#MarketTiming – tracks of the bear?

Sometimes, as they say, it’s not a stock market, it’s a market of stocks:

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

#MarketTiming – Oversold and very close to a bounce…

MARKET TIMING SIGNALS FOR 5/13/2019.

Long-Term Breadth (NYSI): SELL FROM 5/6.
Short-Term Breadth (NYMO): SELL FROM 5/13.
Price: SELL FROM 5/13.
Nifty-50-Stock-List: 9 BUYS, 0 NEW BUYS, 2 OVERBOUGHT; 41 SELLS, 14 NEW SELLS, 30 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 32, FALLING, FEAR LEVEL.
Bellwether Stocks: 0 UP, 15 DOWN.

OF NOTE SPY OPTIONS:

In a very bearish trading environment, today was a put day (see post below) with the in-the-money at the open 284 put rocketing to a 144% gain at its peak and registering through a chop at the end of the day a 76% gain. That final gain is if one was not paying attention, but obviously there were profit taking points all during the day – as it gained 100%, coming off the top for 121%, selling on the first blue-bar sell signal for 90% (see the chart in the post below).

WHAT:

Today’s market action was again news driven as the US-China trade talks broke off Friday with Trump escalating the pressure with a jump in tariffs on many Chinese imports from 10% to 25%, then tweeting over the weekend several threats to make it worse.

Finally, China retaliated with $60B in tariffs on US products, most farm products in the heart of Trump’s voter support. Sixty billion is not that much on its face but in the scheme of things it was a sign China is not going to, as some Trump supporters were claiming, “bend a knee.”

With an all-out trade war getting closer and closer to a real possibility (don’t these guys ever read history?) it was inevitable the US market was going to take a big rip.

On a technical note, except for a one-day up blip on 5/3, the long-term breadth, as measured by the NYSI, has been been falling since 4/17 (see the red vertical line on the chart below). Since that time, the market managed to trudge higher but the indexes are all now below the level they were at when the NYSI turned down. In other words never bet against the NYSI. It sometimes takes a while but it most often wins in the end.

In a previous post on the this pullback, I said: “If the market focuses more and more on the Trump administration turmoil in Washington, it is likely to unstable for some time.” That still is the what’s what.

WHAT’S NEXT?

However, for now, it is time for a bounce. It may not come Tuesday (a “turnaround Tuesday”?) but it is very close by.

The market can go down as long as it wants but not forever.

At this point SPY is down seven of the past nine trading day, the nasdaq down eight of the last ten. Short-term breadth, the NYMO, is deeply oversold. VIX has moved from the “12s” to 20 in the same amount of time. It’s getting to be too far, too fast, which always leads to a quick bounce. Except for QCOM, all the bellwether stocks are sells and were flushed to oversold with big drops in the indexes today.

In addition, my nifty-50-stock-list has 41 stocks on sells and 30 individual stock on the list oversold. Forty or more on sells is oftentimes the beginning of the end, if not the end, of a downswing.

I’m not one for Fibonacci numbers because like all support and resistance indicators they are notable only as long as the market doesn’t slice right through them (which it often does), but they are sometimes fun to take a look at and right now it appears SPY is sitting on one on a retrace of the rally from December (see the chart below). Supposedly that’s as good a spot as any for a bounce to begin.

(click on the chart for a larger view)

$LYFT gets no lift on first earning report since IPO

LYFT, the ride-share biggie, is a perfect example of not buying into the hype surrounding an IPO.

LYFT came public on 3/29 and dropped almost immediately in on its opening bar, then gaped down the next day (see the charts below). Eventually, it settle down to move sideways until…today. It’s earnings report was terrible, losing $9 a share, more than a billion dollars, despite an increase in revenue and market share. And it had to announce on a day when its drivers are on strike with its biggest competitor coming public Friday.

The stock dropped nearly 11%

If one is an investor, none of this should matter. As outlined in this link below, investors should not even be long the stock until all fundamental and technical finally shake out, if they ever do. (Keep all this in mind also for the upcoming UBER IPO.)


Buying IPOs For Dummies

These IPOs are difficult to short in the initial stages, but traders on biggies like LYFT have options to play with. LYFT’s options came to market five days after the stock’s IPO day (see the charts below). And there is where the downside can be played. The LYFT May monthly 75 puts bought on its own “IPO day”, using the same criteria outlined for the stock in the link above,is now up approximately 150%.

Now that is uplifting.

(click on the chart for a larger view)

$SPY – the slide from the top continues…

MARKET TIMING SIGNALS FOR 5/8/2019.

Long-Term Breadth (NYSI): SELL FROM 5/6.
Short-Term Breadth (NYMO): SELL FROM 5/6.
Price: SELL FROM 5/6.
Nifty-50-Stock-List: 18 BUYS, 3 NEW BUYS, 7 OVERBOUGHT; 32 SELLS, 1 NEW SELLS, 16 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 41, FALLING, FEAR LEVEL.
Bellwether Stocks: 5 UP, 10 DOWN.

OF NOTE SPY OPTIONS:

SPY CALLS AND PUTS, BOTH, were down on the day as a tight sideways chop all day slammed premium for Friday’s expiration on both sides of the market. (See the charts below for how bad it was.)

The most nimble of options traders could make money, at great risk, buying the yellows And selling the blues on the charts below, but not much. The not-so-nimble could lose a lot.

WHAT:

It appears the market has been moving on Trump tweets. That is as absurd as it can get since he should not be tweeting about any of this and the market shouldn’t be paying any attention to any thing he tweets. The New York Times broke a story on ten years of his tax returns during a time he lost more than a billion dollars, all of the money his father gave him a lot more. Surely, one of the worst businessmen in history but a major-league con-man. His beloved Twitter has hung #BillionDollarLoser on him.

If the market focuses more and more on the Trump administration turmoil in Washington, it is likely to unstable for some time.

WHAT’S NEXT?

All sell signals remain in place – as usual this is a market can can go down as long as it wants and turn up any time. That sharp drop in the calls and the rise in the puts in the last twenty minutes of the day on the 10-minute charts below may hint there is more downside to come right away tomorrow but news, like a trade deal with China, can intervene.

This is a dangerous time for short-term traders. On the longer term, every bear market begins (or resumes) on a single down day and that day was six days ago to start this current slide.

(click on the chart for a larger view)

#IPOs – when “dummies” should take the trade

And on the second day of trading an IPO, dummies discover why they should never buy on the first day of trading.

This is based on suggestion in this post:

Buying IPOs For Dummies

Don’t mean to use the term “dummies” in a derogatory fashion but sometimes it’s hard not to.

Over and over again, unless one is a real insider or being bribed for doing something else, or running some money-laundering scam that’s beyond me, anyone giving in to the hype surrounding an initial public stocks offering and buying before seeing which way it is going when its first day is done is plain and simple a dummy.

As said the link, this is one of the easiest trades in the market if one has persistence to follow an IPO and the discipline to wait for it reveal its direction before buying. Initially these stocks are difficult, if not impossible to short, so we’re talking only the long side here.

The keys to taking a position in a recent IPO are the high and the low in price on the first trading day (its “IPO day”). It is a buy on a close above the high of the IPO day. After the buy the high of that day becomes the stop loss level or the low of the IPO day becomes the stop-loss level depending on any individual trader’s or investor’s risk tolerance.

The trade is as simple as that.

See the chart panel below for examples. The top row of charts are recent successful IPO investments using this system. Each is set at a $10,000 investment to show both the money and percentage gains (the white flags on the lower right of each chart). As of today’s close, SWAV is up 46%, PINS up 11%, ZM .98% and SOLY up 133%.

In the bottom row are four IPOs from Friday which should not be in anyone’s portfolio…not yet at least – these second days are, as I said above, when dummies learn they never shoulda never bought any of these Friday.

Going forward, RRBI will be a buy above 58 and not before; SCPL above 18.75, ATIF above 5.10, and YJ above 18.20.

Simple as that.

(click on the chart panel for a larger view)

#MartketTiming – Swing Signals 4/10/19

THE SIGNALS AS OF 4/9/19.

Long-Term Breadth (NYSI): BUY FROM 4/10.
Short-Term Breadth (NYMO): BUY FROM 4/10.
Price: BUY FROM 4/10.
Nifty-50-Stock-List: 21 BUYS, 5 NEW BUYS, 11 OVERBOUGHT; 29 SELLS, 3 NEW SELLS, 3 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 70, FLAT, GREED LEVEL.
Bellwether Stocks: 14 UP, 1 DOWN.

OF NOTE, $10K Swing Trades, SPY OPTIONS:

SPY CALLS, 287, 288, 289 STRIKES FOR WEEKLY 4/12 EXPIRATION OR MONTHLY 4/18 EXPIRATION.

OF NOTE, $10K Swing Trade Stocks:

BUY ON OPEN 10/11: GS, MSFT, AMZN, FSLR, NVDA, WYNN,TWLO, TSLA. STOCK OPTIONS.


WHAT’S NEXT?

As was suggested the post below in regards to yesterday’s drop in the market and pull back in short-term breadth: “Most likely it’s a mere dip to the zero line on the NYMO.

And so it was.

With today’s pop (not so much on the Dow but worthwhile pretty much everywhere else), the NYMO and NYSI are once again positive.

Kind of get tired of saying it over and over again but as long as the NYMO and/or NYSI remain positive overall the usual play is to be long, take profits when the stocks give sell signals, and buy coming out of dips but have to say it since it happens over and over again.

Fourteen out of 15 bellwether stocks were up, 40 of the 50 stocks on my nifty-50 stock list gained, all eight of the 3xLeverage ETFs I follow — TQQQ, TNA, UPRO, SOXL, FAS, ERX, LABU, FNGU, up, up, up…

And most notably the NYMO put in another low above a low (see the chart below) so until further notice expect follow through – this is broad market run to the upside.

(click on the chart for a larger view)

#MarketTiming – from bearish to bullish to bearish again…

On Monday, this blog posted that this stock market at this juncture is —

TRICKY, TRICKY, TRICKY.

No kidding.

At that point, for Monday, the market, according to many technical indicators, was poised to sell off, ending the splendid rally from December. But then it didn’t sell off.

Instead, yesterday, it gave a tentative, but likely, indication it was going to continue to go up into a typical bull-market cycle advance, and today on the opening gap and with its pre-lunch follow-through from the open, it appeared the snorting gods were in their heaven and all was right with bull world.

Then, during the day a quick slide took everything negative. Not by much, hardly enough to notice on daily charts at the end of the day, but it was enough to turn long-term breadth negative again (see the dots on the chart below), which makes being long the market dangerous and while short-term breadth did peek above the zero line for a day a look back looks pretty bearish (the yellow line on the chart below) with highs below highs generally all the way back to the beginning of the rally.

Tricky.

I’ve long said this is the rally to make everyone believe a bear market did not begin in September of last year, that the bull market from as far back as Obama’s first term was resuming and continuing and it may still be (it sure looked like it yesterday), but it will not surprise me if a benign dip like today turns into a raging grizzly while the buy-and-holders sitting at The Palm or at Smith & Wollensky are wondering why the steaks are taking so long.

For today I’m posting my “Black Candle” chart. Black candles shows up when an index or ETF or stock or whatever one’s trading closes higher than the day before (usually on a gap) but lower than its open. There are candlestick names for these kind of chart patterns but just plain “black” is fine with me.

Today, notably, we had black candles on SPY (below) and TQQQ, and remarkably on FNGU (the leveraged ETF for the FANG stocks). They don’t always signal tops of swings, although I can’t think of anything else that comes as close (see examples on SPY below), but they are alerts. They do signal sudden indecision. And they are useful markers, pretty much as simple as it gets — go long above the high of the black candle, go short below the low of the black candle as the indecision gives way to a direction either up or down.

(click on the chart for a larger view)

$SPY – it doesn’t even rhyme, it repeats?

History…

Back in December there was this post:

$SPY – Simple black candle tops…

In which it was noted:

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.

And it was further noted going into that December black candle:

“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.

The December black candle (see the chart below) started the plunge into the December 26th buy signal from which we have rallied again to…you guessed it…280 on the SPY! Lots of traveling around in the market to go almost no where. Swing traders love this — after all what a rally! Long-term holders must sit grateful that it’s not as bad as it was…but is it going to get any better for them?

Well, we’ll see. Like last time we were here, there are again simple black candles everywhere: besides SPY (the chart below), and QQQ they are in a slew of ETFs – TAN, FAS, SOXL, FNGU, TNA, TQQQ, UPRO — as well as DB and C in the banks and no less than eight staring me in the face in my nifty-50 stock list (that a lot for a single pattern all at once).

So what’s it mean? Maybe nothing since all-important long-term breadth continues to rise, but then short-term breadth (measured by the McClellan Oscillator, $NYMO), continues to wind down (see the lower portion of the chart below), giving warning signs of a turn to the downside coming near. To keep it simple, let me say it will not surprise me if a dip starts Tuesday and goes down a while.

(click on the chart for a larger view)

#MarketTiming – $SPY ready for a Santa Claus Rally?

I’ve always been confused at what constitutes as”Santa Claus” or Christmas rally mainly because in bullish years, most years, the market rallies into Christmas and right on up into January so it’s hard to tell what is distinctive about Christmas itself.

This obviously is not one of those years.

SPY has come into Christmas in a free fall, eight consecutive days down (see the chart below), fueled by bad news (the usual Trump stuff) but mostly from being so ridiculously overbought and speculative something had to give. It is down now 20%, which makes this an “official” bear market.

My last post here was December 4th, 20 days ago. There has been no need to give a general-market update since the unraveling of margin debt has ruled this slam down and will likely keep doing so as the bear market continues its decline for some time to come.

So what about a Santa Claus Rally now?

Given the difference this year from so many others, I decided to seek out a simple definition of the possible phenomenon, went to Investopedia, Seeking Alpha, The Street, and eventually to Wikipedia which pretty much summed up all the others had to say:

A Santa Claus rally is a rise in stock prices in the month of December, generally seen over the final week of trading prior to the new year. It is a type of calendar effect.

There is no generally accepted explanation for the phenomenon. The rally is sometimes attributed to increased investor purchases in anticipation of the January effect, an injection of additional funds into the market, and to additional trades which must, for accounting and tax reasons, be completed by the end of the year. Other reasons for the rally may be fund managers “window dressing” their holdings with stocks that have performed well, and the domination of the market by less prudent retail traders as bigger institutional investors leave for December vacations.

The Santa Claus rally is also known as the “December Effect” and was first recorded by Yale Hirsch in his Stock Traders Almanac in 1972. An average rally of 1.3% has been noted during the last five trading days of December for the NYSE since 1950. December is typically also characterized by highest average returns, and is higher more often than other months.

The failure of the Santa Claus rally to materialize typically portends a poor economic outlook for the coming year; a lack of the rally has often served as harbinger of flat or bearish market trends in the succeeding year.

That last line in the quote is probably giving already-battered bulls further heart palpitations but let’s consider how oversold this market is and the chances of a rally coming.

Short-term breadth (the McClellan Oscillator) is near a level last seen at the February low this year and down four days in a row (four is a magic number) and at a level which usually generates at least a violent bounce if not an ultimate bottom of a down swing. My nifty-50-stock list has had 40 or more stocks on sells for two days now (48 on Friday, 43 yesterday, an uptick) — another sign, if not of the bottom of a down swing, or at least the beginning of a bottom. The VIX, solidly in bear-market territory above 25 has been screaming up for seven straight days. In standard deviations of average declines SPY is down more than has been seen in at least a year (I keep track of only a year). CNN Money’s “Fear and Greed” index is at two!

I guess what I’m saying is this market is down so far so fast it is bound to bounce any day, any minute… If short term breadth had clicked up Monday with the market at new lows I’d be more confident Santa is here with more than a lump of coal for the bulls, but one can not have everything, even at Christmastime.

I am a bear, and as recorded in these posts, have been pretty much from the top this year. With sector by sector falling apart, and stocks all over the place in bear-markets of their own, and the pot stocks becoming the leading sector at the end, it was rather obvious the bull was about to stumble and die.

But in the spirit of Christmas, let’s give bulls a bit of relief.

The last time I ventured a guess as to high an upswing might go, I suggested the 281 neighborhood (see the chart below) I’m not good at that kind of guessing but luckily nailed that one as SPY hit a high at 280.40 before ending the run around a closing 279. So I’ll venture another guess. If this is a fierce, multi-day run up into early January, in other words a “Santa Claus Rally”, it could get to the 250 neighborhood (see the chart) with 255 to 260 as formidable resistance beyond that.

(But, bulls, don’t let this bit of relief become a beacon of false hope, this will be, if it does come, another rally to sell.)

(click on the chart for a larger view)

#MarginDebt – The Reckoning has arrived…

You know those recaps that begin each new episode of TV shows with words like “Previously on Mad Men…Previously on Shameless…” or most appropriately in this case “Previously on Breaking Bad”?

For a year I’ve been watching for the end of this bull bubble and chronicled it’s slow rollover in the links in this link so let’s call this recap “Previously on Margin Debt”:

Margin Debt – the divergence that kills the bull

As has been noted before the trouble with this gauge from FINRA (it used to be from the NYSE) is that it is calculated and released always a month late. So during any given month one pretty much has to guess from price action what’s going on with the margin debt. Given how over extended it was, my guess October’s price action was probably finally killing the bull market (see the link above), and November would probably be the confirmation that the bear was out of it’s nine-year cave. Indeed, it was confirmation and the bear did emerge.

If one stares at the chart below for a while, it’s clear if history is any guide (at least based on the 2000 and 2007 bull bubbles) when margin debt comes apart it does not quit feeding on itself until the SPX declines 40 to 50 percent.

Ai-yi-yi, long-term holders!

But can this time be different? Of course it can. Margin Debt this time is coming down from higher levels than even 2000 and 2007. What if different turns out to be the same as 1929-1932? Talk about a “Presidential cycle” – the last “businessman” to be President was Herbert Hoover who presided over the worst bear market in history.

Different is never really different. It really means all things must change so that all can return to being the same.

America has had magnificent prosperity from 1945 to… Picking a time depends where one sits on the income inequality scale but I suppose for the vast majority of Americans the time was the 1980s when prosperity began to fray, the American dream began to fade. Read an telling opinion piece on this just yesterday – American Capitalism Isn’t Working. Needless to say it can be fixed but the fix is going to take a lot of year now. It’s going to be long climb back and we’ve not even hit bottom.

I could be wrong about this, of course, since market psychology can run amok even in the face of time and all sorts of fundamental foolishness.

In the meantime, as J.P. Morgan so famously put it “the market will fluctuate.” There will continue to be plunges to buy and bounces to sell. For those of us who actively play this game, that’s all that matters to make money.

(click on the chart for a larger view)