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Wednesday, April 29, 2009

Some Bearish Tidbits

I have been trying to anticipate and indeed call a 38% correction for quite a few weeks. But why? I'll tell you. After a valid ABC pattern from 666 has played out (which I certainly think it has), normally an X wave (or B wave) experiences a 38% correction. So hence, the wave patterns and technicals at times have supported the notion of a move lower. It hasn't happened to the tune of 38% although a 50 point drop did ocurr which is perhaps the most the market will get at this stage. There is no rule on this just merely past precedence and guidelines.
One good indicator of a top is negative divergence from the everyday indicators as compared to another recent market top. A week or 2 spread between the tops is a stronger indicator than if it only happened a day or so apart.
The SPX shows a bit of this negative divergence. Also volume was certainly less than impressive particularly the DOW. But again, its nothing to bet the farm on.
The VIX continues to show positive divergence. New market highs yet the VIX is stubbornly holding higher. Its noteworthy.
The last chart is the banks. Banks have certainly not wanted to participate in the latest up moves. The leading bear sector always points the way downward. One interesting thing about the banks is that EWI contends that April was a big market corrective period. But if you look at the banks, April has been one big catch-up as it was lagging in the beginning. Are the banks merely lagging yet again?
Perhaps. Monday is a big bank stress test day. If they are lagging a bit again, they will surely rally hard if the market is indeed breaking upwards and out from a month-long correction.
But I'll wait until Monday.


  1. There is no way in hell the weekly charts chug along toward the 0 macd line after such a brutal beating in 2008 without a pullback. Find me a chart of a stock that has done so or even go back in time on the indices to find such a significant dip below the 0 macd histogram and shows that the market makes its way back up in a straight line. Market is doom soon. bank on it. just look at the weekly, forget the daily.

  2. I think these are the true signs of the next couple of weeks. With bears MIA and the market having virtually no resistance to going up (no real selling) you would expect a much stronger moves up without final hour dips. Also up volume should be very strong since they have nothing to fear. Yet every move up is on little bit less volume and ends up being smaller.

    Today I put on a bull hat and I was still frustrated (although not as much as a bear past few weeks). I think bulls will become frustrated and step out.

  3. Stir, stir, stir. If it doesn't go up, it goes up. If it doesn't go down, it goes up. Go figure. There we have it. Now the bear's confidence is hurt and changing the side of the fence. The moment you switch side, the market will give a big surprise.

  4. I don't know what to make of it...SPX 1000 ?

  5. The moment you switch from bear to bull is the moment the bull turns on you.

  6. How can EWI call the whole month of April a correction. Last time I checked a correction occurred when the market was lower in price not higher. Let's see the March close in the S&P 500 was at 797.87 and right now it stands at 873.74. So let me get this right. The S&P has risen 9.5% in April and EWI says this is a correction before the market heads higher.

  7. I'm only scalping and daytrading till next week..... no big positions either way..... and curses for getting out of faz before me.... I only made a whopping 50cents on that sucker before I kissed it goodbye.... ughhhhhhh.....

    but one note on that, faz did not put in a lower low with the market putting in a higher high... still not going to touch it till next week.....

    the never ending rally is soooooo on my nerves.....

  8. Today's action was merely a run on stops and 875 is the top you seek. The weak hand shorts, what few are left are now out because fear had them place stops too close and what few Cramericans are buying the new highs, rather hype are in; in for the another ride of their life. Most Cramericans are waiting to buy the dip since they are convinced the "garden variety depression" for whatever that means, is over. Once they finally figure out the market is not turning for them as they buy the dips/$ cost average in, they will be the crouw that helps drive it lower. As I stood there again at 875 cash S$P; 871 futures, the clan was but a few to say the least yet I gladly sold again what they asked for.

  9. Something to consider is that from the lows of the 21st we are seeing an expanding diagonal triangle (megaphone pattern).

  10. Playing on the long next week or two is playing with fire to my opinion. Instead of worrying about missing the boat, might as well keep the cash in the pocket and wait for the clarity. It is too hard to make money in this kind of weather when TA is challenged by the face of government's power. What goes up must comes down. It has been a huge run this month. It will be very difficult to time the market entering May the moment you decided to switch from bear to bull. Patience is the virtue.

  11. Dan, you were right in the beginning, but got under pressure yesterday by the market's action to switch side. Although I don't blame your concern when there is the possibility of government intervention. The sell off happens two days earlier than your prediction.

  12. Have you seen the move this market has made since March? WOWSA! Very impressive indeed!

    We continue to power higher and higher through this earnings period. I pointed out the insurance companies the other day and last week, they should continue to move higher here into earnings.

    GAPS have been GOLDEN here, folks, and they are the easiest trade there is. You should all be playing them. We also had the famous FOMC trade whereby we always run into the FOMC meeting. We powered higher into it, faded, then repowered and then rolled over a bit into the close. It's interesting that we've had that happen a few times lately where very late day they roll us over as though people are still scared to hold longs overnight.

    It'll be an easy fade if we gap down tomorrow. A gap up is tougher and could lead to some profit taking early on. We look destined for 900s on the S & P now for sure and my 8500 target lives on. You just can't fight this tape, there are buyers all around and stubborn shorts are getting CRUSHED beyond belief.

    I'm feeling a tad better, but will be VERY happy when I am fully recovered. I feel like someone is using me as an experiment, hehe. It's all good, or so they say. Whatever don't kill ya makes you stronger. Same holds true for trading, whatever losses make you stronger as long as you LEARN From your mistakes and don't make them fatal and wipe yourself out!

    Futures are up here, but its early. Remember that FOMC usually produces some trend days and weeks post it. So, tomorrow's action should give us some insight into near term trading. Watch individual names and check your earnings calendar. Again, its been golden. No one wants to be short stuff into earnings, everything right now is going up no matter what. Next week's earnings plays are this weeks pickups. It's kinda like Fantasy Baseball when you pick up the two-start pitchers, you want to be in them here now, before everyone else piles in. We are in PRU, which reports May 6th and already up decently. I think $35 to $40 is doable if the market holds up on PRU. Stops under $25 as thats strong support now.

    May 4th stress test. I think we should run the banks into that, but honestly it's a 50/50 crap shoot here, with a lean toward up only because you have to lean that way in this tape.

    As I finish this up futures are taking off, we're over strong resistence at 875.00 on the S & P futures. If we hold that over next few days we'll see 900 in a jiff. Next after that would be maybe 925 to 940. We are skyrockets in flight, afternoon delight at this point, so enjoy it while it lasts!

    These are strange times, indeed. From 6600 to 8500 in a few weeks, I bet there are a lot of investors kicking themselves. More than a few!

    See ya on the other side,