Play it Again Sam

If you read this blog regularly, then you'll recognize a chart pattern that has been repeating itself in the Seven Sentinels since early May. But before I get to that, let's see what drove the markets today.

First, it was OPEX, which can be a guessing game anyway. And after the market tipped its hand at the open with a gap down, the market never looked back. Economic data didn't help either. The preliminary Consumer Sentiment Survey for July from the University of Michigan dropped to 66.5 from 76.0 in the prior month. This was much lower than the forecast 74.5. The Consumer Price Index (CPI) for June decreased 0.1%, which was in-line with estimates. But the Core CPI increased 0.2%, which was a bit more than the consensus of 0.1%.

Earnings have been decent so far in the early going, and this week there were 23 S&P 500 companies that reported earnings. Of those, 19 reported better-than expected earnings and 15 beat revenue estimates.

But Google reported earnings that were a bit below expectations, even though it grew revenue a more than expected.

Personally, I think the market is just looking for excuses to take profits.

So let's go back the repeating chart pattern I had mentioned early on. In particular, BPCOMPQ is my focus. Here's the charts:



When the market dives as hard as it did today, you can usually expect to see some damage to the charts. NAMO and NYMO are certainly no exception and have both flipped to sells.



Same with NAHL and NYHL.



Two more sells here with TRIN and TRINQ.



While I'm still bullish overall (let's face it, this volatility seems to be par for the course now) as sentiment is generally bearish, the one chart that makes me take pause is this one. Since early May we've seen BPCOMPQ step ladder down with the market. And I'm concerned that it's about to take another dive now. The question is, will we make a lower low? We still have a ways to go to get there after the recent rally so it's too early to get overly concerned, but we need to keep in mind that more selling may yet occur before we bounce again.

This market is making wide swings, which can be devastating to our accounts with one misstep.

But we do remain on a buy as the SS have not yet rolled over. But next week the bulls need to take control again, hopefully before too much more damage is done.

As usual, I'll be posting the Tracker charts over the weekend. See you then.

 

[crws]

I found this point of view quite reasonable.
http://online.wsj.com/article/SB100...190202.html?KEYWORDS=The+Yo-Yo+Market+and+You
The Yo-Yo Market and You

The stock market will suffer dizzy spells until the fog of monetary policy uncertainty is lifted.


By ANDY KESSLER
Bull markets, it is said, climb a wall of worry. Smart investors buy in early when worries about profits or inflation or wars scare away the faint of heart. Latecomers then bid up stocks as each worry becomes unfounded, until there is nothing left to worry about. Once there is only good news, the market peaks as there is no one left to buy.Bear markets, on the other hand, fall into what I like to call the pit of doom. Forget about worries—actual bad stuff happens, until nothing bad is left to happen and the market bottoms as there is no one left to sell.
From early May through last week, the market dropped 1500 points into the pit, on the backs of gushing BP oil, riots in Europe, a 30% drop in pending home sales and the news that maybe your next door neighbor is a Russian spy. But now we've seen 680 Dow points added over seven straight up days before a slight decline yesterday. What the heck is going on?
Call it the yo-yo market—from the top of the wall to the bottom of the pit and back—and you better get used to it. It's hard to tell which market moves are real and based on prospects for better profits, as opposed to moves that are driven by all the extraordinary government measures to prop up the world economy. Until a few things are resolved, you'd better learn the yo-yo sleeper trick—that is, keep spinning at the bottom without going up.

ZIRP: We live in abnormal times. The Fed is running what is essentially a zero interest rate policy, aka ZIRP. The stock market lacks a compass, a true north, to find its way.
Good news, like the private sector adding 80,000 workers in May, or container shipping up 12% over last year, is truly good news. Bad news, like Portugal's debt downgrade or a 10.8% drop in auto sales in June, suggests the economy is slowing. No wonder the market can't figure out which is the dominant trend. And so it goes up and down, up and down.


Until public policy returns to some semblance of stability, or at least more certainty, get used to 1000 point swings. Get used to the fans of gold and canned goods leading us to the pit of doom one week and bullish optimists up the wall of worry the next. For me, I like to get my bad news over with.
I'm waiting for Spain to melt down the World Cup to pay off its debts, or more seriously, real defaults from Spain, Greece and maybe California and New York. Let's get on with it and put the structural reforms behind us. That would be a true buy signal.

 

[coolhand]

That was a good read. Thanks for posting it.

I found this point of view quite reasonable.
http://online.wsj.com/article/SB100...190202.html?KEYWORDS=The+Yo-Yo+Market+and+You
The Yo-Yo Market and You