These Breadth Charts Say We Are Due For A Bounce
These Vehicles Are Ticking Time Bombs
A Gap Down With Huge Consequences
Saturday, January 9, 2016
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Read This Before You Call It Quits
These Breadth Charts Say We Are Due For A Bounce
These Vehicles Are Ticking Time Bombs
A Gap Down With Huge Consequences
These Breadth Charts Say We Are Due For A Bounce
These Vehicles Are Ticking Time Bombs
A Gap Down With Huge Consequences
Thursday, January 7, 2016
Market In Turmoil
The market is off to a rocky start this year, in the last six days, the S&P500 is down nearly -7%, the Russell 2000 -8.5%, and the Nasdaq -8%.
The news of the day again was China and billionaire investor George Soros, who said we might be in a 2008 situation again. But the fact is that the average intra-year decline in the S&P500 in the last 35 years is roughly 14%. Until we breach that mark then this all part of the game.
With today's near 400 point decline in the Dow Jones, CNBC and Bloomberg both have a "Market in Turmoil" scheduled for tonight.
More importantly, breadth in the short term is getting a little stretched to the downside that might lead to some short-term respite (3-5 days).
Here are the stretched breadth charts:
The news of the day again was China and billionaire investor George Soros, who said we might be in a 2008 situation again. But the fact is that the average intra-year decline in the S&P500 in the last 35 years is roughly 14%. Until we breach that mark then this all part of the game.
With today's near 400 point decline in the Dow Jones, CNBC and Bloomberg both have a "Market in Turmoil" scheduled for tonight.
More importantly, breadth in the short term is getting a little stretched to the downside that might lead to some short-term respite (3-5 days).
Here are the stretched breadth charts:
SP500 vs. NYSE, NASDAQ, AMEX, one-day decliners.
We saw a significant spike in stocks down 4% or more today; spikes tend to be short-term positive.
We also saw a large spike today in stocks down 13% or more in the last 34 days; spikes tend to be a short-term positive.
The percent of stocks above their 20-day moving average is also pointing at a dead cat bounce, unless of course we crash, and that rarely happens.
We saw a huge spike in 1 month fresh new lows; again spikes usually mean short-term exhaustion.
The same can be said for 3-month fresh new lows.
The percent of Russell 3000 stocks above their 10-day moving average is also at exhaustion levels.
The percent of S&P500 stocks above their respective 3,5 and 10-day moving average is singing the same tune.
I want to make something clear; these short-term breadth extremes normally are short-term positives that produce 3-5 days dead cat bounces. Then we usually get a retest of the price low, and that's when might see some positive divergences that may lead to a sustain bounce.
4%, 13% breadth charts courtesy of Pradeep Bonde
These Vehicles Are Ticking Time Bombs
The market has started the year under pressure. China has been a mess and now we hear that billionaire trader George Soros thinks that we might be in a 2008 situation all over again.
During volatile times, a lot of investors tend to gravitate to a few volatility vehicles; TVIX, UVXY, VXX. These vehicles are complicated, and most investors don’t understand them. The most frequently asked questions are; why is the VIX up 10% and the VXX is only up 2%? Now and then you can and will make a significant amount of money in them, but these vehicles are ticking time bombs.
Below is an article from September 2015 that gives you a thorough explanation why you are better off staying away from being long these vehicles for too long.
Over time, this cost adds up, and is the primary reason VXX is down an eye-popping 99.6 percent since its launch, and down significantly in every year since inception. Fluctuations in the underlying VIX Index matter, too, but over longer-term horizons, contango are what’s been killing returns for the ETN.–ETF.COM
A perennially poor performer, VXX and similar products such as the ProShares VIX Short-Term ETF (VIXY | B-61) and the VelocityShares VIX Short-Term ETN (VIIX | B-62) have lost tremendous value over virtually every time period.Since its inception in January 2009, VXX is down 99.6 percent; from a year ago, it’s down 2.8 percent; and year-to-date it’s down 15.1 percent.
Read the rest of the article here
Read the rest of the article here
Wednesday, January 6, 2016
The House Always Wins
WYNN Resorts to me is a stock of interest here in the short term. The issues that company has faced and his facing in Macau are no secrets; the stock has suffered dramatically because of Macau. Since hitting a high of $250 in March of 2014, it's been all downhill since.
Things got interesting in December when WYNN was removed from the Nasdaq 100, probably due to the stock's performance, but at the same time, Stephen Wynn (CEO, etc.) bought 1 million shares in the open market.
The indices have a habit of removing stocks after the stocks have suffered huge drawdowns and include them after years of serious outperformance, think of Apple's recent inclusion to the Dow Jones in March of 2015. Many stocks that get booted from the indices perform better immediately after than those that replaced them in the index.
Bottom line, WYNN is a long candidate as long as it stays above $64.
Things got interesting in December when WYNN was removed from the Nasdaq 100, probably due to the stock's performance, but at the same time, Stephen Wynn (CEO, etc.) bought 1 million shares in the open market.
The indices have a habit of removing stocks after the stocks have suffered huge drawdowns and include them after years of serious outperformance, think of Apple's recent inclusion to the Dow Jones in March of 2015. Many stocks that get booted from the indices perform better immediately after than those that replaced them in the index.
Bottom line, WYNN is a long candidate as long as it stays above $64.
Something Positive Amidst a Down 200 Point Day
Many blogs have written about how horrible breadth has been for the last year or so (including this one). And, how F.A.N.G (Facebook, Amazon, Netflix, Google) single handily kept the SP500 afloat last year, which is true. However, today the Russell 2000 traded down to the August 2014 panic lows but the amount of stocks trading above their 200-day moving average is well above the August levels as you can see in the chart below. This could be viewed as a positive divergence.
Monday, January 4, 2016
A Gap Down With Huge Consequences
Today's breakaway gap to the downside will more than likely be the talk of the town as the week progresses. If you remember, the first trading day of 2013 the SP500 gapped up 1.89% and never looked back, that gap is still unfilled. Many might assume that today's breakaway gap down might have the same effect as the 2013 gap up, but obviously in the opposite direction. Regardless if that is the case or not, I believe that today's gap will be very significant going forward and will more than likely act as stiff resistance in the days and weeks to come.
2013
Today's Gap
The Market Starts The Year Oversold
The SPY (SP500 ETF) started the year down 1.70%, and it immediately triggered its first oversold reading of the year. As you can see in the chart below the average amount of SP500 stocks above their 3,5, and 10-day moving average is at a level that has historically produced bounces. These bounces have allowed opportunistic traders an opportunity to make some money on the long side and have given others better prices to sell into days later.
Welcome to 2016 and our first oversold reading of the year. We will all be watching to see if this oversold reading acts the same way it has nine out ten times over the last couple of years--with a bounce.
Welcome to 2016 and our first oversold reading of the year. We will all be watching to see if this oversold reading acts the same way it has nine out ten times over the last couple of years--with a bounce.
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