I really like the style of the David Singer’s handwritten annotations of this chart:

>

SPX Annotated
click for ginormous chart
annotated-spx

PDF: DS’ Annotated SPX

>

Any thoughts on this ? I think stylistically its fresh, and David has been pretty sharp calling the very short term squiggles . . .

Category: Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

40 Responses to “The Annotated S&P”

  1. David SInger says:

    This chart is interesting because it can be used to support many theories…

    My own personal theory as to what will happen, can be seen by using this chart with the chart attached below… The thesis is that just like the % of S&P 500 stocks over 200 day ma led the SP 500 itself down in July 2007, it seems that the % of S&P 500 stocks over 200 day ma, could be leading them higher here. IAs you can see the S&P 500 itself is still fairly low on the chart, while the % of S&P 500 stocks over 200 day ma is already at 457, meaning there isn’t much further it can go to the upside.

    That means this chart could be used to support the following thesis:

    The market continues to go higher and eventually fills the “Lehman gap” up to the high 1100′s, low 1200′s, but that has to be on weakening overall strength and breadth because the market has shot up so insanely already and like I said 457 of 500 are already above their 200 day ma’s. That area is also the neckline that was penetrated long ago and is severe resistance. By that time, the overall rally will be some 85% off the lows and almost everyone will be sure that this is a new bull market. Picture the atmosphere now, but up another 200 points on the S&P. Those 200 points will be the public finally coming back on board as the message that recovery is here gets filtered into everyone’s psyche. As you have noted, the professionals are “all in”. As we move up, the public investor gets in just in time for the market to begin moving lower again in earnest…

    Its just a theory, but….

  2. ben22 says:

    David,

    I think this is very well laid out. Simple and to the point and very similar to how I imagine things can play out. I agree also with the idea that the market has been liquidity driven and today that seems to be the only credible argument I can find for why we still can move higher, into the 1,100-1,200 range you mention. Also another reason not to be too short if that’s what you are trying to prepare for. It does also seem like this rally has one more final extreme to the upside in sentiment as recently there were some extremes in some of the surveys but at the slightest pullback it would reverse quite quickly.

    Perhaps as we get closer to the announcement of Q3 GDP there will be more expectation of a + print and that could provide the fuel for the above to occur, despite the fact that a + GDP is not a promise of the end of our troubles or the recession. Still, I’m sure many will use that as the final confirmation that the recession and in fact any serious threat to stocks are gone. Time will tell.

  3. Mannwich says:

    Sounds plausible to me, but to me, there are a couple of caveats:

    (1) How high can oil go without blowing up the economy, and eventually the markets again? $100/barrel, $150/barrel? I may be wrong, but I don’t think so.

    (2) How long can the Fed afford to keep debauching the dollar in their efforts to reflate the markets and economy without it blowing up in their faces?

  4. Stuart says:

    It’s all in the Fed’s OMO purchases of Treasuries and MBS with the PDs then ramping the futures. Throw in non-stop MSM/CNBC pumping = sucking in the sheeple. The market breadth is fugly and insiders are selling into it en masse. These Fed purchases are directly correlated since March with this chart. Is BB telling the truth when he jawbones about ending these purchases in October. How this chart would look like for the next few months is not difficult to guess.

  5. Tom K says:

    I don’t see any special insight here except a ‘momentum begets higher prices’ argument.

    There are two seemingly contridictory axioms repeated by market pros: ‘the trend is your friend’ and ‘beware of crowds’. Most folks who practice any sort of market timing usually identify with one of the two camps; trend followers or contrarians, but usually not both.

    My timing strategy is to always follow the trend, but reduce exposure when sentiment is falling from levels of over optimism. That’s exactly what we’re seening today.

    Predicting the direction or level of market prices is a fools game. However, I believe there are good risk measurement methods, and when combined with simple trend indicators, it is possible to significantly reduce portfolio volatity and drawdowns without sacrificing long term returns.

  6. dougc says:

    looks like the index won’t significantly correct until the % over 200 day ma falls and fails to confirm retests of the highs. Probably could get confirmation with the accumulative A/D. The game isn’t over until the smart money sells to the masses, unless a black swan appears.

  7. Myr says:

    “The strength appears liquidity driven and might indicate the *initial* strength and thrust to propel the indices to much higher ‘nominal’ levels.”

    We’ve already seen the “initial strength”…the S+P is already up 54% since March! Now is the time to look for the exits as this countertrend rally is clearly in it’s final stage. The rally has not been driven by “liquidity.” It’s been driven by a natural temporary reversal of the extreme negative sentiment we saw in March. The pendulum has swung virtually all the way to the other extreme now and the bear is just about set to re-emerge. It’s time to keep a very close eye on internals…when the momentum wanes it’s time to get very short again and then go back to sleep for a year. I’m expecting the top to come within the next month at a price level around 1050 in the S+P. This next downward leg will take us to new lows, but it will take some time for the downward momentum to gain strength, but when it gets going it will shock us all.

    The bottom line is that we’ve done virtually nothing to lower the amount of debt in the system. We can not support that debt and that ugly truth will become evident to all soon enough.

  8. PDPotomac says:

    Its an ascending triangle with lows at 666 and around 875 with a breakout at 950 and no retest. Then another ascending triangle with lows at 875 and 980 with a recent breakout at 1010 very late the formation of the triangle. Historically ascending triangles that breakout late in the formation will soon turn into a failed breakout. I look for something bad to happen really soon. The only caveat is that whoever has been gunning the SP futures continues to be successful. The fix could be in for awhile.

  9. Christopher says:

    No market manipulation going on there….

    Like mannwich said the other day….”fundamentals don’t always matter, but when they do, they matter a lot”….or something to that effect….

    To my mind, all it will take is just one….

    One big hurricane in the wrong spot, one big bomb in the wrong spot, one big bank to push it too far, one small supposedly inconsequential EU country to belly up, one important person gets the flu and dies….

    Dominoes.
    http://www.youtube.com/watch?v=Hgtekdw1eyo

  10. Christopher says:

    PS

    That’s a stunning chart.

    And while I agree that is there plenty of room for SPX to fill upwards….look what happened shortly after the last time the SPXA200 was at these levels.

    Don’t let the smooth taste fool ya…..

  11. Marcus Aurelius says:

    Stuart Says:

    It’s all in the Fed’s OMO purchases of Treasuries and MBS with the PDs then ramping the futures. Throw in non-stop MSM/CNBC pumping = sucking in the sheeple.
    ________

    ‘zactly.

    There has bee no recovery in any segment of the economy. There has been plenty of pumping — like every other regulation on the books, those governing the function and scope of OMOs have been deep-sixed. Primary dealers have not only been bailed out, they have been handed the opportunity to control the stock markets. As soon as the taxation-to debt creation cycle has come full circle (and the bill for all of this comes due), we will see the mother of all economic implosions.

  12. swood says:

    Hey Barry. Why do we always have to get your stock market predictions from other websites such as Tech Ticker that’s listed above? Would have never known about your thoughts without being redirected to another site. I’m not talking about your March call. I missed that too because I don’t frequent that site. Would appreciate hearing how you feel at present since this is your blog and I come to your site everyday in the hope of getting a better financial education. A quote that took almost everyone by surprise a few months ago was when you mentioned offhand that you were invested at 70-30 and then a month later at 60-40. Wonder where you are now? The vast majority of your articles are bearish, yet you still are on the bullish side. Don’t get it. Seems like I learn more about your calls whenever you go on Tech Ticker.

    ~~~

    BR: You need to get a better RSS feed (or look into the Video Tab occasionally)

    I posted the Tech Ticker interview as it went live here on Friday:
    http://www.ritholtz.com/blog/2009/08/professionals-are-buying-the-stock-market-rally-are-you/

    And the March ’09 call was also posted: Bear Market Rally
    http://www.ritholtz.com/blog/2009/03/bear-market-rally-3/

    As was the August ’08 “Sucker’s Rally?”
    http://www.ritholtz.com/blog/2008/08/suckers-rally/

  13. NakedHedgeFund says:

    Interesting chart…. what a ridiculous swing move. … I wish the chart had a longer period of time

  14. wunsacon says:

    Same observation here as swood.

  15. Myr says:

    swood says:

    “Would appreciate hearing how you feel at present since this is your blog and I come to your site everyday in the hope of getting a better financial education…The vast majority of your articles are bearish, yet you still are on the bullish side. Don’t get it.”

    I have to agree with you. I’m not sure how Barry has positioned himself. I would love to see some clear regular posts on his view of the market and how he’s positioned himself. I do visit the site everyday and I don’t know if he’s long or short. I do know that he thinks this is a counter-trend rally and that he’s been long tech.

    ~~~

    BR: I post just about every interview I do (See the video tab)

  16. call me ahab says:

    quite the mountain range on the MACD- using that as your only tool the trigger line crossed in January- i wonder what use it is on this chart-

    any takers on that question- what would be your purchase decision based on the January MACD buy signal on this chart???

    possibly just there to show the change in momentum- presaging the ultimate reversal-

    I think more charts thrown up for analysis would be educational and entertaining- w/ no notes or anything- so the posters on this site can debate what is happening in the chart-

    then BR can close out the post w/ his 2 cents-

    hmm . . .sounds cool- and I am always more than willing to hear what others have to say-

    as I’ve said before- i am always learning

  17. Pat G. says:

    @ Myr–”The rally has not been driven by “liquidity.” It’s been driven by a natural temporary reversal of the extreme negative sentiment we saw in March.”

    Totally agree. The reversal from risk aversion to risk taking. Which also explains the performance of the USD since then. “Parked cash” has predominately gone into equities. The big players are now waiting for Joe Retail to start buying in order to sell to them.

  18. hs says:

    “Why do we always have to get your stock market predictions from other websites such as Tech Ticker” , says swood. I agree. I hardly follow Tech Ticker and I check The Big Picture daily.

  19. jc says:

    Like Peter Lynch’s advice to sell when the cabdriver is giving stock advice – my barber had turned off his nonstop Frank Sinatra audio to listen to CNBC Friday and was fist pumping for his Freddie Mac “investment”

  20. jc says:

    I sure hope the sheeple who put their 401Ks in cash a few months ago aren’t jumping back with both feet in equities now…but I think they are

  21. constantnormal says:

    to the peeps advocating that BR post his position changes on his blog — do you really want him to be accused of front-running his portfolios? ‘Cause that’s what would happen if he posted his positional changes here.

    I trust him to only report his changes in position after a suitable interval. If you want to be a customer, plunk down the coin and do so. Don’t look for him to cast the pearls of his efforts before us for free.

  22. alfred e says:

    OT: MSM defense of Blankfein and GS. No mention of wrongdoing and fines. Just sympathy.

    http://www.time.com/time/magazine/article/0,9171,1917727,00.html

  23. Myr says:

    BR,

    I do watch the vids everyday…they’re great. I just went back and looked at all your appearances since July 10th when the S+P closed at 879 and there’s virtually nothing there that tells me what you think the market is going to do. I did find the 7/14 appearance on BNN(which I had seen at the time) wherein you say you “like tech(AMD,DELL,EBAY,GOOG, some semi’s)” and that you’ve been “somewhat long”…but you don’t say much more than that. There’s also the appearance on Kudlow(ugggh) on 7/13 where you go up against Jeremy Siegel from my alma mater and, at the *very* end you say that you’re 60% long and that you think the next bull market won’t start for 3 – 5 years.

    My point remains the same. I have no idea what you think of the market at the moment. We’ve rallied 53% since March. I’m curious as to your view. I’ve been able to find virtually nothing that tells me what you think the near to medium term outlook is. I do read your blog *every* day and that includes the vids.

    To “constantnormal”: I’m not advocating that BR post his position changes on his blog. I’m saying I have no idea what BR’s opinion is of the market at the moment and I think that’s odd. Is he long still? I’m guessing he is. My blind guess says he’s 40% long and still riding techs, but he’s been upping his stop loss limits which he places 15 – 20% below the market. That’s all 100% pure conjecture.

  24. constantnormal says:

    @Myr 10:37 pm

    “That’s all 100% pure conjecture.”

    And that’s as it should be. Barry has a number of for-profit enterprises — he sells market research to institutional customers, he participates in managing a hedge fund (where I would expect the customers pay the customary 2 and 20 for his expertise), he sells a software tool that provides trading guidance, he has his book and this blog.

    I’m betting that the blog takes an outsized portion of his time compared to the (ad) revenue it brings in.

    It just seems unrealistic to expect him to give away for free the same information (or any part thereof) that his paying customers are getting. I know of no mutual fund managers (let alone hedge fund managers) who make their current investing stances publicly (or even privately) available, except via the quarterly reports, and those usually lag the end of the quarter by some interval. It’s not like Barry is Jim Cramer, or any of those other CNBC talking/shouting heads, even if he does spend a fair amount of face time in the media.

    It’s just not his job to guide the folks here in their adventures in the markets — that’s not the purpose of this blog. It’s a place where significant market information and viewpoints can be highlighted and discussed. I thank him for providing this forum and don’t expect anything more. This is hands-down the best financial discussion forum on the web, bar none. That’s more than enough for me.

  25. constantnormal says:

    @Pat G. 3:46 pm

    ‘ “Parked cash” has predominately gone into equities.’

    Got any data to substantiate that? Any numbers that would indicate that the amount of money in short-term Treasuries, CDs and money markets has declined while the markets have exploded upwards?

    The volume on the DJIA has been declining ever since the rally started back in March. Declining volume while the market explodes higher does not make me comfortable.

  26. Boots or Hearts says:

    Agree w/ constantnorm above.

    It is possible to be bearish longer term or intermed term, while bullish (or not fighting the tape) short term. I do recall that Barry mentioned here at least once the situation that arises when clients want “in” no matter what your particular view of the upside (or downside) risk, or value (or lack of) may be at a particular moment in time.

    Lastly, why would he provide that data for public scrutiny. This site is filled with mountains of useful and free information and resources, that should keep you busy enough.

  27. Mr Objective says:

    In early March, there were a lot of “how low can we go” articles around. We’re starting to see *some* “how high can it go” articles now. Not neccesarily any great sign of a large downturn ahead … but at fairly likely the gains are limited now.

    Interestingly, many of the real speculative stocks (e.g. FRE as jc mentioned, AIG, and RDN) look quite cleary that they are in that last ‘elliott’ fifth wave of C of their corrections. (The third waves are those moves we’ve heard on CNBC described as “wow, did you see what AIG did today”). They all had a slight correction after massive gappy moves and have now pushed to “new” highs or just about. They are actually becoming great short candidates. AIG and FRE are worthless, but obviously some players on the short side got blown out heavily (making them appear scary to short, but actually much safer to short now). The small time specs are jumping in on the longside

    I’d say the speculative stock rally is coming to an end and maybe the general market moves mostly sideways for a few weeks to months before it decides what to do.

  28. constantnormal says:

    The numbers I remember seeing from back during the HFT hoo-hah showed that program trading was accounting for over have the NYSE volume. Hardly an indicator of a rousing public participation in the markets.

    I’m sure that the program traders would like to get some sheeple lured into the markets for shearing — I’m just not sure how much of that is really happening. I think that so long as John Q Public has any concerns about losing their job or house, it’s going to be VERY DIFFICULT to entice them to move what money they have left into the markets, especially with data like the ridiculous PE ratio, soaring corporate bond defaults, increasing bank failures, etc, etc readily available.

    While some people are gullible enough to believe the happytalk, and desperately want to believe Bernanke when he tells us that “the worst is behind us” (and implying that a return to normalcy lies only some months ahead), people that are that gullible have already lost everything. Those remaining will wait to see signs of economic expansion in the world around them before emerging from their mental bomb shelters.

    From all the credible reports I read, the story is that the “professional” fund managers are “all in” while Johnny Retail remains “all out”. Eventually the number of chairs is gonna start declining, and the “pro” fund managers will be fewer in number as the music stops. That’s no kinda dance for me.

    This shooting star stock market is a thing of beauty, but having missed it thus far, I’ll continue to wait for an entry point more to my liking before I push all the chips in. I have a substantial fraction of my capital in high-dividend canroys, and spend every trading hour watching for signs that the bottom is falling out. No way will I commit more money into anything risker (the canroys have PEs that are (numerically) less than half their dividend yields and are profitable enough to maintain the dividends) until I believe that the risk of the wheels coming off the global economic applecart is substantially lower than it is today.

    All it would take in this current still-highly-interdependent global economic playground is for some bankster to have an unexpected skeleton emerge from their closet of horrors, a lunatic in the Middle East launch a significant military strike on just about anyone, Al Qaeda to rattle our cages with a bombing anywhere in the USofA, or any of our own home-grown lunatic fringe make a splash on the front pages, and we would see this pretty shooting star stock market wink out like a snuffed candle.

    No amount of technical analysis can predict the emergence of such a black swan. And from what we have seen, the black swans are a lot more numerous than previously thought.

  29. Pat G. says:

    @constantnormal (11:37pm)

    http://www.ritholtz.com/blog/2009/08/rally-time-items-to-watch/#comments

    I was talking about the professionals not Joe Retail.

  30. constantnormal says:

    The pros can take care of themselves (or not).

    I just had a delicious thought about a possible black swan that would disrupt (that’s putting it mildly) the calm demeanor of our gummint.

    Suppose that among the data turned over by UBS are accounts of a number of our stalwart elected officials?

    Wouldn’t that be delightful? Or better yet — if Tim the tax cheat was tagged.

    Of course that will never happen, as it would be against the thieves’ code of peer conduct — but it’s fun to contemplate, and I take my pleasure where I can find it these days.

  31. Myr says:

    @constantnormal,

    How’s this for a simple question? Is Barry bullish or bearish? I thought that was a reasonable question to ask of someone who runs a very active daily blog on the stock market. Perhaps I was wrong.

  32. Myr says:

    I just saw BR’s vid on tech ticker…that’s exactly what I wanted to hear.

  33. constantnormal says:

    Again, his blog is the most minor of his activities, and he has paying customers who pay for that information (among other things). All I suggest is that it is as improper of us to ask him for that info for free as it is to walk up to a physician friend and ask for a free medical opinion on our condition. Barry is not just another one of us, he falls into the “professional” category, and therefore needs to be treated under different rules.

    He does, from time to time, throw us a bon mot indicating his opinion. I took your comment to mean that you thought he ought to do so on a more regular basis, which seemed inappropriate to me.

    Here’s a hypothetical question for you — I don’t know what you do for a living, but let’s suppose, for the sake of argument, that you are an independent professional who makes a living selling your expertise to clients. Maybe a lawyer, doctor, or a fund manager. Maybe an art appraiser. Could be anything. Further suppose that you operate a blog that covers areas of interest to you in your realm that you think might be of interest to others.

    A blog reader wants you to give YOUR PROFESSIONAL OPINION on the state of whatever area your blog covers, for free. Even ignoring the aspects of personal liability entailed here, do you feel inclined to oblige him in that request?

    That’s how I perceive this situation. Just sayin’, that’s all.

  34. DiggidyDan says:

    If you really want to base all of your investment decisions upon one man’s (exceptionally enlightened) perspective, pay for his service. Otherwise, analyze and filter the advice and ramblings of the unwashed masses posting. You could do well still, thus.

  35. m111ark says:

    I’m relatively new to stock trading, was a futures trader years ago.

    So, when did this stop being a free market? We all know the currency markets are not; GATA may convince you that gold is not; then there’s the ‘Plunge Protection Team’ that surely intervened in the past.
    Does any one else think Wall Street made a deal with the messiah – ‘give us all the money we want and we’ll give you a bull market.’

    Where’s the world’s best performing stock market? Didn’t have anything to do with the economy. So, where’s all that funny money to go…

    I dunno, seems all the analysis in the world won’t help you thru this mess unless you’ve got a pipe into GS

  36. bdg123 says:

    You know, this is why technical analysis gets a bad name. There is a selective rewrite of history in its analysis. I don’t like MACD or other very simple technical tools because in the hands of most people it provides too many false signals. There were many possible MACD momentum upswings before this rally and what of them? We selectively pick what supports our bias?

    Technical analysis is a self-fulfilling prophecy of fundamentals. In other words, all technical analysis tools used to predict a rally failed with this last collapse. And they failed and they failed and they failed. Because most people using technical analysis have no idea how to analyze fundamentals. The only thing that mattered was understanding fundamentals to anticipate a rally. When everyone kept calling a rally after September of 2008, I wrote that there was no imminent bottom. Then before this March Rally I was writing that the seeds of a major rally were building. I wasn’t using a technical analysis chart to divine the future. I was using fundamentals in both instances. Even for shorter term moves.

    This isn’t any reflection of some type of brilliance on my part. It’s simply understanding of what drives the economy – money. Fundamentals will drive any future selloff and any future rallies. Just like every other major rally and major selloff.

    There is a fallacy to be learned from this post. Most people don’t really understand what drives the economy and markets. Technical analysis gives those people a simplified window of those factors. A window that is much easier to understand. But one must understand technical analysis always fails at major turning points because fundamentals drastically change in the process. And fundamentals are the major factor driving technicals.

    The future will not be divined by staring at a chart of stocks above or below their 200 day moving average or of MACD. Instead fundamentals will give us insight into what those self-fulfilling indicators will do.

  37. cvienne says:

    What does this say about the OTHER 43???

    I mean, my gosh, think about it…

    The most manufactured, hyped up, liquified market in history, and your stock STILL can’t get above it’s MA???

    s2bu = It’s sucks to be you!

  38. SINGER says:

    @bdg123…

    I appreciate the feedback and if you notice I state that the chart is interesting because it can support many theories…

    you wrote:

    “…In other words, all technical analysis tools used to predict a rally failed with this last collapse. And they failed and they failed and they failed. Because most people using technical analysis have no idea how to analyze fundamentals. The only thing that mattered was understanding fundamentals to anticipate a rally. When everyone kept calling a rally after September of 2008, I wrote that there was no imminent bottom. Then before this March Rally I was writing that the seeds of a major rally were building. I wasn’t using a technical analysis chart to divine the future. I was using fundamentals in both instances. Even for shorter term moves.”

    These link to charts of the S&P when it was at 1495 in June 2007. My theory at that juncture was either we take out the 2000 highs in the S&P 500 decisively or we enter into a huge down move…

    http://3.bp.blogspot.com/_r47sOI__h_M/RmhSCmcK1CI/AAAAAAAAATM/Sf_vaYK9Yds/s1600-h/closesp.jpg

    http://2.bp.blogspot.com/_r47sOI__h_M/RmhSCWcK1BI/AAAAAAAAATE/_ql2Ah61Z4M/s1600-h/longsp.jpg

    Later, the chart still seemed to show the potential for a big move down…

    http://4.bp.blogspot.com/_r47sOI__h_M/SExukDrx6RI/AAAAAAAAAz4/RJWbep54lPE/s1600-h/DOW+MONTHLY.png

    In late February 2009, BR posted a chart re: the DJIA… based on the chart it was obvious that a snapback of some kind was imminent, even based on the MACD alone…

    http://www.ritholtz.com/blog/2009/02/dow-jones-industrial-average-long-term-chart/

    Finally, the OIL chart showed clear fromer resistence now support around the $40 level…

    http://www.ritholtz.com/blog/2008/12/crude-oil-support-at-40/

    Obviously, any chart contains the fundamentals to the extent that participants are buying and selling based upon things like earnings outlook and supply/demand of commodities…

    In my view the technicals and fundamentals are inseparable, not mutually exclusive…

    No matter what you use, no one can consistently predict the future. That’s why I use charts as an idea and theory generator, in order to discuss what the future might hold…

  39. bdg123 says:

    You cannot consistently make money by looking at a chart. Nor can you consistently make money by using MACD or any other simple tool. That the market was so oversold that every single stock was below its 200 day moving average was not the reason why the market rallied. It rallied because fundamentals changed very substantially. If they had not, your analysis would have been wrong and the market would have trended lower regardless of what the MACD or stocks below the 200 were.

    I appreciate what you are saying but it is not a method by which someone can consistently make money. Fundamentals are the only proven method one can use to make money. Whether that is economic fundamentals or fundamental analysis of a company’s financial statement or business model. And I can assure you that all of this Frankenstein finance we see today that is currently yielding fruit for traders is going to fail miserably before we are out of this. That means most everything anyone used to make money over the last ten years is going to fail with it.