Pulling the $BID – when bear markets can be born

Forecasting tops in the market, the kind of tops that lead to substantial declines, even to bear markets, is no easy thing to do.

Virtually impossible, no matter how many so-called market gurus claim they have.  Most often top callers get chopped to death before they get their sell-offs, and those that appear to have succeeded in calling a top never say how painful it was trying along the way.

I am not calling a top here but I am calling attention to the fact $BID (Sothebys) may be the most important bellwether stock there is.

I don’t know if it’s because the rich quit buying expensive art, jewelry, wine and other luxury items at auction or what?  But on a simple, purely technical-analysis approach it is obvious over and over again that the stock leads when it comes to sell-offs.  There’s always a bid and ask in trading and investing and BID clearly shows when someone pulls the bid.

See the charts below. The first is a daily chart showing while the general market (SPY) has lumber up in recent days, BID has been selling off with conviction.  The second is a monthly chart showing the history of BID in relation to the market on the longer time span (that is when Bear Market can be born).  If history and the stock is to be believed this market advance is on truly dangerous ground.

Any day, any minute now the market may follow BID down.

(click on the charts for a larger view)

 

#Greed top could lead to #SPY stumble

CNN Money’s “Fear and Greed Index”, a calculation of seven key market indicators in order to gauge the primary emotions underlying the stock market, appears to have put in a double top at an extreme greed level.

Historically, this pattern has led to significant sell-offs in the general market as investors’ and traders’ greed, fueled by the market’s recent rally, cycle down once again to a prevalent fear level.

There is really no way to tell how far the S&P 500 index (SPX, also the SPY ETF) will fall but the last time this down cycle took place the SPY fell from a high of 211 to a low of 185 (about 250 SPX points, a 10% or so correction). There is no guarantee it will stop there.

Regardless, this is an excellent shorting opportunity across the face of the stock market, just as it will eventually lead to an fine buying opportunity later on.

Market timing.  They say it can’t be done but a study of the chart below should make it rather obvious “they” don’t know what they are talking about.

(right click on the chart to view a larger image)

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#NYSE Margin Debt

This may be too simplistic but every time I look at this Doug Short chart, I think at least 800 SPX points down before this finishes unraveling. It takes time, of course, but this time that would put the S&P 500 somewhere in the 1400s.

These numbers from the NYSE are a month old so the current record rally is not in them yet but I suspect when it is, it’ll look similar to that little blip up in 2008 just before the real tumble continued.

For Doug Short’s article GO HERE.

(click on chart for a larger view)

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I $SPY seven days of greed…

CNN Money’s Fear-and-Greed Index is, simply put, one of the most useful market-timing tools there is.

For example, the most recent rally, using the index as a trigger, bought the market on the open of February 16 (see the green vertical line on the chart below), a swing that has carried SPY, the SPX ETF, from 188 to 199 today, a gain of 5.3%, but more notably it has so far racked up gains for the 3x-leverage ETF of 17.4% in UPRO, 15.9% in the Nasdaq’s TQQQ, and a whopping 29.5% for TNA, the Russell fund.

That buy signal, now 18 trading days old, is still on and counting but …

But the Fear-and-Greed Index has now registered greed for seven days.  Call it lucky or unlucky depending on one’s bullish or bearish point-of-view but seven days of greed is often all she writes on an upside swing (see the chart) before a sudden sell-down.

As they say, it could be different this time but…

But it seldom ever is.

(right click on chart for larger view)

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$COMPQ – 8 days down, enough already!

The Nasdaq composite closed lower again today for the eighth consecutive day, and a total of 470 points to the downside.  The last time I had a setup like this the Nasdaq bounced nearly 200 points up the next day.

That was the August bottom.

So here we are again in a veritable market free-fall and the notion of “enough already” is screaming ENOUGH ALREADY!

Eight days in a row has only happened on the Nasdaq composite four times in the past 20 years previous to today. There is no ninth day down.  The NDX and QQQs have both had  a time of nine straight declines and one instance of 10 days down in a row.  So, of course another day or even two to the downside could happen but the odds are shifting to the upside.

These are the kind of sell-offs that make for big bounces and sometimes lead to longer-term rallies.  We may not get the rally just yet but I’m looking for at least 100 points up on the Nasdaq and will play it with the 3x-leveraged ETF, TQQQ, with NQ futures and with QQQ calls.

The 10-minute chart below shows a rather steady and orderly decline with a little pop up on today’s close.  If that pop can hold or at least not take out today’s low, believe there will be stair steps up for the rest of the week.

If not, there are always stops, a must.

(right click on image for a larger view)

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$COMPQ – chop, chop, finally plop!

December’s Nasdaq composite ($COMPQ $COMPX) closed lower than November on higher volume.

In the past that was as simple and elegant a longer-term sell signal for the general market as there was (see red vertical lines on the chart below).

In the past two years, however, it gave way to chopping up and down with alternating buy signals (closing higher on higher monthly volume, the green lines on the chart below)…it seemed almost monthly.  Not quite sure, but I suspect that was because of the Fed Reserve QE efforts in the market making it hard to get any traditional bull-market correction against cheap credit constantly infusing the market (also suspect we may be paying dearly for that Fed manipulation now).

But it appears the simplicity and elegance of the sell is back, and compelling.  If so, the market’s general indexes  (DOW. SPX, NDX, RUT) are going down until further notice, a bear-market trading and investing environment of “sell the bounces” (one is coming up soon) instead of the bull-market dictum to “buy the dips.”

P.S. I first learned the value of this from a poster named “SemiBizz” on Traders-Talk.Com. when he ended up calling the top prior to the 2008 bear market (see the blue oval in the middle of the chart).  He deserves all the credit for his contribution to that most difficult of market tasks — calling tops.

(right click on the chart for a larger image)

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$AAPL analysts – the wrong advice and still getting paid for it

This, again, is what I love about Wall-Street Stock analysts.  They are so often more wrong than right that one wonders why they are getting paid anything to do what they do.

Take Apple Computer (AAPL) as the latest example.  Note the chart below from Finviz documenting recommendations for the last quarter – all except one being on the buy side with price targets ranging from a new high ground around 130 to as high as 179.  And only one downgrade in the bunch.  One.

AAPL closed today at 97.  All these analysts’ “Buys”, “Overweights” and “Reiterateds” came before now, higher up.

I suppose these guys have all sorts of fundamental reasons why AAPL should go up.  The company has tons of cash, many fine products, avoids  a lot of taxes, had a reputation for industry-disruptive innovations.

But the thing about fundamentals is, in the end, none of them matter if the price of the stock no longer agrees with them.

When everyone who loves AAPL, and buys its story, already owns it, one wonders if the analysts ever wonder who are they going to be able to sell it to;  when a company achieves a market cap north of $500 billion (let alone the $700 billion Apple bought for itself), one wonders is any of these analysts might wonder if history repeats – with the exception of Exxon-Mobil – every company reaching that lofty number has eventually had its stock cut in half.

A lot of these mistakes could be cured, or at least alleviated, by adding market timing to their analysis but I’d bet they would join the rest of the Wall-Street chorus harping that no one can time the market. No one. Fact is, it is they who can’t time the market.  One glance at a stock chart would not have hinted the stock was going down, it would have flat out said it was going down.

But since they keep getting paid despite being consistently wrong for whatever reasons, why should it matter to them?

Well…hard to believe, but maybe one day these guys’ clients might take note.

By the way none of this should be construed as investment advice.  As a solitary trader when I’m right only the market pays me, and when I’m wrong it takes it back.

P.S. AAPL is going to be a buy soon…for a bounce to $106 or so, maybe $111, but longer-term…mentioned above something about being cut in half so enough said.

(right click the image for a larger view)

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$SPY – A dreaded doji ends the swing

At week’s end (maybe should say at the end of this week’s two and a half trading days), SPY put on a candlestick doji to end the swing.

Nice week though with UPRO up 4.1%, TNA up 6.2% and TQQQ up 2.1%, the 3X-leveraged ETFs on the major indexes; among the sector 3Xers the big winner was ERX up north of 12 percent.

Have gone to cash on the doji but this remains a buy-the-dips time until further notice.

(right click the chart for a larger view)

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Market – Santa bounce season

It’s Christmas rally time and the stock market could rally the rest of the week.

Nice turn in the market today off Friday’s nasty plunge with divergences all over the place.

For instance, my nifty-50 stock list, after registering an important 40 stocks on sells on the 12/14 drop, could manage 31 on sells on last week’s plunge.

As for other breadth indicators see the green circles on the chart below — plain and simple those often trigger bounces, and bounces can trigger rallies.  In other words, it is likely the market bounces the rest of the week and could maybe rally the rest of the year (just maybe).

I’m looking to TQQQ, TNA and UPRO, the 3X-leveraged ETFs for the major indexes to play the bounce.  Stocks in the nifty-50-list giving new buy signals for tomorrow’s open included EFUT, ZEN, HA, PCRX, AMAT, and WAL.  Big caps giving individual buys signals: WMT, HD, INTC, MMM, SBUX. And there are always futures and options.

(Anything written here should not be construed as investment advice but instead no more than a personal log of my market timing.)

All in all in this traditionally bullish season, it appears one better not pout, and better not cry, because Santa Claus is coming to town.

(right click image for a larger view)

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#Solar Stocks shine again

Every month or so I’ve written about renewable energy, particularly solar stocks.  Since is been a month since I’ve written about anything here, I thought I’d start up again with this old favorite.

The bottom line in stock selection is “when in doubt buy renewable energy.”

As I’ve said before (back in August, see blog post below):

Always a good sector to buy with any market rally, solar may be the best chance to rack up a 50% gain in the next couple of months.  Longer-term, no matter how volatile, it is a growth sector and preferable in the future to investing in fossil fuel stocks of any kind, particularly better than coal.

As it turned out I may have underestimated the sector.

Witness this past month in solar stocks (right click to view a larger  image):

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