Everything I'm reading this morning sez short term pullback.
I might be on the wrong side of this. Ewww!
Market Monitor from Nightly Business Report.
Show-me,
All I can say about this run is WOW! Good News, Bad News, or No News, the dippers just keep buying. Make no mistake about it, distribution is taking place. However, the trend remains up into a historical great time to be in stocks. The newsletter folks I follow remain bullish, and are still fully invested.
Sentiment Trader has the dumb money 64% smart money 38%. It doesn't matter both are making money if you are long. The trend remains up, but the VIX is warning.
Some Comments from a TA on the VIX:
The low in the VIX today near the 10 level is likely a signal that some selling and profit-taking is in order over the next few trading days.
This low level in the fear index indicates that options traders have finally gotten to the greed level where selling and fear begin. There is some valid statistical math behind the concept that volatility cannot go below a certain level. That level becomes an absolute, not relative number.
Marty Chenard stated it well when Alfred E. Neuman was seen buying stocks last week.
http://www.stocktiming.com/Wednesday-DailyMarketUpdate.htm
Friday, November 17, 2006
The housing numbers were just plain trouble, no need to mince words. The DOW shrugged it off thanks to a cigarette company (I guess if your home lose 20% of its value you will start lighting up, although I think Seagrams would be a better fix), but the underpinnings were not there for the rest of the indices and only option expiration kept the markets from correcting further. Will this all be shrugged off next week as traders sprint into the usual Thanskgiving rally? There is even talk of a new bull market, another four year cycle and that the May correction was it, no more, basta, done. OK, maybe. But if the economy is starting to slow down, as opposed to getting out of a recession and accelerating (your usual new bull paradigm), this would seem somewhat implausible. Excess liquidity has been driving the markets, that does not mean it can last if the US consumer starts a strike, even a modest one. All time highs are not supposed to be accompanied by a slacking consumer or even a less than stellar consumer. I won't argue with price, and you should not as well, but we can also remain a little more grounded than the screaming lunatics. Of course if the housing numbers were a fluke and consumers flock to the malls without a care in the world and give us the biggest Christmas season ever (that is what is priced in, there is no room for error now), then we deserve to have a rally that continues unabated.
First things first: we are due for a quick visit to the 10 day moving averages and with equity pc ratios hitting the .40's, VXO closing at 9.84 (that's the old VIX), seven days and no test, we are due. Let's see if that holds when we get there. We will evaluate after that.
If you have hung around watching this useless action, you probably noticed that they are doing everything they can to hold things up, regardless of the data. It could be called complacency, but they are not stupid (and they know you are shorting this). Big brokerages are just counting on the retail trader to buy their inventory at higher prices. Then they pull the rug and you think they have just started selling. No, they haven't. The distribution is going on everyday, it's just done in a way that keeps everyone happy and blissfully unaware. A few appearances on CNBC (with a designated hitter) and there you go, a few more millions on Monday pouring into overbought stocks.
It has been fun playing with them, but it's time to think ahead for what will be the next swing. As for daytrading, that's an entire different subject, there was plenty of money to be made either way, every day. In fact, even though the trend is up, there were great shorts, usually at the open. Short the opening bounce, cover at overnight lows and let her run into the close. Like clockwork everyday. Some just take the short and ignore the upside, since it is getting a little toppy. But not everyone has the time to play this game and this is why I also try and identify the next broader set up for the casual reader. First clue? Seven days without testing the 10 dma. That is right around the corner.
BNP is betting on a much lower dollar by early 2007 and considers any Euro dip as a buying opportunity. Their view is that the bond market is correct, not the Fed, and that we are headed for a hard landing, i.e a recession. I tend to agree and consider any long dollar trade as just that, a good trade this week, but be ready for a reversal at some point. I will update the charts over the weekend.
http://aheadofthenews.com/index.html
Tomorrow maay be ????????????:notrust:
Rum and Coke anyone.
