Thursday, June 4, 2009

7 days in a row !!!

Yesterday
Another odd day to add to the list. I have to admit I was a bit surprised at the action after the open yesterday (excluding the close). We had a strong GAP down without any fill attempts. While we continued trading lower my key sectors Financials and real estate did not do anything. Both remained in a very narrow range most of the day. I did enter a small short off the open in both of those sectors but the hesitation throughout the day with the S&P500 divergence spooked me a bit. I had closed both of them out towards the afternoon at no gain/loss (covered fees and got some lunch money but thats it).

"If you do not understand it, get out and ask questions later". This was one of those for me yesterday. I expected a lot more action around key support ranges especially after the open but none occurred until the last hour.

Our daily volume continues to drop further and further. Considering we are moving at key ranges here we should be seeing new buyers step in. That is not the case and if you watch the 1-min bars carefully for many sectors we continue seeing quite a bit of selling pressures. The liquidity providers are doing a great job at hiding the real picture. This is not meant as a bearish support fact - just a mere observation I find interesting.

APPL - 7 days in a row. Thats a first for 2 years. There are only 2 other similar events with such a strong up move on the noob index as they were coupled with a distribution day in between.

8/14/2008 - 7 days + 1 down in between (bear market rally top at 8/18/2008)
5/6/2008 - 9 days + 1 down in between (bear market rally top at 5/19/2008 - apple did put in a higher high at 5/14/2008)

Both times APPL lead the bear market rally top by 4-5 days. So keep this in mind while we continue through our ranges here =)

Dollar Example
I am going to make a simple analogy so it makes a bit more sense.

My Cash: 1000 EURO (could be any other non USD based asset)
US Equity 1 share price: $100USD

Todays Exchange rate: 1 EURO = 1 USD
Today I could buy 10 shares of said company (10 shares @ $100USD = $1000 USD = 1000 Euro)

Tomorrows exchange rate: 1 EURO = 2 USD
Tomorrow I could buy 20 shares of said company (20 shares @ $100USD = $2000 USD = 1000 Euro)

So with the dollar decreasing in value US equities are cheaper. So lets look at the USD - Euro changes over the past 3 months. We went from 1.25 all the way to 1.42. Thats quite a big increase and another key driver why the markets have rallied so much. Thats what happens when you keep on printing money =)

So once the dollar finds support which it will very soon, the markets should make a turn as well. USD is a leading indicator meaning it takes a bit longer before the markets react. Thats why its important to watch this carefully so you can time the turns properly.

Today
I will post updates in comments. Not a lot of time this morning.

12 comments:

  1. Thanks a lot for the Dollar explanation Chris. Makes total sense. Sounds even elementary when I read it, but I never made that connection until now. I'm a noob :) Learn something new everyday.

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  2. In addition, where do you think the dollar is headed? I know you don't have a crystal ball... but an educated guess?

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  3. The other direction =) .. take a look at UUP on the daily. Turn will come soon. Coupled with the noob index making its last moves we are very well positions to time our short entries here.

    I am still 100% cash and staying out most of the time. I did some tries yesterday but "walked" away again. Rather wait until everything lines up the way I want it to.

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  4. also keep in mind I had mentioned earlier in the week that this is a "discovery" week for me.

    We have a huge amount of variables to consider at the moment. Commodities, energy, USD, US equities, Europe equities (FTSE not playing nice for the bulls). Plus fiscal policy, money printing machine not just in US but also elsewhere.

    All of those will screw with every variable we need to consider for a longer term trade. It is so difficult to navigate through this at the moment - more then ever before I feel.

    While you know I am as bearish as they can be - part of this may require me to turn bullish on sectors even though the overall view is bearish. Its quite a mind game at the moment ...

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  5. I suspect not much activity today. we close negative. tomorrow we may see 909- 914 or so. like samala.... suggested.

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  6. take a look at financials and real estate. Quite a bit of strength today and maybe just what the bulls need here as we had discussed yesterday.

    If we can get S&P to follow on the upside we should have the chance for more upside here tomorrow.

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  7. Chris, Sam, thanks for all your comments. Ive been following the blog in 'silent mode'...or should that be in ..'beaten up by the market so badly mode'...

    i get the feeling the market wants to retest the highs from monday before going down?

    thanks again
    adam

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  8. samalamadingdongJune 4, 2009 at 1:48 PM

    chausgy...whats the game plan? you still scared or are you ready to take a crack?

    sama m - sidelines for you. you need to clear your mind. meditate.

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  9. adam, yeap difficult market. Retest of previous high is to be expected here and most likly a marginal new high followed shortly thereafter.

    samalamadingdong, been mostly watching waiting for my short entry. Not going to participate on the long side until I see the first real play after the 200dma break.

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  10. Thanks Chris.

    As always will be watching your comments for when you feel its right time to go short.

    Continue the good work!

    Adam

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  11. samalamadingdongJune 4, 2009 at 4:31 PM

    Adam - How about looking at the right time to enter a trade...whether it be long or short. You perma-bears are getting crushed. Need to have an open mind when trading (unless you enjoy losing money).

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  12. Went to the bank to refinance my house. To my surprise, 30 years fixed jumbo loan is now 6.7%.

    It is up 150 bps from just two weeks ago.

    Time will tell, but I think we're near a top. Expect worse economic numbers by Fall this year.

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