I was very close to tapping out on MCP until the higher volumes started coming in, b the is really a concept that we saw en masse yesterday, but not just volume, the degree of oversold with 9 of 9 S&P sectors red, 17 of the 239 Morningstar groups green, horrible intraday breadth, etc. Years ago as technical traders we'd have been short and stayed short through a day like that, but Wall St. has long since (not only known everything about TA), has known that most traders are using TA since online brokers became the rage with the advent of the internet, changing Technical rules forever, although technical traders have not adapted to Wall St.'s adaptation.
Thus, heavy volume days, just like the heavy volume candlestick reversal days are about 3x more effective than a reversal candle without heavy volume, often translate in to short term 1-day oversold/overbought events which is why I track the Dominant Price/Volume Relationship that pointed to a move higher in the averages today or the S&P and Morningstar sectors, also both pointing to a 1-day or short term oversold event.
The same was true of MCP yesterday and stayed my hand from closing out the position. As much as I still believe in MCP, if it's dead money, it's not doing me any good if it can be better utilized in other places, luckily for the position, there weren't too many other places I was interested in putting funds to work yesterday.
Here's a full update for MCP because I think the longer term context or reason I like this one is important. If you are looking for the shorter term indications, especially since yesterday, see the last few charts near the bottom, but when you have time, check the rest as there's an interesting parallel.
I've said many times in the recent past, that with the Bernanke Put being lifted as QE is phased out, Volume Analysis which has become a lost art in a sea of new indicators, will be VERY important moving forward. You won't find too many if any bull markets like the 2009 through present with volume actually declining. Any market advance that is healthy should see rising volume just like the 2002/2003 to 2007 bull market. Volume hasn't mattered during the F_E_D's accommodative policy term, the only thing that mattered was the size of the F_E_D's balance sheet which has a direct correlation with the SPX which should be something to take note of as the QE taper is just about done and the F_E_D which once guided that they'd hold assets UNTIL MATURITY are now openly talking in F_O_M_C minutes about SHRINKING the balance sheet. However the main point is volume will matter again more so than it does now and there are few who are versed in the subtle art of volume analysis, especially if they grew up in the market during QE.
And look at today's candlestick combo, an inside day as we call it in the West or a Bullish Harami reversal (Mother with baby) as they call it in the east (Japan). This is a bullish reversal price pattern and thus far volume is good.
This is where it reminds me of some interesting charts that should make you think twice about how far in advance Wall St. REALLY works as well as the inside information they have and how long it takes them to put together a position. They magically know things about the market that we won't find out for years and they prepare for them far in advance. Of course being on the F_E_D's early release list like the minutes released by the F_E_D a day and a half early to 154 major banks and private equity funds, by EMAIL (I thought everyone got the same information at the same time...if so, why would they need email which in market terms is virtually snail mail unless you are getting information days early?). Yep, the F_E_D got caught red-handed sending out inside information which is just further proof in my view that QE was nothing more than a stealth bank bailout as the initial bailouts of companies like AIG at the start of the crisis weren't very popular with the voting public.
Here we are... it may not look like much, but it is. HOV, a home builder under accumulation on a daily chart through 2000 while the market and tech bubble were crashing around it.
This raises all kinds of questions like why would boring housing lead the next bull market after the amazing advances of the Tech era? Who would have ever suspected that housing that had very small gain year over year back then , would lead the next bull market through consumer discretionary spending (the HELOC or second mortgage)?
How did Wall St. know at least a year in advance , as I recall, housing didn't really start taking off in to bubble territory until aprox. 2002-2003 with initial gains in 2001, but these didn't look too different from the short term bubbles that would build quickly, peak and pop, sustained bubbles were rare.
In reality, the economic growth/bull market from 2002/2003-2007 was largely driven by Consumer spending as equity was taken out of homes and spent on discretionary items.
In any case, it's an interesting period to study and I've spent a lot of time looking at it. MCP reminds me of this environment.
Shorter term...
This is the most recent capture of MCP's 2 min leading positive divegrence , remembering the daily bullish reversal candlestick set up...
Although the short squeeze here would be epic, I still suspect there's something bigger going on in MCP.
The Sub-Industry group also looks like it has hit intermediate capitulation and has the same inside day today...
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