Well, that was something you don't see very often ... a nearly 2000 point swing in the Dow.
Here is what that looked like intra-day.
There has been unusual volatility for a while, but this was noteworthy.
A Weekly View of the S&P 500 Index Shows the Bigger Picture.
The recent rally stalled at a well-known Fibonacci retracement level. In addition, it doesn't bode well for the bulls (at least in the short-term) that price just broke down through critical support, and on high volume.
When markets are ready to change course, we often see violent moves. The side that was enjoying the trend is fighting to keep it alive. The new side, taking over, will have nothing to do with that. Back-and-forth it goes ... then all it takes is a massive move to spark a little fear and greed ... and you saw what can happen.
What Does the VIX Show?
Here is a chart of the Volatility Index ("VIX") from Bespoke.
Apparently, the VIX is not the only way to measure fear in the markets. Another way is to follow what "insiders" do. The idea is that if they believe the market will get stronger, then they hold their stock.
So, What Does Insider Activity Tell Us?
According to Trader's Narrative, insider selling continues to dominate buying by a wide margin. We’ve seen a continuously extreme reading from insider activity measures for the past 12 months. The market has - until recently - ignored this vote of "no-confidence" and plowed ahead. This sustained level of selling pressure by insiders is unprecedented in recent history. Usually we see the buy/sell ratio fluctuate between the two extremes.
NYSE CEO Explains the Sell-Off.
NYSE Euronext CEO, Duncan L. Niederauer, says his exchange slowed trades of stocks including 3M, Accenture and P&G during the 998 point drop. So, you'll be happy to hear that it was a "feature" ... not an "error".
We are now pretty over-sold and due for a bounce. Throughout the recent rally, pull-backs triggered buying. It would surprise me if that happened again here.
Jay Leno was the
headliner at the dinner, and Obama called him "the only person whose
ratings fell more than mine."
Leno observed that Obama was less aloof
than he appears ... "He loves to socialize ... health care, car
companies," naming industries where the Obama administration has
intervened.
The President got more laughs than Leno. Perhaps part of that was in
deference to positional power; however, give Obama some credit - he hired staff writers
from The Daily Show to come up with his material.
A friend was driving me to his office last week. A flashy car pulls up beside us at a stoplight, and motions for us to roll-down the window. Without even saying hello, this well-dressed man in his late-40s starts bragging about day-trades he made recently.
He asked my friend whether he bought the bank stock they talked about, and then went on to gloat about a few of his other successes, including buying Palm just before HP bought it.
When the light turned, he said "you should have listened" and drove away.
Little things can say a lot. What do you think this implies about the
state of the markets?
I hadn't seen "that" type of behavior in several years.
It reminded me of cocktail parties in the late 90s (up until about 2001). You know, where stock-picking gurus wearing black faux-turtlenecks and blazers drank expensive wine and talked about Internet stocks.
The rally finally ran into some resistance. Still, the Dow Jones Industrial Average remains above 11,000. However, the thing that caught my eye last week was that the Dow
broke below its recent trend-line. By itself, not a cause for major concern, just a key to notice. The question is whether it can get back above that level, or will this be the start of a more meaningful correction?
It is also worth noting that the MACD indicator is showing more downside momentum than it did at the same price level earlier in April.
A Peek Over the Wall.
Is
China's Shanghai Index sending a warning about the world economy or just
their economy?
Unless things change in a hurry, China's Shanghai
Composite could drop significantly. This chart shows the triangle
pattern that played-out over the past nine months.
You can think of the Triangle as a well-contested battle
between the bulls and the bears. Inside the pattern, neither side
gives-up much ground. However, when one side loses conviction, the
market surges in the direction the winners push it.
Triangles
are often continuation patterns. So, be wary that this move is a
head-fake down to trigger a big rally. Otherwise, the target is pretty
far below.
Sentiment Here in the United States is Still Very Bullish.
While stocks have certainly become more volatile in the last two weeks, newsletter writers seem to be taking it in stride. According to Bespoke, the latest Investors Intelligence survey of newsletter writers found that 54% of those surveyed are now bullish on the market. The last time bullish sentiment was this high was back in December 2007, before the crash.
Another important to measure of the crowd’s extreme bullish sentiment is that fewer than 20% of advisors are currently bearish. According to Prieur du Plessis, these are first indications of a market top.
Another Sign of a Potential Top?
The U.S. Treasury Department plans to sell “up to” 1.5 billion
shares of Citigroup in the government’s
biggest step yet to exit the 27 percent ownership of the bank it rescued
during the financial crisis. Bloomberg quotes Geithner as saying: "We’re
putting TARP
out of its misery," and "the government is withdrawing from the
financial industry after forcing lenders to recapitalize with private
money."
If you think that is funny, then so is this cartoon.
KFC's new Double Down sandwich has been getting tons of press since its ingredients were revealed. Some blogs are calling the sandwich "disgusting", while others
gleefully talk about their eating experience.
The Double Down is essentially a sandwich with two chicken fillets taking the place of bread slices. In between are two pieces of bacon, melted slices of Monterey Jack and Pepper Jack cheeses, and a "zesty" sauce (you know, things your cardiologist is secretly happy you're putting into
your system).
How Bad For You is Eating Something Like This?
While it certainly doesn't qualify as health food ... it also doesn't
have bread. Further, according to KFC, it weighs
in at a reasonable 540 calories, 32 grams of fat, and (a less
reasonable) 1,380 milligrams of sodium, Other sources argue that the
calorie count is much higher.
Regardless, there are lots of fast foods worse for you than this
sandwich (click
here to see the rankings). Some even claim the Double Down is
healthier for you than a salad (see
why).
It Might Not Be Great Food, But the Marketing Is Working.
The marketing has been pretty effective driving demand and generating buzz in the media. Here is one of their commercials.
After seeing it, my teenage son begged me to get him one. Okay, it didn't
take much
persuading.
Nonetheless, I've been counting calories, recently, and
logging what I eat
in an attempt to eat healthier and lose weight. Like my wife, my skinny
pants (still patiently waiting in an under-used corner of the closet) hoped I
would put up more of a fight than I did.
In advertising, attention is good (even if some of it is controversial). It looks like the folks at this Pepsi spin-off, Yum Brands, have a hit. Not only are people who wouldn't normally eat at a KFC, now eating at KFC ... There's a bunch of folks fighting about whether this is a good or bad thing.
When Wendy's came out with the Clara Peller commercials, with the
tag-line: "Where's the beef?" ... it changed their business. Kentucky Fried
Chicken needs a tag-line (or brand promise) that will capture more than the
disgust of the American public, if they want this to last.
The rally has been strong. With the Dow Jones Industrial Average above 11,200, some are calling for an extended Bull market.
How Strong Has Breadth Been? The Answer is "Pretty Strong".
With the advance over the past two months, the percentage of stocks above their 50-day moving average surged back towards prior highs. This chart shows that indicator is above 85% for the first time since January.
Some commentators take this as a strong bullish sign. It helps to think of this indicator like a momentum oscillator. As such, it can become overbought and remain overbought during a strong uptrend. While relatively high readings may be considered overbought, it is also a sign of strength as long as this indicator remains at high levels. However, as the chart shows, a sharp decline below this level would increase the odds of a correction unfolding.
What is the State of the Current Economy?
Russell Investments publishes a nice summary of Market indicators. In general, it shows that interest rates are high, and mortgage
delinquencies are nearly off-the-chart, while most other indicators are
at
the low ends of their typical ranges.
Also worth noting, here, the VIX
decreased to its lowest month-end level in over 33 months.
Volatility is Coming Back to the Markets, Though.
When the SEC announced civil fraud charges against Goldman Sachs, its shareholders proceeded to lose $12 billion.
Here are some of the news items about this that caught my eye:
Why The SEC's Theory Against Goldman Will Fail. (Forbes)
Goldman
Sachs & the SEC - Greedy Until Proven Guilty. (Economist)
Goldman
Sachs and America's Regulation & Supervision Paradox. (Globalist)
Financial
Reform? Obama to Wall St.: ‘Join Us, Instead of Fighting Us’. (NYTimes)
The Lighter Side of the Issue.
Did you hear that
Goldman Sachs made the Iceland volcano erupt? It did pretty well
shorting airlines.
The Goldman Sachs lawsuit and financial reform are becoming common topics of every-day humor.
It's one thing when the business press writes about a topic, it's another when it is the subject of a David Letterman Top-10 List, an on-going discussion on Jon Stewart, and the opening segment of Saturday Night Live. What do you think it means that this issue is now in the mass media?
How does President Obama's popularity and approval rating compare to past presidents? This chart surprised me a little. It turns-out that the steep decline of his approval ratings is a little unusual, but not unprecedented.
The real issue is whether the Democrats will lose control of the House of Representatives in the next election. Jeff Miller has a good article about that on A Dash of Insight.
Dancing With Obama.
Domestic politics aside, apparently, the President is still pretty popular. While nuclear summits aren't usually a source of humor, the New York Times may have unintentionally struck gold with this time-lapse video. Watch the absurdity of presidential photo-ops as President Obama works the event, shaking one hand after another.
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Capitalogix Commentary for the Week of 05/10/10
Here is what that looked like intra-day.
There has been unusual volatility for a while, but this was noteworthy.
A Weekly View of the S&P 500 Index Shows the Bigger Picture.
The recent rally stalled at a well-known Fibonacci retracement level. In addition, it doesn't bode well for the bulls (at least in the short-term) that price just broke down through critical support, and on high volume.
When markets are ready to change course, we often see violent moves. The side that was enjoying the trend is fighting to keep it alive. The new side, taking over, will have nothing to do with that. Back-and-forth it goes ... then all it takes is a massive move to spark a little fear and greed ... and you saw what can happen.
What Does the VIX Show?Here is a chart of the Volatility Index ("VIX") from Bespoke.
Apparently, the VIX is not the only way to measure fear in the markets. Another way is to follow what "insiders" do. The idea is that if they believe the market will get stronger, then they hold their stock.
So, What Does Insider Activity Tell Us?According to Trader's Narrative, insider selling continues to dominate buying by a wide margin. We’ve seen a continuously extreme reading from insider activity measures for the past 12 months. The market has - until recently - ignored this vote of "no-confidence" and plowed ahead. This sustained level of selling pressure by insiders is unprecedented in recent history. Usually we see the buy/sell ratio fluctuate between the two extremes.
NYSE CEO Explains the Sell-Off.NYSE Euronext CEO, Duncan L. Niederauer, says his exchange slowed trades of stocks including 3M, Accenture and P&G during the 998 point drop. So, you'll be happy to hear that it was a "feature" ... not an "error".
We are now pretty over-sold and due for a bounce. Throughout the recent rally, pull-backs triggered buying. It would surprise me if that happened again here.
Business Posts Moving the Markets that I Found Interesting This Week:
Lighter Ideas and Fun Links that I Found Interesting This Week
Posted at 01:18 AM in Current Affairs, Market Commentary, Trading | Permalink | Comments (0) | TrackBack (0)
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