The Markets ended up higher again today. The Dow was up +58 pts, the S&P +7, and the NASDAQ +21 and were up 3/4%, 1%, and 1% respectively. The volume was fairly light though. The NYSE traded 3.8 billion shares just before the market closed and the NASDAQ traded 1.5 billion shares. For a continued rally, we need increased buying ON expanding volume. Volume will be key next week so pay attention to volume.
From a technical perspective, many short term indicators have and are turning positive (these apply only to short term traders who watch the markets daily). The 14 Day Stochastic crossed above its 3 day moving average on both the NASDAQ and the NYSE.
Also, Selling Pressure is trending downward and the rate is increasing, while the Buying Power has remained somewhat strong as measured by Lowrys (see attached graph). The rate of change of the slope of the line (the 2nd derivative) is important. Notice Selling Pressure is going down at a steep angle while Buying Strength is turning upward also with a decent incline. These are both bullish signs. We need to pay close attention and watch for a reversal in the slopes of these lines. Selling Pressure and Buying Power are intermediate indicators measuring trends, and a change in directions of both Buying Strength and Selling Pressure will demonstrate the trend reversing and will give strong clues to the next bear market.
As I have stated before, earnings should be good, but after that, fundamentals of the global economy, deficits and debts of governments will begin to occupy peoples' minds. The US Congress is already talking about another stimulus plan (because the all the prior stimulus packages or bailouts worked so well). This will not bode well for longer term bonds but will be good for gold.
Have a good weekend and keep studying,
Dan Stewart CFA®
Friday, July 9, 2010
Wednesday, July 7, 2010
Finally, a Strong Rally on Good Volume - What To Do Next
Yesterday, it looked like it was going to be a good day with a strong market. Then the market sold off late morning and was down for most of the remainder of the day. With less than an hour left in trading, it staged a small rally and the major indices ended up marginally positive.
Seemed to be a good day on the surface. However, looking underneath at the market internals, tells a different story. The NYSE had a 61% Up Volume day, NASDAQ actually had a 52% Down Volume day. So even though the NASDAQ was up marginally, more than 1/2 of the NASDAQ stocks were down.
The broader markets were, in fact, down. Both the S&P Small Cap Index and the Russell 2000 Index were down almost 1 1/2%. As of last week, of all the S&P Industry sectors, 96% were below their 26 week moving average. The markets are extremely oversold as can also be demonstrated by both the 14 Day and 14 Week Stochastic momentum indicator. These are just a few of the many indicators with oversold readings.
Does this mean we will get a bounce, or is it an inflection point and we are entering into a bear market?
Well, today, we finally got a strong rally a good volume. In fact the market trended upwards without much pause throughout the day, and with less than a half hour left, we are approaching 5 billion shares on the NYSE. We blew through the support level we broke through last week at 1040 on the S&P and around 9770 (9800 rounded). I have attached a one day chart (today) of the Dow just going into the close so you can see the strong trend.
Currently, just before the close, the Dow is up almost 275 points, the S&P up 32, and the NASDAQ up 65. This translates into about a 3% gain give or take for all the major indices. The reading and analysis provided early tomorrow morning by Lowrys Research will almost certainly show a 90% Up Volume day on both the Dow and the NASDAQ.
What does this mean. It means you need to watch closely over the next few days and see if we get some follow through. We got our strong demand today that we needed. We still need to see some increase in demand/buying coupled with some good economic date or earnings (I would count on the economic date, but I would count on the earnings).
We will also get a "short squeeze" where all of the shorts are scrambling to cover their positions. This happened some at the end of the day today. I believe that is why you didn't see the market trail off and pull back some late in the day.
The next few days might give you an opportunity to lighten up once the momentum loses steam. Again, I believe we will have a decent earnings season, but after that, most of data point in the negative direction.
You should be thinking about cash, short term bonds, or shorting. Get you plan of action ready in advance.
Keep studying,
Dan Stewart CFA®
Seemed to be a good day on the surface. However, looking underneath at the market internals, tells a different story. The NYSE had a 61% Up Volume day, NASDAQ actually had a 52% Down Volume day. So even though the NASDAQ was up marginally, more than 1/2 of the NASDAQ stocks were down.
The broader markets were, in fact, down. Both the S&P Small Cap Index and the Russell 2000 Index were down almost 1 1/2%. As of last week, of all the S&P Industry sectors, 96% were below their 26 week moving average. The markets are extremely oversold as can also be demonstrated by both the 14 Day and 14 Week Stochastic momentum indicator. These are just a few of the many indicators with oversold readings.
Does this mean we will get a bounce, or is it an inflection point and we are entering into a bear market?
Well, today, we finally got a strong rally a good volume. In fact the market trended upwards without much pause throughout the day, and with less than a half hour left, we are approaching 5 billion shares on the NYSE. We blew through the support level we broke through last week at 1040 on the S&P and around 9770 (9800 rounded). I have attached a one day chart (today) of the Dow just going into the close so you can see the strong trend.
Currently, just before the close, the Dow is up almost 275 points, the S&P up 32, and the NASDAQ up 65. This translates into about a 3% gain give or take for all the major indices. The reading and analysis provided early tomorrow morning by Lowrys Research will almost certainly show a 90% Up Volume day on both the Dow and the NASDAQ.
What does this mean. It means you need to watch closely over the next few days and see if we get some follow through. We got our strong demand today that we needed. We still need to see some increase in demand/buying coupled with some good economic date or earnings (I would count on the economic date, but I would count on the earnings).
We will also get a "short squeeze" where all of the shorts are scrambling to cover their positions. This happened some at the end of the day today. I believe that is why you didn't see the market trail off and pull back some late in the day.
The next few days might give you an opportunity to lighten up once the momentum loses steam. Again, I believe we will have a decent earnings season, but after that, most of data point in the negative direction.
You should be thinking about cash, short term bonds, or shorting. Get you plan of action ready in advance.
Keep studying,
Dan Stewart CFA®
Tuesday, July 6, 2010
Market Finished Up, But Narrowly
The markets opened up strong with all three indices up strongly on good volume. Then late morning, two economic reports came out to dampen the early rally. The Institute of Supply Management (ISM) reported the service sector growth was slowing and Citi's revised negative outlook on the retail sector sent stocks lower, especially retail stocks.
The markets sold off hovering around the breakeven and then remained negative for most the afternoon. A late day rally salvaged the day with the Dow ending up +57, the S&P up +5 1/2, and the NASDAQ up +2 on overall, decent daily volume.
With more economic data coming out, it looks more and more as if the double dip recession is coming. In the short term, we still have earnings season. And remember, with taxes going up next year, companies will accelerate earnings into this year. Therefore, we will probably have one more good Quarterly earnings season before the slowing economy will affect the bottom line of most companies.
Keep a close eye on your stocks over the next few days. Likewise, it is a good time to lighten up if you are overweighed in stocks.
Also, for those of you who missed out on gold earlier or are looking to increase you exposure, you may find another entry point very soon. I have attached a graph of spot gold so you can see how it is hitting a bottom trend line.
These are my thoughts for today. Keep studying,
Dan Stewart CFA®
The markets sold off hovering around the breakeven and then remained negative for most the afternoon. A late day rally salvaged the day with the Dow ending up +57, the S&P up +5 1/2, and the NASDAQ up +2 on overall, decent daily volume.
With more economic data coming out, it looks more and more as if the double dip recession is coming. In the short term, we still have earnings season. And remember, with taxes going up next year, companies will accelerate earnings into this year. Therefore, we will probably have one more good Quarterly earnings season before the slowing economy will affect the bottom line of most companies.
Keep a close eye on your stocks over the next few days. Likewise, it is a good time to lighten up if you are overweighed in stocks.
Also, for those of you who missed out on gold earlier or are looking to increase you exposure, you may find another entry point very soon. I have attached a graph of spot gold so you can see how it is hitting a bottom trend line.
These are my thoughts for today. Keep studying,
Dan Stewart CFA®
Friday, June 25, 2010
Are We Still Rolling Over or Getting a Repreive
The markets yesterday finished down fairly significantly and it looked like they would qualify for a 90% Down Volume Day. However, both the NYSE and the NASDAQ fell just short with the NYSE at 89.3% and the NASDAQ at 89.1%.
The market breadth was also negative with the decliners outpacing advancers by approximately 3 to 1 on both the NYSE and the NASDAQ. Volume on the NYSE was 4.9 billion shares, well below its 30 day moving average of 5.8 billion. Likewise the NASDAQ was below its 30 DMA of 2.3 billion coming in at 2 billion shares traded.
This was the 4th straight down day and I am glad I am holding a lot of cash and bonds. Important to watch are selling pressure and buying strength. It looks like selling pressure is beginning to pick up momentum. If we don't get a offsetting increase in buying strength or selling keeps increasing, it would be bearish for the markets.
I have attached a graph of the proprietary chart from the technical analysis firm of Lowrys, the most respected and decorated technical firm in the world. They have many trademarked indicators and methodologies they use which are extremely reliable. Their Selling Pressure and Buying Power is one of their most reliable indicators I have yet found.
I will explain in a later blog the background math to this chart, but suffice it to say, it measures the supply and demand for stocks on the NYSE. See for yourself and see if you think buying strength is "rolling over" and/or selling pressure is "increasing." Both would be bearish signs.
You want the Selling Pressure to be sloping downward and the Buying Power to be sloping upward. The slope or direction is paramount, but also important is the "rate of change" of the slope of the line or how "vertical" the line is. The more vertical, the faster it is changing and the more you have to pay attention.
Today, the market reversed and ended on a positive note. The Dow was flat, and the S&P and NASDAQ were both up almost 1/3%. Volume, which has been very light compared to the 30 day moving average, increased significantly and was well above their 30 DMA on both the NYSE and the NASDAQ.
The revised GDP numbers came out during the day at 2.7%, below the 3% estimate. This put further doubts about the global recovery and Asia and Europe were both down. Our markets were also down but then our consumer confidence numbers came out positive and the markets turned around.
Investors are beginning to feel more trepidation about all the spending, debt, and economic problems the bailouts or stimulus didn't solve. On the commodity front, oil spiked because of bad weather and the threat of hurricanes in the Gulf is going to shut down all the rigs soon. There are still tension in the Middle East so keep an eye on the price of oil.
Keep studying,
Dan Stewart CFA®
The market breadth was also negative with the decliners outpacing advancers by approximately 3 to 1 on both the NYSE and the NASDAQ. Volume on the NYSE was 4.9 billion shares, well below its 30 day moving average of 5.8 billion. Likewise the NASDAQ was below its 30 DMA of 2.3 billion coming in at 2 billion shares traded.
This was the 4th straight down day and I am glad I am holding a lot of cash and bonds. Important to watch are selling pressure and buying strength. It looks like selling pressure is beginning to pick up momentum. If we don't get a offsetting increase in buying strength or selling keeps increasing, it would be bearish for the markets.
I have attached a graph of the proprietary chart from the technical analysis firm of Lowrys, the most respected and decorated technical firm in the world. They have many trademarked indicators and methodologies they use which are extremely reliable. Their Selling Pressure and Buying Power is one of their most reliable indicators I have yet found.
I will explain in a later blog the background math to this chart, but suffice it to say, it measures the supply and demand for stocks on the NYSE. See for yourself and see if you think buying strength is "rolling over" and/or selling pressure is "increasing." Both would be bearish signs.
You want the Selling Pressure to be sloping downward and the Buying Power to be sloping upward. The slope or direction is paramount, but also important is the "rate of change" of the slope of the line or how "vertical" the line is. The more vertical, the faster it is changing and the more you have to pay attention.
Today, the market reversed and ended on a positive note. The Dow was flat, and the S&P and NASDAQ were both up almost 1/3%. Volume, which has been very light compared to the 30 day moving average, increased significantly and was well above their 30 DMA on both the NYSE and the NASDAQ.
The revised GDP numbers came out during the day at 2.7%, below the 3% estimate. This put further doubts about the global recovery and Asia and Europe were both down. Our markets were also down but then our consumer confidence numbers came out positive and the markets turned around.
Investors are beginning to feel more trepidation about all the spending, debt, and economic problems the bailouts or stimulus didn't solve. On the commodity front, oil spiked because of bad weather and the threat of hurricanes in the Gulf is going to shut down all the rigs soon. There are still tension in the Middle East so keep an eye on the price of oil.
Keep studying,
Dan Stewart CFA®
Thursday, June 24, 2010
Do Markets See Economic Slowdown and Contagion?
As I stated yesterday, Tuesday's down market qualified for a 90% Down Volume day. Statistically, a 90% Down day is usually followed by a 2 to 7 day rally. This is usually due to bargain hunters entering the market, technical traders looking at oversold indicators, and short covering, However, yesterday, Wednesday, was essentially flat and Tuesday's selling wasn't enough to entice people pick up their buying.
Today, the Dow was down 145 points to 10,152, breaking through the important support level of 10,186. The S&P was down 18 points to 1073 also breaking through support of 1089. Additionally, the NASDAQ was down 36 to 2217 staying below its 200 day moving average.
The European markets were down significantly with Spain down over 3% and Italy & France down over 2%. The Asian markets were mixed, either marginally up or down. Shanghai was the worst down almost 1%.
The Fundamentals of our economy and the world economy is slowing. Therefore, the bailouts, excuse me, the stimulus didn't work and create a sustained growth economy. People are worried about economic contagion from Europe and China is having troubles of her own.
Tomorrow, I will be watching very diligently to see if selling accelerates and buying dries up, or we get a bounce. The fundamental shift I have been speaking and writing about may come sooner than we think.
I have attached a graph of the Baltic Dry Index, which is a very good indicator of global economic activity and a good indication of growth expectations going forward. I have attached a long term chart and a short term chart so you can overlay and compare to the indices. Notice the near vertical decline over the past month.
Again, the next few days will give us a very good indication of the trend to come. Until we get some better clarification, I will continue to hold a lot of bonds, cash, and some stocks. Incidentally, I am short European stocks.
Keep studying,
Dan Stewart CFA®
Today, the Dow was down 145 points to 10,152, breaking through the important support level of 10,186. The S&P was down 18 points to 1073 also breaking through support of 1089. Additionally, the NASDAQ was down 36 to 2217 staying below its 200 day moving average.
The European markets were down significantly with Spain down over 3% and Italy & France down over 2%. The Asian markets were mixed, either marginally up or down. Shanghai was the worst down almost 1%.
The Fundamentals of our economy and the world economy is slowing. Therefore, the bailouts, excuse me, the stimulus didn't work and create a sustained growth economy. People are worried about economic contagion from Europe and China is having troubles of her own.
Tomorrow, I will be watching very diligently to see if selling accelerates and buying dries up, or we get a bounce. The fundamental shift I have been speaking and writing about may come sooner than we think.
I have attached a graph of the Baltic Dry Index, which is a very good indicator of global economic activity and a good indication of growth expectations going forward. I have attached a long term chart and a short term chart so you can overlay and compare to the indices. Notice the near vertical decline over the past month.
Again, the next few days will give us a very good indication of the trend to come. Until we get some better clarification, I will continue to hold a lot of bonds, cash, and some stocks. Incidentally, I am short European stocks.
Keep studying,
Dan Stewart CFA®
Wednesday, June 23, 2010
Resilience in the Face of Bad News
Yesterday, the markets tried to respond to Monday's failed rally. But again, in the afternoon the markets sold off. Yesterday qualified for a 90% Down day on the NYSE with 90.7% Down Volume. The NASDAQ, however, did not qualify and Down Volume was only 70%. Overall volume on the NYSE was 4.6 billion shares, below the 30 DMA of 5.9 billion.
All of the major indices are very close to support levels we must pay close attention too. For the Dow it is 10,186, the S&P 1089, & the NASDAQ 2242. Currently the Dow closed today at 10,298, the S&P 1092, & the NASDAQ 2254. The volume on the NYSE was 5.2 billion shares and picked up from the past few days.
The good news is the markets were resilient with the bad economic news coming out, namely the FED being cautious about the recovery and economic growth, and US home sales declining.
All of the technical indicators show the markets as being oversold and we should get a nice rally. However, the fundamentals are getting worse. Therefore, there is a tug of war and that is why I am holding some cash and not fully invested. Also, if I have to raise more cash, I will.
Now is the time to be diligent, watch closely, and let the markets show us which way the longer trend is going to be.
Keep studying,
Dan Stewart CFA®
All of the major indices are very close to support levels we must pay close attention too. For the Dow it is 10,186, the S&P 1089, & the NASDAQ 2242. Currently the Dow closed today at 10,298, the S&P 1092, & the NASDAQ 2254. The volume on the NYSE was 5.2 billion shares and picked up from the past few days.
The good news is the markets were resilient with the bad economic news coming out, namely the FED being cautious about the recovery and economic growth, and US home sales declining.
All of the technical indicators show the markets as being oversold and we should get a nice rally. However, the fundamentals are getting worse. Therefore, there is a tug of war and that is why I am holding some cash and not fully invested. Also, if I have to raise more cash, I will.
Now is the time to be diligent, watch closely, and let the markets show us which way the longer trend is going to be.
Keep studying,
Dan Stewart CFA®
Tuesday, June 22, 2010
Getting Close to Resistance Without a US Budget
Yesterday, the initial rally wore off after the DOW was up 145 points and finished marginally down. The S&P and the NASDAQ were slightly worse. However, two positives came out of yesterday's market. First, the selling lacked intensity and Down Volume on the NYSE was 50%, and a little heavier on the NASDAQ at 60. Also, it was light volume on the NYSE with 4.5 billion shares traded well below the 6.1 billion 30 day moving average.
Another positive was there was little change in Selling Pressure and Buying Strength. In fact, Supply or Selling actually contracted a little bit. Thus even it is and has been a very choppy market, these positive trends are still in place.
However, we are getting close to the resistance levels after today's down markets and must remain diligent. The S&P closed at 1095 and just broke below its 200 DMA at 1110. The key resistance level to watch for on the S&P is 1089, so we are close. Virtually all of the short term technical indicators point to an overbought market and suggest a rally.
I am still bullish in the short term and the upward trend is still intact according to all the technical market internals and indicators. It is just choppy! The mid and long term is a different story. The Fundamentals are greatly in favor of a slowing economy, corporate profits squeezed, and higher interest rates (due to high debt loads & risk). This will be bad for US bonds, most stock sectors, and even $US cash if we devalue the dollar.
There will come a time in the not so distant future, we will have to make a fundamental shift into commodities and energy, more metals, and other currency based assets. I will be writing more about this in the weeks to come. But you will have to change your way of thinking as the $US is going to come under severe pressure. The inflation you remember in the 70s might even seem tame.
We will be talking about this extensively today on the radio from 4-6 p.m. on 1190 AM in DFWS, or you can listen live streaming at www.thewallstreetshuffle.com , or podcast later. We will be discussing Congress new decision NOT to issue a budget this year. No budget! Just spend! That will change your life more than you think unless you are proactive and awake.
Keep studying,
Dan Stewart CFA®
Another positive was there was little change in Selling Pressure and Buying Strength. In fact, Supply or Selling actually contracted a little bit. Thus even it is and has been a very choppy market, these positive trends are still in place.
However, we are getting close to the resistance levels after today's down markets and must remain diligent. The S&P closed at 1095 and just broke below its 200 DMA at 1110. The key resistance level to watch for on the S&P is 1089, so we are close. Virtually all of the short term technical indicators point to an overbought market and suggest a rally.
I am still bullish in the short term and the upward trend is still intact according to all the technical market internals and indicators. It is just choppy! The mid and long term is a different story. The Fundamentals are greatly in favor of a slowing economy, corporate profits squeezed, and higher interest rates (due to high debt loads & risk). This will be bad for US bonds, most stock sectors, and even $US cash if we devalue the dollar.
There will come a time in the not so distant future, we will have to make a fundamental shift into commodities and energy, more metals, and other currency based assets. I will be writing more about this in the weeks to come. But you will have to change your way of thinking as the $US is going to come under severe pressure. The inflation you remember in the 70s might even seem tame.
We will be talking about this extensively today on the radio from 4-6 p.m. on 1190 AM in DFWS, or you can listen live streaming at www.thewallstreetshuffle.com , or podcast later. We will be discussing Congress new decision NOT to issue a budget this year. No budget! Just spend! That will change your life more than you think unless you are proactive and awake.
Keep studying,
Dan Stewart CFA®
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