Divot's Account Talk

[Divot]

Robo -

Thanks for bringing both these blogs to my attention. I found Kevin's especially well written.

I have to say I really agree with his post that you quoted. I, too, am actually short stocks. Obviously, TSP doesn't let me do that - but in my brokerage account I've been short utilities for some time now, and more recently short health care.

It's silly to look for a crash, and it'll get you in trouble just as will "irrational exuberance". All we can do is watch the market and act accordingly. This is why it's vitally important to have "emotionless barometers" on the market that can help you to gauge supply and demand.

Hopefully I'll find some time this weekend for a longer blog post - there are some serious issues in the markets that have tripped several of my larger indicators. The "double top" is only one of them.

Thanks for reading my blog, and I value your comments.

 

[robo]

Divot,

Flipping long next week. We are due a bounce and 1500 on the S&P held last week.

I'm buying weakness next week for a trade. A bunch of data to move the market and the Bulls have shown many times they have the liquidity to run it up. Also, we have end of month window dressing, and getting oversold here.

The boyz will still try and take this up to all time highs soon to ensure they they catch more Bears throwing in the towel.

Henry also thinks utilities have seen their high for the year.

http://www.safehaven.com/article-7804.htm

Good trading next week. The risk is getting higher both ways, but I'll play the trend and go long next week with tight stops.

Support held Friday and next is around 1480's then 1460's. However, my take is one more rally first before we head down again. That's why I have stops, in case I'm wrong. I'll flip short if 1500 does not hold for a short-term trade. All trades are short-term these days. Talk about whipsaws!

This trading range could go on for some time. I think the strong hands are selling to the weak and soon they will take it back. It's what they do!

Disribution continues from the strong hands. It takes time to sell Billions in stocks without taking the Market down too quick. This of course is only my opinion and I could be wrong. I think a better buying op is coming soon. We shall see!

 

[robo]

Divot,

Some Market thoughts after some review this weeded. Any opinions?

Do we start a new rally next week or more sideways action? The Boyz will want to catch the bears off guard next week.

1500 on the S&P held this week. If we close below 1500 I might short again, but I think we are headed higher next week.

Monday the dippers should be back in full force with accounts loaded up with cash to put to work. However, they might not show up, due to the Subprime shake up. But the action for months has been buy the dips and why not keep on doing what has worked in the past for months now.

Will the overseas Markets sell-off due to Subprime worries and put pressure on US Stocks? How about the Fed?

Nothing to worry about if your a trader. Stops take care of everthing.
Keeping TSP money in G Fund for now.

In my opinion no rate increase and they will watch the inflation wording due to the Market being nervous about Subprime.

Again, in my opinion the Boyz target is still 1560 in the S&P.

Bottom line for me next week:

The trend remains up.

I'll be trading on the long side. ( Stops in place, but not to tight )

( Buying the dips and a gap down Monday morning, if we get one )

Use care with any new shorts. ( Tight Stops )

We had plenty of selling Friday and the best the Bears could do was take it down around 2% down. Makes me bullish next week. I still think institutional guys are selling to us.

http://www.wwfn.com/crashupdate.html

( The chart above is only to show that in my opinion the money flow is in distribution from institutional folks. I have other charts to support this , but I can't show them because they are paid services.) I'm not calling for a crash. I'm Bullish for now, but cautious.

Bulls and Bears are always giving reasons why the Market goes up and down.

If they really new why would they tell us. All just opinions. The biggest BULLs put out the Biggest BULL----. The Biggest Bears put out the Biggest Bear Crap. Both are like used car salesman and trying to sell you a product. The good ones like Bob Brinker are not on CNBC. That guy is Crammer.

Give me the trend, oversold/overbought, sentiment and I'm happy. Turn off the volume on CNBC.

Therefore, I'll trade on technicals and sentiment and it's telling me now up next week. However, I have been wrong many times before and that’s what stops are for.

The smart play remains a balanced portfolio, with a dollar cost average approach every payday for most investors. This is what I tell my son and how I handle my wife's account.

But for us traders it's like watching the grass grow. Not much fun for a Fighter Pilot Divot. We must give credit to the buy and hold/DCA folks like Birchtree and Rokid. Their approach has done well, but I'm a Trader Fred / Ebbchart / sentiment survey / FundSurfer / Thunder5 kind of guy.

Again, watch out shorting next week. The Boyz will be looking for another payday!

http://xtrends.blogspot.com/

Looking forward to Divot's or other comments on my market thoughts.

After all, they are all just opinions, and 50% of them are always correct at any given time. Up or down for next week?

 

[Divot]

New Blog Post - Avoiding Distractions

There's so much to talk about:

Investor sentiment, market breadth, interest rates, subprime fiascos, initial public offerings, seasonality...

I hope I don't disappoint my fans, but I'm not going to touch most of those topics in this post. You see, I feel quite strongly - rather, I know - that only SUPPLY and DEMAND will actually affect the prices of investments.

Read the rest at my blog!
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Break break -

Robo,

Great discussion points, excellent references, and a nice mention of trading psychology. I like your emphasis on avoiding emotional attachment to an opinion or position.

Although trading is really a very human game, be careful not to anticipate the anticipators. I'm reminded of Vizzini from "The Princess Bride" (with slight modifications):

"The market's due for a bounce, so I clearly can't go short! However, only a fool would be invested with negative market breadth, so I clearly can't go long!"

Stay light on your feet, try not to over think the problem.

 

[robo]

Divot,

Thanks! "Stay light on your feet, try not to over think the problem."

Great Advice. I just read your Blog and Good trading next week.

The Qmni is red. Thought you might get a kick out of Oscar's site since your a trader. A daily read for me. He has been making great calls the last few months.

http://futurestraders.com/modules.php?name=Content

 

[Divot]

New Blog Post and fund TRANSFER

A Slippery Slope in US Markets

The best word to describe Wall Street today was "parabolic." As I discussed in yesterday's post, going long at the open with tight stops could have turned out quite profitably. Assuming you became bored around mid-day and sold before the crowds.

The big news of the day was the bullish percents. These were completely clobbered today. Whacked. Crushed. Beaten with the ugly stick. Today's declines in bullish percents would have been significant if they took place over the course of a week, but THIS MUCH in one day should cause notice.
.....
Read why I'm moving 20% into the I Fund in this latest blog post!

 

[Divot]

New Blog Post

Drag of Gravity

The title "Drag of Gravity" pretty well describes the market's behavior. It's as if all the little candlesticks were just really heavy and tired at the end of the day...

On a completely unrelated note, "Drag of Gravity" also happens to be an excellent local Phoenix band. Not appropriate for those who don't appreciate rock and roll.

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Charts and I Fund downside risk discussion follow in the rest of the post.

 

[Divot]

New Blog Post - Officially on Defense

Officially on Defense

The market is officially "on defense" as of yesterday. Both the NYSE and S&P bullish percents reversed down as seen on a point and figure chart. This doesn't mean it's time for me to do anything differently, rather it's confirmation of the market behavior I've been noting for some time.
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Charts and commentary in the rest of the post!

 

[Divot]

Why I'm Bearish (at least for the moment)

Why I'm Bearish (at least for the moment)


Lots to talk about from the past week, so buckle your seat belts and hold on. I've got a few charts for you...

Here's the bottom line up front:

• The best case scenario is that the market has established a trading range that it could bounce around in for some time. However:
• All the supply and demand indicators show unmistakable evidence that sellers are overpowering buyers on a broad scale.

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Read the rest, see the charts at my blog.

 

[Birchtree]

Good read but you may be looking at a misfire. Significant market tops do not simply happen, they usually evolve. The A/D line of the NYSE confirmed recent highs and volume patterns that imply underlying and increasing demand. Be right and sit tight. This market has contracted by $436 billion so far this year versus $600 billion in 2006.

 

[Divot]

New Blog Post (and allocation change)

The Calm Before...

Lots to chew on from a light volume week... Thanks for all the comments!

 

[Show-me]

I'm not sure I understand your IFT. You canceled your July 5th move today. With our tracker rules it will have to stand as your in the G today. Can you clarify it please.

Note: Forget I ever said anything. I am confused and you are not. Sorry.

 

[Divot]

Just to clarify the confusion -

My IFT (submitted last night) will put me 100% G as of COB today.

 

[EW_ret]

Your account post thsi morning for COB July 6th is fine. I'm talking with Show-me about your account post and what 12%ayear posted to his account. I believe Show-me meant the issue was with 12%ayear and not your entry.

Just to clarify the confusion -

My IFT (submitted last night) will put me 100% G as of COB today.

 

[Show-me]

:embarrest:WOW! My bad! You are correct, EWguy. I must have done this before the first pot of coffee. I stand corrected.:embarrest:

 

[Bullitt]

Excellent point with the low volume moves. I agree that at the end of the day, price is the only thing that makes money. A diverging MACD or drop in volume won't make a difference in price, but they are worthy to make note of. As I said before this week even began, any price moves could be erratic either way and they are not to be taken too seriously. The QQQQ's did break out this week and they are often the leader in a rally but the Volume has not been convincing enough to confirm the breakout.

By the end of next week we should have a good idea which way this market is heading.

 

[Divot]

New Blog Post - Earnings Season

Earnings Season


Last week was truly the calm before the storm, for we've now entered earnings season. This is the time every quarter when many publicly traded companies report their results - and the impact on the market is significant.

Today was a bit of a continuation of last week's quiet - take a look at the market breadth numbers to the left. Light volume, indices nearly unchanged, and breadth tightly balanced. It looks as if the big players are waiting too see how these earnings turn out before committing one way or the other.

At this point, I'm out of all the stock market funds, and I outlined in the last post my reasons why. Now my job is to identify a point to reenter the market. The worst case scenario for me would be for the market to simply drift along in this trading range. Although very playable in my brokerage account, that makes end-of-day TSP transactions a thing of guesswork. No, what I really want is for the market to establish direction one way or the other. Don't think for a second just because I'm out of the market, I'm a committed bear. I'm just as ready to put my money back to work in the market.

Earnings season should make this problem easy - because quarterly results are always overreacted to. Fear and greed make the markets. Either results are going to blow away expectations, or they will totally underwhelm (I know, that's a real heavyweight call I made there). My point is that this massive amount of new earnings data will give the markets something to digest, and I expect a trend will soon emerge. If that trend is to the upside, I will jump on and ride it!

With that being said, remember not to take earnings headlines at face value. Earnings expectations are completely artificial, and just because a company beats analysts expectations doesn't mean the stock is going higher. This is sometimes called "buy the rumor and sell the news." The headlines, the quarterly reports, and the conference calls are irrelevant. The price movement - the market's reaction - is all that matters.

Besides all the earnings releases, there's some noteworthy economic news items also due this week. Consumer credit (released today) is not a real market mover, but tomorrow's wholesale inventories, Thursday's jobless claims, and most of Friday's reports have the potential to cause a reaction.

This is a very interesting time for me to watch the markets! Tons of data about to hit the street, a tight trading channel to break out of (one way or the other), and warning signs last month on my supply and demand/breadth indicators. It's my opinion that the trend established in the next week or two will be powerful, setting the market direction for the rest of the year. Time will tell!



- Divot
http://tsptrader.blogspot.com

 

[WIND_HUNTER]

Great analysis Divot! A breakout in either direction would be nice. If not and we stay in the channel for a while. I might be on the sidelines until something significant happens. Too risky for me...

 

[Divot]

Paladin -

Spotting a point for re-entry is easy! In hindsight, that is...

But seriously, I'm looking at the following:

• Most importantly - the bullish percents need to reverse back up to a column of X's. That likely won't happen soon.
• Reestablishing an uptrend on a cumulative advancer/decliner chart. It's all about supply and demand, here.
• A peak in the VIX (above 19) would attract my attention as one of the first indicators to show, but it's not enough to jump in with both feet (or even one).
• Extremely high volume with an intraday reversal back up would elicit similar thoughts.
• I'll also watch the moving averages, support levels on the Point & Figure charts, and Fibonacci regression levels.

I hope this is enough information to satisfy your question.

 

[Divot]

New Blog Post - As Expected

As Expected


This is the kind of day that it's really nice to be out of the market (plus a couple leveraged short positions in my brokerage account.) I often say about the markets, "it doesn't matter why, but what happened." Nevertheless, today's intraday chart DEMANDS a second look - what happened just after 1 PM?
Prior to 1 PM - sure, the market gapped down - but a nice up trend was established, and it looks to me that the market could have closed even for the day. And then... our friend Ben spoke. Click the photo to link to the AP story, but I think the expression says a lot.
Today's action knocked out all of last weeks gains, taking the S&P 500 back down through its 50 day moving average.
Far more important was the internal damage to the market's bullish percents. The S&P bullish percent was down almost 2% today... which would be a bad WEEK. There's a lot of chatter lately about how large cap is supposed to be outperforming small cap. But take a look at a relative comparison between the bullish percents on the New York, NASDAQ, and S&P! There's around 50% more new sell signals (in the time period shown) in the S&P vs. the NASDAQ.
Although some might argue that the S&P will find support at the 50 day MA, the fact that demand is losing the battle to overwhelming supply tells me that the future is lower for the S&P.

Currently, futures point to a mild rebound - but the overseas markets seem to be following today's lead.

The rest of this week will be very interesting to watch. No trend has emerged as yet - a break below 1490 on the S&P would set the down trend, breaking above 1535 would set the uptrend.

Thanks for reading and emailing. More charts (beyond the 4 allowed per post here) at my blog.