ShadowTrader_08
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Good Morning, Traders. We came into the session yesterday morning, full of vim and vigor, and armed with a watch list of about 20 stocks that we felt were at technical lows and had made reversal candles on their dailies in the context of Monday's swift afternoon reversal off of the lows. A reversal that came on the heels of breadth at 100 to 1 negative and a NYSE a/d line that just stayed locked onto -3000 like a pitbull to a mailman. No offense to any postal workers who may be reading this.
We bought nothing.
We are sure, however that some did. Those few people left on the earth who don't trade with thinkorswim and who probably don't have access to our <i>Squawkbox</i> and <i>Focus Report</i>. We pity these lost souls.
Basically, it's like this. You have to look at every anticipated move in the context of what just happened. In this letter you have often heard us talk about the "disappointment" play, that being some technical situation where the chart just screams "look, look, if the price doesn't go to HERE, then all THESE PEOPLE from HERE are gonna ________. (Either sell, cover their short, or buy, you fill in the blank. -- the game remains the same, only the faces change.) Yesterday's morning action was a perfect example of this. You have a grossly oversold market, a record Dow crash, followed by another bearish day. Inside of that bearish day when the sellers completely exhaust themselves, you rally at the end to close at the highs. At this point we are scanning. What's touching down into support? Some retailers? What's got really strong balance sheets and making money hand over fist while their shares get pummelled? Didn't that raving lunatic who throws the chairs say <b>FWLT</b> has $10 of cash per share in the bank and is selling at $30? Yes, yes, yes yes, of course it's gonna be short lived but let's trade! On top of all this, and their timing is always so good, isn't it---the Fed steps up to buy commercial paper, in effect unfreezing the credit situation. Futures rally like mad into the open and the bell rings. At this point we're thinking darn it, all the good stuff is gonna gap up! Some does, some don't. Then trading begins. Right off the bat you are looking at internals. The thought process is that you put the news together with the prior day's reversal plus the most important fact that this reversal came off of a $VIX that almost hit 60 with the aforementioned internals plunging into Hades, and you are thinking this market is gonna recover at least 500 Dow points in this very session.
We bought nothing.
It's all about the internals. We stress this breadth, a/d line thing so much because it tells the tale. Not only should the market have been ripping off of the open yesterday, but the statistics under the hood should have been stellar. They werent'. In a word, immediately the internals were poor. Right off, you should know something is up. If the NYSE a/d doesn't register over 1,000 very early in the session on the whole setup that we just described in detail, then something is off. Breadth should open positive and power up to at least a 3:1 plus ratio within the first 30 minutes of trade. The Breadth Ratio should have been registering +90 coming off of Monday. Instead you got a feeble run to about 78 and then a hasty retreat!
The facts are as follows: NYSE a/d briefly flirted with +1,000 on the open and by 10:00am EST was at the zero line. Breadth, same thing. Flirted with positive territory in first 15 minutes and quickly retreated to parity. At the same time, you already know from the chart we posted the night before in the <I>Focus Report</i> that there is a nice gap just above on the <b>SPY</b> that by all intents and purposes should act as a strong magnet and suck the market right up into it. Did we mention that there was Fed action pre-market? Unreal. All of this and yet the market does nothing. There is no play, you simply do NOT buy stocks when the market should be doing one thing and is clearly not.
We sincerely hope you weren't fooled either.
Good Morning, Traders. We came into the session yesterday morning, full of vim and vigor, and armed with a watch list of about 20 stocks that we felt were at technical lows and had made reversal candles on their dailies in the context of Monday's swift afternoon reversal off of the lows. A reversal that came on the heels of breadth at 100 to 1 negative and a NYSE a/d line that just stayed locked onto -3000 like a pitbull to a mailman. No offense to any postal workers who may be reading this.
We bought nothing.
We are sure, however that some did. Those few people left on the earth who don't trade with thinkorswim and who probably don't have access to our <i>Squawkbox</i> and <i>Focus Report</i>. We pity these lost souls.
Basically, it's like this. You have to look at every anticipated move in the context of what just happened. In this letter you have often heard us talk about the "disappointment" play, that being some technical situation where the chart just screams "look, look, if the price doesn't go to HERE, then all THESE PEOPLE from HERE are gonna ________. (Either sell, cover their short, or buy, you fill in the blank. -- the game remains the same, only the faces change.) Yesterday's morning action was a perfect example of this. You have a grossly oversold market, a record Dow crash, followed by another bearish day. Inside of that bearish day when the sellers completely exhaust themselves, you rally at the end to close at the highs. At this point we are scanning. What's touching down into support? Some retailers? What's got really strong balance sheets and making money hand over fist while their shares get pummelled? Didn't that raving lunatic who throws the chairs say <b>FWLT</b> has $10 of cash per share in the bank and is selling at $30? Yes, yes, yes yes, of course it's gonna be short lived but let's trade! On top of all this, and their timing is always so good, isn't it---the Fed steps up to buy commercial paper, in effect unfreezing the credit situation. Futures rally like mad into the open and the bell rings. At this point we're thinking darn it, all the good stuff is gonna gap up! Some does, some don't. Then trading begins. Right off the bat you are looking at internals. The thought process is that you put the news together with the prior day's reversal plus the most important fact that this reversal came off of a $VIX that almost hit 60 with the aforementioned internals plunging into Hades, and you are thinking this market is gonna recover at least 500 Dow points in this very session.
We bought nothing.
It's all about the internals. We stress this breadth, a/d line thing so much because it tells the tale. Not only should the market have been ripping off of the open yesterday, but the statistics under the hood should have been stellar. They werent'. In a word, immediately the internals were poor. Right off, you should know something is up. If the NYSE a/d doesn't register over 1,000 very early in the session on the whole setup that we just described in detail, then something is off. Breadth should open positive and power up to at least a 3:1 plus ratio within the first 30 minutes of trade. The Breadth Ratio should have been registering +90 coming off of Monday. Instead you got a feeble run to about 78 and then a hasty retreat!
The facts are as follows: NYSE a/d briefly flirted with +1,000 on the open and by 10:00am EST was at the zero line. Breadth, same thing. Flirted with positive territory in first 15 minutes and quickly retreated to parity. At the same time, you already know from the chart we posted the night before in the <I>Focus Report</i> that there is a nice gap just above on the <b>SPY</b> that by all intents and purposes should act as a strong magnet and suck the market right up into it. Did we mention that there was Fed action pre-market? Unreal. All of this and yet the market does nothing. There is no play, you simply do NOT buy stocks when the market should be doing one thing and is clearly not.
We sincerely hope you weren't fooled either.