Monday Market Conditions 9/24/12 $SPX $SPY $VIX $VXX

Over the weekend, Apple (AAPL) sold more than 5 million new iPhones in the first weeknd, but that's about half of what analysts expected.  In the EZ, Spain is running lottery bonds, and Germany is getting impatient. 

The S&P continues to consolidate, forming a potential bull flag.  Will have to see how it plays out.  Regardless, the long-standing channel up remains intact.  We could keep riding this up for a while.

Volatility and fear still remain depressed.  Not many known-unknowns left out there in the near future now that Ben, Draghi, and Japan have announced stimulus.  Much of the important news is priced in.


Even with the market still edging lower, the McClellan Oscillator is barely negative.  Not much conviction in these down days recently.  The percentage of stocks trading above their 50-day moving averages remains astronomically high at ~80%, and the put/call ratio is still call-heavy.

-Technology is flagging after breaking out.  Could be preparing for another blastoff.
-Financials, Energy, & Miners all sliding after the big QE3 pop two weeks ago.


-Small caps appear to be back to risk-off, supported by...
-The defensive Utilities sector outperforming.
-Industrials turning back down, confirming weak global manufacturing.
-Not a good sign when the typically forward-looking Transportation sector makes lower lows.

Big Ben Bernake As A Child

Monday Market Conditions 9/10/12 $SPY $SPX $VXX $VIX

Last week the markets got a big boost after Super Mario announced that he is willing to open up the checkbook to help the EZ.  This produced a 30-point run up in the S&P, which someone told you to watch out for.  Retail sales appear to be up, but are hurt by rising food and gas prices.  NFL ticket prices and attendance also point to a recovery that hasn't fully taken hold yet.

The S&P 500 closed well outside the Bollinger band Friday and 7% above the 200-day.  The market was due for some digestion, and we got a bit this afternoon.  I remember commenting Thursday that we saw panic buying as those investors on the sidelines rushed to get into the market before they missed the move.  That tends to happen at the end of bull runs, but she could have more steam left before she's done.

Things should get real interesting with all the important meetings Wed & Thurs.  Unless we get solidly good news (like full-blown QE3), I expect more selloff.

Lots of big swings in the fear index lately.  Down as low at 13.5, up to 19, and back down to 14 before closing above 16 again.  Up 13% today with the markets down ~0.6% is interesting to note.

The McClellan Oscillator hit its highest point since early July last week.  Today it is still positive but nowhere near overbought.  The number of stocks trading above their 50-day moving averages, however, is extremely overbought at nearly 81%, while the put/call ratio is at the lowest it's been since March.  Everybody on one side of the boat right now.

-The Tech sector trend broke and led the market down after leading it up.
-Financials continue to outperform the market.
-Energy appears to be making a rounded top.
-Materials are being bought up but are hitting resistance.

-Small caps are making a nice recovery off the Aug-1 low point.
-Utilities, industrials, and transports all taking a dive since July.

Market Conditions 9/4/12 $SPX $SPY $VIX $VXX

September is here and after a few boring weeks, things could start to pick up in a hurry.  The major spark could come Thursday, when ECB president Draghi may announce more bond buying.  Other than that, the manufacturing sector has contracted for the third month in a row, and oil prices are continuing to creep up.

The bears fought hard today, but in the end could only muster a 1.6-point drop in the S&P 500.  Stochastics have quickly turned around from two weeks ago.  Momentum seems to be slowing, but another 30-point bar could be lurking right around the corner.

After closing in the low 13s a few times in August, volatility has begun to return to the market (good news for option sellers!).  The VIX almost touched 19 at one point today, the highest in nearly a month.

The McClellan Oscillator rebounded into positive territory today for the first time in a few weeks.  Still not much conviction to either side since the quick 100-point run up from June to July.  Still almost 70% of stocks above their 50-day moving averages as well.

-The market is still being led by the tech sector, which is in turn being led by AAPL & GOOG.
-Financials are seeing a bit of buying, probably due to the additional stimulus expected to be announced.
-Energy names are forming a rounded top.
-After being bought up slightly, the Material sector is starting the next leg down.

-Somewhat reassuring to see the small caps also moving with the larger market.
-Utilities possibly seeing some selling due to risk-on trading.
-Industrials getting hammered on today's ISM data.
-Not good when Transports lag the rest of the indexes.

Monday Market Conditions 8/20/12 $SPY $SPX $VIX $VXX $AAPL

Another week, another melt up.  Other than Thursday's jump, the markets were relatively unchanged.  Overseas, Germany is keeping the pressure on Greece to keep up its end of the bailout bargain.  And today Apple (AAPL) overtook Microsoft ($MSFT) as the most valuable stock of all time.

The three-month-long flag is still flying, with a possible resolution date at the end of next week.  Until then, it's entirely possible we keep floating higher.  ATR is back down to April levels (right before the S&P dropped 150 points).  And Stochastics are asymptotically approaching 100.

Fear continues to remain pretty much nonexistent in the market.  The VIX put in a new multi-year low last week, though it closed back above 14 again.

The McClellan Oscillator has begun to penetrate more strongly into the positive side, but it is still a ways from being overbought at +60.  The total put/call ratio (CPC) is creeping dangerously low again.  This points to everyone being on one side of the boat.

-The market still appears to be held up by AAPL & GOOG.
-Financials seem to be rebounding off support.
-Energy sector forming a bit of a rounded top.
-Nice to see Materials finally recovering a bit.

-The jump in the Russell points to more risk-on trades again, confirmed by...
-Defensive sectors such as Utilities showing a lot of relative weakness.
-Rearward-looking Industrials on the move.
-Good sign of a healthy market when the Transportation sector picks up again.

Monday Market Conditions 8/13/12 $SPX $SPY $VIX $VXX

Following last week's low-volume snooze-fest, we learned that Japanese growth slowed to 1.4% annually.  Also of note is that Japan voted to double their sales tax over the next three years to help fight their growing debt.  When a similar course was taken in 1997, it had the effect of stalling out their economic recovery.

More data is surfacing which continues to suggest that China is continuing to slow.  Chinese export growth fell to just 1%, missing forecasts of 5%.

The market had its first red day in about a week and a half, though the bears didn't have much of a bite, and again it came on super light volume.  Lots of important data coming out this week (Retail sales, PPI, inventories, CPI, unemployment), so I fully expect that to change starting tomorrow.

Volatility continues to nosedive, even with the market down today.  Closing in on the lows from March.

While indicators on the S&P 500 chart remain overbought, the McClellan Oscillator is anything but.  And the percent of stocks above their 50-day moving averages remains at the highs of the year.  The CBOE put/call ratio has actually started to creep back up, meaning investors have 1) begun buying puts to protect their positions and/or 2) buying puts/closing calls in anticipation of a pullback.

-Tech continues to surge thanks to AAPL & GOOG.  Wonder where we would be right now without these two names.
-Financials seem to have leveled off a bit.
-The Energy sector remains strong.
-After a small bounce, Materials look to be headed back down.

-Small caps continue to under-perform the larger market.  Can't have your generals and admirals leading you into battle without the privates and ensigns.
-Utilities have given a little back but are now in step with the S&P.
-Industrials have started to pick up a little life.  These tend to lag major market moves.
-Transports are in a nosedive.  Bad news if you subscribe to Dow Theory.

Monday Market Conditions 8/6/12 $SPY $SPX $VIX $VXX

A year after S&P downgraded the U.S. credit rating, the market seems as if it never happened.  Even though the change in non-farm payrolls (NFP) went up, so did overall unemployment.  Knight Capital gets rescued after losing nearly $400 million.  And Mario Draghi created some selling pressure last Thursday by pulling a bait-and-switch.

We keep breaking out to new highs, both Friday and today (albeit on much less volume than Friday).  Not a lot of big macro data coming out this week, except for the weekly unemployment insurance claims on Thursday, so we may continue floating up higher.

Technically, the market ran right up against the upper resistance line today.  OBV actually dropped below the symmetrical triangle.  This run still looks like it's starting to run out of steam, but it can still keep floating higher in the meantime.

The VIX dropped below that critical line at 16, which has preceded volatility spikes in the past.  Definitely a low-risk trade here, but stay away from any volatility derivatives.

The McClellan oscillator has been bouncing around between positive and negative.  As an overbought/oversold indicator, it has been very neutral.  As a momentum indicator, it shows that moves either direction have not been very strong lately.

-The Tech sector finally broke out and is leading the way up again, mostly on the backs of $AAPL & $GOOG.
-Financials battled back a bit but the trend is still down.
-Energy names are still hot, could be readying for another leg up.
-Materials perking up a bit.  Have them bottomed or is this just a bounce?

-The small-cap Russell index continues to make lower highs and give up the headway it made in July.
-Utilities consolidating a bit, but still continue to be a profitable trade.
-Industrials keep pushing lower.
-Transports as a leading indicator tell an ugly story.

Monday Market Conditions 7/30/12 $SPX $SPY $VIX $VXX

After three large red candles to open the week, the S&P gained almost 50 points in Thursday & Friday's trading session.  This all comes on more QE3 hopes and the belief that Mario Draghi will back up his promise to save the euro.  Even if he does, the U.S. economy is still in trouble as higher taxes and federal spending cuts loom around the corner.

Looks like the upward momentum from last week didn't carry over into today, with the S&P failing to pick a direction.  This doji candle has formed at many of the short-term tops and bottoms from the last two months.  This could signal another move down in the coming days while we wait for the Fed statements.  The bearish divergences in the indicators still hold.  Higher highs in the market, lower highs in OBV and the stochastics.

The large move Friday and today's indecision weren't exactly mirrored in the volatility index.  Note how even though SPX gained ~25 points Friday, the VIX didn't even break the lows from 7/3.  Also see how it gained nearly 8% with the markets flat.  Watching the 20-day moving average as a mean-reversion indicator, you can see it is starting to curl back upwards.

The McClellan oscillator regained positive territory again last week after a short stint in the red.  Also interesting to note the divergence here.  As the market is making higher highs, NYMO is making lower ones.
The number of stocks trading above their 50-day moving averages is at its highest since March.

-After leading us higher, tech names have started to cool off.  And this is with Apple having a strong green day.  It would only be worse otherwise.
-Financials leveled off after taking a hit.
-The Energy risk-off train is moving right along.
-Materials still can't catch a bid.

-More risk-off with small caps getting hit.  Perhaps last week was everyone's chance to take profits?
-Utilities are also enjoying the money that comes with risk-averse investors.
-Industrials bounced slightly but appear to be ready for the next leg down.
-The sharp decline in the forward-looking Transports remains troublesome.

Monday Market Conditions 7/23/12 $SPX $SPY $VIX $VXX

Today we gapped down hard after finding out that Spain is in trouble, and Greece may exit the euro.  Oh wait, we already knew that?  Perhaps that's the reason for recovering nearly half of today's losses.

Bulls appear to remain in control, buying just about every dip.  But keep in mind the bearish divergences in OBV, ATR, and the stochastics.  The three latest peaks in prices have come as the on balance volume decreases, meaning less money driving the prices up.  The stochastics make lower highs, indicating less upward momentum up each time.  And the average true range is declining, which tends to mean less enthusiasm in the overall move.  All three point to this bull run losing steam.

The volatility index spiked as many were probably caught off guard when they woke up this morning.  However, any fear quickly wore off as the VIX closed halfway into the gap.

The McClellan oscillator registered its first significantly red reading since the beginning of June.  I'm going to start showing this as an area chart to help tell the story from now on.  Also added the 20-day moving average as a bit of a mean-reversion analysis.  We'll see if it sticks.

-Tech rebounded back into the falling wedge after being beaten up, thanks in large part to GOOG's strong earnings.
-Financials took a nose dive last week.
-Energy stocks continue to get bought up by the risk-averse and yield-seekers.  These tend to be strongest at market tops.
-No bottom in sight for Materials.  Going to keep pointing to this chart for anyone that doesn't believe worldwide growth is slowing.

Added this new chart this week.
-Small cap stocks underperforming the broader market confirms that many investors are seeking safety.
-Utilities, like energy, point to risk-off trades.  This sector tends to get stronger as we enter a bear market.
-Industrials also point to slowing growth, another sign of the end of the expansion cycle.
-Transportation names are seeing a sharp decline the past few weeks.  Considering the fact that this index tends to be forward looking, this could be a bad sign.

Market Conditions 7/17/12 $SPX $SPY $VIX $VXX

After a couple ugly candles dropped the S&P 500 down to ~1345 early in today's trading session, the market shrugged off the losses to close 10 pts up.  The rising wedge continues to hold, and this is generally viewed as a bearish pattern.  It may not resolve itself until we reach 1370-1380, however.  This is especially true given how the mixed to poor macro economics data that has been coming out hasn't

The VIX continues its march downward off the June high, though 16.00 continues to be a line of resistance.  This could be a good place to get long via outright calls or bullish call spreads.

The McClellan Oscillator is back into positive territory after dipping negative for a day.  While this indicator is reading neutral at the moment, the bias is slightly overbought.  Still not significant enough to point to a trade in either direction though.

The number of stocks above their 50-day moving averages is almost back to 70%.  A little bit of digestion last week but still a bit more needed in my opinion.

Tech finally broke down hard last week after a few months of churning.
Financials continue to lead us higher and may continue to be the hot sector.
Energy names are finally finding buyers as investors seek more conservative plays.
Materials continue to get pounded.  You don't need to look any further than this ticker to see how world growth is slowing.

Monday Market Conditions 7/2/12 $SPX $SPY $VIX $VXX

U.S. manufacturing has decreased for the first time in 3 years, EU unemployment hits record highs, and the possibility of a double-dip recession is as high as ever.  Yet, today we close convincingly above 1360 for the first time since early May.  This is mostly due to the receipt of news out of Europe last week that a new plan had been agreed upon to allow rescue funds to recapitalize Spanish banks, as well as purchase Italian bonds.

Keep in mind, however, that this is not a fix and the underlying debt problem still exists, along with the rest of the worldwide fundamental problems.  But you can't fight the tape.  To that point, we continue putting in higher-highs and higher-lows from late May, with OBV showing increasing accumulation.  Could this just be climbing a wall of worry?  Take note of today's weak volume bar.

Volatility continues to fall closer and closer to that 16-level.  The time we breached that in March happened to coincide with a top in the S&P.  The biggest moves happen when everybody is on one side of the boat.

The NYMO put in a new high of the year again to start off the week.  We are dangerously overbought, and longs should consider taking some off here, but I wouldn't rush to load the shorts just yet, remember: the market can stay irrational longer than you can stay solvent.  Wait for confirmation.

64% of stocks above their 50-day smas represents the highest number since April.  Stocks are greatly overextended.  The recent move is just too far, too fast and needs to be digested.

Technology continues its descent.
Financials are really starting to wake back up.  This is a good thing.
Energy and Materials perked back up a little last week, but they still have a lot of work to do to to repair their charts.