Ron Griess of The Chart Store brings us this chart showing the quandry traders face when it comes to playing the rally at this late date.
Up 70% from the lows, the question is: Mere consolidation (like 2003), or end of the run?
>
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.
"Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries." -Bill Gross
Signs continue that European markets are getting tired. The Spanish and Italian stock markets, big beneficiaries of the sharp decline in their bond yields over the past few months are falling to the lowest since Feb 1. The European bank index is at a 1 1/2 week low after earnings reports from Commerzbank and Credit Ag (RBS bouncing although reporting weaker than expected earnings) were disappointing. This market action is in spite of the German IFO business confidence figure which rose to a 7 month high coming in a touch above expectations and Italian consumer confidence which bounced more than...
read more »
Tweet
Facebook
Reddit
Digg this!
January 19th, 2010 at 12:16 pm
Well, with multiple states teetering on bankruptcy, I’m guessing a market hiccup as we work through that scenario.
And why, if the Feds have underwritten $12 trillion in debt to stop the financial meltdown, would they not dole out $100 billion to plug the state budget gaps?
January 19th, 2010 at 12:20 pm
BR questioned:
Up 70% from the lows, the question is: Mere consolidation (like 2003), or end of the run?
reply:
——–
Given the pump and methodology, it is possible the market could keep going past 1300. I’d be a rabid enthusiast if the market was traveling sideways in a 10% range between maybe 875 and 975. That would probably be a safe place to put some cash. It might fall below 875 but you could be sure it would get back there shortly and rise past 975 permanently if the fundamentals supported it.
In fact, the HFT algos that create a sticky market and a floor would be a fortunate accident of the manipulation. Whether by design or by nature, the HFT algos would be serving a good purpose and everybody would win.
But no. The predatory HFT algos will serve as middle men, find the highest prices anyone will pay for a given stock and fill that order with a stock at a, hopefully, much lower price. A win-win game is not part of the plan. This will continue to bias the markets upward and maintain a rising floor. As someone said here recently, the last trade sets the market cap, and in a thinly traded market the last trade may not be the same as real value when price creep sets the price. And, since the house always wins, there is little enthusiasm for a market that reflects anything that doesn’t first and foremost benefit the house.
January 19th, 2010 at 12:24 pm
Afterall, the Feds had the ultimate authority when “Wall St. got drunk.” With that foul-up and the unfunded and underfunded mandates, why shouldn’t the Feds bailout the states? Further, after taking on $12 in debt liabilities, what’s another $100 billion???
January 19th, 2010 at 12:38 pm
PS: again, for those who think I am whining about missing most of the greatest stock buying opportunity of our generation:
I made 22% in 2007 and lost about 3/4 of that 22% in 2008. This is about the equivalent of earning 5% or 6% in 2007, selling out and staying out. Thus, my holdings are about the same as if I had sold at maybe S&P 1425 and ignored everything after that. I’m still much better off than most reading this. My ‘calls’ are pretty good. I suppose if I lost it all and held throughout, I’d be desperate for recovery and afraid to sell or believe any doomsayer such as myself. Suckers.
Most of the loss was following BRs advice to put a toe in the water, BTW. Bad timing. My fault. I should have listened to myself.
January 19th, 2010 at 12:52 pm
Mere consolidation.
However, a 10% correction may be in the offing.
January 19th, 2010 at 1:00 pm
Heard bells ringing on friday but it turned out to be the ice cream truck.
January 19th, 2010 at 1:09 pm
It would be a useful chart…if the MACDs had any predictive value whatsoever.
I don’t get why anyone would draw any conclusions from this…
What exactly is the premise: “That when MACD (12,26) and MACD EMA (9) are above zero and moving sideways, the price action in the underlying repeats itself?” [Ah hell...it deserves several more??????]
What constitutes “sideways”? Why isn’t the period from 12/06 to 12/07 included? The MACDs appear to have gone sideways for 3 or 4 squares on the grid during that period of time…not good enough?
Also, does it make a difference if the MACDs are above 2%…or is zero the threshhold. If it’s just zero, then what does the chart say about all those other times the MACDs were above zero? ["Oh, they were above zero, alright, but they weren't moving sideways. They were undulating from 0 to 2%. That's totally different."]
Then, after reaching a particular conclusion, like the aforementioned: “When the MACDs are above zero and moving sideways, price action repeats itself”"…..
How many times have you witnessed this phenomenon? From the chart and the attention grabbing ovals, it appears to have happened twice. Is this your “sample”? Or are you drawing this conclusion from some other source as well?
And while I’m at it:
Would any rational person take his hard-earned money and use this information to help guide an investment decision? In any way…even slightly?
January 19th, 2010 at 1:15 pm
Dan Duncan Says:
January 19th, 2010 at 1:09 pm
It would be a useful chart…if the MACDs had any predictive value whatsoever.
reply:
———
In a normal market with a large number of buyers and sellers, each with different objectives, the MACD is a great statistical tool that has the potential to graphically display the actions and flows of all participants and provide insight into possible trends. Especially if you apply fundamental analysis to various points.
This is not a normal market, it does not have a large number of buyers and sellers, HFT is the dominant force, and the only objectives are to make money from a quick trade off any rube who is dumb enough to transact business. In this context, the MACD is useless and has been for maybe a year now.
January 19th, 2010 at 2:50 pm
Same old story! macd, big mack, its all bull Sh.. No one can predict when market will go down, NO ONE
January 19th, 2010 at 3:44 pm
IMO if nothing else sets the alarm bells ringing then the gradual build up of widespread public scrutiny and disgust for TBTF and the resulting political fallout very well might do the job. If the FED no longer has the alliances it requires to effectively goose the markets the markets will collapse. Even the credible threat of serious curtailment could be sufficient.
January 19th, 2010 at 3:49 pm
Of course this is the basic argument for TBTF. It was blatantly used by Paulson and Geithner in 2008. The public disgust at the brutal face of TBTF that has resulted may have significantly damaged it’s further utility.
January 19th, 2010 at 8:11 pm
My Vote, Consolidation and then a bouncy move up to September (1300ish) after which the Institutional (Cafra derivatives Funds) bail.
January 20th, 2010 at 5:04 am
interesting … if one looks at the slope of the market’s movement from 2003-2007 as reflective of the cheap money being poured into the economy by Easy Al Greenspan, then one might also see the slope of the market growth from March 2009 to present to be reflective of the MUCH easier money policies of Boom-Boom Ben Bernanke. Lower rates = steeper slope.
As to where it will top out, so far as I can see, if could be at 1400, 1600, 2000, who knows? As noted, this is not a nominal market, by any standard, with money pouring out of stocks and into bonds and gold, and absolutely zero economic activity to support the prices of the stocks. This is a market driven by the last closing quote, zero rates, and little else.
The only real expert I can rely on in this is that economic genius, Herb Stein, who said,
“If something cannot go on forever, it will stop”.
Eventually something will happen that provokes traders to sell, and the exits will suddenly appear mighty congested. It would be nice if I could tell exactly when “eventually” is, but significant losses made me abandon that last year. Until I see a significant decline in stocks, I’m riding the Z-train.
Fer sure, the easiest “sell” signal would be an increase in rates from the Fed — like that will happen any time before November 2012!
January 20th, 2010 at 9:05 am
1228 on the SPX is the 61.2% retracement from early March lows (and 10/08 highs). Not as hard resistance as the 50% (1121) that was first eclipsed in late December, but resistance nonetheless. And, with the 200 week MA right at 1228, that’s going to be a very compelling level of resistance. We might get there by mid to late February.
We might then see a drop back to 1121 before a surge to to 1300 (pre Lehman gap). Big question is how much longer this rally will last in light of low volumes, and more selling than buying (overall). Until there is a better trading success vehicle, I suspect.
January 20th, 2010 at 10:05 am
“It would be nice if I could tell exactly when eventually is,” .. don’t you really mean – *will it ever return to a profit in my lifetime or before you need it back? Because you don’t have to run out of the exits like its a theatre fire or something. Unless *coda.