$SPY – Santa leaves behind a “fast up” rally

Despite AAPL’s bite of the Santa rally two days ago, it appears the rapid bear-market rally that began the day after Christmas has gone on to a bigger thing.

That is good news and bad news for the bulls. The good news they have received remarkable relief from the drubbing in the fall. The bad news is this rise still looks like a typical bear-market rally. Just as bull markets grind up, then drop hard, then grind up again and so on, bear markets tend to grind down, rise up fast, then grind down again and so on.

This up swing truly fits that later description.

On the plus side, both short term and long term breadth have had a screaming flight out of the massive oversold low to a massive overbought high (see the chart below). That breadth blast has a lot of analysts commenting on the history of “breadth thrusts” and generally indicating the market has had its correction, maybe even an entire bear market when the S&P tapped a 20% decline (for one day).

That may turn out to be so but I doubt it.

I suspect this more likely just a bounce on the road to the next grind down, but it could go up more or chop sideways for a while before the grind begins again. Margin debt has likely not finished its fall (we won’t know how far it has to go until its reported for December at the end of this month) and that means more downside to come (take what just happened in November and December and do it again).

But, granted, this has been a spectacular rise with the 3x-leveraged TQQQ up 26%, TNA up 32%, UPRO up 23%; and leading the leveraged sector ETFs, LABU (biotech) up 67.5%, ERX up 35% and FAS up 23%.

NFLX, among my bellwether stocks, is the star of the show so far in this rally , up 32.5%.

This is eight days in the market and again prime example of the value of swing trading over buying and holding through declines. There are numbers in stocks’ advances during these last eight days that would make an asset manager’s entire year (and maybe will). Forty-eight of the stocks in my nifty-50 list are on buys. Today 43 of the 50 were up. And finally 40 of them are overbought.

And SPY itself is coming into the 255/260 resistance suggested here when this rally kicked off.

So what now?

Probably more upside but it would be prudent to set stops to preserve swing profits. I’ve cautioned in the posts below that this longer term is a relief rally, and likely just the kind of rally the market uses to make everyone believe it’s the resumption of the multi-year bull.

The key here is go along for the ride but guard against being fooled by how fast the up.

(click on the chart for a larger view)




$AAPL – a Santa rally revisit

On the way to writing what was intended to be a cheery progress report on the buy signal posted here Christmas Day the bear took a bite out of the after-market and had an AAPL for dessert.

AAPL has plunged after-hours as CEO Tim Cook lowered earning guidance in a surprise announcement after the close.

This was forewarned here last November in this post:

AAPL Giveth, AAPL Taketh Away

I’ve been an AAPL bear for quite a while because when a stock is priced to perfection one must remember perfection usually lasts less than the blink of an eye.

Before the news, the general market from the open of the day after Christmas on the buy signal in the immediate post below was is in a very sharp upswing, a true Santa Claus rally.

TQQQ on today’s close is up 20.6%, UPRO up 18.4%, TNA up 20%; among the sector ETFs, LABU is up 31.2%, ERX up 21.3% and FAS up 18.2%.

We’re talking five trading days here.

The bellwether stocks moved too – NFLX up 14.4%, FSLR up 8.1%, GS up 9.6%, and AAPL itself was up 6.5%.

And not a sell signal anywhere to be seen at the close, except maybe the fact after five-day up pattern in the index ETFs one had to be alert to a sell down and maybe the fact my Nifty-50 stocks list, which went from 48 stocks on sells to all 50 on buys in those five days, clicked down to 47 on buys today (a crack in the advance, but a very small crack indeed).

All that is likely to change tomorrow thanks to the AAPL news. In the link on AAPL above it was noted it would take the market with it when it fell given that it was dominant in not only the Nasdaq but also in the S&P and Dow, and it has been the most over-owned stock in the market.

Since August it has and appears it will again.

And it was noted in the Christmas Day post that in the general market this was going to be little more than a market bounce to give some relief to the bulls in a bear market, not a beacon of hope for a resumption of the bull.

Funny how news comes along to agree with market history, with market internals, with the relentless swings from fear to greed and back again, all in the fullness of time.

See the charts below for a look at the AAPL and TQQQ plunges after the close.

(click on the charts for a larger view)





$SPY – Simple black candle tops…

Let’s call this a KISS moment as in “Keep It Simple, Stupid.”

Again and again, market upswings end in black candles – a hanging man, a shooting star, a dreaded doji, or just a sign after six days up and two blasts of nothing-much news the buyers get tired. Not always it’s a black candle ends the rally, but it happens often enough, me thinks, for swing traders to take notice.

On November 26th, it was suggested this market would rally in this post: If Santas’s rally is coming to town… and on the follow up in this post: Fast and furious the bear-market rally rises… it was suggested this swing has the speed of a bear-market rally and it was noted:

“If I had to guess, I’d pick the 281 neighborhood as a place where the SPY may settle this trip up (see the chart). Maybe even a bit higher. It may not take long or it may chop up until January. After that all indications are we have not seen the eventual lows of this bear.

Well, it didn’t take long. SPY came within 60 cents of that 281 number today and sold off. Hence the black candle.

So is this swing done?

Could be but maybe not… If not the simplicity of this looks truly stupid, if so I suppose it looks…smart? The key to these singular candle moments is what always comes next. Looking back over the chart below, it appears, what comes next is the smart part but if it breaks that red line at 281 it will likely go considerably higher (more Santa gifts for bulls and those who want to jump out of the house from an upper-story window).

Must note that all of my bellwether stocks – NFLX, AMZN, NVDA MSFT, GS, BIDU, BABA, FB, TSLA, AAPL — were up today from yesterday’s close, and ALL OF THEM were down from today’s open. In other words, in one of the posts linked above it was suggested in a bear market there would be selling pressure nearly every day – today during the day it was obvious this was one of those days.

Tomorrow could another and it could bring more serious selling if the simple black candles have their way.

(click on the chart for larger view)

$SPY $TQQQ – Fast and furious the bear-market rally rises…

It was noted in the post below from the day before yesterday that bear market rallies tend to be fast and furious so we would have to see how this one goes.

And now, so far, it has went exactly as expected. Both short-term and long-term breadth, measured by the McClellan Oscillator and Summation Index, gave buy signals for yesterday’s open.

Despite a somewhat squishy start to yesterday, the rally (or maybe it should be called a “bounce”) clicked in strongly today. The fast move up midday was probably due to a speech by Federal Reserve chairman Powell which turned out to be more dovish than expected on future interest-rate increases. Funny how often news comes along to agree with what market breadth is saying already.

Notable moves in the rally so far include TQQQ up 12.% in two days; UPRO up 9.1%; FNGU, the 3x-leveraged ETF of the “FAANG” stocks, up 9.7%; tech ETF TECL up 13.4%. In two days…

So what now?

Both SPY and TQQQ are up more than two standard deviations of an average advance (“fast and furious”) and SPY is about to smack into an obvious down trend line (see the chart below). This is not sustainable. It is likely too much too soon. In addition my nifty-50 stock list has 45 stocks on buys (this current turn to the upside started with 39 of those 50 stocks on sells). Consequently, it’s likely the general market will either go sideways for a time now or take a quick dip…maybe only one day. Given past history, those who did not jump on the buy signals yesterday are probably itching to buy any dip so the rally should go on. Only 11 of my 50 stocks are overbought. Usually there will be many more of them overbought before this upswing stalls out completely.

If I had to guess, I’d pick the 281 neighborhood as a place where the SPY may settle this trip up (see the chart). Maybe even a bit higher. It may not take long or it may chop up until January. After that all indications are we have not seen the eventual lows of this bear.

(click on the chart for a larger view)

$SPY $TQQQ – if Santa’s rally is coming to town…

It appears it started today and triggered the likelihood of more to come tomorrow…

This should be a rally all the way to Christmas and possibly a bit beyond.

Why?

Because the market has been pounded hard to the downside since, in some index cases, early October. But more importantly short-term and long-term breadth, measured by the McClellan Oscillator and Summation Index (see the chart for today below), has simultaneously given buy signals for tomorrow’s, Tuesday’s, open. And they have done it with a telling divergence – see on the chart how deep the breadth plunge was on the lows in late October, and how the breadth numbers failed to confirm the price lows at the same levels last week.

In addition, my nifty-fifty stock list had 44 sells on the first plunge (usually the sign of a swing bottom) but could not muster more than 39 on sells during the last sell-off. Forty-five of them are now on buys.

I have major 3xleverage ETFs giving new individual buy signals for tomorrow’s open – FAS, SOXL, FNGU, TNA, TQQQ, UNPRO — and major bellwether stocks doing the same – AMZN, NVDA, TWTR, GS, BABA, FB. But neither TSLA nor NFLX can be ignored on any market bounce.

While AAPL missed an individual buy signal today by a whisper, this market is not going anywhere without it. However, I see, it closed at 174 and is down to 170 after-hours (a better bargain?). That AAPL has an after-the-close sell down raises the possibility the downside is not yet done.

Highly likely we are now in a bear market with Finra (NYSE) margin debt unraveling. If so, there’s going to be downward pressure on this rally almost every day. This is the time for traders to take advantage of sharp upside bounces like today and for long-term investors to lighten up on their holdings if not to get out completely. Every time margin debt has come apart (and this time it is from a higher level than both 2000 and 2007) the SPX has lost 40% to 50% before the bear market ended in 2003 and 2009. See this LINK – the divergence that kills the bull.

Bear-market rallies tend to be fast and furious so we’ll see how this one goes, but if it is truly a bear-market rally, it will as time goes by take a lot of time to recover from the its eventual bottom whenever it comes and at whatever price level.

(click on the chart for a larger view)

$SPY – Is the bouncing cat dead?

The general market has bounced from its low last Thursday.

The actual buy signal was issued on the market’s short-term breadth indicator for Monday’s open three trading days ago. In that time the 3x-leveraged ETF, TQQQ (the Nasdaq) is up 5.8% (the Nasdaq), UPRO (the S&P) is up 5.1% and TNA (the Russell small caps) is up 8.8%.

All this is fine and dandy in reaction to last week’s fast, severe sell-off.

Now the question rises: Is this a classic “dead-cat bounce”?

In stock market terms, as defined by Investopedia, “a dead cat bounce is a temporary recovery from a prolonged decline or a bear market that is followed by the continuation of the downtrend.”

Despite these last three days, the overall market hasn’t been able as yet to turn the all-important long-term measure breadth (the NYSI, the McClellan Summation Index) up, and today its short-term component (the NYMO) clicked down.

How many times have we see that before — the market pops out of a deep drop and the NYMO turns down in negative territory.

Dead cat? In addition the SPY ends today in a dreaded doji (see the chart below). Dead cat? Sure looks like it. If so, the market’s current recovery will roll over in short order…probably tomorrow. Maybe Friday (or maybe Friday too).

However, this is all could be (and probably is) a positive sign for swing-trading bulls. Since last week’s lows my nifty-50 stock list has moved from 40 stocks on sell signals (usually the bottom or the beginning of the bottom of a swing) to all 50 on buys yesterday. They clicked down slightly today (another sign of the cat) but the last time all this happened was March 5th at the end of the three-day bounce out of the March low. The cat that died that day gave rise in the end to the spring rally. If this bounce dies now, it very well could result in a bottom for a trading rally.

Such a rally may be, in the fullness of time, the last of this bull market and an opportunity for buy-and-holders to lighten up or to raise protective stops before the real bear growls, but it could also be a stock rally that rises all the way to the end of the year.

(click on the chart for a larger view)

#MarketTiming – Day 4 0f Upswing

The general market moved up again today. Fourth consecutive day up on the Nasdaq. It is the third day of the trade from Monday’s open. A four or more day move is where the money is made in swing trading, particularly with 3x-leveraged ETFs (see table below), or options, or futures.

At the same time, this market is getting wildly overbought. Forty-three of my Nifty-50 stocks are on buys, with 34 overbought. This is a lot.

The Nasdaq composite is more than two standard deviations of an average advance. That puts it on borrowed time for more upside. Needless to say, it can borrow more time. Markets go up until they go down. Simple as that, and this bull market has had an inclination to put on more gains just when one thinks it should stall.

It is time still to let profits run since all principal buy signals remain positive and long-term breadth just turned positive also, making this a market now to buy the dips, any dips.

TRADING SIGNALS:

PRICE: Positive. Long on Monday open (Trade Day 3).
SHORT-TERM BREADTH: Positive. Long on Monday open (Trade Day 3).
VOLATILITY: Positive. Long on Monday Open (Trade Day 3).

CONTEXT:

LONG-TERM BREADTH: Positive (Day 1).
FEAR AND GREED INDEX: (47, rising back into neutral).
NIFTY-50 STOCK LIST: 43 Buys, rising; 34 Overbought, 0 Oversold.

The rally results so far (three full days):

TQQQ up 6.0 percent.
XIV up 5.4 percent.
UPRO up 2.3 percent.
TNA up 2.8 percent.

The net gain for a basket of the above leverage ETF for the three days in the trade is 4.1 percent.

#StocksToBuy for Tuesday’s open

Following the green…

My newly sorted Nifty-Fifty stock list had buys signals triggered pre-holiday for Tuesday’s open: CARB, UBNT, BID, TRMB, TFX, and CYS (also a yield play).

Among the 3x-leveraged ETFs giving new buys signals: ERX, TNA, TQQQ, and UPRO.

Looking for follow through to the upside for a day trade tomorrow, and maybe a hold for a swing through the week.  But if they violate the open on a five-minute chart, they can be stopped out,  something that has been happening all too much lately in this choppy, nevertheless up-grinding market…

Of note, CYS (see sample chart below) is up 22 percent year today on these swing signals (long only) in addition to sporting a double-digit dividend yield.

Update:

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(right click on chart to view a larger image)

DAYTRADE_2016-08-29_2313

This market could scream higher…

Call this a perspective on my Nifty-Fifty stock list.

Yesterday, there were 44 of the 50 stocks on sell signals.  That usually marks either the beginning of a bottom or the bottom itself.

On the up day today (however small) one has to lean to the idea this is the bottom itself.

Ask me, this is hard to believe since the market virtually has not gone down at all. So it seems this is a sideways move that will vault (scream) to new highs again soon. Maybe tomorrow.

Note on the chart below the past instances of 40 or more sells on the Nifty-Fifty.  Hard to believe but pretty plain to see.

(right click on the chart for a larger view)

NFTY50_2016-08-18_1435

#DayTrading – when the trend is NOT your friend

Following the red…

Had six stocks from my Nifty-Fifty list on individual buy signals for today’s open: UAL, SKY, FBHS, BRKS, HII, FIVN.  At the moment, five, bought on the open, are down.

Why?

It is likely because most stocks trade with the general market, which it is always a warning flag, bullish or bearish, for initiating individual stock buys or sells, and in today’s case the bearish warning is so far the reality.

The market has been in an intraday downtrend since mid-day Monday, a trend that has so far continued today (the red cast on the chart below is the general-market trend), and its weakness is obviously weighing on stocks that otherwise might have rallied (and might still if the market firms into the close).

So, as the old saying goes, “the trend is your friend,” but on some days like today it is not (unless one’s a bear, of course).

UPDATE AFTER THE CLOSE: the stocks above finished down 1.4% as a basket (1 up, 5 down). Should be noted stops must be used at all time when playing this game (for example if bought on the open, the second bar on the chart below would be a possible stop).

(right click on this SAMPLE chart for a larger view)

SPY_RED_2016-08-09_0957