5th straight week of bearishness for the market

Both the 50 day SMA and 7200 level has been a good resistance for Nasdaq (pic 2 below)

Last week The S&P 500 came to within 4 points of its 200-day moving average, currently around 2,609.

It has now at the end of the week an Accumulation and distribution scale of D. the worst in the scale of A-E is E.

Look at volume – above the last 15 days but it has not budged Thursday and serious plunge on Tuesday. On Friday despite the wonderful slaughter of analysts expectations by AMZN stock.. AMZN actually declined by the end of the day !!

Amazon and Intel staged ugly reversals.

Amazon gapped up 7.9% but then retreated to a 3.6% gain. Intel rose 5.1% and then erased everything to close with a 0.6% loss.

Next The rising 10-year rate is causing the yield curve to steepen.  In the past week and a half, the spread between the 10-year and 2-year treasury rates increased by 32% from 0.41% to 0.54%. Investors have been worried about the flattening of the treasury yield curve and the potential for a yield curve inversion (2-year treasury rate greater than the 10-year rate).  An inversion of the yield curve has been a reliable signal that the economy is approaching a recession.  Investors have also been worried about rising interest rates. (Source of this para and below pic is Delta market sentiment )

Sidelined for now – the picture is getting uglier

Market still in the weeds

Happy weekend from Seoul, South Korea

As observed on April 13th, 2660 is a critical test for S&P. It passed with flying colors on Monday and Tuesday April 16th and 17th. In fact April 17th was a solid gap up (when the market opens well above the previous days price )

Look at the volume of the entire stock market at the bottom of thr above picture. This is the most beautiful pertinent information. Why? This is the sum Total of all actions of the entire 100s of money managers and pension funds and hedge funds. When the market is falling the volume is going up – red lines and when price is rising the volume in blue is not that great.. this last week it went up 80 points and gave back 80 points. So the volatility is still high and it’s up and down

About 47-50 % of S&P stocks are below their 100 day SMA (say there are 100 stocks in entire market 50 stocks are below their price averaged over their last 100 days) – 2nd picture

On Friday the market S&P and NASDAQ price sliced below their 50 day SMA

S&P 500 is back to testing the 2660. It is just a few points above it.

7300 is now shaping up to be solid resistance for NASDAQ

FFTY the 50 top growth stocks – last picture is back down its 10 days SMA (growth stocks are first bought by institutions when the market is healthy).. if growth stocks are not braking out in high volume..the market is not healthy

In the side lines for now. Let it play through.

Happy weekend

Ps: a blog on my travels

https://ourhumanex.com/

DMZ zone North Korea

More than half of big caps below their MA

howdy folks from Beijing !

On March 20th we had observed in one of the posts that “S&P 500 solidly gave up the 50 Day MA under a clear gap down . Very close to 2700 support The 2800 was a solid resistance. Time to get in sidelines ”

This week Tuesday’s powerful move was masked amid the higher volatility. The Nasdaq and S&P 500 printed price bars that were actually smaller than several others in the past many days.

The March 27 high was easily today in nasdaq

But the S&P 500 is at a critical March 27 and April 5 highs.

Both are below the 50 day SMA ..

2660 is a critical test for S&P (1st chart below ) the advance decline line for S&P is flattening .. volume for S&P has steadily backed off

7050 is critical support for nasdaq

Sidelines for now.. let it play out further

behavior of leading stocks in a market correction

Screen Shot 2018-03-29 at 9.49.25 AM

FFTY is the fund that has the 50 leading stocks in the market. Since Feb 17th 2016 techs have been dominant leading index. the purple line is the 50 day simple Moving average (SMA) and the red line is 200 day SMA. If the leading stocks are testing their 200 SMA. Time to get to the sidelines and watch (as indicated in previous post) The volatility has been crazy!

on Monday The Nasdaq composite up 3.3%; the Dow Jones industrial average soared 2.8% and the S&P 500 jumped 2.7%. a pure dead cat bounce!! because on Tuesday The Nasdaq composite plunged 2.9% and undercut Friday’s low. The S&P 500 slid 1.7% !!

Both indexes’ price ranges Tuesday exceeded the prior day’s — a bearish behavior that’s known as an outside day!

semiconductor, software, internet have taken much more pounding as the stock market sees its second intermediate-level correction unfold so far this year.

The Nasdaq 100 slid 1.1% and pierced the 6500 level for the first time since Feb. 8.

The biggest winners fall 1-1/2 to 2-1/2 times as much as the major indexes do. What does this mean? With the Nasdaq at 6949, down 9% from its 7637 all-time peak, expect some of the leaders to fall anywhere from 14% to 23% from their own 52-week or all-time peaks.

look at the S&P index – a very robust broad and key index

Screen Shot 2018-03-29 at 10.03.53 AM

It is in hair’s breath of the most important indicator 200 day moving average. Why is this most important indicator ? mutual funds, hedge funds, pensions, sovereign wealth funds see this level at 200 day MA as the key level to buy or sell.

there is no buying now – look at the triple top in the second chart above. Stay in sidelines and watch

Source of some of this article : IBD

 

 

 

volatility is back

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The stock market does not like uncertainty.  Uncertainty is a component of how the stock market discounts future earnings back to a price today.  The discount rate is the denominator of the equation.  Just as 1/10 is a smaller number than 1/5, stock prices are lower as uncertainty rises.

Whether we look at the relative performance of stock market components based on exposure to foreign trade or the CBOE Volatility Index (VIX), it is evident stock investor anxiety is on the rise.  How concerned should we be?

We look to the credit market to see if lenders are also feeling anxious.  The debt market is substantially larger than the stock market and often provides a more reliable and leading indicator of broad investor sentiment.  Specifically, we monitor the high-yield spread.  If the differential between junk-debt interest rates and treasury rates is 5% or greater and rising, we get worried about the stock market

Currently, the high yield spread is about 3.6%.  3.6% is down from about 3.8% a month ago and 4.1% a year ago.  If the bond market were the British Government, it would be telling us to “keep calm and carry on.” (source : delta market sentiment )

Having said that – based on our trading philosophy – the price is the true north star

on Monday March 19th 2018  market fell very badly

S&P 500 solidly gave up the 50 Day MA under a clear gap down . Very close to 2700 support

The 2800 was a solid resistance. Time to get in sidelines

 

 

 

Historic Drawdowns in market

The last two weeks steep downhill and loss of 10+ percent on S&P

RED DOTS – inter year DRAWDOWNS

The chart below shows calendar year S&P 500 returns without dividends (grey vertical bars).  Below the bars are red numbers which indicate the maximum intra-year drawdowns.  The chart makes clear that 10% drawdowns are fairly common.  What is not common is a drawdown of only 3% which was the case in 2017.

Another important observation from the above chart is that as long as the economy is not in a recession (areas shown with horizontal green bars), the calendar year returns are usually positive.  The U.S. is not currently in a recession.

From January 1950 through December 2017, the S&P 500 has declined by 5-10% 41 times.  The average length of the decline was one month.  The average recovery from the low was one month.  In the 11 cases that the S&P 500 declined by 10-20%, the sell-off lasted and average of 4 months and recovery took and average of 3 months.

Source : delta maker sentiment

Volatility and high frequency algorithms

Screen Shot 2018-02-07 at 3.14.26 PM

If it wasn’t obvious to investors,  fanned the market volatility. Treasury Secretary Steven Mnuchin said that algorithmic trading played a role in the sell-off as he sought to reassure jittery investors.

The S&P 500 fell as much as 9.7% from its peak. That’s practically the definition of a market correction, which is commonly understood to be a decline of at least 10%. The small-cap Russell 2000 did sink more than 10%. (IBD)

No, i am not talking about terminator 2 judgement day

yahoo has a small segment here

As posted in the previous post on this site we have had and we had exited the market on Jan 30th when we

5 days of stalling and no progress

2 days of high volume selling

100 points loss in 2 days in high volume

Top leaders down in high volume

( first photo source : trading view )

FFTY etf a proxy for top 50 beat stocks in the market down by 2%

On Jan 30th – the market gapped down 88 points …