Monday, February 9, 2009

End of Day 2/9

The markets gave Geithner a pass, plain and simple. In doing so, they showed much more patience with the bull than I ever would. I just don’t see any signs of adult supervision, it all appears to be the work of hormone raged teenagers and manipulative criminals to me. Pardon my petulance; the things I’m seeing are just hard to face – especially on a Monday.

On this Monday, the DOW closed down 10 entire points, the S&P closed up one entire point, the NDX gained an entire .3% (and led with that), while the RUT lost .6%. Basically a nothing, flat, and time killing day. GE was an exception gaining nearly 14% on the day.

My first thought is that the go nowhere motion of the day may have produced a small movement on the McClelland Oscillator, which if it did will mean a large move is coming in the next couple of days, direction not known from that indicator. I’ll know more tonight and will report in the morning.

My second thought is that the market is going to react to Geithner’s announcement strongly in one direction or another, or maybe even in both directions! Before you’re biased by my charts and opinions, go to the bottom of the post and vote “funny” if you still think his rocket shot is going to blow up on the pad, or “cool” if you think we get a successful moonshot! Oh, and let’s vote “interesting” if you think we’re likely to get one immediately followed by the other.

I wouldn’t be at all surprised to see an initial spike higher followed by the sellers showing up afterwards. That may fit, especially if today’s sideways action was a wave 4 movement and the spike creates a 5th wave up… the markets have had an awful lot of time to price in this stuff and think about it.

Internally, advancing issues were slightly positive on the NYSE, but interestingly, on the Nasdaq declining issues outnumbered advancing issues. While the Nasdaq closed level, the NDX’s positive close is a bearish divergence, although the number of new lows continues to come down.

The VIX has an interesting triangle that I think is likely to get decided tomorrow one way or the other. The downtrend line off the top has held for quite some time, so a break above that line would be bearish for the market while a further break down would be obviously bullish.

Let’s start on the charts by looking at a 10 day SPX. If you follow the price action up from the beginning of February, it sure is beginning to look like we either are just finishing an abc, or have finished wave 3 up and are working on 4 with wave 5 to go? I think this is one of those critical junctures where you won’t know until after the news and see the reaction. That said, there’s also a potential double top in play, and I note that we are very overextended in the short time frames on the stochastic. While the 10 and 30 minute stochs are midrange, the 60 minute slow has not even left overbought as of yet:

Let’s look at the SPY daily just because I can get the volume over there on my Prophet charts. The doji is the same as on the SPX and note how we closed almost exactly on the 50dma. It tried to get above but failed. More telling is the volume pattern. Once again, is there any doubt whatsoever that prices are rising on declining volume? Bulls had better take note of that. That doji, while it shows indecision can also indicate a top:

Now let’s look at the NDX. That was a fine run while it lasted, but I think it’s close to being over. Breadth is falling off, the divergences in the RSI are growing, the daily stochastic is way overbought, and we closed a spinner over the daily Bollinger band. Frankly, I would love to see this pop one more day on a government pump job, I will be adding short if it moves higher – but I’m saving some ammo for a break of the uptrend lines, definitely NOT getting carried away:

The XLF is interesting too, if only to see the volume pattern here. It pinned the $10 level but failed to gain it. I was hoping it would make a charge for the $11 level, but there’s simply not enough volume to support it. Perhaps that’s just because we’re waiting to be “saved” AGAIN, or maybe it’s the AGAIN part of that statement that is holding it down? Gee, you would think the old adage about fooling me once would apply, but in the stock market’s case it seems to be fool me 10 times shame on you! Big whoop, the XLF gains $2 in a couple of weeks while America burns TRILLIONS to make it happen… seems like the definition of insanity to me.

Okay, now let’s look at the CBOE TOTAL Put/Call ratio. This is simply the number of puts over the number of calls. If they were equal, the number would be 1.0… but they’re not, or I wouldn’t be showing you this chart! In fact, the Put/Call ratio is at the lowest level of the past year, and only the second lowest reading of the entire bear market! That means simply that there are WAY more people buying calls than are buying puts. Now, either the majority is really smart, or they are about to get killed – AGAIN. This is just another indicator we have to take the temperature inside the room. The math works against the majority when it gets heavily tilted one way or the other. This is because once everyone is convinced that the market will go up (on .gov bailouts), then they already have their money in. Who is left to buy the market higher? This is a one year chart that shows the P/C ratio in red/black and the SPX in solid black. You can see that this is not a perfect top or bottom indicator, but at the extremes it does tend to tell you which direction the market is likely to head. Look at the extreme bearishness in November, and it was followed by a serious advance. Then look at the readings below .80 and you will see that fairly soon afterwards prices on the SPX began to fall. The current .67 reading is the lowest in more than a year.

So, overall today was a Monday just spent killing time waiting for the children at the Treasury to announce how they are going to rob us all blind. Now, that may sound negative and cynical, but in fact I will note that it’s just the truth and sometimes the truth is just hard to believe. Especially on Mondays!

Bon Jovi & Bob Geldof - I don't like Mondays

Oh, and by the way, the moon was just recently full and for those who believe in Bradley turn dates and such, well here you go… a fun version of Werewolves of London that is very much in keeping with the news:

Bailouts for Wallstreet – Ah - ooooo!

Remember to vote “funny” if you still think his rocket shot is going to blow up on the pad, “cool” if you think we get a successful moonshot, or “interesting” for one followed by the other!