Friday, April 29, 2016

Bear Market Leadership

In bear markets I watch bear market leadership to spot inflection points.

Small caps

Brokers / Dealers

Transports

VIX weekly


Saturday, April 9, 2016

Rats leave the sinking ship first

 these sneaky insiders know exactly when to leave the ship


And of course, we all know what was scaring the markets at the beginning of the year. High yield bonds.



Insiders

A reliable valuation metric :  Q ratio

Tuesday, April 5, 2016

Thanks for the lift Yellen

If it wasn't for the FED, we wouldn't get the excellent shorting opportunity lately. Without another QE, markets will sink like a cadaver in the water. Rates may stay at zero forever. It will actually make things worse for the financial sector / banks.

This is a kind of bear market no one in this generation has seen. Yes this first sell off may be bought somewhere below the most obvious spot (SPX 2000), but the type of selling climax we will see at the end of the whole intermediate term move will be astonishing imo.

Gold and other PMs are in bull market because there is no place else to hide in for long term and there is not much upside left in USD. Crude and other industrial commodities will stay sluggish because of global slowdown. We may see some upside in agricultural commodities only if El NiƱo helps.

Bloomberg Grains Subindex


Below is yesterdays "Opening Comments" and todays intraday update posted for xTrends Live members who have been on top of everything in this market.



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Opening Comments 



I was expecting Monday to be a bigger down day but looks like those who stand against the selling and bought the dip will be run over in overnight session. That is why we hold core short position in a confirmed swing sell off. There is just too much money to make in overnight sessions.

This sell off was telegraphed by a few unique indicators we have been following for more than a week now.

First, this MA crossover indicator derived from short-term RSI of McClellan Summation Index. I had explained this before, it is now in free fall and price is following it with a little or no delay.



Secondly we had this indicator that spots extreme contango overshoots. I had also explained what it is and how it works in conjunction with VIX



And today I want to show you another unique indicator that works like a clock in this bear market. As you know, transportation is the leading sector of this bear market. It leads on the downside and on the upside. It shows relative weakness at the tops and relative strength at the bottoms. This indicator measures the correlation between SP500 and Transportation index. When the correlation between the two drops significantly towards the zero line, this means transportation index wants to move in the opposite direction of SP500. Since Transports lead SP500, we can expect the overall market to reverse its direction to the direction of the transportation index when the two indices decouple. As I was pointing out over the last few trading days, transports were showing extreme relative weakness which caused a sell signal measured by this indicator:


Structurally, Transports failed at the horizontal resistance coming from a previous breakdown point and the index jumped back inside the falling wedge.


Of course there are weekly and monthly bearish setups that can dominantly effect any other setup

TRAN weekly

Russell 2K continues to be my favorite short among all major indices

IWM 120m

RUT weekly

Crude oil may find a temporary support right here but this has nothing to do with stocks as they decoupled long time ago.

USO daily

In addition to our core short positions in ES and TF and long position in VX, I will be looking to short more TF and ES on a rebound as we are about to see the initiating power move which is the most lucrative portion of this corrective swing sell off

We will likely open below the red line tomorrow, that gap should take us to the bottom line quickly. In other words today may be a trend day.

SPX 120m


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Intraday Update



Russell 2K is breaking down, I am trying to maximize profits by shorting intraday bounces as I just tweeted another short.

Put/Call ratio for all SP500 constituents is 0.56, this is something you will see at the market tops , not on a down day. Small traders are buying the dip with no fear and that means we will likely see a swoon into the close as they puke.

I will close todays short positions at the close today and keep core shorts.

RUT 30m


Tuesday, March 29, 2016

Best FED day for patient equity bears


Looks like FED is reading my blog. 
Market took off when this hit the wire today



 <  F'ed has "considerable scope" for stimulus if needed  >


Scope?

I talked about FED pulling another QE bluff in my previous post , there it is.    First time in a long time FED signaled that it may use its QE tool to intervene once again. At first, this sounds super bullish of course. SPX ran into a massive resistance layer on a panic buying as if there was nothing there.
But this statement now created another expectation other than the expectation for steady interest rates. Market already priced in steady interest rates policy for the year. That is what this whole rally from Feb was for. If todays surge is the beginning of something, it will be the beginning of "sell the news". But now there is going to be another expectation that will be priced in. It is QE4 and we all know FED will not be able to do it under the new administration next year. Ready to play "Waiting for Godot" ? We are going back to the times when everybody begs for QE whenever ES goes 5 handles down.

Bear market leadership has a clear message for all of us:

 TRAN lifetime quarterly

 close-up

daily close-up

weekly

Sunday, March 27, 2016

French kiss ...

Aside from a possibility of a lower high, France is done. Of course, it will be a different story here in US. The land of PPT will resist the bear until the last bluff FED can pull without a quantitative move. And that will make the plunge real profitable in the end.
Understanding what stage we are in will be the key. For our terminator at xTrends Live, it really doesn't matter whether it is a bull or bear, just give him a market he will milk the life out of it.

$CAC weekly


Wednesday, March 23, 2016

The four most dangerous words...

The four most dangerous words in finance are 'this time is different.' 


Dow monthly



Friday, March 18, 2016

Monday, March 14, 2016

Tuesday, March 8, 2016

Recent breath trust is reminiscent of...

Recent breath trust is reminiscent of those seen in July 2010 and Nov 2011 but there is also something that is different this time. We are no longer in a bull market, or at least the bull market is not as fresh as it was then. This means we may not see a higher low this time 

As you know McClellan Oscillators went off the scale recently. This is mainly because of the excessive bearishness that persisted for sometime now. In other words, it was short covering as evident from the massive set-backs in short interest across the markets.


NYSE McO

Nasdaq McO

McO similarities between July 2010 and Nov 2011



See the weekly chart of NYSE Composite and ST chart of Crude Oil shown in the post below. Oil already hit the target zone this morning and NYSE reversing from the weekly trg. We identified last week that the next downside leadership index will be NDX. 

Excerpt from yesterdays "Opening Comments";



Opening Comments

March 7, 2016 at 1:14 am by Sol   9 Comments

Value Line Arithmetic weekly, self explanatory


One of the downside leadership sectors of the bear market is Transportation Index. It is currently testing a monthly resistance.


$TRAN monthly



RUT which was another downside leadership index shows a similar picture

RUT monthly


Weekly NYSE Composite vs Summation Index, self explanatory


ES is currently down 5 points from Fridays close while CL is up about 2%. I think this couple is now decoupling. Crude oil clearly broke out, it looks like it is headed to 38.5-39.5 range next
CL daily

hourly



Looking at the short term charts of SPX and ES , I see a clear rejection around ES 2000 level
ES daily

SPX hourly

ES 240m

I am expecting another range bound day with an intraday lower high around ES 2002-2003. I plan to add NQ short  ES tests this level. If we get an early dip, 


Tuesday, March 1, 2016

Today was all about ....

Today was all about crude oil. We saw crude breaking out last night, sent this out this morning. We went long SP from 1938.5, CL from 33.57 after the open. I think CL has more upside in short term but there is no change in intermediate term picture.




March 1, 2016 at 9:09 am 1 Comment by Atilla Demiray
Crude oil is breaking out...

This will create a short term spike in crude oil and related sectors. And it should also effect SP500 positively in the short term.