Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Here’s Why You Must Protect Yourself Outside the Financial System… - 22nd Nov 19
The Promise of AI - 22nd Nov 19
The Financial Implications of Bitcoin Casinos in Japan - 22nd Nov 19
FOMC Minutes Reveal an Important Shift That’s Key for Gold, Too - 22nd Nov 19
Adaptive Predictive Modeling Suggests Stock Market Weakness Into 2020 - 22nd Nov 19
Why You Should “Follow the Money” on The Yellow (and Silver) Brick Road - 22nd Nov 19
This Invisible Tech Stock Threatens Amazon with 800,000+ Online Stores - 21st Nov 19
Crude Oil Price Begins To Move Lower - 21st Nov 19
Cracks Spread in the Precious Metals Bullion Banks’ Price Management System - 21st Nov 19
Why Record-High Stock Prices Mean You Should Buy More - 20th Nov 19
This Invisible Company Powers Almost the Entire Finance Industry - 20th Nov 19
Zig-Zagging Gold Is Not Necessarily Bearish Gold - 20th Nov 19
Legal Status of Cannabis Seeds in the UK - 20th Nov 19
The Next Gold Rush Could Be About To Happen Here - 20th Nov 19
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Charting the Stock Market is Similar to Tracking a Squirrel Crossing a Busy Street

Stock-Markets / Stock Markets 2010 Jul 25, 2010 - 12:34 PM GMT

By: Guy_Lerner

Stock-Markets

Best Financial Markets Analysis ArticleGlenn Holderreed of Quacera Capital Management and the QPM Radar sent me an email the other day describing the market:

"Charting this market is similar to tracking the moves of a squirrel crossing a busy street. Quickly moving to the middle, no better turn back, no, no, I can make it across, oh no I better go back, shucks I can make it across. Sometimes they make it, but many get flattened. I think there are a few flattened in this market."


For the better part of 8 weeks, prices on the S&P500 have gyrated above and below our key pivots causing two failed signals. This past week has yielded a third buy signal as prices are back above the key pivot of 107.58 on the S&P Depository Receipts (symbol: SPY). This area was resistance, but old resistance now becomes new support. These whipsaws certainly have had this squirrel chasing nuts and like many in this market, I have been driven nuts.

For the record, the PowerShares QQQ Trust (symbol:QQQQ) is above its key pivot at 45.01, and this is only the second signal in 8 weeks. The prior signal was a failure. 45.01 is now support.

With regards to investor sentiment, the "dumb money" remains bearish (i.e., bull signal) and the "smart money" and company insiders never really got super bullish with the current down draft and they continue their indifference to the market. I would interpret this set of circumstances as the following: 1) prices are above key pivot points and this is bullish; 2) investors remain bearish on the market and this should provide buying support if prices drop below current levels; 3) the market should continue to grind higher as the "smart money" continues its indifference.

The last 8 weeks and probably for several months prior, market participants have considered the possibility of a world economic slowdown and a double dip recession here in the USA. These concerns (rightly or wrongly) have subsided over the past two weeks as earnings and economic data out of Europe have buoyed investor optimism once again. The past 8 weeks of up and down price action has clearly reflected the concerns of investors. Failed signals are the kind of technical signs that I would expect prior to a bear market, and they should be respected. On the other hand, closes above key resistance levels can lead to powerful market moves. Being whipsawed in and out of the market (as we have experienced over the past 8 weeks) is not pleasant as you are zigging when you should be zagging. Whipsaws are a reality of trading.

I suspect for the immediate future we will end up somewhere between these two extremes. The markets won't be a pure bummer, but I don't see a real barn burner either. Unfortunately, despite the possibility of future whipsaws, I still see the need to honor my signals.

The "Dumb Money" indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio. The "Dumb Money" indicator is now bearish for four weeks in a row.

Figure 1. "Dumb Money"/ weekly

The "Smart Money" indicator is shown in figure 2. The "smart money indicator is a composite of the following data: 1) public to specialist short ratio; 2) specialist short to total short ratio; 3) SP100 option traders. The "Smart Money" indicator is neutral.

Figure 2. "Smart Money"/weekly

Figure 3 is a weekly chart of the S&P500 with the InsiderScore "entire market” value in the lower panel. From the InsiderScore weekly report: "buyers stay stagnant".

Figure 3. InsiderScore "Entire Market" Value/ weekly

Figure 4 is a weekly chart of the S&P500. The indicator in the lower panel measures all the assets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall.
Currently, the value of the indicator is 43.36%. Values less than 50% are associated with market bottoms. This is the lowest value since July, 2009.

Figure 4. Rydex Total Bull v. Total Bear/ weekly

Improve your market timing withPremium Content from TheTechnicalTake. For a nominal yearly fee, you will get a unique data set that will show you which way investors (i.e., bull market geniuses) are leaning.

To subscribe to Premium Content click here: Subscribe

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2010 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Guy Lerner Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules