If these charts look rather dull and uninspiring, that's because that is what they are, perhaps the holiday week, perhaps Friday, perhaps hesitation to take on risk over a weekend. One thing I try to tell members using 3C is, "Don't torture the charts looking for a signal", it's either there or it isn't, you can always find some little jiggle and call it a signal, but a real signal, a high probability signal is the one that jumps off the chart, for example...
FB This is the same 60 min chart, just a wider view and a closer view.
With the long positive divergence on a strong 60 min timeframe, FB accumulation was a strong signal worth taking, FB ran up and then gave another signal last week.
A closer look at the same 60 min chart reveals a negative divergence in to higher prices on an important timframe-60 mins, this was impossible to ignore, it's why I posted last week that FB would pullback even before it started and as it was making higher highs in price, that's a hard signal for some to take as they are making money, but it was the correct call and there was no searching the chart for the signals, they were clear as day.
Perhaps in addition to the other things I mentioned above about weak signals today (as already seen in futures), QE3 may be causing confusion among traders as for the first time in QE history, the F_E_D was front run, the market priced in QE months before it was ever announced, at ;east 3 months which never happened before.
Now that we have two QE's under the belt, we know that it can push asset prices up, but it has little effect on the economy. The banks that will be selling the MBS to the F_E_D may not be in the best shape and "may" not act like they did in QE1/QE2, they may retain capital. Lastly as we saw with QE1, the effect on the market is dynamic, QE1 started out as a failure as far as asset prices were concerned, it was only months later when the F_E_D upped the ante and added more MBS purchases and for the first time Treasuries that QE1 started to move asset prices. QE 2 started with a bang before it even started as Bernie told the world it was coming at Jackson Hole months before it came, but before the program ended, the market already was selling off so the QE effect is not a constant and there are many ideas as to the effectiveness of giving up al your surprises, going all in and many other issues like dividends being lower now, P/E ratios being much higher (stocks are more expensive), earnings disappointing , a manufacturing recession and likely a GDP recession soon. Stocks aren't cheap, one could say they are in a bubble.
If the market and economy were very healthy in 2004-2005 supported by huge consumer spending which came from the value of rising homes and employment was at the F_E_D's mandate, then consider the economy now vs then and asset prices between a healthy, humming along economy and one that is on the edge worldwide.
Does anyone really think we can compare the economy back in 2004 to the economy now and reasonably expect asset prices in the SPX to be 34% higher?
To be clear I'm not advocating selling the market on common sense principle, that's not how things work. If the market wants to give, then we should take no matter how unreasonable it may seem, the market long ago ceased to be a discounting mechanism of value. However, when a bubble forms, you are well advised to take advantage of it, but to be cautious and to never try to convince yourself, "This time it's different" as centuries of bubbles, all the way back to the 1600's Dutch Tulip Bubble have shown us time and time again.
In any case, I've ventured off the path.
Here's the market update.
The DIA believe it or not is one of the better looking charts intraday, but that's not saying much. There's a leading positive position on the 1 min above yesterday's readings.
A closer look reveals an early positive and that leading positive we saw form quickly before noon time and pretty much in line since then. There are several short term signals that look like a rally in to the close to fill today's gap looks likely. Still, this isn't the positive divergence that would be expected as the point of a constructive pullback.
DIA 3 min positive yesterday around the Spanish budget details in the a.m., negative at the highs and leading negative toward the afternoon. There's nothing to see today.
DIA 5 min, again the same principles described above for yesterday, today a market that is just moving to fill a gap more or less, nothing special here at all.
IWM 2 min with distribution yesterday, an early positive today and that leading positive before non, since a relative negative , again, the point of a constructive pullback in the case of a bounce like this is to bring prices down to a lower level and aggressively accumulate them, carving out a larger positive divergence.
IWM 5 min, I had hoped this would hold up and not see deterioration, but it has during the day to move in line with price rather than showing a positive and holding up.
IWM 15 min shows an intraday negative divergence as price moved higher on an intraday basis today. Still this chart alone doesn't look that bad and if the shorter timeframes looked better, I'd say it's capable of supporting further upside on a bounce, but they way the 5 min chart went, it almost looks more likely that deterioration will migrate here, this is one of the reasons for closing the 3x long R2k position.
QQQ 2 min with a negative yesterday, early positive today which really was just enough to move prices as they did today and an inline status.
QQQ 5 min, negative yesterday, the same small positive in the a.m. which is enough fuel to move the Q's intraday as they have.
QQQ 10 min, that noon time leading positive today, but nothing else.
SPY 1 min is leading negative here
SPY 3 min is negative at the afternoon highs
The 10 min chart does look decent, but again from today's behavior, it's more likely to see negative migration unless Monday we see accumulation on the short term timeframes.
As it stands now, I'm deeply unimpressed and don't see any reason on these charts to expect a big move on Monday to the upside, at least not based on anything that happened today.
No comments:
Post a Comment