#MarketTiming – Usually the market loves a war but…

But maybe not this one.

Finally?

The market took a hit five days ago when President Orangutan ordered the assassination of Arch Duke Ferdinand (Iranian Gen. Qassem Soleimani) in Iraq. That was a strategic strike mostly aimed at distracting the country from his impending impeachment trial (Trump’s, not Soleimanini’s), a violation of international law and practice, in other words an act of war. Over the weekend, the world held its breath waiting to see how Iran would respond.

Today, the Iranian response, or part of the response began, as Iran has been launching missiles into bases in Iraq where U.S. military forces are stationed.

If the overnight futures are any indication, the market is not pleased. As I write this the ES is down 40, the NQ down 130, the Dow futures are down more and 300 points. The market may recover during the night (after all, it is a bull, or at last count a bull in a blow off) if Tweeter can keep his Tweeter trap shut (when’s that ever happened?). But now it’s the world again holding its breath to see is the U.S. crank is going to crank up the conflict further.

This is how stupid accidental world wars can begin. See Barbara W. Tuchman’s history, “The Guns of August.”

Setting news aside for a moment…

After two highs below highs on the NYMO (short-term breadth), the important NYSI indicator (longer-term breadth) turned negative today giving a sell for tomorrow’s open (see the chart below).

Funny how news comes along to validate what the market internals have been saying all along.

I’ve been warning here that the rally, which began in early December, could be getting too exuberant for its own good, most recently in the post below — #MarketTiming – the Santa Claus rally goes crazy.

In addition, CNN Money’s “Fear and Greed” Index is at 89, coming down from 97 four days ago (it can’t go higher than 100) but still at an “extreme greed” level. It has a long way to fall.

For the record, on today’s close, the Nasdaq 3x-leveraged ETF, TQQQ, was up 16.5% in the 20 trading days of this rally; among leveraged sector ETFs TECL was up 17.6%, SOXL 25.1% and FNGU, which simulates the FANG stocks, was up 41.6% (this was primarily a tech rally). Notable stocks from my bellwether list include TSLA up 38.4% (remember, that’s in 20 trading days), SHOP up 13.3%, WYNN up 16.8%, and AMD up 22% – true evidence that the Santa rally did go crazy.

If this sell-off continues overnight into tomorrow’s open, all those above are going to get hit.

One last note, the leveraged energy-stock ETF, ERX, was up 19.3 and GUSH, the 3x-leveraged daily S&P Oil and Gas ETF from Direxion, was up 54.3%.

No matter what, oil and gas will still love a war.

(click on the chart for a larger view)

#MarketTiming – the Santa Claus rally goes crazy

The Santa Claus rally which arrived with a buy signal on the open of December 9th, is still going and going and going…

I wrote about this quiet rally trigger first in this link:

#MarketTiming – with not much fanfare Santa slips into view

Then, as the fanfare took hold:

#MarketTiming – the Santa Claus Rally, a progress report

Since that second post, TQQQ has gone from up from 9% to 17.7%, UPRO from 6% to 11.2%. The 3x-leveraged sector ETFs continue to surge: TECL (tech) up 21% now, ERX (energy) up 18.1% and SOXL (semis) up 29.9%. Among the bellwether stocks I follow, TSLA is leading the pack, up 27% now; NVDA up 13.4%; WYNN up 18.2% on a big jump out of a high-level consolidation today.

AAPL, which lagged early on, has now moved up a nice 10.9%, closing above 300.

Big gains in not much time – the rally is a mere 17 trading days old.

All of which is great for the bulls…except it’s all begun to go kind of crazy.

AAPL has a market cap of $1.3 trillion, somewhat insane no matter how much cash the company generates for buy-backs. MSFT is at $1.2 trillion; both GOOGL and AMZN are knocking on the trillion-dollar door. These stocks have market caps four and five times such “puny” companies as Walmart, Coca-Cola, Nike, Proctor and Gamble, Home Depot and even Exxon-Mobil. How crazy is this?

Speaking of buy-backs, corporate debt is likely piling up more and more as the FED keeps its foot on the printing-press pedal – margin debt did not move much last month so all this “irrational exuberance” has to be coming from somewhere.”

CNN Money’s “Fear and Greed” Index is at 97. Ninety-seven! That in and of itself is the stratosphere of extreme greed. It can’t go higher than 100. A year ago it touched 3, on a trap door that swings both ways.

Still, the market can go higher, and probably will, since there is momentum in that 97 number. It usually takes a divergence (a high below a high) in that index to trigger a decent down swing (see the red circles on the chart below). The index has to back off on a market dip (which is likely imminent) then fail to go higher as the market resumes its advance to another high.

And both breadth measures, the NYMO (short-term) and the all-important NYSI (longer-term) remain positive. So there is time for more rally.

Not much more to say at this time…except to note in markets going crazy (like 1999, like now) there is, in the end, no profit until one sells.

(click on the chart for a larger view)

#MarketTiming – the Santa Claus Rally, a progress report

On December 6th, the all-important NYSI, measuring longer-term market breadth, turned up signalling an on-coming upswing in the market beginning the open of Monday, December 9th. It was an unusual turn in that it preceded the NYMO short-term breadth indicator.

That doesn’t usually happen unless there’s been a V-bottom in price on the most recent downswing. And, in this case there was, and the NYMO confirmed the rally on 12/11 giving its own buy signal for the open of 12/12 when I wrote this entry below:

#MarketTiming – with not much fanfare Santa slips into view

Since then most of the major indexes, and their 3x-leveraged ETFs, have been up a cumulative eight days. Needless to say, the market is overbought. CNN Money’s Fear and Greed index is at 90, an “Extreme Greed” level, a level which eventually leads to sells downs.

Consequently, the market could take a dip or a tumble anytime (although with Christmas yet to come everything remains bullish). With that in mind, me thinks it’s time for swing traders and anyone else who feels comfortable taking profits should either tighten stops under the advance or cash out some of the gains.

Among the major leveraged ETFs, TQQQ is 9.0% for the eight days, TNA up 6.3%, UPRO up 6.0%. In the leveraged sector ETFs, TECL is up 10.4%, ERX (remarkably) up 10.3% and SOXL is up a whopping 19.6%. Eight trading days.

Notable stocks in my bellwether group include TSLA up 19.5%, NVDA up 11.3%, SHOP up 7.5%, NFLX up 7.9%. AAPL usually gets the press coverage but it’s a laggard at up 3.6%. Still, it’s just eight trading days.

(click on the chart for a larger view)

#MarketTiming – with not much fanfare Santa slips into view

On a FED day as the Federal Reserve held firm on low interest rates, it appears the annual Santa Claus rally may have quietly slipped into view despite the tight trading of the past few days.

Possibly it’s even set up a for a fast move by the tight trading.

Appropriate timing, I guess, since it’s hard to fathom this market continuing to rally on anything other than the FED pump, pump, pump…

Regardless, the NYMO put in a low above a low today (see the chart below), to go along with the important NYSI’s rise for the past four days. That completes the breadth pattern that is a most reliable trigger for a sustained up swing.

Since the last time the NYMO put in a low above a low on October 8th, SPY has rallied seven percent.

I would venture to suggest about the only thing that could abort the rally would be the Tweeter in chief scattering the trade-talk sticks again. Reportedly he is meeting tomorrow with advisors to discuss the proposed Dec 15th tariffs against China. Since when has he listened to advisors? So anything can happen.

In the meantime, one has to respect the signals and be long, and buying dips, until further notice.

(click on the chart for a larger view)

$SPY #Options – Day trading calls 12/6

INITIAL ENTRY:

FIRST HALF PROFIT:

CLOSE OF THE DAY:



(Click on chart for a larger view)

$SPY #OPTIONS – Day trading puts – 12/02

A fast and furious drop-down day…

INITIAL ENTRY:

FIRST HALF PROFITS:

CLOSE OF TRADE:

ONE MORE TRY:

$SPY #OPTIONS – Day trading calls – 11/26

Truly a grinding day as one follower on Twitter so aptly noted, but at least managed to escape with a small profit.

ENTRY

BREAKEVEN STOP

REENTRY

FIRST HALF PROFITS:

FLAT:

$SPY #OPTIONS – Day trading calls on 11/25

ENTRY

FIRST PROFIT:

CLOSE OF DAY TRADE

$SPY #Options – Day trading puts 11/21

A rather tiresome day as the SPY chopped to a small profit with two stops at breakeven.

INITIAL ENTRY:

STOPPED:

REENTRY:

FINAL EXITS:

Divergences don’t matter…until they do…

Over and over again, especially in bull markets, prices keep going higher despite divergences on internal indicators, but when a tumble comes, a “pull back”, even a crash and one looks back at its beginning there is usually a divergence there.

Or a cluster of divergences.

So as of today, we have one in CNN Money’s “Fear And Greed” Index. That index has been wildly over bought as prices have surged on most major indexes (in the SPY ETF surrogate for the S&P 500). It is back off, risen again and as of today put in its divergence by making a lower low while SPY has hugged its high (see the chart below). It is not infallible but if history do tell, it is a reliable context (not the red lines on the chart and subsequent market drops).

And wonder of wonders, the FINRA Margin Debt reading for October came out today (see the second chart below). It is a monthly and always a month behind so there’s always some guess work to be done in real time, but this reading is, indeed, ominous.

Besides having risen way beyond the debt levels of both 2000 and 2007 before those bear markets arrived, it has now been carving out a ledge pattern on its chart (sometimes called a bear flag) for the past few months as the market keeps rising into thinner and thinner air.

Why ominous?

Note it’s the same pattern that was in place as the market was making highs last time and, when it finally fell apart, it was the precursor of the bear markets in both 2000, and 2008. Is it different this time? Is it ever different this time?

History, history, history.

This is to say nothing of the divergences on the McCellan Oscillator (the NYMO) with its Summation Index (the NYSI) declining for the past 10 days even as the market as advanced.

Does this mean we’re about enter a bear market?

Maybe not, divergence don’t always matter. But if a bear comes roaring now there is a good chance when we look back to this day this cluster of divergences will have mattered.

(FEAR AND GREED – CLICK ON THE CHART FOR A LARGER VIEW)

(FINRA MARGIN DEBET – CLICK ON THE CHART FOR A LARGER VIEW)