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Today's post will be in sharp contrast to the "bear worries" post I did last night. I do think there is still some hope for us beleaguered equity bears, in spite of the fact that the apparent utter collapse of fiscal cliff talks has had virtually no meaningful effect on the market. I would have fully expect the S&P to be in an unmitigated free-fall by now, particularly given Boehner's "Up YOURS!" press conference today.
The fact is that the NASDAQ Composite is in a different world; the wedge is broken, and it's clinging tentatively to its former support level. Don't be surprised if the market does, in fact, head into a free-fall, surprising all the numb-nuts over at CNBC.
The Russell 2000 banged out a very nice doji today.
The S&P 500 – – which, against all sensibilities, is near a recovery high – – is still beneath its broken intermediate trendline. I will say that even a big plunge in the market probably won't get us anywhere below the lows set last month.
Another tally-mark in the bears' column is the Utility index, which is starting to fall away from a well-formed top.
One big question mark is the miners. If we can manage to break the long-standing trendline, which goes back to the 2009 bottom, it will be a jumping-up-and-down sell signal. That's a pretty big "if", though, since it has reliably bounced off this line in times past.
I leave you with the closing few minutes of the Young Ones series. This, my friends, is how the Cliff is going to end.
Such is also the case on the European and Chinese
Financials ETFs (compared with the SPX), as shown on the following Daily ratio charts.
Perhaps the noxious gases from
the "Fiscal Cliff" discussions are beginning to have an effect,
as traders take profits, before the U.S., potentially, goes over the cliff at
the end of this month. Both political parties seem as far apart as ever, with no
resolution in sight.
Years ago, when I was running Prophet, our most important commercial client was optionsXpress, co-founded by David Kalt. Once David made his fortune selling OX to Schwab, he went off and started something totally different: The Chicago Music Exchange. I was pleased to see the “100 Riffs” video that’s making the rounds was from that very store. Check it out!
A: Nothing. It’s what’s wrong with peoples’ expectations and perceptions that is the problem.
Once again I’ll quote NFTRH 208 from October 14 (that edition and a sample interim update can be reviewed here: Samples), not to be an ‘I told you so’
wise guy (I didn’t definitively tell anybody anything), but rather to
highlight how important sentiment is to this sector and also I suppose
to toot the horn a little with respect to good risk management.
“Sentiment is over bullish in the precious metals.
Public opinion is over bullish, Hulbert’s HGNSI is over bullish and the
CoT data show that the little and big speculators are over bullish.
This should be cleared out before we renew our bullish enthusiasm on a
risk vs. reward basis. Broad stock sentiment is in a better state than
in the precious metals. It is mostly neutral.”
The over bullish sentiment in the precious metals has been ground
down to a current state of numbness at best, and full out despair at
worst. Actually, it is the reverse; a state of despair is best for a
This has been a very impulsive move up from the low last Friday. Statistically yesterday should have been a retracement or consolidation day but instead we saw a strong move up and SPX punched through the daily upper bollinger band and closed well above it. So where does that leave us this morning?
These strong punches above the daily bollinger band are relatively rare, but they still happen fairly regularly. Since July 2011 there have been five previous instances where this happened as I have marked on the chart below. Of these five , three were close to significant highs but not one was immediately followed by a retracement of any significance. Three saw flat closes the next day with the other two closing significantly in the green. Historically there is therefore no reason to think that we saw any kind of significant high yesterday. Here's how that looks on the SPX daily chart: