coolhand's Account Talk

[coolhand]

The bears made it 2 in a row today. The market wasn't hammered, but it's been trending lower now for over 2 weeks. And NAAIM has been bullish for most of that time. At this point, I have to say that the smart money was too early this time.




Price on the S&P edged a bit further below the 50 dma. It's still not far from that key average and hopefully it won't stay below it for much longer. Price on the DWCPF edged lower as well, but still remains above that same key average. Momentum continues to fall. Volume has only been average overall through the decline.

Breadth was modestly bearish yesterday, but after today it's more bearish. Still, it's been below the 39 day EMA before. And it doesn't generally stay below that level for long (unless it's different this time). I don't expect it to be different, but I can't say the selling is over.

My personal market sentiment generally follows NAAIM sentiment. And because they were bulled up almost 2 weeks ago it was a no-brainer to follow their lead. That's where the money has been for quite some time. But no one bats 1,000.00 (unless you're a central bank).

At this point, I think the odds that the market is nearer the bottom than the top is about even.

I am going neutral. That means that I suspect a bottom is not yet in, but that most of the downside may be behind us. Getting out now could mean missing a big rally off the bottom. NAAIM reports again in 2 days.

 

[coolhand]

The bears started off the week with another attack on price that sent the indexes lower, though the market did close well off the lows of the day.




The most notable thing about the charts is that price on the S&P 500 closed under the 50 dma today. The question is, will it stick? The DWCPF remains in better shape, but it too has been under pressure. Momentum took a turn lower.



Breadth technically flipped bearish, but it's not a strong signal as yet.

As I said earlier today, the smart money isn't usually wrong for very long. Normally, they get right within 3 days, but we're well past that point. Up to this point, technical damage has been very limited, but now we see the S&P 500 testing the 50 dma and closing under that key average. I'm still not bearish, but this market may challenge weak bulls.

Let's see how the bulls respond to the S&P 500 support being tested. I am remaining bullish given that is where the smart money is and the fact that the DWCPF remains in decent shape despite the weakness.

 

[tom4jean]

I'm sure people read the headlines and know that futures turned down because of the covid surge in Europe last evening. I know there's a lot of things in the mix but personally I think the possibility of another covid surge and shut down and uncertainty on how the future elected officials will handle it is driving this more than the usual pre-election nerves at this point.

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[ToddB]

I also expected wall of worry AKA 'WOW' to continue, now I'm thinking the market is pricing in predicted election results and no stimulus deal before the election.


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[Beester15]

CH, I found it curious as well. I am still new to all of this, but I really expected the market to continue the upward trend for a few days and then pausing this friday....

 

[coolhand]

It's very unusual for NAAIM to be as bullish as they are and the market manifesting weakness at the same time. I attribute this to the "big event" approaching in early November. I still believe the market eventually turns up (as long as NAAIM remains bullish).

Just my thoughts.

 

[coolhand]

As difficult as this market has seemed at times, the indexes were only down moderately last week (about 0.5% or less). They still sport significant gains on the month.




Friday saw the market make it 2 up days in a row. Momentum is flattening. I'd like to see price on the S&P 500 make a run at the September high and break to the upside from there. I suspect that will eventually happen.



Breadth moved higher and remains bullish.

TSP Talk sentiment came in neutral with an almost even split between bulls and bears. Of course, NAAIM remains bullish.

I just can't get bearish on this market (not that I want to). Especially when the smart money is long. Don't forget about the wall of worry.

I remain bullish.

 

[ToddB]

Thanks Coolhand!
I always appreciate your viewpoints!
Spot on!


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[pmaloney]

I agree. Hopefully we will lift out of this Bullearish period tomorrow and next week! :smile:

 

[coolhand]

The bulls turned things around today as stocks started out mixed, but began to rally by mid-morning eventually closing out the day with good gains.




I note that price on the S&P 500 came very close to testing the 50 dma before reversing. Price on the DWCPF has held its position well above its respective 50 dma.



Breadth ticked higher and remains bullish.

To this point, it remains uncertain if today's rally finally broke the string of weak trading days, but the smart money remains long stocks.

NAAIM came in bullish today, though not quite as bullish as last week. I do not see much shorting going on by this group, so that's telling as well. Based on this reading, it seems it may simply be a matter of time before the market finds its feet once again. Maybe today was the beginning. I get the impression that the market may be waiting for something to happen.

I remain bullish.

 

[coolhand]

The latest NAAIM reading revealed a small decrease in bullishness among these money managers, but make no mistake this reading is still bullish. It appears that those that reduced long exposure went neutral rather than bearish (for the most part). These managers are basically telling us that they expect prices to rise once current bouts of weakness dissipate.

 

[coolhand]

Wednesday's market action wasn't much different than we've seen of late; early strength followed by weakness. Price was up and down, but by the close the indexes were down on the day.




It's obvious there's a battle going, but so far the bulls have contained any serious technical damage to the charts. It's worth noting that overbought conditions more than a week ago are well out of overbought territory now.



Breadth is still technically bullish, but like the charts it's under pressure.

Am I surprised by the weakness? Yes. And I suspect the money managers at NAAIM may be too. They report tomorrow with the fresh sentiment reading.

I am remaining bullish, but that may change depending on the NAAIM reading.

 

[coolhand]

The relief bill back and forth may be throwing a wrench in the works.

I would not be surprised. Narratives are often crafted or leveraged to explain market action.

 

[Whipsaw]

The relief bill back and forth may be throwing a wrench in the works.

 

[coolhand]

Once again, the market started out on the strong side only to see selling pressure manifest later in the trading session.




The selling pressure erased sizable gains on the S&P 500, but that index still managed to post moderate gains by the close. The DWCPF closed with a modest loss. Overall, it wasn't a bad day for the bulls, but they have not been able to mount an upside attack without the bears countering their efforts.



Breadth ticked higher and is leaning bullish once more.

So far, the bullish NAAIM reading hasn't resulted in the kind of action I generally expect to see within the first 3 days of the survey, but that doesn't mean the signal is a bust (necessarily). It just may need more time, but another reading is only a couple of days away.

I remain bullish for now.

 

[coolhand]

Well, It's obvious that the bears have not gone away as yet. The market started out positive, but could not maintain that positive start.




Looking at the charts, we can see that the S&P 500 is now getting close to testing its 50 dma. Price on the DWCPF appears to be weathering the weakness a bit better than the S&P. Neither chart is showing any serious technical damage, but if the S&P 500 doesn't firm up soon, it's possible that it may violate support at its 50 dma. That still won't be cause to get overly bearish, but it would embolden the bears. Momentum is falling, but is not bearish as yet.



Breadth flipped bearish on the NYSE today.

There are bearish forces out there that have trying hard to take this market down since the September peak, but the bulls have not been inclined to simply step aside. It is also not unusual to have a big bullish shift in NAAIM and then see immediate weakness for up to 3 days or so, but that isn't a given every time it occurs. Unfortunately, it's happening in this case to this point. I still expect the bulls to counter this downside attack. If they do not turn the market back up soon however, we may see NAAIM back off their bullish disposition at least to some extent (emphasis "may").

I remain bullish, but if the S&P 500 closes below its 50 dma, I may go neutral. The relative strength of the DWCFP is still encouraging, but it's the S&P 500 that has better visibility among traders.

 

[coolhand]

For all the downside pressure the bears tried to put on last week, the C and S funds still managed to eke out modest gains on the week. Friday's action, coming just 1 day after a decisively bullish NAAIM reading, saw more back and forth price movement that resulted in largely a mixed close on the day. Keep in mind that NAAIM readings are not daily readings. They are weekly readings, so instant gratification is not a given.




Still no real technical damage on these charts. The market was overbought on the DWCPF, so a pullback was certainly not unexpected. But also notice that price on the DWCPF is only modestly below its all-time closing high. This does seem to suggest underlying strength in the overall market.



Breadth remains weak of late, but is still bullish.

The TSP Talk sentiment came in less bullish than last week, but still leaning bullish.

NAAIM, as we know, came in bulled up last Thursday. That reading is likely to get right soon. I'd say within the next couple of trading days. These readings should be used to give one an overall sense of how the smart money is not only feeling, but how they are positioning. Remember, they are smart money for a reason. They often have access to information that we do not. I feel more strongly about this sentiment reading than any other and right now they are positioned for gains on the long side.

I remain bullish.

 

[coolhand]

The market fell hard at the open today, but the bulls immediately countered and eventually turned price back up. It took the entire trading day, but the bulls did close the market mixed, which was a victory in itself.




Still no serious technical damage, but are the bears done? They might be (see below).



Breadth ticked higher on the day and remains bullish.

NAAIM came in heavily bulled up today. The bears have thrown in the towel in this survey. That's a huge clue because it suggests that the uptrend may be about to resume.

I remain bullish.

 

[coolhand]

The bears managed to pull the market back bit more today, but so far the pullback has been measured and not inconsistent with a healthy one at that.




So, we may have potential bulls flags forming. Momentum has leveled off.



Breadth fell along with the market, but remains bullish.

NAAIM reports tomorrow. It's always interesting to see what the smart money is doing on a week to week basis. They were modestly bullish last week.

I remain bullish.

 

[coolhand]

Yesterday, I said the market was due a pullback, but it may not be deep or last long. Today, we got a pullback and it wasn't deep, but whether there is more weakness remains to be seen.




The charts still look very bullish, though the S&P 500 still has overhead resistance at the September peak.



Breadth dipped, but remains bullish.

We'll have to see if the bears can continue to put pressure on price, but I have a feeling there may be a floor under this market right now. Where that floor is I don't know, but I doubt it's lower than the 50 dma; if price can even be driven that far (I doubt it). In fact, we could see the bulls turn the market back up before long. The DWCPF hitting all-time highs this past week is not something I can ignore and I still think the S&P 500 joins that index sooner or later with new highs.

I remain bullish.