Is it Different This Time?

The S&P is getting closer to resistance at the 1100 area, but did not make it there today. Another 1% higher and it'll hit the top of this channel. Then what? I certainly don't trust this market. Even if the S&P manages to get above resistance and close there, that doesn't mean a head fake might not be possible. And the volatility is punishing to us TSPers if we get on the wrong side of these trades. I still believe the flash crash we saw last month, along with this volatile action is a warning sign.

I'd prefer to wait until there is blood in the streets before I make another entry. As it is the Seven Sentinels did not trigger a buy signal today, but then technically it's still on a buy. I'm just not used to getting a buy signal and then see it immediately followed by 5% losses.

Here's the charts:



Looks good here, two buy signals. Highest levels we've seen in some time.



Two buys here too.



Two more buys.



BPCOMPQ remains on a sell, but is getting close to flipping to a buy.

The last two times this system triggered a buy I got punched in the mouth. To say the least that's frustrating. So I won't be buying this market on a buy signal in this volatility. I'd much prefer to see some blood and then jump in based on other indicators such as sentiment.

See you later this weekend.

 

[Bullitt]

I hear ya, but this time I like the fact that NYMO, NAMO and the HL indicators are pushing over the zero line.

 

[Boghie]

CH,

Does the system require on G/S holdings - one at a time?

The S is the most volitile fund we can invest in. It is probably also the one that gets gobsmacked the most by tax increases. Maybe smooth out the equities side by a mixed allocation...

SS seems to have been on target, its just hard to hang on...

 

[crws]

I don't blame you at all.
I am nervous about being 80% in for triple witching week even though there has been a definite history of 69% outcomes to the upside, and historical downside risk appears only about 3%.
If it gets nasty I have no problem pulling the plug. Lately, a weekend has been a lot of time for trouble to brew. i.e. North Korea still after the limelight.
I wonder why there was no market reflex when Japan announced they had to crank down the spending not to end up like Greece, but when Hungary, of all countries, tried to manipulate the IMF by screaming default, the market had a cow and collapsed.
The Japan story is what worries me going into next week, that maybe they will broadcast louder, since there seemed to be no effect!
I highlighted the comments I wanted to selectively hear on the below snippet... lol
PS- the June 2010 Wells Capital Management pdf in one of the comments links below is chock full of info... https://www.wellscap.com/research_library/emp.html

Article:
http://online.barrons.com/article/SB127605459202003151.html

Calling a Bear a Bear
Claiming the stock market is merely correcting looks like an error.

THE SORT OF MARKET that dare not speak its name -- bear -- is being mentioned increasingly in polite company.
It's been a few weeks since this column asserted the trend had turned lower ("A Bear Market by Any Other Name," May 21.) If anything, the tide still is moving in that direction even more strongly.
While the major stock averages aren't down the requisite 20% that conventionally defines a bear market, the odds of the current decline stopping short of that mark aren't great.
According to Bespoke Investment Group, there have been 58 "corrections" of 10% or more in the Standard & Poor's 500 since 1927. In 33 cases, the corrections stopped short of the 20% bear market threshold and the market went on to higher highs, while 25 times they grew into a full-grown grizzly.
But in the 32 instances when the market has dropped as much as this one has -- 14.4% from the April 23 peak through Monday -- the outcome has been heavily weighted to the losing side. Only seven times drops of that size stopped short of the 20% bear mark. In the 25 other times the decline extended to 20%, the average bear market decline was 35.5%.
As pointed out in that aforementioned column from last month, Dow Theory Letters' Richard Russell was unequivocal in urging his subscribers to get out of stocks. And in his latest Remarks, the dean of market technicians is even more adamant. After listing a litany of bearish technical indicators, he concludes;
"So all in all, I'm convinced through many of my studies that the top has been put in and the primary bear trend is again in force. Remember, the 14-month counter-trend advance served to hold back the bear forces, even though the bear pressure had been building up. For this reason, I'm afraid of what might occur in the weeks and months ahead. This, even though I believe a tame period is overdue."
On the latter score, Market Semiotics' Woody Dorsey proprietary sentiment readings point to some "upside tries" ahead. His Semiotics Sentiment hit an absolute 100% at the peak in late April, but has tumbled all the way to 1% in the latest reading. That could point to a bounce into June 18-23 before giving way to the Summer Bummer he's been predicting for months. For the longer term, Dorsey remains steadfastly bearish, calling from the next buying opportunity in 2012 and an ultimate "secular buy" in 2015-16.

• • 01:34 pm ET June 9, 2010 Michael Schneider
    There are positive signs that go against some of the analysis here including the strong growth in Chinese exports which was in the news today. Wages are also rising in China. In the US oil demand has been rising a bit, utility energy use is higher and the bank panic of last year is pretty much over. I suspect we have a correction in a bull market combined with a bit of seasonal selling and aftershocks of the great panic in the financial sector. There is no big surprise in the slow recovery.
    wrote:
    • Link
• • 02:04 pm ET June 9, 2010 Jonathan Hains
    It is difficult for me to conclude that we are in other than a LT Bear Market despite the rally since March 9, 2009 given that deflationary forces continue to be the global rule rather than the exception.
    
    Indeed, despite massive administration of monetary and fiscal stimulus, the patient does not seem to be getting much better, only that the hemmorrhage has been staunched.
    wrote:
    • Link
  • 02:53 pm ET June 9, 2010 Michael Schneider
    Jonathon Deflation is a concern but most of it seems to be a correction of excesses-- note that oil prices are down considerably from their all-time high but they are still much higher than they were say 10 years ago (same with copper, silver, etc.). Agriculture commodities rose alot a few years ago because of floods, drought etc. but those were aberrations from normal crops.
    replied:
    • Link
    
    
• • 03:43 pm ET June 9, 2010 Leigh Johnson
    Wednesday, June 9th, Barron's has two blog-stories suggesting a BEAR trend.
    
    For a contrast, Paulson's (Wells Mgt) June release paints a brighter FUNDAMENTAL basis:
    https://www.wellscap.com/research_library/emp.html
    wrote:
    • Link
• • 11:55 am ET June 10, 2010 Stephen Wilson
    Randall, much as I value your market insight, I'm afraid you've got this one all wrong. The signs of economic growth are just too pervasive to deny. With this economic backdrop, I can't see the present market contretemps as anything but a good opportunity to add to my equity position.
    wrote:
    • Link
• • 12:39 pm ET June 10, 2010 Stephen Wilson
    To elaborate somewhat on my previous post, one of the best indicators of the strength of this recovery is the much misunderstood employment report. The second derivative tells all: the 12 month change in year-over-year payroll employment growth now exceeds plus 4%. That has happened less than 10% of the time in the past 60 years and has almost universally been associated with bullish stocks. The most glaring exception was 1984.06, when the bond market had sharply sold off. Check the charts: there were few better buying opportunities in bonds while stocks rocketed up over 23% in the next twelve months.
    The folks cited in your article may or may not eat their own cooking. For their financial health, I hope they avoid it.

 

[J-Trader]

Coolhand, I urge you not to give up on your system. I'm saying this for several reasons. No system is perfect, but if it works more times than not and is properly back tested (like I'm assuming yours is), then you should ALWAYS follow it. No exceptions. You might likely be kicking yourself in a few weeks when we're approaching 1150 and you're sitting in the G.

Additionally, 2 systems I try to follow flipped to buys in the last few days. Not that my systems are fool proof, but that should give you some encouragement.

 

[coolhand]

Coolhand, I urge you not to give up on your system. I'm saying this for several reasons. No system is perfect, but if it works more times than not and is properly back tested (like I'm assuming yours is), then you should ALWAYS follow it. No exceptions. You might likely be kicking yourself in a few weeks when we're approaching 1150 and you're sitting in the G.

Additionally, 2 systems I try to follow flipped to buys in the last few days. Not that my systems are fool proof, but that should give you some encouragement.

Hi Frorule,

I'm not giving up the SS. Far from it actually. I just think the current market environment is too fast for the SS and our TSP accounts. And I also think there's a very good chance we make another scary shot down. But the market makers and big money will do everything they can to fool the most number of people, so while a lot of buy signals may be getting triggered here it may just be to lure in the bulls before they pull the plug again.

FWIW, I think sentiment is very important right now. That may be key as to when to buy this market.

 

[Boghie]

CH,

It might be that da'Boyz have already gamed the system and are starting to buy back in. They don't want the little people to panic - they just want them selling low and buying high. Thus, a 15% correction might be just right

With the crappolla that is scheduled to happen the only way da'Boyz will make money is by trading within a range. Another collapse helps nobody - and, we are still way down from the high point. We have to grow the S&P by 42.5% to reach the 2007 highs. Lots of space for a trading range. Why drag it down with panic selling?

 

[coolhand]

CH,

It might be that da'Boyz have already gamed the system and are starting to buy back in. They don't want the little people to panic - they just want them selling low and buying high. Thus, a 15% correction might be just right

With the crappolla that is scheduled to happen the only way da'Boyz will make money is by trading within a range. Another collapse helps nobody - and, we are still way down from the high point. We have to grow the S&P by 42.5% to reach the 2007 highs. Lots of space for a trading range. Why drag it down with panic selling?

I'm not predicting a crash. But the pieces may be in place to have one should the EU start to default and trigger a domino effect.

But forget about crashes for the moment. I'm only saying risk is quite high and the action fast. I'm sitting tight for now until this market proves what it's going to do. We haven't even closed above resistance yet on the S&P, we're just now approaching the top the channel again.

Place your bets everyone. Your guess is as good as any right now.