Annotated Dow
By Barry Ritholtz - September 4th, 2009, 12:00PM
Here is Dave Singer’s latest annotation, from earlier this week:
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Annotated Dow
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
September 4th, 2009 at 12:08 pm
Hey… those look like my charts!
Glad to see I’m not the only one still hand notating my work…
September 4th, 2009 at 12:10 pm
ok, what the hell just happened? s&p shoots up 8 pts in <5 mins
September 4th, 2009 at 12:16 pm
@bubba:
The PPT doing it’s work early today so they can hit the road for the Hamptons early?
HCF
September 4th, 2009 at 12:17 pm
Looks like the final pump of the unofficial summer rally here. Gotta love it.
September 4th, 2009 at 12:26 pm
with such horrible employment numbers— why on earth is the market going up today? anyone
September 4th, 2009 at 12:35 pm
@ CTX at 12:26 pm
“with such horrible employment numbers— why on earth is the market going up today?”
continued cost cutting means Q3 results will be BTE?
September 4th, 2009 at 12:40 pm
I think the bounce back relief rally zone at the time of the Lehman collapse is why we’re getting resistance at these levels: 1044 ish on the SP500. There was a lot of volume traded in that range. 1044 was the top of the rally on 10/14/08, the bounce back after Lehman.
Not sure about the Dow Jones….I don’t chart that market because it’s an “average” and not an index. It just seems “funny” to me and sometimes behaves too differently from the SP and Nasdaq.
September 4th, 2009 at 12:53 pm
OT and On topic:
http://www.nytimes.com/2009/09/04/business/global/04optiver.html?_r=1&th&emc=th
Its superfast, supersecret oil trading software was called the Hammer.
And if the Commodity Futures Trading Commission is right, the name fit well with an intricate scheme that allowed commodity traders in Chicago working for Optiver, a little-known company based in Amsterdam, to put their orders first in line and subtly manipulate the price of oil to the company’s advantage.
Transcripts and taped conversations of actions that took place in 2007, included in the commission’s case, reveal the secretive workings of high-frequency trading, a fast-growing Wall Street business that is suddenly drawing scrutiny in Washington. Critics say this high-speed form of computerized trading, which is used in a wide range of financial markets, enables its practitioners to profit at other investors’ expense.
Traders in the Chicago office of Optiver openly talked among themselves of “whacking” and “bullying up” the price of oil. But when called to account by officials of the New York Mercantile Exchange, they described their actions as just “providing liquidity.”
September 4th, 2009 at 1:00 pm
@alfred e: I think it may be time to pull my funds out of the market entirely. How can anyone play in what is clearly a rigged game? They’re not even hiding this fact anymore.
September 4th, 2009 at 1:00 pm
@HCF
thought it may have something to do with this yahoo headline: “Bank CEOs Still Making Millions, With or Without a Gov’t. Bailout”
http://finance.yahoo.com/tech-ticker/article/317598/Bank-CEOs-Still-Making-Millions-With-or-Without-a-Gov‘t.-Bailout;_ylt=AlKyrCuVHP_S22kt9aNP2Zy7YWsA;_ylu=X3oDMTE2Y3VsdTI5BHBvcwMxMARzZWMDdG9wU3RvcmllcwRzbGsDYmFua2Nlb3NzdGls?tickers=gs,skf,xlf,c,jpm,wfc,bac&sec=topStories&pos=8&asset=&ccode=
gotta love them bankstas
September 4th, 2009 at 1:04 pm
This chart is an absolute joke!! It’s basically saying the market will go up unless it does down! Can’t possibly trade and make money with such complex annotations.
September 4th, 2009 at 1:11 pm
the dollar collapsed
September 4th, 2009 at 1:13 pm
@ rdhall:
You’re missing the point.
September 4th, 2009 at 1:25 pm
I’ve been saying this for weeks – Dow 11,500-12,000 by EOY. Why can’t you people see this and profit from it?
September 4th, 2009 at 1:29 pm
Welcome back, Harry. Time will tell if you’re proven right. Glad you’re back though.
September 4th, 2009 at 1:34 pm
Nice to be back. Haven’t had a lot of time lately. I’ve been telling people through this rally to buy any dips on shallow pull backs of 2-4%. That’s all you’re going to get on pull backs. This week’s pullback was a gift. Went back to the opening of the last shallow pullback, reinforced support there and is rocketing higher. Next week, when volume returns, it’s going to really take off.
September 4th, 2009 at 1:35 pm
@Harry: How do you account for the fact that on most high volume days (there haven’t been many) this summer, the market went down? Why would it shoot higher on higher volume next week and beyond then?
September 4th, 2009 at 1:50 pm
Holy crap! Has Dave seen a Beautiful Mind?
(Great work!)
September 4th, 2009 at 1:54 pm
@Mannwich: Actually the third strongest volume day was huge to the upside.
September 4th, 2009 at 1:56 pm
@Harry: What about the other top volume days? I believe most were down days, no?
September 4th, 2009 at 1:57 pm
Jackson Pollock lives!
September 4th, 2009 at 2:16 pm
Welcome Back Harry :-)
I pointed out last Monday (while you were away doing your BUSY things), that 1,016 was your first opportunity for a 2% dip buy…
I implored your market counseling (at that moment)… ALAS, no reply… Stilted like an ugly prom date, I was…
NOW YOU’RE BACK… Let’s see, where are we at? 1,013… Oh, just a few points underwater from your original 2% dip buy (nice recovery there)…
But naturally, you waited until 991 to buy…
September 4th, 2009 at 2:19 pm
All this does for me is re-enforce the notion that a trend is a trend until it changes. Since it seems that HFT is making up a large volume of the market. Tech analysis now has to be a component in your decision making. Computer Algorithms no nothing else.
Just an aside, I saw that CNBC is now carrying the VIX in it’s liners. That officially means it is now another meaningless number.
September 4th, 2009 at 2:25 pm
“I’ve been saying this for weeks – Dow 11,500-12,000 by EOY.”
ok- i must have missed where you explained why this will happen-
time to step up- let’s hear your analysis
September 4th, 2009 at 2:29 pm
@Harry
Go ahead and answer ahab with no compunction…
I promise to step out of this fray…
Note: Harry, I’m being SERIOUS when I say that… I actually like your comments… Why? Because, for my part, I like the people who come out on this site and put their balls on the fire to make a call…
September 4th, 2009 at 2:59 pm
call me ahab @ 2:25
“Dow 11,500-12,000 by EOY.”
Which year? If it’s 2010, that’s not hard to swallow.
September 4th, 2009 at 3:00 pm
Harry means THIS year. Sounds downright Cramer-esque to me.
September 4th, 2009 at 3:05 pm
dl-
that was in response to “harry” – he said EOY-
since he didn’t clarify the obvious takeway is that he meant 2009-
he probably won’t answer though- his whole trading advice to date- to make the easy money- is just buy on the dips-
like shooting fish in a barrel- a no-brainer- he is quite the analyst
September 4th, 2009 at 3:08 pm
@ahab: It’s as easy as buying and flipping homes……….oh, wait, shit, maybe not.
September 4th, 2009 at 3:14 pm
mannwich-
i posted last night on a different thread- (like a ghost town on TBP last night)- anyway- on my way home i saw a handwritten sign at an interesection that said something like-
“real estate investing
foreclosures, short sales
2K to 4K week”
so – it didn’t take long- the dude putting up that sign must have been tripping over money- especially since he didn’t waste all his RE profits on a professionally done sign-
some fool will answer his ad
September 4th, 2009 at 3:17 pm
It’d be easier if the Call premiums where higher.
September 4th, 2009 at 3:20 pm
@ahab: I saw similar signs off the highway in the town right over the city line in my neighborhood, but it was more like “if you haven’t made $3,000/week this year, call……….”. Not kidding. Got a good chuckle out of that one.
September 4th, 2009 at 5:41 pm
The really trippy part about this are the dashed midpoint lines in the upper and lower price channels he has drawn out, and how they line up with not only the fib’s and trendlines in the weekly, but also with the intermediate trends and support and resistance levels in the daily. I’d like to see this guys daily charts too. Such beautiful symmetry at work.
September 4th, 2009 at 6:49 pm
Some questions for David Singer if he reads this and is kind enough to answer….
Do you have any issues with the relatively small Right Shoulder of the proposed inverted H&S? (5 weeks and small v. the other one which took 12 weeks and is larger)
With the Fibbo retraces, do you every use Fibbo’s based on the log scale given the enormity of the price scales we’re dealing with many of these indexes and stocks?
September 4th, 2009 at 8:53 pm
On this thread you have Singer with his annotated (fascinating) hand drawn charts…
Then, over on the other thread you have Kent Thune asking us whether we’re an “Inwestor” or a “Gambwer” (with Dan Duncan providing commentary which hints at the notion that unless you’re in with a QUANT, you’re life is destined to be as hokey as that dude on the Scottrade commercial telling everyone how BAM, he hit his 80-20 stochastic cross with a tweak, and ST fired off the trade)…
Meanwhile, Steenbarger is giving us quizzes, and BR is telling us about life in East Egg…
I’m just a humble guest here so I have no right to complain, but what kind of gymnastics are we supposed to perform with this cornucopia of apparatus?
September 4th, 2009 at 11:18 pm
@ Andy T
I do have issues with the right shoulder, then again I have issues with everything because nothing is set in stone.
I’m thinking what looks like the inverse head and shoulders may eventually unfold as part of a larger pattern, such as a “W” bottom, where we get some sort of spike high and then we retest the “head” of the inverse head and shoulders, which would, at that point be evidently the first part of the “W” bottom.
Interestingly, what if the entire “proposed” inverse H&S is really the left shoulder of a bigger H&S pattern where the head ends up at a new low in equities and an eventual real bottom?
If this proposed inverse H&S turns out to be part of a larger pattern it would not be too surprising because the top
we just experienced was a series of H&S patterns whose necklines were all eventually broken…
Then again, maybe the right shoulder is smaller because of the excess liquidity and super low rates…
Furthermore, the low of the right shoulder of the inverse head and shoulders was not as low as the left shoulder… That would traditionally be bullish on an inverse H&S… Note the H&S top that occurred from 2006-2008… there the right shoulder was higher than the left shoulder, which it usually isn’t on an H&S top that really breaks down, but sometimes the “rules” are broken…
With regard to Log Fibonacci ratios, I don’t use them because I don’t have access to them. I see nothing wrong with using them, though… Speaking of Fib, check out the chart on Silver over the past few years. The recent rally has brought us back to exactly 61.8 of the total decline from ~ 21 to 9…
I appreciate everyone’s feedback and thank BR for posting some of my stuff…
September 5th, 2009 at 5:19 am
This is an interesting chart, but is missing one ginormously important pattern. July tripped a bullish engulfing pattern of an “Outside Up Month”, where the lows of the month were lower than the prior month, and the highs were higher than the prior. This is a RARE occurrance that typically predicts an intermediate term trend. In this case it CONFIRMS the inverse H/S and should project a MINIMUM of a 50% retracement on the decline.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=spy&time=8&freq=1
Way too many are fighting the fed and this tape. We have also at least 2 outside up weeks confirming this move. This feels very much like the 2003 cycle – Duct Tape Bottom.
Thoughts Barry??
It’s fascinating that so few have noticed this pattern. Go back and back test it’s predictive power.
September 5th, 2009 at 9:27 am
@yosull
Thanks for your observations.
I did a checkback on your “Outside Up Month” comments. I came up with the following (forgive me if I missed something).
Monthly Outside up Candles
7/09 Black Candle, 90 day following index action, ?
7/07 Red Candle, 90 day following index action (higher)
2/07 Red Candle, 90 day following index action (higher)
5/06 Red Candle, 90 day following index action (higher)
3/05 Red Candle, 90 day following index action (higher)
3/04 Red Candle, 90 day following index action (lower)
3/03 Black Candle, 90 day following index action (higher)
1/02 Red Candle, 90 day following index action (lower)
12/02 Red Candle, 90 day following index action (lower)
9/00 Red Candle, 90 day following index action (lower)
7/00 Red Candle, 90 day following index action (flat)
1/00 Red Candle, 90 day following index action (higher)
10/99 Black Candle, 90 day following index action (higher)
5/99 Red Candle, 90 day following index action (flat)
10/98 Black Candle, 90 day following index action (higher)
So that’s 15 instances in the past 11 or so years…
FWIW – I was only modestly interested in the market direction action 90 days AFTER the OUM… What struck me as more relevant was the FREQUENCY in which they occurred, and at what point in, perhaps, an established EW cycle theu might have occurred…
Note that the one previous to 7/09 was 7/07 (a 24 month hiatus)… Whereas between 10/1998- 10/2000, there were 6 in 24 months (a 1 in 4 frequency)… As we all know, 1998 was the LTCM crisis, and as we all know March 2000 was the dot.com top followed by an eventual failed breakout which extended until 9/00…
I think what I’m trying to say here is that based on macroeconomic factors, I’d expect a similar pattern (post LTCM) to emerge, with the “frequency” of OUM’s increasing…
Personally, I draw a lot of similarities between the LTCM collapse and the Lehman collapse (in terms of market behavior)… It is as if the markets are behaving in a way that suggests that this is a problem that is related to the financial world (market behavior from October 2008 – March 2009), without acknowledging that there is an actual structural problem with the economy…
Sure, economists TALK about the recession, the recession ending, yada, yada, but the BEHAVIOR of the markets is like it doesn’t exist… IOW – there remains a TOTAL disconnect between Wall St. & Main St. with respect to equity markets… The bond markets are telling you this right now (and have been all summer)… In 1999, the fantasy played out for a very long time, eventually ending in March 2000, when, “oops – were in a recession” finally dawned on people, and holding onto equities with ridiculous valuations didn’t seem like such a good idea anymore…
So basically, I’m on board with the idea that the present rally could stretch higher… The tape is proving itself to to be as crazy as it was in 1999… I’d expect a lot of intermittent volatility (as in – more frequent occurrences of OUM’s) in the process…
Especially as they correlate to “time sequences” in EW patterns…
September 5th, 2009 at 2:14 pm
@ yosull
Note: The chart and the annotations are not meant to be an exhaustive explanation of reality, just a jumping off point…
This is a weekly chart…
Nevertheless, thanks for the input and your point on the “monthly bullish engulfing” is well-taken…
Thanks for bringing it up…
September 6th, 2009 at 10:39 pm
We should have a blog to just talk about charts.
September 7th, 2009 at 2:21 pm
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