Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
It's just one amazing day after an other. The Dow was down over 200 within 40 minutes of the opening bell. My energy puts are doing fantastic. I entered the day with $NDX puts, but I just took profits on those. The indexes are sweeping toward their target areas at a surprising rate. Wow. Just wow.
You've probably heard the old saw about war: long stretches of unbearable boredom interrupted by brief spurts of sheer terror. That's what the market seems like these days. In spite of whatever you may read about a tame VIX, the market is knee-deep in whipsaw dust.
The tinted areas you see above are, in this young month, the instances where the S&P went flying either higher or lower in a very short amount of time. I still am slack-jawed with shock that a massive government bailout, which two months ago would have yielded a +400 day for the Dow, whithered away into nothing. FRE was down. FNM was down. So was the Dow. And the S&P. And the Russell.
Incredible.
Tomorrow is going to be gargantuan. Both PPI and Retail Sales get reported at 8:30 EST. And then Ben Bernanke is hauled in front of Congress at 10:00 EST to have a little chat about monetary policy. Do you think they'll be able to find anything to talk about?
And after the close, earnings season heats up with INTC and CSX. And in the coming weeks, day by day, the quantity of companies reporting earnings will push higher.
I'm a frustrated bear, because in spite of the continued weak market, my portfolio is at a standstill. It's going to tack a whack at energy to really push my portfolio value higher. But that's where I see the best trades right now. This is going to be a deliberately short post today (but, hey, you got two earlier), so with that, I will bid you farewell.
Judging from the pre-market action this morning, one would expect the Dow to be up several hundred points right now. Amazingly, all the major indexes are in the red. It seems that, unlike before, the US Government rushing in to the rescue isn't having the effect it did in months past. Well, it did have an effect – for a few minutes – but not the kind of giant bounce one might normally expect.
So we should open ourselves up to the idea of a continued swoon. In spite of today's choppy action, I still think the likelihood of a big bounce is very real, but as an alternate, keep in mind the large down-sloping trendlines I have drawn below. There is the prospect of the Dow and the S&P continuing to push there way to these levels (Dow about 10,700, and S&P about 1,170).
Update: Soon after I made this post, a reader sent it his own chart, which seems to line up with my own S&P projection.
Just as people describe mid-March as the "BSC Bottom", I think what we saw Friday will be remembered as the "FRE/FNM Bottom." Thanks – once again – to a government-orchestrated bailout, the market is getting ready for a major bounce.
I'm glad to see this for a couple of reasons. First, it makes sense from a charting perspective (as I wrote this weekend). And I like it when things make sense. It appeals to my rationality. And I'm serious about this. It would actually be frustrating and confusing for me if the market had kept dropping on Monday. We were so due for a bounce.
Second, we bears need a lift in this market. A lot of sectors are way too beaten down to be attractive shorting opportunities. The same certainly applies to stock indexes in general. I'm watching the @ES0809 right now (it's 4:15 in the morning), and it just keeps leaping higher (currently up about 19.75). I would like to see it up about twice that much (getting back to about 1,270 on the S&P 500) before I even toyed with the idea of an index put. And this is a major intermediate bottom, the bulls might enjoy another 100 points or so tacked on top of that before we start to tilt down again.
What is very clear now is that mid-May was a gift. Although I was griping, agonizing, and whining about it at the time, we simply didn't know how good we had it. If you look at a daily chart of the S&P, the huge rise from mid-March mid-May was a gift straight from heaven. In retrospect, it obviously would have made sense to run around like mad and short every non-energy stock in existence, because it was a perfect setup for the bears. It just goes to show you what a blessing in disguise looks like.
The market should go up this week.
That's what the charts say. That's what the explosively higher volume on certain ETFs say. That's what most market observers, bull and bear alike, say. Even some of the most wild-eyed armageddon-prepped bears that I read concede that it's time for a bounce.
That's precisely what worries me. Any time most people agree on what should happen next, just the opposite occurs. There's nothing that gives the market more jollies than proving as many people wrong as possible.
All the same, it would be pretty easy to conjure up some things lining up to create a substantial, multi-week push higher, such as:
One other possibility (but certainly not the only other one) would be for a single, one-day shakeout that pushes the $VIX way up into the mid- or high-30s, thus dispensing with the excuse that everyone keeps trotting out for this not being a bottom – – – fear hasn't been high enough.
I've had surprisingly little time this weekend to look at charts, so I decided (here, at 3:30 a.m. on Sunday!) it would be better to put together a short post rather than just having nothing out there. So here goes.
The "one missing piece", as I said, that everyone keeps seeking is a really high $VIX. We are at nearly double the levels seen in mid-May, but people want (to borrow a title from an early 1990s drama) Thirty-Something on the VIX. Paradoxically, people want to see rampant nervousness so that they can rest easy.
I mentioned recently that I think the Dow is going to make a pretty major bounce at somewhere near the 10,700 area. We are awfully close. Friday put us into the 10,xxx camp, and the huge intraday rally (taking the Dow from -230 to positive territory in less than an hour) indicates to me the pent-up bullishness lurking under the sheets.
I don't show volume in many of my charts, but this was knocked me over for its statistical weirdness. I noticed that for every day last week, particularly the final four days, the volume on the IWM was almost identical. Not just sort of close. But borderline exact. Tuesday, Wednesday, Thursday, and Friday all had volume of 131 million and change. It's just weird. It's like walking into a class of students and finding out that half of the boys are named Fred. I don't draw any conclusions from this except for the fact that there is a lot of high-volume churn going on in the market as a base attempts to get hammered out.
Oh, and then there's the big post-close news of the week: the shuttering of Indymac Bancorp. Just look at this chart – – from the mid 40s to $0. Obviously the elimination of a stock whose market cap was only about $25 million is inconsequential in the numeric scheme of things, but the psychological effects of the third largest bank closing in the U.S. will be seen on Monday.
If the markets do bounce, I think the Russell will bounce the strongest. That's where I intend to stake out my trades, should strength take place.
Virtually all my short positions are in energy-land, and in fact I did buy five different call positions on Friday. There are still a handful of interesting charts on the short side, even with the market at these levels. PG is one of them.
I mentioned the strong ETF volume. Look at UWM, and how strong the volume was at the mid-January and mid-March lows. We can see a similar surge in volume here.
Even moreso, look at SSO, whose volume was a new record!
I guess I'm most bearish on energy, which is why I've got a ton of DUG. I am delighted at the price behavior above its former resistance trendline.
And so I'm going to leave it at that. The upcoming week is going to be a barnburner. We've got a slew of major economic reports. Testimony in front of Congress by Bernanke. Earnings from a ton of companies, including a little outfit named Google. And all this with a backdrop of a market battered to pieces over the past 2 months and FRE/FNM on top of it. Hold on to your hats!
