The question is...will the sp hit 1250 and shake out all the shorts and call sellers.
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Is S&P forming intermediate term double top?
- Thread starter fly down
- Start date
I wanted to ask if anyone here uses breadth indicators and if so, what do they tell you? I generally haven't used them, but if I look at them now they seem to be painting a reasonably unhealthy picture.
My fundamental attitude towards the markets (all asset classes, bonds, commodities and stocks) is quite bearish and I was wondering if I could find something other than the ridiculousness of the current economic situation to confirm my vision that this last move has been a sucker's rally (or the FED's private party).
As I said I have no real experience with these indicators, but I wanted to throw it out there (note I find the term "indicator" convoluted because normally an indicator is a line that explains price by price, this is somewhat different)
Either way, the new 52-week highs are a lot lower than at the last top (april) by almost 40%. This is a large divergence (such divergences have occurred in the pas without a trend shift, however no trend shift has occurred in the past without a divergence, hence it does increase the odds but makes it by no means certain)
52 week lows continued to travel higher (although of course not high in general) during all bottoms May through August, even though the august bottom was actually higher (again, divergence, more 52-week lows even though the bottom was ~3% higher)
The advance/decline index confirms this as it has been trending lower since August.
Further put/call interest has been trending towards call dominance, whereas relative put interest trended upwards until April this year.
Then, finally, the VIX is at a pretty low level. The index itself isn't at all-time lows but the futures really went for it (down) and imo don't anticipate trouble.
As I said no experience with this stuff, just my thoughts on what I found when I looked into it. I might even have some of the data wrong. Anyone want to comment on why it's retarded to be looking at this?
My fundamental attitude towards the markets (all asset classes, bonds, commodities and stocks) is quite bearish and I was wondering if I could find something other than the ridiculousness of the current economic situation to confirm my vision that this last move has been a sucker's rally (or the FED's private party).
As I said I have no real experience with these indicators, but I wanted to throw it out there (note I find the term "indicator" convoluted because normally an indicator is a line that explains price by price, this is somewhat different)
Either way, the new 52-week highs are a lot lower than at the last top (april) by almost 40%. This is a large divergence (such divergences have occurred in the pas without a trend shift, however no trend shift has occurred in the past without a divergence, hence it does increase the odds but makes it by no means certain)
52 week lows continued to travel higher (although of course not high in general) during all bottoms May through August, even though the august bottom was actually higher (again, divergence, more 52-week lows even though the bottom was ~3% higher)
The advance/decline index confirms this as it has been trending lower since August.
Further put/call interest has been trending towards call dominance, whereas relative put interest trended upwards until April this year.
Then, finally, the VIX is at a pretty low level. The index itself isn't at all-time lows but the futures really went for it (down) and imo don't anticipate trouble.
As I said no experience with this stuff, just my thoughts on what I found when I looked into it. I might even have some of the data wrong. Anyone want to comment on why it's retarded to be looking at this?
Quote from Locutus:
I wanted to ask if anyone here uses breadth indicators and if so, what do they tell you? I generally haven't used them, but if I look at them now they seem to be painting a reasonably unhealthy picture.
My fundamental attitude towards the markets (all asset classes, bonds, commodities and stocks) is quite bearish and I was wondering if I could find something other than the ridiculousness of the current economic situation to confirm my vision that this last move has been a sucker's rally (or the FED's private party).
As I said I have no real experience with these indicators, but I wanted to throw it out there (note I find the term "indicator" convoluted because normally an indicator is a line that explains price by price, this is somewhat different)
Either way, the new 52-week highs are a lot lower than at the last top (april) by almost 40%. This is a large divergence (such divergences have occurred in the pas without a trend shift, however no trend shift has occurred in the past without a divergence, hence it does increase the odds but makes it by no means certain)
52 week lows continued to travel higher (although of course not high in general) during all bottoms May through August, even though the august bottom was actually higher (again, divergence, more 52-week lows even though the bottom was ~3% higher)
The advance/decline index confirms this as it has been trending lower since August.
Further put/call interest has been trending towards call dominance, whereas relative put interest trended upwards until April this year.
Then, finally, the VIX is at a pretty low level. The index itself isn't at all-time lows but the futures really went for it (down) and imo don't anticipate trouble.
As I said no experience with this stuff, just my thoughts on what I found when I looked into it. I might even have some of the data wrong. Anyone want to comment on why it's retarded to be looking at this?
Why must you search so hard for reasons to be bearish ? Earnings are at all time highs and #1 earnings drive stock markets. In addition, increased liquidity is a bonus reason to move up. People also complain about the Nasdaq rising but the Nasdaq was badly lagging in valuation most of the year. There are many cheap technology stocks still. Look at the P/E levels of large caps, many of them are cheap ( haha says the permabears but I invite you to research what kind of P/Es these firms usually trade at ).
You have a problem if you carry a fundamental bias with respect to markets. This will distort your ability to trade properly. This board is littered with people being bearish for no particular reason.
Myself, I called a nice 2% drop the evening before a few weeks ago but switched to bullish once it was very clear we had many reasons to rise now. I have been telling many people that Philly Index was a game changer for this month; what it indicated was the US economy was indeed starting to recover and in a bigger way then most people expected. More recent economic indicators have only further confirmed this trend.
Sometimes I wonder if the majority on this board are even paying attention ( re economic indicators, news, earnings ). There seems to be a lot of psychological babble going on not enough rational research. People will argue to the death about this and have been since 1041 on the S&P when this recent bull run began in earnest. It is obvious which camp is right the market is up 20% since that point ( but note not that much on the calander year ).
Nine_Ender is right. However you are right too. Market breadth indicates a pullback (maybe small) is necesary. Probably a fast plunge for a few days or so, scaring the bulls. But the bull market won't give up so easily.
Also, even though the new highs divergence exists, in the past they got resolved, even in 2007, to the upside, until the top was hit. So you cant call a downtrend when we are at year highs.
3 weeks ago I called 1270 at 1180. market now at 1240. 50-60 point run is pretty good imo.
However I am sure we wil hit 1270 in next few months.
Also, even though the new highs divergence exists, in the past they got resolved, even in 2007, to the upside, until the top was hit. So you cant call a downtrend when we are at year highs.
3 weeks ago I called 1270 at 1180. market now at 1240. 50-60 point run is pretty good imo.
However I am sure we wil hit 1270 in next few months.
I actually don't need to search for reasons to be bearish, I just don't mind adding some for timing purposes. After all, a bunch of people were (correctly) bearish throughout 2007, saw the crash coming yet lost a load of cash due to being too early and not persistent. Hence my questions if anyone has experience with breadth indicators. Now since you started on the fundamentals, I am happy to provide my arguments.
Have you noticed that the participation rate is going down while unemployment is going up (slightly)? Not to mention that long-term unemployment is going down. There is no doubt this indicates that people are simply giving up. Have you noticed the exponential increase in deficit spending? I wouldn't argue US federal debt is "out of control" at this time, but with rising interest rates and another year (god forbid another term) of Obamanomics and then we will see what happens to the Federal budget, which has been using essentially free money for the last year or so. I find that the unemployment is way less volatile and more trend-like than industrial production indices, which can reverse quickly.
To recap, the unemployment rate has not moved significantly from the bottom of the crisis whereas stocks have. I think expectations priced in the stock asset class are wrong, both on the inflation expectation and recovery expectation.
I'm really not such a big fan of corporate earnings because:
a) They're not inflation-adjusted (inflation-adjusted corporate earnings are not that impressive, see P/E)
b) Balance sheets don't look very attractive (Though I have been long some stocks which I liked. I'm only actually short on AAPL as a matter of principle)
c) P/E is nowhere near all-time lows and currently well above average (by over 30%). Would you say economic conditions in less than five years are going to be 30% over average?
d) deleveraging cycle for consumers is not yet near complete, consumer credit still unsustainable
e) Several critical markets are not recovering (Housing)
f) Inflation in food prices will mean, especially for the poor, less money to buy stuff (from your loved tech stocks). Considering they're already absurdly leveraged I doubt they will be really willing to take on much more debt (although consumer credit increased again, ridiculously)
Further reasons would be state-side problems, where California is actually going to use IOUs next year and New Jersey got a downgrade from one of the rating agencies. The market has conveniently ignored these issues, by way of focussing on the EU crisis which isn't nearly a problem of equal proportion.
The only real chance of a recovery is that the messed up western fiscal policy is actually going to work and for the rich and powerful (who as a group are still doing really dandy actually) to save the day by spending us out of the dip.
I don't know whether we might test the old lows, form a new bottom or just have another correction (which would confirm sideways trend, which would imo be much more suitable for current economic climate)
I also don't exclude the possibility for the stock market to keep increasing for several months, perhaps years. I just find it very unlikely.
Have you noticed that the participation rate is going down while unemployment is going up (slightly)? Not to mention that long-term unemployment is going down. There is no doubt this indicates that people are simply giving up. Have you noticed the exponential increase in deficit spending? I wouldn't argue US federal debt is "out of control" at this time, but with rising interest rates and another year (god forbid another term) of Obamanomics and then we will see what happens to the Federal budget, which has been using essentially free money for the last year or so. I find that the unemployment is way less volatile and more trend-like than industrial production indices, which can reverse quickly.
To recap, the unemployment rate has not moved significantly from the bottom of the crisis whereas stocks have. I think expectations priced in the stock asset class are wrong, both on the inflation expectation and recovery expectation.
I'm really not such a big fan of corporate earnings because:
a) They're not inflation-adjusted (inflation-adjusted corporate earnings are not that impressive, see P/E)
b) Balance sheets don't look very attractive (Though I have been long some stocks which I liked. I'm only actually short on AAPL as a matter of principle)
c) P/E is nowhere near all-time lows and currently well above average (by over 30%). Would you say economic conditions in less than five years are going to be 30% over average?
d) deleveraging cycle for consumers is not yet near complete, consumer credit still unsustainable
e) Several critical markets are not recovering (Housing)
f) Inflation in food prices will mean, especially for the poor, less money to buy stuff (from your loved tech stocks). Considering they're already absurdly leveraged I doubt they will be really willing to take on much more debt (although consumer credit increased again, ridiculously)
Further reasons would be state-side problems, where California is actually going to use IOUs next year and New Jersey got a downgrade from one of the rating agencies. The market has conveniently ignored these issues, by way of focussing on the EU crisis which isn't nearly a problem of equal proportion.
The only real chance of a recovery is that the messed up western fiscal policy is actually going to work and for the rich and powerful (who as a group are still doing really dandy actually) to save the day by spending us out of the dip.
I don't know whether we might test the old lows, form a new bottom or just have another correction (which would confirm sideways trend, which would imo be much more suitable for current economic climate)
I also don't exclude the possibility for the stock market to keep increasing for several months, perhaps years. I just find it very unlikely.
Quote from Locutus:
I actually don't need to search for reasons to be bearish, I just don't mind adding some for timing purposes. After all, a bunch of people were (correctly) bearish throughout 2007, saw the crash coming yet lost a load of cash due to being too early and not persistent. Hence my questions if anyone has experience with breadth indicators. Now since you started on the fundamentals, I am happy to provide my arguments.
Have you noticed that the participation rate is going down while unemployment is going up (slightly)? Not to mention that long-term unemployment is going down. There is no doubt this indicates that people are simply giving up. Have you noticed the exponential increase in deficit spending? I wouldn't argue US federal debt is "out of control" at this time, but with rising interest rates and another year (god forbid another term) of Obamanomics and then we will see what happens to the Federal budget, which has been using essentially free money for the last year or so. I find that the unemployment is way less volatile and more trend-like than industrial production indices, which can reverse quickly.
To recap, the unemployment rate has not moved significantly from the bottom of the crisis whereas stocks have. I think expectations priced in the stock asset class are wrong, both on the inflation expectation and recovery expectation.
I'm really not such a big fan of corporate earnings because:
a) They're not inflation-adjusted (inflation-adjusted corporate earnings are not that impressive, see P/E)
b) Balance sheets don't look very attractive (Though I have been long some stocks which I liked. I'm only actually short on AAPL as a matter of principle)
c) P/E is nowhere near all-time lows and currently well above average (by over 30%). Would you say economic conditions in less than five years are going to be 30% over average?
d) deleveraging cycle for consumers is not yet near complete, consumer credit still unsustainable
e) Several critical markets are not recovering (Housing)
f) Inflation in food prices will mean, especially for the poor, less money to buy stuff (from your loved tech stocks). Considering they're already absurdly leveraged I doubt they will be really willing to take on much more debt (although consumer credit increased again, ridiculously)
Further reasons would be state-side problems, where California is actually going to use IOUs next year and New Jersey got a downgrade from one of the rating agencies. The market has conveniently ignored these issues, by way of focussing on the EU crisis which isn't nearly a problem of equal proportion.
The only real chance of a recovery is that the messed up western fiscal policy is actually going to work and for the rich and powerful (who as a group are still doing really dandy actually) to save the day by spending us out of the dip.
I don't know whether we might test the old lows, form a new bottom or just have another correction (which would confirm sideways trend, which would imo be much more suitable for current economic climate)
I also don't exclude the possibility for the stock market to keep increasing for several months, perhaps years. I just find it very unlikely.
problem is, those reasons existed 2 months ago, when market was at 1050. obviously we had a almost 200 point run in the meantime. So what changed?
I think you are trading what you want to see, not trading what is.
Also, you critique those who lost money but where right. Except you do exactly the same by shorting apple at all-time highs.