The Rodney Dangerfield sell off continues. The bearish move started at 2 PM yesterday, Tuesday, when the FOMC Minutes did not provide the crack cocaine (quantitative easing) that was desired by markets, thus, the markets are going through withdrawal. The market bulls treat the sell off as if it is something cute, and innocent, and of no significant threat, with patronizing commentary, "Look at the weak little bears trying to sell the markets, aren't they cute?" Traders are not giving this market selloff the respect that it deserves. Hence, the action is labeled as the Rodney Dangerfield Selloff. Women and children walked up to the selloff today and kicked it in the knees; the cab driver and shoe shine boy proclaimed that the sell off was already over. The selloff does not get any respect.
On Tuesday, the market sold off hard, dropping like a stone at 2 PM, but by the close had recovered the losses. Wednesday begins with another downdraft from 1414 to 1394, but recovers again performing a 38% Fibonacci retracement to 1401 and then closing the day at 1399. The SPX has only dropped fifteen measley points since the FOMC bombshell. But the news gets worse with the downgrades of GE, IBM and MCD today, John Chambers of CSCO says business is slowing, and a disappointing Spain auction this morning occurs as Spain yields blowout to the upside. But, there is no respect, no respect at all, the SPX gives up fifteen mesley points. Analysts and pundits parade in front of cameras each parroting identical words saying the pull back will be shallow and only a percent or two at most. The selloff is not getting any respect.
Even more interesting is that Keystone's trading algo, Keybot the Quant, remains short, and in only four days, shows that four market sectors have failed; CRB 312, UTIL 463, JJC 48.87 and SOX 423.50. But, no respect. Four negative sectors deserves a far greater sell off than fifteen S&P handles. As long as all four of these compadres remain under the levels shown, the broad market selling will continue. The bulls need to move at least one above the levels shown to slow or stop the downside.
The NYAD tagged -2125 today so some bounce back in the broad indexes should occur to relieve this downside pressure, but this may be quick and short-lived. The NYHL printed -19 today the lowest number since the Fall. Reference the NYHL chart a few posts back. BPSPX topped at 86-ish so a print at 80 will create a market sell signal, and a failure of 70 will usher in strong selling. The BPSPX printed 83.20 at the close, three points from signaling danger. The TRIN is 1.43 which represents strong orderly selling today that can easily continue. Keystone's SPX:VIX Indicator is at 85 and will signal strong selling at 68. Keystone's SPXA150R Indicator is down to 86.40 so the bears are cruising. Remember when Keystone commented as to how the SPXA150R over 90 is a very attractive level to short the markets? The VIX is showing upside life which emboldens the bears.
Jobless Claims are at 8:30 AM and Natty Inventories are at 10:30 AM so the economic data will not impact trading to any great extent. Markets are typically buoyant in front of a three-day holiday weekend so the bulls would be favored seasonality-wise. Markets are also typically bullish as the full moon approaches. Considering the importance of this down move in the markets the seasonality factors take a back seat. Today's size selloff in the markets, about 8 or 10 S&P points or more, occurring on a Wednesday, typically results in further weakness into Thursday morning.
For the SPX, starting at 1399, under its 20-day MA, the bulls need to retrace today's sell off, a difficult task, to restart the bull party. The bears need to push under the 1394 support, if so, the downside will accelerate and perhaps the market selloff will receive the respect it deserves. 1389 is sturdy support. A move thru 1395-1412 is sideways action.
To paraphrase Rodney, 'no respect, no respect, the selloff has received no respect at all'. Watch the four sectors and levels mentioned above, as long as prices stay under those levels the markets will continue to sell off, perhaps traders will then show the market selloff some respect. The bears are cruising. Watch JJC 48.87 especially closely at the opening bell.
Global miners are selling off and have been for weeks. Many are now in danger of collapsing below major support and the market continues to disrespect this fact also.
ReplyDeleteAt some point participants will wake and realise that the "bs" they've been hand fed the last 4 months or os is just that.....BS!
KS, glad I took your advice and sold KGC the other day! But it looks like there's a gap fill between 9.50 to 9.60 near term. Do you have plans to go back into this? Sounds like you were disappointed by today's bounce back at the close. Futures are flat to green. I think the market is looking for its next catalyst to go in either direction. On a side note, I've been holding SPXU from the $10 range and worry that it might do a reverse split if it keeps dropping (because of decay or market gap ups). Typically, when does a reverse split occurs for these types of ETFs? I know that UVXY recently did a 6-for-1 reverse not long ago. Take care and thanks as always for your great insights KS. Go SVU! Any plans to enter RIMM or are there internal problems with the company that is not publicly known?
ReplyDeleteSteve
Hello Beetlejuice, yes, the miners are beaten but as always there are opportunities either way in any markets. The miners may bottom before other stocks since they do have a head start. A few are listed on the Positions and Picks page, KGC remains a fave of Keystone, it receives a beating but the charts are setting up very favorably, so that may be worth a look and due diligence as a potential long once this market down move is sorted out.
ReplyDeleteGDX lost the 200-week MA yesterday and continues to appear weak on the weekly chart. The juniors, GDXJ, are getting beat up but they appear slightly better than the regular gold miners, probably as speculators make selections in the space targeting future takeover plays.
Hello Steve, well, Keystone does not give any advice, the site is simply for educational and entertainment purposes, but KGC is interesting and remains a fave. It shows how tricky the timing can be for knife-catching. If Keystone would have stayed in the trade for Monday, then sold, that would have been ideal. The concern was the coming market sell off (remember all the charts and indicators pointing this way) since small caps will be beat hard. So you have to think long and hard about holding the riskier small caps. Keystone will probably buy back into KGC at any time.
ReplyDeleteGaps are tricky with speculative stocks such as miners, or commodities, since each move tends to result in a gap. Thus, with swiss cheese everywhere, the gaps lose their meaning. Other stocks move in tighter ranges so the gaps standout. At any rate, KGC did take the flush south yesterday with the miners in general creating the gap at 9.5. the positive divergence on KGC weekly and daily charts separates it from other miners.
Keystone is not disappointed ever in any movement in the markets, only to the extent that the trade would be going the wrong way. It does not matter if the markets sell off day after day, that is fine, or if they rally day after day, that is fine, all that matters is that the trade is right.
SPXU looks good bouncing off positive divergence and now showing long and strong indications. Some further basing may be required but it appears that the worst is over.
On ETF's and ETN's it is the Wild West. After the incident with TVIX, and the details that Credit Suisse was not creating shares as should be the case, the whole ETF area is suspect. The 1987 crash was exaccerbated by index futures that appeared on the scene back then. Perhaps nowadays ETF's will be our bugaboo as the weeks tick by? GLD has always held Keystone's interest since many many folks own this and with gold falling, and perhaps people now souring on GLD for the first time, perhaps ever, in mass, things may get interesting.
For reverse splits for ETF's they do occur typically in the 5 to 10 dollar range but that is all a crap shoot as to when. Reverse splits are never good but with ETF's they are at least a bit more palatable whereas a reverse split for an indvidual stock is a kiss of death.
Keystone is still in SVU and likes it, it is highly speculative and dangerous, however. RIMM should set up nicely in the days ahead. The long weekend is a good time to study positions and picks and chart a strategy moving forward.