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Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stock Market Bears Maintain Control...

Stock-Markets / Stock Markets 2010 Aug 16, 2010 - 08:04 AM GMT

By: Mark_McMillan

Stock-Markets

Best Financial Markets Analysis ArticleRecommendation: Take no action.

Daily Trend Indications:


- Positions indicated as Green are Long positions and those indicated as Red are short positions.

- The State of the Market is used to determine how you should trade. A trending market can ignore support and resistance levels and maintain its direction longer than most traders think it will.

- The BIAS is used to determine how aggressive or defensive you should be with a position. If the BIAS is Bullish but the market is in a Trading state, you might enter a short trade to take advantage of a reversal off of resistance. The BIAS tells you to exit that trade on "weaker" signals than you might otherwise trade on as the market is predisposed to move in the direction of BIAS.

- At Risk is generally neutral represented by "-". When it is "Bullish" or "Bearish" it warns of a potential change in the BIAS.

- The Moving Averages are noted as they are important signposts used by the Chartists community in determining the relative health of the markets.

Current ETF positions are:

DIA: Short at $105.19

QQQQ: Short at $45.91

SPY: Short at $110.65

Daily Trading Action

The major index ETFs saw another gap down open. They were able to fight their way higher until shortly after 10:00am when the bears took over. The bears moved the major indexes to new intraday lows but they didn't break below Thursday's lows before the bulls reasserted themselves in late morning. From there, it was a modest but steady climb until around 1:30pm when the bears wrested control that would last into the close. Volume gained late in the session as the bears forced all the equity indexes we regularly monitor to close with losses. The S&P-500, Russell-2000, and NASDAQ-100 closed at their intraday lows, matching the morning lows. The leading indexes (NASDAQ-100 (QQQQ 44.72 -0.32), Russell-2000(IWM 61.07 -0.70), and the Semiconductor Index (SOX 322.74 -3.01)) all closed with more significant losses than the Dow (DIA 103.35 -0.10), S&P-500 (SPY 108.31 -0.32), or Bank Index (KBE 22.86 -0.03). The Regional Bank Index (KRE 21.95 -0.20) lost nearly one percent, joining the leading indexes with more significant losses. The NASDAQ Composite, the Semiconductor Index, and the Regional Bank Index all closed at new lows, breaking below the morning intraday lows at the close. The 20+ Yr Bonds (TLT 102.29 +1.26) moved inverse to equities and reached a point just under its 52-week high. NYSE volume was very light with just 870M shares traded. NASDAQ share volume also very light with just 1.610B shares traded.

There were four economic reports of interest released:

  • CPI (Jul) rose 0.3% versus an expected 0.2% rise
  • Core CPI (Jul) rose 0.1% as expected
  • Retail Sales (Jul) rose 0.4% versus an expected 0.5% rise
  • Retail Sales excluding Autos (Jul) rose 0.2% as expected
  • UofMich Consumer Sentiment (Aug) came in at 69.6 versus an expected 70.0
  • Business Inventories (Jun) rose 0.3% versus an expected 0.2% rise

The first four reports were released an hour before the open. The other two were released twenty-five minutes and a half hour after the open respectively. Since the U.S. economic reports tracked close to expectations, they didn't much affect U.S. equity markets.

Instead, U.S. markets fed off the trading in European markets as European bourses closed off about one percent. European markets traded opposite the stronger than expected GDP results, with Germany showing GDP growth of +2.2%.

Utilities (+0.3%) were the only economic sector in the S&P-500 to advance. Retailers sold off -1.4% on the day, in spite of the inline results reported. This saw Consumer Discretionary (-1.1%) followed by Tech (-0.7%). Consumer Staples was unchanged.

Implied volatility for the S&P-500 (VIX 26.24 +0.51) rose two percents while the implied volatility for the NASDAQ-100 (VXN 28.07 +0.44) rose a bit less.

The yield for the 10-year note fell five basis points to close at 2.69. The price of the near term futures contract for a barrel of crude oil fell thirty-five cents to close at $75.39.

Market internals were negative with decliners leading advancers 6:5 on the NYSE and by 9:4 on the NASDAQ. Down volume led up volume by 10:7 on the NYSE and by nearly 11:4 on the NASDAQ. The index put/call ratio fell 0.08 to close at 1.49. The equity put/call ratio rose 0.05 to close at 0.67.

Commentary:

Friday's trading action saw very light volume for the major index ETFs as well as U.S. exchanges. The Dow remains stubbornly above its 50-Day Moving Average (DMA) while all the other equity indexes we regularly monitor are below their 20-DMA, 50-DMA, and 200-DMA. We have been expecting a bounce, which we are getting after gap down opens, even though the major indexes continue to decline.

The Semiconductor Index closed at its lowest point since the early February lows. The intraday low on Thursday touched a supporting downtrend line in place since late May. We will monitor for a break down below that level. The Russell-2000 is also threatening to move to a BEARISH BIAS by the middle of the week and could lead the major indexes to follow. With the long bond threatening to break to new 52-week highs, the stage is set for a large potential slide in equities. We will maintain our short positions as many equity indexes approached oversold conditions.

We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.

If you are receiving these alerts on a free trial, you have access to all of our previous articles and recommendations by clicking here. If you do not recall your username and/or password, please email us at customersupport@stockbarometer.com.

By Mark McMillan

Important Disclosure
Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.
Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.
In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.
For a complete understanding of the risks associated with trading, see our Risk Disclosure.

© 2010 Copyright Mark McMillan - 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.


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


Comments

peter
16 Aug 10, 12:27
confused (again)

The last time you posted on this site (10/8), you were long the markets (and reporting profits). Now you are reporting profits on being short the markets. Don't really see the point in you posting if you are not going to notify change in positions ?? (or is that only for subscribers ?)


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