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  • Market Commentary as of March 7, 2008

    This week had everything: gaps, market-moving comments and whipsaws. The Russell 2000 was down 3.8%, and the other US Equity Indices didn’t fare much better. But, in my opinion, short-term movements here are simply noise.

    Clearly the Markets are in short-term oversold conditions and toying with Support Levels. Still, the CBOE’s Equity Put/Call Ratio hit the highest reading seen since February 2003. According to SentimenTrader readings like this often precede major intermediate-term lows in the market.

    Longer-term charts might provide better context. Markets sank to 18-month lows on heavy selling. The S&P 500 Index closed at its lowest level of the year and is very close to breaking through support. In the chart below, the green line marks the trendline support since the year 1981.

    080307_25_year_sp500_trend

    As an aside, do you really think a trendline with so few touches since 1981 is really a market mover? It’s possible that it "describes" what happened better than it "predicts" or "affects" what happens next.

    The other major indexes also are sitting just above critical support areas. This will be an interesting week. Don’t be surprised if prices shoot through a widely-watched technical level, only to reverse and head back the other way.

    For a little extra credit, I saw an interesting chart on Bespoke’s site. It shows all S&P 500 corrections of 10% or more since 1927. Each point on the scatter chart below represents the percent of the decline along with the number of days it lasted. So how does the current correction stack-up? Compared to historical corrections of 10% or more, while the current period has been longer than average, the declines have so far been milder.

    Sp500_corrections_since_1927

  • Market Commentary as of March 7, 2008

    This week had everything: gaps, market-moving comments and whipsaws. The Russell 2000 was down 3.8%, and the other US Equity Indices didn’t fare much better. But, in my opinion, short-term movements here are simply noise.

    Clearly the Markets are in short-term oversold conditions and toying with Support Levels. Still, the CBOE’s Equity Put/Call Ratio hit the highest reading seen since February 2003. According to SentimenTrader readings like this often precede major intermediate-term lows in the market.

    Longer-term charts might provide better context. Markets sank to 18-month lows on heavy selling. The S&P 500 Index closed at its lowest level of the year and is very close to breaking through support. In the chart below, the green line marks the trendline support since the year 1981.

    080307_25_year_sp500_trend

    As an aside, do you really think a trendline with so few touches since 1981 is really a market mover? It’s possible that it "describes" what happened better than it "predicts" or "affects" what happens next.

    The other major indexes also are sitting just above critical support areas. This will be an interesting week. Don’t be surprised if prices shoot through a widely-watched technical level, only to reverse and head back the other way.

    For a little extra credit, I saw an interesting chart on Bespoke’s site. It shows all S&P 500 corrections of 10% or more since 1927. Each point on the scatter chart below represents the percent of the decline along with the number of days it lasted. So how does the current correction stack-up? Compared to historical corrections of 10% or more, while the current period has been longer than average, the declines have so far been milder.

    Sp500_corrections_since_1927

  • Want to See a Downtrend? Check-Out the Dow Priced in Gold.

    I use a service called “Chart of the Day” – and as you might guess – they post one chart each day. I love preparing my own charts. But, I think the way I think. Sometimes, I get a new insight or perspective from how others see the market.

    What follows is an example of a chart I wouldn’t have thought of myself. The second chart provides a little context and contrast.

    The Dow Priced in Gold:
    The Dow currently trades about 15% below its all-time record high. For some further perspective into how the stock market is actually performing, the chart below shows the Dow divided by the price of one ounce of gold.

    This results in what is referred to as the Dow / Gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 12.9 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces back in the year 1999. When priced in that other world currency (gold), the Dow is in the midst of a massive eight year bear market!


    Gold versus the Dollar: Thanks in part to a large US trade deficit and a weak US economy, the US dollar continues to trend lower. For some perspective, the next chart illustrates the current trend in the US dollar (blue line) as well as that other world currency, gold (gray line). As this chart illustrates, the performance of the US dollar has varied inversely to that of gold since October 2005. It is worth noting that the US dollar is currently testing support.


    from <http://www.chartoftheday.com>

    March 8, 2008

  • Want to See a Downtrend? Check-Out the Dow Priced in Gold.

    I use a service called “Chart of the Day” – and as you might guess – they post one chart each day. I love preparing my own charts. But, I think the way I think. Sometimes, I get a new insight or perspective from how others see the market.

    What follows is an example of a chart I wouldn’t have thought of myself. The second chart provides a little context and contrast.

    The Dow Priced in Gold:
    The Dow currently trades about 15% below its all-time record high. For some further perspective into how the stock market is actually performing, the chart below shows the Dow divided by the price of one ounce of gold.

    This results in what is referred to as the Dow / Gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 12.9 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces back in the year 1999. When priced in that other world currency (gold), the Dow is in the midst of a massive eight year bear market!


    Gold versus the Dollar: Thanks in part to a large US trade deficit and a weak US economy, the US dollar continues to trend lower. For some perspective, the next chart illustrates the current trend in the US dollar (blue line) as well as that other world currency, gold (gray line). As this chart illustrates, the performance of the US dollar has varied inversely to that of gold since October 2005. It is worth noting that the US dollar is currently testing support.


    from <http://www.chartoftheday.com>

    March 8, 2008

  • Custom Index Built with Worden Blocks

    Worden Blocks is a fun and useful tool.  It is very easy to build and customize charts, indicators, and scans.  Here is an example of something built with Blocks.  It is a composite index of the five major US equity indices (Dow, S&P, Naz, Russell 2K, and MidCap).  On the version I use, I also have a tool that shows the percent change from any date to any other date.  I marked two of them on the chart below.
    080229_clgx_markets_index_from_0710

  • Custom Index Built with Worden Blocks

    Worden Blocks is a fun and useful tool.  It is very easy to build and customize charts, indicators, and scans.  Here is an example of something built with Blocks.  It is a composite index of the five major US equity indices (Dow, S&P, Naz, Russell 2K, and MidCap).  On the version I use, I also have a tool that shows the percent change from any date to any other date.  I marked two of them on the chart below.
    080229_clgx_markets_index_from_0710

  • Market Commentary from February 29th

    Up_down_stock Who asked for the extra day in February anyway?   Certainly not me. The week started great.  Then investor confidence took another blow Friday as the S&P 500 declined by 2.7%; its worst day in a long time.

    If you were watching, I don’t have to tell you how bad it was late last week.  Bottom Line: oversold market conditions and a fair amount of manipulation from the sidelines has not been sufficient to move the market out of the consolidation range of the last several weeks.

    The whipsaw volatility seen the last few weeks worsened Thursday and Friday. After attempts early in the week to take the market up and beyond the contracting Triangle patterns found on most of the US equity indices, the selling on Friday brought us down to levels where the lower-range boundaries of the Triangles are now clearly threatened.

    On the other hand, DecisionPoint had an interesting chart that may indicate we’ll see a major low soon.  It shows the percent of NYSE Stocks trading above their 200-day moving average.080229_percent_nyse_above_200_ema

  • Market Commentary from February 29th

    Up_down_stock Who asked for the extra day in February anyway?   Certainly not me. The week started great.  Then investor confidence took another blow Friday as the S&P 500 declined by 2.7%; its worst day in a long time.

    If you were watching, I don’t have to tell you how bad it was late last week.  Bottom Line: oversold market conditions and a fair amount of manipulation from the sidelines has not been sufficient to move the market out of the consolidation range of the last several weeks.

    The whipsaw volatility seen the last few weeks worsened Thursday and Friday. After attempts early in the week to take the market up and beyond the contracting Triangle patterns found on most of the US equity indices, the selling on Friday brought us down to levels where the lower-range boundaries of the Triangles are now clearly threatened.

    On the other hand, DecisionPoint had an interesting chart that may indicate we’ll see a major low soon.  It shows the percent of NYSE Stocks trading above their 200-day moving average.080229_percent_nyse_above_200_ema

  • Market Commentary as of February 22nd, 2008

    Market Commentary Most major US equity indices are in a "triangle" consolidation pattern (like the one shown in the chart below). I view this as constructive, even if it results in lower prices short-term. The bear-swing down, from late December through January, had a lot of momentum. The consolidation worked-off a lot of that. Consequently, another move down would result in many positive divergences – and would likely be strong support for the next rally.

    080222_spx_triangle_for_blog_5

    Choppiness increased as we moved further to the point of the "triangle" shown above. It makes sense, doesn’t it? The upper and lower boundaries for market swing is getting smaller (both in size and in time). The result is choppiness – or volatility that we’ve seen recently.

    Think of this as a well-contested battle between the bulls and the bears. Neither side has given-up much ground, yet. Soon, though, one side will have had enough and the market will surge again.

    Every once in awhile I feel the need to remind people that regardless of my personal opinion, we rely on the mechanical trading models to determine our market posture. And that my comments are intended for information and context.

  • Market Commentary as of February 22nd, 2008

    Market Commentary Most major US equity indices are in a "triangle" consolidation pattern (like the one shown in the chart below). I view this as constructive, even if it results in lower prices short-term. The bear-swing down, from late December through January, had a lot of momentum. The consolidation worked-off a lot of that. Consequently, another move down would result in many positive divergences – and would likely be strong support for the next rally.

    080222_spx_triangle_for_blog_5

    Choppiness increased as we moved further to the point of the "triangle" shown above. It makes sense, doesn’t it? The upper and lower boundaries for market swing is getting smaller (both in size and in time). The result is choppiness – or volatility that we’ve seen recently.

    Think of this as a well-contested battle between the bulls and the bears. Neither side has given-up much ground, yet. Soon, though, one side will have had enough and the market will surge again.

    Every once in awhile I feel the need to remind people that regardless of my personal opinion, we rely on the mechanical trading models to determine our market posture. And that my comments are intended for information and context.