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Archive for the 'Markets' Category
Here is some recent news I’ve found interesting:
- A rare event: the S&P 500 is 20% above its 200 dma for the the first time since 1983.
- I wonder if this road map from a technical analyst will prove to be more or less correct?
- Wells Fargo (WFC) sells a loan—right at the 120 day point where it counts the loan as “defaulted”—to itself. Is this standard practice? Is it something to worry about? However you describe this practice, it just doesn’t seem right to me.
- There still seems to be no major shifts in money flows into or out of the markets.
- Mean reversion and further ruminations on whether the market is cheap or expensive: according to the Shiller 10 year PE ratio the stock market is trading at an 18 PE.
This is a video of David Rosenberg with the Squawkbox crew on CNBC. It’s almost 10 minutes but I think it’s well-worth watching.
For the past several weeks I’ve been wondering to myself, “What portion of the economic growth we have experience in the past decade or so is solely attributable to the expansion of debt?” I have not been able to come up with an answer. However, I did create a chart that may or may not provide a vague, general answer.
For this chart I simply plotted the S&P monthly closes and the total consumer credit outstanding data (provided by the St. Louis Fed). My basic hypothesis is that the markets will find a bottom at their 1994-95 levels as this was the last point in time the markets started to increase after a period of zero or negative percent growth in consumer credit.
I am not an economist and I have no idea whether I’m right or wrong or just crazy. But I can look at a chart!
If anyone has an answer to the above question, please leave a comment.
Via streaming quotes, I’ve had the opportunity to watch how the market has reacted on days where there is a scheduled Fed announcement. The typical pattern is usually a slow build up until the Fed releases the statement at which point there is huge volatility. The market spikes up and/or down once or twice before deciding on a direction. It’s always a nailbiter. Today was no different. Here’s a 2-day chart of IWM (it tracks the Russell 2000) to demonstrate what I’m talking about:
Can you tell where the Fed made it’s announcement? Even without my big hint, I’m sure you could make an educated guess.
Anyways here is a longerterm chart of the IWM:
I still am in agreement with some of the bears out there that there is room for more downside to the markets.
Finally, the market is getting interesting once again. We are soon to be at another crossroads as the indices approach their 50 DMAs. Tim Knight recommends to handle these coming days with care and posts some charts of interesting short opportunities.
Here are some more charts and trading ideas if you’re having trouble finding something worthwhile:
- Beanieville
- What to trade next – MDT MO JNPR + xy chart STRA,CHK,DVN
- The Resourceful Bear – Investment Banking And Banks Take Stock Market Lower
As for myself, I exited a couple of my puts when the Russell was down 1%, a little too early, as it later declined another .7%, but best to be safe than sorry I guess.
After Tuesday’s huge up day (I saw freaking 7-10% gains for some banks and brokers), yesterday could be termed as consolidation, though after Bernanke’s testimony the markets turned downward for modest losses.
Now I think most people are worried or hoping that this rally will continue. Here are some charts of volatility and advance/decline. These charts show that we are at a critical juncture.
And one last chart of volatility: the CBC put/call ratio.
Five experts from the American Enterprise Institute (a former employer of mine) have graded and assessed the Federal Reserve’s recent policy decisions. Each expert gives good analysis, but the feeling I get is that the majority of would give Fed should get an “A” for effort and good intentions but a “C” for delivery.
Next, the Resourceful Bear Blog says Lehman Brothers is likely another Bear Stearns. The fact that Golman Sachs and Lehman Brothers debt was downgraded on Good Friday by S&P is cited as an indicator of this possibility.
Finally, according to Oppenheimer analyst Meredith Whitney, Merrill Lynch and and UBS may suffer respective first-quarter write-downs of $6.03bn and $11.06bn.
The slope of the 50 day moving average for SPY is still pointing down. There is also some evidence that chances of a pullback increase when the market closes higher 3 days in a row while under its 200 day moving average.
One last, large factor that indicates a pullback from this small rally is the lack of volume. Volume has decreased over the last few trading days, thus creating a negative divergence between volume and price, and this is not favorable for a rising market.
With all this in mind, I feel its highly unlikely the market will rise, but certainly more likely that the markets will be in a trading range or will be falling once again.
I remember seeing an interesting chart from some blog showing a long term chart of some broad-based index showing the rarity of a decline in the markets for four straight months, but I can’t seem to find the chart or blog. Thus, I’ve created my own chart, a 20 year monthly chart of the S&P 500. I’ve highlighted the points where there have been 4 or 5 straight months of decline.
The important thing to note is that these series of declines have all taken place during a period of recession. Also, there is usually a good-sized rally after these series of declines. Just something to keep in mind.
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