Wednesday, March 11, 2009

End of Day 3/11

Interesting day in the markets… I was looking for today to give me clarity, but instead I have a mixed picture, so we’ll have to see what tomorrow brings now. In the mean time, we can all congratulate Jamie Dimon who, having no conflicts of interest whatsoever by being both the CEO of the company who’s claim to fame is being the world’s largest holder of derivatives and who simultaneously sits on the board of the N.Y. Fed, has won the prestigious 1st annual Asshat of the Year Award! Congratulations, Jamie Dimon, you’re a lucky man…

Emerson, Lake & Palmer - Lucky Man:

On this magnanimous awards day, the DOW gained 3 entire points (may someday soon represent a 5% move), the S&P gained .2%, the NDX gained 1.2%, and the RUT was the drunk of the party with the nerve to LOSE .4%. The transports were strong, gaining 2%, but on DECLINING volume, IYR lost 1.7%, and the XLF gained 2.6% which I’ll cover in detail later.

Ah, what the heck, let’s cover it now. Below is a 6 month daily chart of the XLF. That is a great big, giant descending wedge. Today we broke the downtrend line, came back to it, rose again, and then closed on it. This is a tricky wedge, we may or may not be complete with it. As you can see, it’s had previous breakouts with the line resting on the previous peaks, only to then fail again… and again. Each time it does this, I point out that little black spinner on top of the rally leading into it, and each time we subsequently enter a new downtrend. What’s different this time? Rising volume instead of falling volume... Not to say that it hasn’t happened that way before, it has. And as we go along, you’ll see that overall today had lower volume levels (it may be easy for the XLF to have higher volume when you can buy shares of major banks for a buck, or it could be meaningful):

Here’s a zoomed in one month chart of the XLF. See the last rally that ended in a black candle? That was wave 2, and here I am looking for wave 4. Do they look similar? Note that the last time the stochastic was in the same position as it is now:

Okay, so there may or may not be something there. Let’s look inside at a company like Wells Fargo (WFC – full disclosure, I am short WFC). This is a one month chart, just like the last. See the same pattern? Only here it’s identical… a red bottom day, a black spinner, two up days, and topped with a black spinner, falling volume at the end. Hmmm:

Internally it looked more bullish, with advancers leading 9 to 6, and advancing volume was 60% on the NYSE. New lows fell slightly to 69 (look at all the sixes and nines, Seth likes that)… There is a possibility that today produced yet another small change on the McClelland Oscillator. I’ll know later tonight and will brief that in the morning.

When we look at a 10 day chart of the SPX, we see a new channel that is more steep and narrower than my initial guess last night. Amazingly, we ran to about 732 and posted a pin half way through that open gap but did not fill it completely. I would be more comfortable had we done so – but nothing is easy in this market. Note, though, that we ran up on Dimon’s “profit” comments but failed to get back in the upper half of the channel. You know, this rally, like everyone before it, has no substance behind it. Just meaningless words and bullshit games. The uptick rule? Give me a break. I simply am disgusted by how many people think that will be good for the markets. MEANINGLESS. Before I move on, note the stochastic is near overbought again on this timeframe. It’s in the middle of the 30 minute time frame, but on the 60 minute stochastic the fast is half way down but the slow is still overbought. That’s a royal head fake position for those who do not check it, because it tells me the short term pressure will remain on the sell side while the shorter timeframes just oscillate:

Next is the SPX daily. Spinner doji officially shows indecision or consolidation but can be a reversal marker when at the top of an ascent, or a bottom marker at the end of a decline. This looks a lot like a top to me, but we’ll need confirmation, as it could be a continuation – that’s why I say that we need to see tomorrow to know. Regardless, today’s one point gain hardly qualifies as follow through on yesterday’s rally. Yes, we have the fast stochastic out of oversold, but the slow is still down there with my settings:

Next we see a black spinner on the DOW daily (it’s black because it closed up slightly, but below where it opened this morning). Note the lower volume. That looks like a rocket that’s running out of fuel:

When we swing over to the DIA, we see a black spinner as well, also on falling and just plain old low volume, the lowest on this chart. The SPY is the basically the same:

Today is the third day in a row with the Put/Call ratio in the gutter. I closed today at just .73. See the little curl at the end? When I look for the same thing back in time, it usually indicates it’s about to reverse:

Bonds. Wow, TLT and the TNX hit their support/resistance levels and just zoomed off them. That did NOT look natural to me – I’ll leave it at that. There was an auction today that went “well” but this happened before that auction ended by an hour. It seems we may have found a line in the sand:

Today’s up then retreat action was just enough to flip some of the indices to breakout bullish targets on the Point & Figure charts. I do not ignore these, but they can be whipsawed, so this is a bullish piece of the puzzle. I’ve noticed that since we’re in a bear market the bearish targets get hit or exceeded, but the bullish ones are less reliable. We’ll see. I know there are people out there talking bullish, that’s what this market does… Draws in money and grinds it up. $50 trillion world wide in the past year (other indices not shown did not trigger):




So, overall, if I had to place a bet on tomorrow, I’d be a sharp dressed man and pony up to the charts/tealeaves that tell me the bulls had better be careful tomorrow as we may very well see some selling (make that a small bet please). It did take some outside-the-box detective work to come to that conclusion, so we’ll see. I am still expecting a 5th wave in here somewhere… again, my count doesn’t show it complete. That said, the bears should be cautious too. 734 is the pivot above, 717 and 696 are below.

Hey, congrats again to Mr. Dimon on his Asshat award. Well deserved by a sharp dressed man!

ZZ Top - Sharp Dressed Man: