Eichler,
Given the number of messages you post, I was beginning to wonder if you were completely joined at the hip to your computer, but this morning - not a single one! Yet!! LOL. Please don’t stop though. I think they’re very good.
I have been looking at charts all weekend so far and thought I would post some observations. There are so many excellent analyses on SI (including yours, which I find very logically and well-presented), so I prefer to limit what I’m writing to some points which don’t appear to be covered as much. I hope the effect isn’t too disjointed.
I am fairly clueless regarding e-wave but after working my way through Gem-x’s analysis I understand a lot more. I have tried in vain to find the text that accompanied the German e-wave chart that was posted here on Friday (so much to do, so little time!). The chart itself is clear enough though. Both Gem-X and the German guy seem to support the conclusion I’m coming to, which is basically that next week could see some downside, and even a major selloff, but that a significant rally is not far off.
Last week you and Iowaman were expecting the market to go up, which it didn't. Last week I tried very hard not to have an opinion one way or another but now I think it is time to get off the fence. I think last week was simply a result of a false buy signal which has been delayed.
stockcharts.com[h,a]dhclyymy[db][pb50!d20,2!b200!f][vc60][iut!Ue12,26,9!Ub14!Ud10!Ll14!Lc10!Lf]
Trin
The trin is back at the extreme levels which it hasn’t seen since the March lows. I was a somewhat disappointed that Dr. Bob hasn’t addressed it lately, even though he did say he thought it would be a good idea to do so. Armsinsider.com doesn’t appear to be giving up to date readings anymore (perhaps that’s my faulty link, I don’t know) but the 15dma on the following chart does show it.
stockcharts.com[h,a]dhllnymy[dd][pb10][vc60][iUd10]
It worked before, so there’s little reason to expect it to fail this time, although I understand its caveat is that one can expect a rally soon, not necessarily immediately.
USD$
One reason behind the current sellof is fear of the dollar falling further. As the chart below shows, this week the $USD actually bounced off a good support level of 112 set in May 2000. It is oversold technically, and the last time this happened was at the beginning of the year, when a $ rally ensued. I was interested to read today’s Bloomberg article, pointing to the same thing.
stockcharts.com[h,a]whclyymy[de][pb50!d20,2!b200!f][vc60][iut!Ue12,26,9!Ub14!Ud10!Ll14!Lc10!Lf]
quote.bloomberg.com
Many defensive stocks (like g, ko, pg) with significant global exposure have been rallying due to the rise of the Euro, to the extent that they are now overbought. When the dollar starts returning to the mean, these stocks should start to do the same. This is not inconsistent with a rally in the rest of the market.
I'm also wondering when the market starts worrying about global economies pressuring sales and margins of these multinationals, offsetting any positive foreign exchange impact.
AJ Cohen
The widely despised AJC effect may point to a bullish conclusion. I seem to recall that AJC gave a bullish call a week or two before the market bottomed in March. Although she seemed completely wrong at the time, in retrospect, anyone who had used that period to buy probably wasn’t too unhappy the following month (although I hope they took profits where necessary). It is interesting that her most recent buy call also preceded a sell-off.
Put-call ratio
Friday’s high put-call ratio is significant too. I have heard some say it should be discounted because of double-witching, but if other option expiries don’t result in extreme p-c readings, it shouldn’t be discounted too much either. IMO, it is still an abnormally high reading which will definitely result in a rally sometime very soon. It could rise some more before reverting to the mean, especially because the vix, while higher than it has been lately, is nowhere near an extreme.
Putting everything together, I think it is time to start writing the shopping list of stocks to buy that I have been meaning to do for so long. Actually, I have many lists on various scraps of paper lying about but haven’t quite made up my mind yet. Last week’s chart patterns didn’t end on a positive note and suggest more weakness ahead, which is why I believe Monday and Tuesday could be ugly. Very ugly even. But if the signs are that there will be a good rally soon, this should be a time to buy or at least look beyond it. I’m not convinced it’s essential to try and catch the bottom. What is important is to see what is coming as a period of opportunity and certainly not despair.
I'm interested to read your views on the above.
Regards, pvz |
