Miss post, you just weren't paying attention. The F_E_D is SCREAMING exactly what I thought the day before the last F_O_M_C meeting, 

"THEIR HANDS ARE TIED BECAUSE OF INFLATION AND REAL FALLING WAGES, THEY HAVE TO HIKE RATES WHETHER THEY WANT TO OR NOT. "

NOW, in addition to Bullard, Yellen, Kocherlakota and several others, Dallas F_E_D president, Richard Fisher said today,

  • DALLAS FED PRESIDENT FISHER SAYS 'MARKETS ARE OVERSHOOTING'
  • FISHER CONCERNED FED MAY 'BE STAYING TOO LOOSE TOO LONG'
  • FISHER: I DON'T THINK YOU SHOULD 'POP' A BUBBLE, BUT SHOULD LET SOME SPECULATIVE STEAM OUT OF MARKETS
Lets just take out the "Greenspeak".... Markets are "Frothy and overvalued, the F_E_D's "Reach for Yield" has created a monster and if you think for one second that valuations as the talking heads are rampaging on about are not high enough to warrant a crash, just know that almost every previous crash did not have exceedingly high valuations except in 2000, but they certainly are high considering the economic situation in the US and world economy.

He's telling us that markets (like every other F_E_D president) are not accurately pricing in the F_E_D's "NEW" rate guidance which says, they'll hike sooner and faster than the market has ever considered, this is EXACTLY what the Bank for International Settlements (BIS) which is the central banks' bank,  said in their annual report urging "Leading" central banks not to hike rates too late or too slowly and also telling them that they opted for the short term sugar rush policy which has left them with nothing in the end, a clear reference to 6 years of accommodative policy that bought the F_E_D the worst quarterly GDP print of -2.9% in 5 years!

Finally, we have heard over and over from Yellen that the market is NOT a bubble, until yesterday when she singled out Social Media stocks and biotechs, the stocks that move the market.

If there's no bubble, why is Fisher saying what Yellen said about a week and a half ago, that it's not the F_E_D's job to "pop" bubbles? Fisher clearly alluded to a bubble.

Think about the SKEW, the 3C charts and most recently last night's breadth charts that I've only seen look like they did twice in probably 15+ years of using them. Smart money gets it, that's why SKEW is elevated, that's why market breadth has dropped in many cases by more than half in less than a month as more stocks are selling off despite the averages printing "record highs", remember the top of the 2007 market was a record high for the SPX.

THE F_E_D HAS GONE IN TO MASSIVE DAMAGE CONTROL, TRYING TO GET THE WORD OUT QUICKLY IN RECENT WEEKS THAT THEY WILL BE RAISING RATES MUCH SOONER THAN ANYONE ANTICIPATES AS THE MARKET AND ECONOMY ARE IN REAL TROUBLE, FACING STAG-FLATION.

IF YOU ARE NOT GETTING THE MESSAGE BY NOW, YOU SIMPLY DON'T WANT TO HEAR IT.

Here's typically what happens when THE F_E_D HIKES RATES WHICH WILL SLOW OUR ECONOMY MORE THAN IT ALREADY IS....Higher interest rates is the main effect.

 Some of these declines don't look very large so to give some perspective, at 1 to the far left when the F_E_D started hiking rates, the market fell -45%, at 2 when the first rate hikes hit, the market fell -45% at the more recognizable tech bubble in 2000, there was at least a -38% SPX decline, the NASDAQ was worse. And at B in 2007 after a series of hikes failed to cool the housing market , they finally took hold and there was at least a -56% decline. *Note the effect of ZERO Interest Rate Policy (ZIRP) on the market to the far right.

The effects of QE which will end for good in October...

Here are past QE episodes and their effect of the SPX.

Any questions where this rally really came from and what happens when QE stops and the F_E_D hikes?

Just from a 3C point of view...
 Dow Jones 30 at the market top of 1929, 1-day chart. 

Did you know the F_E_D had engaged in QE in the 1920's, but this time it worked for a while leading to the roaring 20's, a time of economic expansion, but it seems the market ultimately paid the price for QE even back then. Note the year long 3C negative divegrence. 


Now the same 1-day 3C chart on the Dow 30 now...
 A significant difference hugh? Any questions as to why I say that "Whoever figures out the new market dynamics first, will see an opportunity that no one alive has seen"?

Now, as usual, the longer 3C charts show heavier underlying flow, it seems in 1929 it wasn't as heavy and had not made it to the 4-day chart very much (3C migration)
 However there was a quick, but sharp 3C decline and negative divegrence as it made a lower low as price made a higher high in to the 1929 top just before the crash.

For reference, here's the same 4 day chart, notice it was similar in 2007 to 1929, but not quite as sharp, but did make a lower low in to a higher high. Now contrast that with the QE/ZIRP fueled Sugar rush rally even the BIS said was a band aide that has made no appreciable results.

I think we are well positioned to be among the first to understand and work out the new market dynamics.

Tuesday, July 15, 2014

A Strong Case for a Market Top

This is from our member's site, 

Click the link above for more information

Today's Daily Wrap

Lots of interesting things going on today, whether it be the EU's Lehman moment with wildfire like contagion or Ms. Yellen's 180 reversal which as I suspected, she sent Bullard out on the "Market is Wrong" tour.

I showed you earlier the reasons I think we have a bounce coming or really it already started as we expected it this week as posted most of last week and on Friday in, THE WEEK AHEAD.

There are some VERY interesting signals I haven't seen since the 2007 top and that just adds to my suspicion that we are at the market top (bounce and all) and further reinforces my decision to let core shorts stand and not to get too fancy trying to trade around them,

First, yesterday we closed what was only a piggy back trade, not the real destination which is the pullback and re-entry of GDX/NUGT long, but we needed a pullback first. I suspected the breakout in GDX above the base was a head fake move as volume and 3C was totally off, yesterday I closed the DUST longClosing Friday's DUST Long For Now for an 8% gain thinking (as we saw some positive divergences) that GDX would see a 1-day bounce off support of the base and GLD a 1-day bounce off support of the 100-day moving average and that's what 3C was showing, a short term bounce for maybe a day before these two continued the pullback we've been expecting. Some of you wondered what happened as DUST headed higher today and GDX and GLD, here's what happened...


 Note right around 11 a.m. GLD dropped hard, I showed you the tight correlation between GLD and GDX earlier today... GLD found short term support yesterday at the 100-day moving average, but after today, GLD saw the worst 2-day drop in 10-months, this is along the lines of the pullback we've been expecting.

GDX saw a similar break, the red trendline is the base support from the breakout which it found support at yesterday. Note the time of the GDX break, the same time (DUST moves opposite GDX).

That gave us a closing GDX candle that looks like this, a clear break back below the base's resistance, volume was up as the long chasers were stopped out as they predictably place their stops just below the trendline breakout area.

GLD ended the day like this, breaking right through yesterday's 100-day support/

Now there are differing opinions as to why this happened, but at the same time as the GDX and GLD break, someone sold 17,000 gold futures contracts at a notional value of $2.3 Billion dollars, that's what sent GDX down and DUST up, there's no way we could have known that yesterday as most institutional investors don't want you to see their cards, this one did, this was a purposeful trade as no one would trade that many contracts at once as it drives price against your position.

This was done for a different reason, whether to try to rescue the market from the Yellen decline or to break support of GLD and GDX and kick start the pullback we have had strong signals for, who knows, but it was intentional and the cause of the GLD/GDX and thus DUST moves today.

Remember, DUST was just a piggy back ride to make some extra cheese and we did okay with +8% for a day, but that's not the trade we are looking for.

The reason I went with IWM calls today and left the Core Short in IWM (SRTY) alone, is because of the incredible market weakness, not just since we called for a bounce and the weakness started right with the bounce yesterday, but because of many reasons I've been highlighting and I have a new one to show you in a bit.

For now, Yellen...

Unbelievably, Yellen, "Ms. The market valuations are fine" actually came out and spanked the momentum crew.

We were proven correct again... Remember when Jim Bullard of the St. Louis F_E_D came out on Fox Business News a few weeks back and said, "The market is wrong" and interest rates may rise as soon as Q1 2015, back then this was TOTALLY at odds with everything Yellen had said at the post F_O_M_C press conference. At the time I said, "There's no way a regional F_E_D president comes out and says things like that without Yellen's approval". Later we saw the F_O_M_C minutes and sure enough, they were more hawkish than Yellen's press conference, but there's more starting today at her Congressional testimony and this is what I've been saying the market has been reacting very negatively to since the F_O_M_C,  and in particular, SINCE THE END OF Q2 WINDOW DRESSING STARTING 7/1 AS I HAVE POINTED OUT NUMEROUS TIMES IN NUMEROUS ASSETS.


Did you catch it today? In Yellen's testimony (the very same woman who made the market feel like interest rates would not be hiked until LATE 2015 or 2016 if she had her way), is obviously feeling the pressure of inflation as she said today to Congress... This is exactly what we've been saying since CPT came out a day before the F_O_M_C.

Yellen today:

"If the labor market continues to improve more quickly than anticipated by the Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned," 

Well of course the labor market is going to continue to improve, the F_E_D and BLS found the secret to lowering the unemployment rate, here's how simple it is...
from Zero Hedge

All you do is reduce the number of Americans counted in the Labor Force Participation Rate which as you can see, has crashed. With less unemployed people counted, of course the unemployment rate drops, in fact from 10.1% to the current 6.1%. That's easy, so yes, rate hikes are coming sooner than later just as we have been saying since just before the F_O_M_C when we saw the trend in Core Inflation/CPI. As I said back then, this is the one metric that ties the F_E_D's hands and makes them hike, Yellen is just finally getting around to slow-boiling the frog and letting the market know a little at a time, but when the hikes come, they won't be so easy to hide and Wall St. has known this, look at the size/length of the base in gold and gold miners which are bought on INFLATION EXPECTATIONS.


Lets see... According to Yellen's testimony, the economic outlook has "considerable uncertainty", the housing market has been disappointing, showing "little progress" as interest rates have "edged" higher. So what's the prescription for a weak economy and a weak housing market being hurt by slightly higher interest rates?

A RATE HIKE, sooner and bigger than expected. Nothing will send mortgage rates higher than rate hikes from Zero to 4% and what does that do for the economy, Cap-Ex and consumer spending? Well as bad as it has been, guess what? It will get worse! However, not as bad in the F_E_D's view anyway as rising and out of control inflation.

In fact, Yellen actually managed to turn the whole thing around 180 degrees and said...

"If economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated," 

According to Yellen's F_O_M_C press conference, she gave the market the impression that rates were likely to be held "LOWER" for longer and raised in small increments, that was the market's anticipation listening to Yellen who they obviously didn't believe as the SKEW jumped right after. However, now "Current Anticipation" is for larger rate hikes sooner!!!

She didn't even use coconut shells (the shell game)!

 Asked about the timing of the first rate hike, Yellen noted that "almost all" participants expected the first rate hike at some time in 2015, and that the median projection for the fed funds rate at the end of 2015 was "around 1%." At the May Joint Economic Committee testimony, she said "most members believe that in 2015 or 2016 normalization would begin under their baseline outlook." 


Lets assume 4 rate hikes of 25 basis points each through 2015 and the expectation is for a 1% F_E_D Funds rate at the end of 2015, that puts the first rate hike SIGNIFICANTLY before the market expects, likely Q1 of 2015! That's pretty far from the May statement of beginning normalization in 2015 or 2016!


It seems  we may have only been half right about inflation as she noted concerns regarding wage growth failing  which would  significantly outpace inflation.

In another development, someone in the mainstream financial media has finally pointed out that major red flag I've been highlighting nearly every day since late June...SKEW!!!
Bloomberg: More Costly Protection Seen in S&P 500 Options
"Investors are paying up for protection against a drop in U.S. stocks as they never have before, judging by the performance of an option-based indicator."

The SKEW “is flashing a big warning signal for equity markets right now,” Kevin Cook, a senior stock strategist at Zacks Investment Research Inc.
Speaking of which...
Note SKEW advanced right after the F_O_M_C . It's not just the reading is elevated in the red zone for a market crash,  it's how fast the rate of change took place and how long it has been elevated.
Our Leading indicators as recently shown are flashing bright red signals, among them, High Yield Corporate Credit and Junk Credit, "Credit leads, stocks follow.

 I thought HYG would help lead a bounce this week, instead it has sold off.

And look at the divergence vs the SPX since... You might have guessed it, July 1, the first day after Q2 Window Dressing ended.

Junk Credit also sold off today, but more importantly...

The bigger picture , again since 7/1
We also suspected our Most shorted Index would be squeezed...
 MSI intraday vs the SPX (yellow)

MSI since, you guessed it...
The Dominant Price/Volume Relationship of the major Averages' component stocks today was one that fits with a bounce as envisioned in the IWM today, that is Close Down/Volume Up, this usually is a 1-day oversold signal with the next day closing higher.

However as I was going through my Breadth Indicators, I saw a strange pattern I haven't seen in some time, not like this, take a look.
 These are Breadth indicators, pure numbers. This particular kind compares the indicator which in this case is the Percentage of NYSE stocks trading 1 standard deviation ABOVE their 200 day moving average. As you can see, there's an odd, almost straight down move, in this time the percentage has gone from 59% to 48%, meaning fewer stocks are 1 standard deviation ABOVE their 200-day moving average  or more stocks are trading under it. Again, it's the rate of change that is really surprising and noteworthy.

 This is the percentage of NYSE stocks trading 2 standard deviations above their 200-day, it has fallen from 27% to 17% very quickly.

This is the percentage trading one standard deviation above their 40-day moving average, this has fallen from 57% to a mere 28%! Look at that ROC!

 This is the percentage of NYSE stocks trading 2 SD's above their 40-day moving average, momentum stocks and they have fallen from 31% to 29% and now to 9%!!!

 And the percentage of all NYSE stocks trading above their 40-day moving average, down from 74% on July 1, remember that Window Dressing ended as of 7/1, and fallen to 54%, only 54% on NYSE stocks are above their 40-day moving average.

I knew I recognized this pattern so I looked back...
This is the percentage of NYSE stocks trading 2 standard deviations above their 40 day moving average at the EXACT 2007 top, notice anything about the pattern in the Rate of Change? That's a move of about 22.5% to 4.5%, not too much unlike our current move from  28% to 9%.
Hmmm...




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