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This was just going to be a long post with a warning about three sectors that were already showing signs of weakness, but then this Dubai news comes out.

I know, based on the hits I get, that there aren’t many of you out there, but I hope you’ve been taking seriously all the bad news I’ve been bringing up lately. Except for a failed TZA trade the other day, I’ve been in and remain in cash. I hope you either hedged or raised cash over the past few sessions.

The following is what I was going to post prior to reading the Dubai news.

Sectors to avoid:

Two key sectors and one minor sector have been flashing warning signs this week. The key sectors are the financials and the small caps. This isn’t anything new. The XLF and the IWM have been setting up in these huge M-A patterns. The M-A pattern would have been negated by IWM if IWM was able to first take out 60.68 and then put in a new rally high, neither of which have happened. Barring govt intervention to avoid a major sell off on Friday, it doesn’t appear the M-A pattern is going to be negated any time soon. These two key sectors have been lagging for quite a while and appear to be rolling over. XLF has now closed below its 20MA on the 60min chart for two days, while IWM has only just done that during Wednesday’s session. I’ve been warning about these two sectors for a while, so no change there.

IYR is the next sector to avoid. It has been flashing warning signs since it peaked on the 16th. It’s chart looks crazy with huge gaps every other day but it continues to close below its 20MA on the 60min chart and its 60min chart reveals a down trend in place. IYR put in a rally high back in September and now just can’t seem to get going. The chart below shows the down trend on the 60min chart.

Not necessarily a sector to avoid, but the $TRAN did not make a new rally high this week. As I said the other day, how hard would it have been to get those extra 6pts? Not hard at all and yet this did not happen. So the $TRAN has been lagging and the $TRAN has been doing a good job of warning when the market was getting ready to pull back. The $BDI is rolling, something it does from time to time, and this may be playing into the little bit of weakness that is evident in the $TRAN. And of course, the airlines and railroads aren’t helping much. I mean, you can pump FDX to the moon but you need more than that.

New margin requirements for the 2x and 3x ETF’s were most likely going to cause some artificial swings in the prices of stocks like QLD and TNA on Friday & Monday as traders liquidate shares in order to meet those new margin levels. With the Dubai news, this is just going to be wild.

So this was going to be the post for today. Add this to Wednesday’s post, scroll down a couple of posts to view the chart of IWM with the M-A traced on it, and you have all you need to be on high alert. This Dubai news has already changed this. The market has been weak this entire rally leg as evidenced by a Summation Index that has failed to get above 500. The pro’s have been building a net short position in the futures while off loading equities to unsuspecting retail longs, and bearishness is near a multi-year low. Enter the Dubai news into an already perfect set up, and you have everything necessary for a significant market drop. I’ve been saying since last week that $SPX 1029 was a possibility and that certainly appears to be in the sights right now.

Oh, and I wouldn’t be rushing out and buying the first dip that comes along. That could prove fatal. Watch the A/D quartet. They’ll flash a ‘climax’ buy signal in the days ahead but there is a chance that the first such signal may just be a head fake. Might still be a money making opportunity but only for those who are fast on their feet.

Av Torill

Først var det bare tran som gjaldt, siden kom fiskeoljen og seloljen, og nå tilslutt krillen. Alle hevder å inneholde omega-3 fettsyrer med "dokumenterte effekter" i massevis. Forvirret? Ja, det er ikke noe rart!

Her er noen fakta:

Først, når vi snakker om omega-3 fettsyrene er det hovedsaklig EPA og DHA fra marine kilder vi snakker om. Kroppen vår er dårlig til å danne disse selv, og de må derfor inntas gjennom kosten, dvs gjennom fet fisk og tran.

Tran – torskeleverolje, dvs fett fra leveren til torsken. Denne oljen inneholder omega-3 fettsyrene EPA og DHA i en konsentrasjon på ca 25%. Fettsyrene er bundet i såkalte triglycerider. Tran selges hovedsaklig i flytende form, da den er vanskelig å konsentrere opp. En god del av forskningen på omega-3 fettsyrenes helseeffekter er gjort vha tran. Norske myndigheter anbefaler tran til alle fra 4-6 uker alder og livet ut! Se www.shdir.no, www.mollers.no

Fiskeolje – fettet fra kjøttet på fet småfisk som sardiner, ansjos og brisling. Denne oljen brukes hovedsaklig i kapselprodukter fordi den kan konsentreres opp til å få relativt mye omega-3 i en kapsel. I likhet med tran, finnes fettsyrene bundet i triglycerider. Fiskeolje brukes også som tilsetning i feks brød. Det aller meste av forskningen rundt omega-3 fettsyrenes helseeffekter er gjort vha fiskeolje.

Selolje – fett fra spekket på selen.  Selolje inneholder mindre DHA og mer DPA (dokosapentaensyre) enn fiskeolje. Noen studier er gjort på selolje og leddsmerter, se www.nifes.no. Man tror at omega-3 fettsyrene i selolje er lettere tilgjengelig for komponenter involvert i betennelse enn omega-3 fettsyrene i fiskeolje, men her trengs det mye mer forskning!

Krill – en gruppe rekelignende virvelløse dyr. De inneholder omega-3 fettsyrer hvorav en stor andel er bundet som fosfolipider. I tillegg inneholder den antioksidanten asthaxanthin. Krill har de senere årene slått seg voldsomt opp som den "nye generasjonen omega-3". Det hevdes i solid markedsføring at fettsyrenes binding som fosfolipider kan påvirke positivt hvordan kroppen tar opp og utnytter disse fettsyrene. Se feks www.superba.no. Er så denne så mye bedre enn de andre? Neppe! Men, jeg lover å revurdere min påstand dersom det gjøres solid og grundig forskning som viser det motsatte.

Enn så lenge nyter jeg min skje med sitrontran i forvissning om  jeg iallefall gjør én ting riktig for helsa mi.

5:50pm

The $TRAN, the $CYC and XLF were the worst performers today with the $NDX and $RUT closing in from behind. It’s the $TRAN, though, that’s going to lead the way. Gets weaker, market gets weaker. Gets stronger, market gets stronger. $TRAN closed just below the 9EMA. Doesn’t mean much now but could in the days ahead if the $TRAN can’t right itself. $TRAN and $CYC could be getting ready to set up an ABC down structure if they close below last Friday’s low in the next couple of sessions.

Weakness in the $CYC due in part to HPQ.

$BDI is rolling over.

It looks to me that the lower BB’s on the $VIX daily chart might start to move up tomorrow. Those BB’s won’t become a factor for a few more days, I don’t think.

The A/D quartet aren’t giving any clues.

$NYA50R, $SPX50R, & $NAA50R all moved lower today. If the market had any real underlying strength and breadth to it, I don’t think they would have done that on an essentially flat day, but what the hell do I know?

The Summation Indexes for the $NYSE and the $COMPQ moved lower today. And the McClellan Oscillators for both have now moved back below the zero line indicating that buyers are leaving the building.

The SG for the $SPX had a lower reading today. I did the math wrong yesterday and said the SG had a reading of -17 when in fact it had a reading of -15. Sorry. Not a big deal because it’s the direction that counts. And today the SG reversed. I’ll do the math later this eventing to make sure I get it right and will post it then. Two of the indicators went backwards today and the B momentum indicator stalled.

Therefore, the SG goes from a transitional phase to:

Weak, unconfirmed, Phase II, sell signal.

Emphasis on weak. As you know by now, when this thing starts to change directions it just doesn’t go straight down. It will meander for a day or two. Almost any kind of rally tomorrow will cause it to move up but, based on all the other issues in the market right now, I think that the die is cast for the next few days.

At about 2:00pm, the $USD started dropping which is the exact same time the markets had that little rally that lasted for an hour or so. Just sayin’.

9:30pm

The SG reading this evening is -18, so a reversal there. I’m still expecting some kind of pull back to develop, though obviously my timing isn’t that good, and I still think that $SPX 1029 is a possibility. Pre-holiday low volume action generally favors the upside. Also, the market needs to confirm the SG with some kind of downward move in the next few days. Until then, anything can happen.

I noticed on Cobra’s page over at Stock Charts, that he uses a ratio with $NYDNV:$NYUPV. On his site he says that a reading greater than 35 means a market bottom. I’ve done a little checking with this ratio and I’m not quite seeing it, but maybe you can.

With the Summation Index still below 500 and now dropping a little, one has to be extremely careful at this juncture. The pro’s can push the market higher if they want, just as they’ve been doing all month, and they know ten times better than me that buyers are not as excited about the market now as they were back in July or October. Those pro’s will be happy to off load shares to you at current levels, if only you’d just step up to the plate with an offer. Then they’ll either short the market with your money or sit on that money until issues get re-priced to attractive levels.

Just be careful. If things continue to deteriorate covertly then they’ll doubtless deteriorate overtly soon enough.

Oh, and was today’s big drop a reaction to yesterday’s extremely overbought $TRIN? Hard to say.

$NYUPV
$NYDNV
$NYUD
$NYAD

As I have said for the past couple of days, I’m expecting a pull back to develop over the next few sessions. I don’t think this is going to be the end of the world. I do think there is a very good chance that the $SPX could revisit the 1029 area from the November 2nd low, especially in light of the fact that the 20MA on the weekly chart is right now at 1029, but I reserve the right to change my view as market dynamics change.

The market has been very predictable since the August peak. It pulls back starting around the 20th of the month, takes back 50% to 70% of recent gains, then bottoms around the first of the next month, only to rally all over again. But as Pee Wee Herman said, “First your mind plays tricks on you, and then you play tricks back.” Or, maybe it will be different this time. Instead of a pull back that draws near the previous low, maybe this pull back will take out the low and keep on going. And of course, the market need not pull back any further. It could rally from current levels. Except that it is a little different this time.

This chart of the $NYA50R clearly shows a lack of participation with the latest market peak accomplished with 68% of stocks within the $NYA being above their 50MA’s. This is the kind of behavior you expect to see near market bottoms but not in an index that is just four days removed from a new rally high. It clearly shows weakness within the index. Compare the current 68% reading to the May, August, September, and October peaks where at least 84% of stocks were above their 50MA’s indicating broad based interest and buying. This chart looks more like the late June peak that led to the July lows. And that’s what I think we’re going to see.

And if you really want to be bothered, take a look at the $NAA50R.

This rally off the March lows has been broad based. It has been led by Big tech, small caps, transports, the cyclicals, & financials, and as the tide rose, the rally lifted all the other ships. But we now have trouble in two key sectors, the small caps and financials.

The $RUT, $BKX, & XLF all gave ’sell’ signals on their weekly charts in late October, based on the full stochastic dropping below 80 and a bearish cross on the MACD, along with RSI 14’s that have peaked. Despite the action over the past two weeks, these sell signals persist. While the rest of the key sectors put in or nearly put in new rally highs in the last week, neither the small caps nor the financials did. This sets up an ABC down structure in the $RUT and XLF, etc. The same could be said for the $SOX, but it’s just not a leading sector anymore. Look at the chart of the daily IWM a couple of posts below this one for a hypothetical trajectory for IWM.

Adding fuel to the pull back theory are the weekly charts of the $NYA, $SPX, $INDU, $RUT, and IYR, which all have shooting star dojis, or at least the potential that the weekly doji is in fact a shooting star. You can clearly see on the $NYA chart below what has happened in the recent past when these shooting stars appeared. Also note that the PPO has a bearish cross, the full stochastic is below 80, and that the RSI 14 has broken its longer term trend line and that it is rolling over now and headed for the shorter term trend line.

So you’re thinking, “A pull back to $SPX 1029? Wow! What a buying opportunity.” But what if it’s different this time?

Those commercial futures hedgers are still net short 60k contracts. They took on 3900 new long contracts while adding 2500 new short contracts as of November 17th. They’ve gone from about 50k net short a few weeks back to 62K net short last week, to this week’s 60k net short position. Clearly they don’t think the worst is behind us. And neither do mutual fund investors.

Mutual fund investors are fleeing equity based mutual funds and flocking to bond-based mutual funds in record numbers. According to this article from Morningstar, the exodus began in earnest during the month of September and most likely continues to this day. Mutual fund investors who went through the trauma of a 401K meltdown regardless of whether they stayed in the market or not apparently have little appetite for any more risk. They would rather invest in a safe though low yielding bond-type fund rather than invest in an S&P Index fund. And who can blame them since many are baby boomers nearing retirement? They probably didn’t sleep well during the market meltdown and they’re simply not going to risk their retirements again. But their monthly contributions are much needed if the market is going to go higher or at least go higher and stay up there. If this exodus is continuing and if it continues, then end of the month window dressing by mutual fund managers just won’t be the same.

Which brings me to the $TRAN. During this week’s rally, the $TRAN failed to make a new rally high while all of the other majors, the $SPX, $NYA, $COMPQ, & the $NDX, did. The $TRAN only missed a new high by about 6pts, but how hard would it have been to get that? This is the first time in quite a while that the $TRAN did not lead the pack to a new high. Maybe this doesn’t mean much right now but we’ve had divergences in the financials, the small caps, and the semis and you just have to wonder if the $TRAN might be moving into that camp.

Finally, or until I think of something else, there’s the $CYC. The Cyclicals Index has been this rally’s poster child. Up 192% from the March low. The stocks within the Cyclicals Index represent a cross section of U.S. manufacturing, finance, transportation, technology, chemicals, etc. These guys are the core of the economy, have been pumped to the moon, and they need to be watched closely. If profit taking takes place in these core stocks, then the decline that I’m expecting could go a bit deeper than even I’m expecting.

So the SG’s are giving mixed signals and have entered a transitional phase. The markets appear stretched with fewer and fewer stocks participating. The Summation Indexes have rolled over, not something you want to see considering they just turned up a few days back, and the McClellan Oscillators are below the zero line and are pointed straight down. The VIX is still quite a ways above it’s lower BB and the A/D quartet, $NYUPV, $NYDNV, $NYUD, & $NYAd, are in flux. This is no time, IMHO, to be adding to long positions, and shorting this freight train is dangerous. If I was one of the lucky people who bought in March, I wouldn’t be too worried unless $SPX 1029 is taken out with gusto. Otherwise, this is just a re-pricing pull back and buying opportunity in progress.

Keep an eye on the $USD. There certainly does appear to be a correlation between dollar strength or weakness and the market.

Have a good weekend.

WE just got back from a mid-week second annual sylvia hotel reunion in vancouver, bc. lots of cotters were there. Not just cupfulls…. BOWLFULLS!!!! it was so great.

We used to live in Vancouver before moving here to the comox valley. I just recently came across a picture of our “moving truck” that chester built when we made the big move— it turns out that his beautiful patina green ‘tran’ (truck+van= tran) caught the eye of an up&coming photographer and now is showcased on miles decourcy’s website. thanks dude.

….long live the tran & it’s can.

“Tran Can and it Will”

shipping container , 1980 dodge b300 maxi van,

Chester Cotter – 2008

{by the way… check out that glorious blue sky peeking through in this photo. so glorious you are blue sky*}

4:20pm

I’ll be back later with more stuff, but in the meantime, here is a chart of IWM showing an M-A pattern. This is pure speculation on my part. IWM could rebound tomorrow and climb back over the peak of 60.68, which would negate this pattern. Until then, this pattern may offer some insight into where IWM is going.

This same pattern can be seen on the $SOX and not as clearly on XLF & $RIFIN.

Here’s the direct link.

_______________________________________________________
6:40pm

The SG for the $SPX dropped from yesterday’s -28 reading to -30 today. The B Indicator is showing a considerable loss of momentum.

Current status for the SG’s for the $SPX & $COMPQ:

Entering transitional phase.

I’ve been questioning this entire rally due to the lack of participation as evidenced in the $SPXA50R, $NAA50R, & $NYA50R so I think the SG’s and the markets have peaked for now. Yesterday the $TRAN and FDX gave a heads up and today they sold AAPL, destroyed INTC & $SOX, and now they’ve taken DELL to the woodshed.

The $SPX hasn’t taken out a major swing low since the June decline. Because this rally just never had much substance, I think the $SPX may have to visit 1029 before it can move higher. I know that would make those futures traders happy.

$NYUPV, $NYDNV, $NYUD, & $NYAD are oversold to the point that there could be some kind of a bounce tomorrow, but they are not so oversold that the bounce, should it happen, will amount to much, especially since it will most likely be sold into heavily. I do find it interesting that these gauges gave a sell signal on the 9th when the $SPX was at 1093. I wasn’t sure at the time if that sell signal would be meaningful or not and I’m still not sure, but I do find it interesting especially considering where the $SPX closed today.

The Summation Indexes have rolled over and the McClellan Oscillators are below the zero line. The Summation Indexes never really did get going during this rally phase, another reason I think we could see $SPX 1029 again.

6:50pm

The reading in the SG of the $SPX is -28 today. Yesterday it was -34 so it is drawing closer and closer to the zero line. But that’s not the whole story. The C Indicator showed a slight loss of momentum today. The others look fine.

Current status for the SG for the $SPX:

Moderating, partially confirmed, Phase IV, buy/hold signal.

Current status for the SG for the $COMPQ:

Moderating, partially confirmed, Phase IV, buy/hold signal.

IYR made a very nice recovery today, but did so on light volume.  Today’s move will need to be confirmed tomorrow…with volume. I don’t like the sector but I do watch it.

Today’s big story is the $TRAN. The transports came down just a little today but did so on a little bit heavier volume. The transports have been very good over the past several months at starting pull backs a couple of days ahead of the general market. The small drop in the transports today might not lead to anything, but it’s going to be important to watch them closely over the next few days. FDX came down hard but the volume wasn’t there. The airlines, AMR, CAL, LUV were also down pretty hard. The sector doesn’t look that weak, but it could tomorrow or Friday.

And wouldn’t you know it. THEY took IWM above 60 in the last 15min of the day. I just knew they wouldn’t let IWM close below 60, but I don’t know that it means a whole lot at this point.

What’s bothering me again today are $NYA50R, $SPXA50R, & $NAA50R. These are all trying to roll over from already low levels.  42% of $COMPQ stocks are below their 50MA’s.  This is not healthy. Even on a less than 1/2% pull back day like today, the $NAA50R should not have dropped, but it did. This is a symptom of internal weakness.  And it’s the same in the other indexes. Fewer and fewer stocks are participating.

Yesterday and today, advancers fell behind decliners in the $NYSE 12:17. I can understand today, but yesterday the markets closed green.  The Summation Indexes for the $NYSE and the $COMPQ are still moving up but the McClellan Oscillators for each are now pointing straight down.  The $VIX seems to be dropping like a rock and the P/C ratio at .84 says that complacency reigns. Maybe everything will resolve tomorrow with a broad based rally on good volume. Maybe not. And don’t forget that lurking out there somewhere is a huge net short position in the S&P futures. When are those guys going to make a move?

And when was the last time you saw the $NDX at the head of a southbound train?

Just be careful right now.

Adding the following at about 7:10pm

Look at the histogram on the $NDX and the $TRAN. You can see the same thing, though not as pronounced, in several other key indexes.

9:20am

Just a couple more concerns.

$TRAN: Look at the volume pattern in the $TRAN. Since the Buffet/BNI bounce, the $TRAN has been rising on ever decreasing volume.  Compare that to other rally legs, especially the September leg, and this lack of volume raises a red flag. There is a possibility that the $TRAN may be topping out around the current levels. FDX lost its leadership role last week and then regained it. If FDX should start to roll today or anytime soon, that will be the canary in the coal mine.

These same bothersome volume patterns are visible for the $NYA, $SPX, $INDU, and then there’s the volume problems with IWM and XLF that I mentioned yesterday.

IWM: IWM should NOT close at 59.99 or less before it closes at 61.01. IWM looks to be under pressure this morning but it’s the close that will matter most. If it can close green and especially if it can close above 60.51, then there would be a good chance that it will close above 61.01 before the week’s out, but a break into the 59’s would spell trouble.

IYR: IYR should stay above 42.99.  If it should break into the 42’s, then there is 9EMA support at 42.95 but if it breaks decisively into the 42’s, then the 9EMA probably won’t offer much support.  The 20MA on the 60min chart is sitting right at 43.78 and would offer some resistance if IYR starts to move up. If IYR can break above 43.78, then all’s well. If it can’t, then it could drop into the 42’s.  That’s still a ways below where it’s trading in the PM and that market maker is a crafty S.O.B. so you just never know what’s going to happen with IYR until the close.

Only the paranoid survive.

4:20pm

Sold 60% of my TNA at a loss today. Have a stop loss set at 38.85 for the rest. I expect to get stopped out tomorrow.

Based on the the damage done to the $TRAN, the $CYC, the financial sector, and especially to the small caps, plus the extreme negative breadth with 23 stocks down for every 6 that were up, I’m expecting a slight reversal today in at least one of the indicators and if this does happen then I think this has to be taken as a major red flag.

Just as in the October rally, this rally leg has never had a sign of strength. Not even close. A rally today may have provided a sign of strength but obviously that did not happen.

AAPL and FDX seem to have lost their leadership roles and the market is  going to have trouble going anywhere if this doesn’t change.  This started to happen yesterday.

The question now is whether or not the pull back will be a one to two day affair or something lasting several days that takes out the November 2nd lows.

* * * *

5:40pm

Time to go. SG for the $SPX  has gone backwards today. Yesterday’s reading was -56.4 and today’s is -67.  I’m not 100% certain that the SG has topped and won’t know that for at least two days, but I think it’s probably close enough. This shouldn’t be happening this early in a rally leg and is evidence that strength is not likely to materialize and that underlying weakness is getting the upper hand. This is telling me that even if the markets do bounce tomorrow in reaction to  oversold conditions on the 15min and  60min chart, the bounce is just going to be sold.

Since the $RUT is running with the weakest sectors, I’m putting in a sell order in the AH for my remainder of TNA shares. Why wait to get stopped out tomorrow at 38.85 when I can get around 39.50 or so in the AH?

I would suggest hedging if you don’t want to sell, just to be on the safe side. The SG could be wrong by a mile.

I don’t have the time to do the calculations for the $COMPQ, but if I did, you would see that it’s actually worse on the $COMPQ than on the $SPX.  Whereas with the $SPX only one indicator has dropped today, two indicators for the $COMPQ have dropped.  On second thought, maybe I will try and do some of the calculations for the SG for the $COMPQ, at least over the past few days.

I will put up a chart ASAP for the SG for the $SPX.

6:10pm

Here is a direct link so you can get a better look at the chart, if you care.

Just my opinion, but regardless of what you decide to do, now is not the time to be adding to long positions. I would wait for the dust to settle. Maybe it already has, but I don’t think so.

Here are a couple of 60min charts from the mid-July period. One is of the SPY and the other is of the IWM. I saved these, fortunately, because of the way the RSI 14 and the Stochastics were behaving.

Usually when the RSI 14 gets above 70 and the Stochastic gets above 80 on the 60min chart this indicates an extreme overbought situation which all the algorithms recognize and which usually flips the computers from buying to selling. But this did not happen during the July rally.

During the July rally, the RSI 14 and the Stochastic on the 60min charts stayed at elevated levels for days on end. There really were no dip buying opportunities. If you wanted in, you just had to bite the bullet and hope that the next day the market wouldn’t pull back.

The point of this is that the 60min charts for the $INDU, $SPX, and $COMPQ are currently very overbought, the $TRAN and $CYC are overbought, and IWM and XLF are very close to being overbought. If we’re looking at a July-like rally, then this shouldn’t make any difference. The pull back that seems to be setting up in the PM market will be bought and the indexes will close in the green. On the other hand, if this is a regular rally, then after 5 days straight up with the $INDU already up 500pts for the month, then the markets should pause a little before heading higher. All to be known in about 7 hours.

* * * *

I forgot to update the SG’s yesterday. Three of the indicators are now moving up so their current status is:

Improving, unconfirmed, Phase III, buy signal.

* * * *

This first one is of the IWM from July 15th. Here is the direct link.

And here is the SPY from July 16th.

The chart below is the chart of the SG for the $SPX.  I set it up so that it goes back to the last week of April because that is when momentum peaked for this rally off the March lows. The values are not as important as the direction the indicator is moving. Up is good, down is bad, and sideways is troublesome.

Based on the SG, momentum peaked on 5/4/2009, days before the market began to roll over. It then went basically down until 7/10/2009 and then really took off to the peak of 8/7/2009. It never got anywhere near close to confirming the late August rally. It then bottomed on 9/3/2009, a day after the market bottomed, topped out on 9/22, never confirmed the October rally, and then fell off a cliff which leaves it where it is now, more or less flatlining.

It has flatlined twice before in the selected time period with different results. It more or less flatlined from late June through early July when it took off like a rocket.  It flatlined in October and then fell off a cliff. What’s it going to do now? I don’t know. Maybe it’s saying that the market needs to consolidate further before it can muster the strength to rise. It could fall off a cliff again. That’s possible, but since it’s already done that then that really just leaves moving higher or more consolidation. Regardless, I do think it’s time to be cautious and I don’t see any reason at all to be short the market right now. I may have to eat these words, but being short is so last week.

Here is a direct link.

Lowry’s data is updated.

Adding the following on Sunday, November 8th:

There are a couple of things going on with the SG’s oscillators that are of note. First, the A Indicator and the B Indicator have started moving up, though the A did stall on Friday. The C Indicator remains in an overall down trend and the D Indicator has been sitting at it’s absolute bottom since 10/27, 9 sessions ago. What’s of note is the current low reading on the SG, which was -79.79 on Tuesday, 11/3.

In the first and second weeks of March, the low readings on the SG ranged from -80 to -103. Also, the C Indicator was just a little lower than where it is now. So what I’m looking at here is the potential for a major buy signal that may come within the next 5 or so sessions, +/- a couple. Here’s my reasoning.

The SG is near a low. It’s possible it could drop 10 more points but it doesn’t have to. Back in March things were completely different than they are now, so the SG for the $SPX could fall a little more but need not get to the -100 level. The second thing is that the C Indicator, the trending indicator, is at a level now that has, in the past, initiated a turn around and a new buy signal. In other words, it is sufficiently over sold. But first the C Indicator has to slow, stall, and turn up. It is slowing a little now. Next, the D Indicator has been sitting on its low reading for 9 sessions. In late February and early March, it only sat at this low level for 13 sessions. So what I’m saying is that neither the oscillators that make up the SG nor the SG itself need to drop any further before a new buy signal comes to pass. I think this should become very clear by no later than Wednesday.

But, of course, the market is the final arbiter in all this.

4:30pm

When it looked certain that IWM would get above and stay above the 20MA on the 60min chart, I went long TNA.

The market is struggling. A 5% rally in the $TRAN and a 2% rally in the $CYC were unable to drag the markets higher. What happens tomorrow if the $TRAN doesn’t rally?

I don’t expect much of a change in the SG’s, which just means any rally attempt must be eyed with great suspicion.

* * I* *

6:30pm

Based on what I’m seeing in the SG’s, the market continues to decay. If there is no significant change by the close to Thursday, then I don’t see how the market can go much higher. FED blah, blah, blah.

* * * *

Current status for the SG’s for the $SPX & the $COMPQ:

Strong, confirmed, Phase IV, sell signal.

5:45pm

The intensity of the down ticks in the various indicators has backed off a bit from what they were last Wednesday and last Friday. That’s to be expected. Last week’s intensity was unsustainable. Otherwise, I see no other change. Downward momentum remains strong and the market continues to deteriorate from the inside out. The weekly sell signals for the $TRAN, $SOX, $RUT and the others remain valid while the $SPX, $INDU, and $COMPQ are somewhere between a buy and a sell, IMHO. Also, look at the Aroon on the daily charts of key indexes. Interesting stuff going on there.

The $CYC was helped by F today while the $TRAN was hurt by YRCW.

Volume today was very heavy in the Q’s, IWM, and SPY. I’m not sure what to make of this. Could the market be telling us that it’s had enough of the downside for a while? Always possible.

If the pattern on the daily $SPX chart is a bull flag pattern, then at the moment $SPX would have to get above the 1060 area to break out of this pattern. If the $SPX could get above last Thursday’s high of 1066 that would do it.

* * * I*

Current status for the SG’s for the $SPX and the $COMPQ:

Strong, confirmed, Phase IV, sell signal.

Jeg pleier å være veeldig skeptisk til tilskudd som lover gull og grønne skoger på bakgrunn av et høyst begrenset studiegrunnlag (min personlige favoritt er n=10 studier i to uker eller når man har dryppet noe ned på en celle i et glass og dermed trekker konklusjoner med hensyn på hele menneskekroppen) men en ting har jeg etter en del søking og fundering funnet ut at jeg i hvertfall skulle gjøre ( i en alder av 24, riktignok ). Jeg skulle begynne med tran!

Spiser man ikke fet fisk, som makrell, laks eller liknende (noe man burde, for det er kjempegodt), bør man ta tran. Tran inneholder både Omega-3 og D-vitamin, som er en av de få vitaminene der myndighetene faktisk går ut og anbefaler folk å ta et tilskudd.

Vitamin C har jo vanligvis blitt trukket frem som “virus-dødaren” men selv med relativt store doser er det ikke så god effekt at man har konkludert med at befolkningen må holde seg til store doser. Cochrane Library sin oversikt konkluderer veldig greit der, henholdsvis med tanke på lungebetennelse og forkjølelse:

Authors’ conclusions

The prophylactic use of vitamin C to prevent pneumonia should be further investigated in populations who have high incidence of pneumonia, especially if dietary vitamin C intake is low. Similarly, the therapeutic effects of vitamin C should be studied especially in patients with low plasma vitamin C levels. The current evidence is too weak to advocate widespread prophylactic use of vitamin C to prevent pneumonia in the general population. However, therapeutic vitamin C supplementation may be reasonable for pneumonia patients who have low vitamin C plasma levels because its cost and risks are low.
link

Authors’ conclusions

The failure of vitamin C supplementation to reduce the incidence of colds in the normal population indicates that routine mega-dose prophylaxis is not rationally justified for community use. But evidence suggests that it could be justified in people exposed to brief periods of severe physical exercise or cold environments.

Det har jo vært spekulert litt i nivåer av D-vitamin og virusinfeksjoner i befolkningen, og spesielt slike ting som at influensaepidemier stort sett kommer om vinteren, at influensa rammer tropiske områder når det er regntid og folk holder seg innendørs (og får redusert soleksponering) Juryen er fremdeles ute på dette selvsagt, flere studier må gjøres, men med tanke på en ikke-tilstedeværende risiko ved å prøve så lenge man holder seg unna hestedosene. Når man ikke blir eksponert noe særlig for sol (som er tilfellet gjennom hele vinteren) er derfor Vitamin D ikke så dumt. (Det å ta mye tran er jo uaktuelt i seg selv, med tanke på hvor skummelt spesielt Vit A er i store doser)

Dette var en svært interessant studie med tanke på Vitamin D og influensa
Intervju i Financial Times om Vitamin D-forskning

I forbindelse med svineinfluensa-sakene som har gått i høst, blir også tran og fet fisk nevnt av samtlige av de intervjuete kostholdsekspertene.

Cochrane holder på med flere reviews om Vitamin D i skrivende stund, blir spennende å se hva de finner ut. I mens tviholder jeg på tranflasken min

(Adding this about 2hrs later. Well, I could have saved myself a lot of work if I had first watched Oscar’s video over at youtube. Here’s the link. Look for the video for 10/31/2009 if it doesn’t come right up.)

First the good news. The retail sector is holding up well. See XRT.

Now the not so good news.

For many of the key indexes, the glass is half full. Using weekly charts, indexes like the $COMPQ & $SPX appear to be under pressure but they have not yet given a sell signal. They are close and the slightest little push in the coming week will send them into the abyss, but they could bounce back. The criteria I’m using to determine whether or not an index has or has not given a ’sell’ signal on the weekly chart is that the index in question is holding trend line support and that there are no bearish confirmations from the MACD, full stochastic, and the Williams%R (50). This chart of the $SPX is typical of so many of the other major indexes and major sectors. The trend line could hold, the MACD need not have a bearish cross, the DI lines could separate, etc. This chart shows a slightly different picture. For this chart the main difference is that I’m using a Williams%R set at 50. Focus on times in the past when the Williams 50 on the weekly chart has dropped below -20 and especially the declines that follow. But we’re not there yet. The charts for most of the major indexes look about the same as the two charts above and so the markets could go either way. A push higher next week, and we’re off to the races again. A push lower next week, and the trend lines will break and each of the four indicators will have bearish confirmations.

This list includes many of the major indexes and sectors that are in the same situation as the $SPX. Some of these are within a hare’s breath of giving a sell signal.

$NYA
$COMPQ
$NDX
$INDU
S&P Mid-cap 400
$CYC
XLF
IYR
XLE
OIH
KIE (look at the weekly volume)
SLX (very, very close to a sell signal)
$RIFIN/FAS
GDX & XME (should probably be in the list belowl)
DRG
$XTC

And now the bad news.

Using the criteria above, which is a break of trend line support on the weekly chart as well as a MACD bearish touch or cross, a stochastic below 80, and a Williams 50 below -20, these indexes and sectors have given ’sell’ signals.

The poster child for this category has to be the $TRAN. This chart of the Transportation Index tells most of the story, and this chart tells the rest of the story. I’m not a Dow Theorist but anyone who knows anything about the stock market knows the importance of the Transports. If airlines aren’t hauling people and if trucks and trains aren’t hauling goods, then you do not have a thriving or growing economy.

Along with the $TRAN, the following indexes and sectors have also given sell signals on the weekly charts:

$SOX
$RUT
$BKX
$KRX
$HGX (a week ago)
TAN
XLU
XAL
BBH (two weeks ago)
BDH (since Sept 1st)
I’m sure a missed a couple.

Basically, the market is at a tipping point. Every index and sector is weak with some just being weaker than others. Lowry’s Buying Pressure Index is at its lowest level since the end of July and its Selling Pressure Index continues to rise. The SG’s for the $SPX and the $COMPQ indicate internal market deterioration, or rot, the likes of which have not been seen since February. The large contract commercial S&P futures hedgers are net short 50,000 contracts so the more they sell, the more they make. Earnings have been ‘better than expected’ but absolutely do not justify stock prices being back where they were before the big drop in September of 2008 or, in the case of stocks such as AAPL & BIDU, hitting new all-time highs. What we’ve seen in the past couple of weeks is bubble froth.

Based on what I’m seeing in the SG’s and what is being confirmed in the $TRAN, $RUT, $SOX, and other key sectors, I have to expect more downside. This does not mean that the rally is over nor does this mean that I expect the market to go into a major down trend and take out the March lows, as I’m sure many of the perma-bears are calling for. To me it just means that the market needs a cooling off period in order to consolidate recent gains after having come too far too fast. The $SPX has already dropped about 6% from its recent high and I have no idea how much further it will drop, if it drops at all. If the $SPX were to take out the July lows, then that would, IMHO, change everything. That level, around 870, would mean a drop of 20% from the recent high which would initiate a new bear market phase, but that’s a long way from the current 1036 level. In the mean time I’m still looking at a bull flag pattern on the daily $SPX chart. If the current downward move continues, then this will just morph into a down trending channel.

And lastly, or until I think of something else, I will leave you with this. Back in August, with the markets still rocketing higher from the July lows, the RSI 14 for many of the major indexes hit extreme levels not seen in years. At the time, I read an article stating that the RSI 14 for the $COMPQ hit a level that was comparable to the level it hit on January 3rd, 2000, which was 86.74. The article went on to point out that even though the $COMPQ would continue to rally over the next 2 1/2 months adding almost 1000pts, none of the subsequent new highs in the index were confirmed by the RSI 14 indicating negative divergence which eventually led to the the bear market in the $COMPQ that continues to this day.

Here are the levels from early August. On 9/22, with the $COMPQ 135pts higher than the August 4th high, the RSI 14 rose to 74.48 showing a slight negative divergence. At the more recent highs, the RSI 14 on the $COMPQ never got above 60. Is history about to repeat?

6:20pm

Market rot. That’s what I’m calling this. The market has been decaying since the middle of the month. Yesterday’s rally was nothing but a dead cat bounce and today we got the real story.

Volume on IWM is now at 115mil shares. That’s the highest volume for a down day in a year.  Today’s volume was heavy all around. Is it capitulation volume? Any other time I would say maybe but I’m even less certain than maybe right now.

The $VIX punched through its upper BB today, another sign that the markets are nearing a bottom, but there have been times in the past where this signal has failed, and I ‘think’ this might be one of them. This has to do with market deterioration the likes of which we haven’t seen since February. Back in February, when the SG for the $SPX produced signs of negative strength similar to the one it produced on Wednesday and today, this was indicating, at the time, that there were serious problems going on under the hood and that it was going to take more than a couple of days for the market to get on the mend and start back up. I ‘think’ we may be entering a similar period, if we haven’t already. If this turns out to be the case, then the market could easily drop for up to two weeks more and give back another 8%.  I’m not saying this is going to happen but I see the potential for such an event.

P/C ratio hit 1.21 today. That usually signals a bottom is at hand but maybe it’s just not going to work this time. Will just have to wait and see.

Here’s some of the damage this market has done, and it’s not a pretty sight.

$BKX closed the month lower than the September low.

$SOX closed the month 1/2pt above its September low.

$DJT/$TRAN closed the month down 180pts and 450pts from the month’s high.

$CYC closed the month down 28pts and 90pts from the month’s high.

$COMPQ closed down 80pts for the month.

IWM closed down about $3.90 for the month and $6.20 from the months’ high.

$INDU closes the month out about 1/2 point higher but down about 400pts from the month’s high.

$SPX closes month down 21pts and down 65pts from month’s high.

* * * *

Current status for the SG’s for the $SPX & the $COMPQ:

Strengthening, confirmed, Phase IV sell signal.

Today’s signs of negative strength are on par with Wednesday’s, which were some of the strongest of the year.

* * * *

8:30pm

For the few of you who are still visiting this blog, I just want to point out again that this is uncharted waters for me. According to the SG’s, this pull back is nothing at all like the pull back from mid-June to -mid-July, or any of the others. The closest I can come up with is the late February period and so I am comparing the current numbers with that period.  Any other time, the signs of negative strength that the SG’s are producing now would be considered climax signals, except when compared to the late February period.  The numbers are not wrong but there is a chance that my interpretation of the numbers is. Regardless, there is no sense in trying to front run the market on the long side right now. The market will let us all know when it’s ready to go back up.

I just took a look at the COT report and see that, as of this past Tuesday, the large contract S&P commercial hedgers have reduced their long exposure at twice the rate of the reduction in their short exposure.  Also, Alex Roslin say’s he’s going short the $SPX this coming Monday.

AAPL and GOOG have filled their earnings gap. AMZN?

And the USD was up.

3:20pm

Market shows its mean side again. Lots of damage and several key indexes are very near their September lows, most obviously the $TRAN & $SOX, but they’re not alone. $CYC down 4% with 40min to go.

Is the bubble unwinding? I expect some very powerful and significant signs of negative strength today and I expect these will compare with those last seen in February. I was concerned about this yesterday.

I did try to play the long side today and got burned. I knew it was risky and so it was just a few shares but it hurts just the same. I did make some $ on DRV but got out of it way too early because I thought we would bounce. WRONG!!

I don’t know if it’s time to get the bear suit out of the closet, but I do think there’s a lot of fear out there right now. A lot of people who saw their 401k’s get wiped out and who held might be thinking it’s time to get out just in case things get really bad.

I will be eying all bounces with great suspicion for a while.

* * * *

5:30pm

This is the strongest sign of negative strength for the $SPX going all the way back to February. That sign of negative strength in February was the strongest of the year. So now things have changed. Instead of referring to signals from the past couple of months, I am focusing on the February time period. Basically, I’m in uncharted territory here and because of that I’m going to be extremely cautious when it comes to the long side. It may turn out that the less risky trades will be on the short side for the near term. That’s certainly been the case since this past Friday.

Back in February, the $VIX was already outside its upper Bollinger Band when the SG for the $SPX produced this sign of negative strength. Today the $VIX lacks at least one session more before it’s going to tag the BB. That could happen intra-day tomorrow. But what’s going to be important is what happens after that. Back in February, the $SPX was still in a major down trend and it then had a very strong one-day bounce. After that, it never looked back. We could be setting up for something similar, and if the market does bounce in the next couple of days, that bounce is going to be key to what happens over the next week to ten days. By that I mean that if buyers come in and keep the market moving higher, then we could be looking at the start of another leg up. But if dip buyers are met with more heavy selling then the markets could be setting up a fairly large ABC down structure.

The bull flag pattern I had on the $SPX was blown apart today and so I’ve had to adjust the lower trend channel. Do that too many more times and its no longer a bull flag. The bottom line, at least for now, is that the market is still in a major up trend. The longer term uptrend line off the March lows for the $SPX is just above where the $SPX closed today, at about 1050. But that is not the end of the world. Just because one trend line fails to hold, doesn’t mean the next one won’t. However, I think all bets are off if the $SPX drops into the 900’s.

There was an increase in volume today but, IMHO, it still lacks some volume to qualify as capitulation volume. We could get that tomorrow along with a $VIX spike to or through the BB’s.

And the dollar was up today.

* * * *

Except for the fact that the intensity of this down turn has reached a momentum and velocity level not seen since February, there is essentially no change in the SG’s for the $SPX and $COMPQ.

Current status for both is: Strengthening, confirmed, Phase IV sell signal.

4:35pm

A Long’s worst nightmare. They sold AAPL today. Is AAPL going to fill that gap at $190.00, which I just noticed is a round # high.

There are things going on in this pull back that we haven’t seen for a while. $TRAN is almost all the way back to the 10/2 low. Same for the $BKX, $SOX, and the $RUT. XLF is now 15cents away from getting into the candle from 10/2. $SPX looks like it wants the 50MA.

A lot of people are saying that this pull back is partially due to strength in the dollar. I don’t know if there is any single factor, except for profit taking by the pro’s at a very opportune time. However, UUP looks like a buy right in this area. Not a recommendation but UUP hasn’t looked like a buy in quite a while. Volume certainly has found it’s way into the ETF.

AKS down over 8% today on easily 2x average volume. X down just shy of 8%.

We have a 3rd day of Distribution and that hasn’t happened in a long time.

V getting the smack down AH.

I day traded some TZA today and picked up a few shares of DRV, which I’m going to try and hang on to.

Be very careful. Retail longs continue to get trapped by the exiting pro’s as the market’s mean side has come to the surface.

* * * *

5:50pm

Current SG status for the $SPX:

Strengthening, confirmed, Phase IV, sell signal.

I am compelled by my data to call this a ‘climax’ signal, but with extreme caution. I will explain below.

* * * *

Current SG status for the $COMPQ:

Strengthening, confirmed, Phase IV, sell signal.

This is the strongest sign of negative strength I have on record, therefore, I am compelled to label this a ‘climax’ signal, but with extreme caution.

* * * *

I have to go with the data. The SG’s produced the strongest signals I have going back to March of 09′. However, there is a chance that we’re entering a period similar to that of February 09′ when signals like these were common place. Since I have no way of knowing if these signals mean a February-like decline, or if they mean the end to this current decline, I plan to play the long side tomorrow but only as a day trade. I will look for any weakness early in the session and jump on board then with a small position. If I had more confidence, I would start a small position in the AH. If the market does bounce tomorrow, then perhaps that bounce may last more than a day. Perhaps the bounce will just keep on going and we’ll start a new rally leg, but I will believe that only when I see it.

I absolutely do believe that any bounce will be sold into heavily by the pro’s and by trapped retail longs, until proven otherwise.

Take a look at this weekly chart of IWM. IWM has broken the LT trend line from the March lows. It’s not the only one. XLF and the $SOX are also in the same shape and the $TRAN is the worst of all with its entire weekly candle below the LT trend line. In other words, the market is in some serious trouble and without some kind of confirmation if we do get a bounce, then that bounce has to be eyed with great suspicion.

Obviously, the market had a change of heart about V.

Be careful. Watch position size. Don’t take your eyes off those M Patterns. Only the paranoid survive.

4:20pm

More damage in the $TRAN today and it appears that the $CYC is playing catchup. For the $TRAN it does look like the swing low from 10/2 is in jeopardy.

Many of the financial ETF’s, etc, got hammered and appear to be running for their swing lows from 10/2. On a closing basis, $BKX and KIE are already there.

I’m watching SLG, PCL, & LRY, which are real estate stocks, to see how they do when their earnings come out sometime today after the bell. One way or another, their earnings will impact IYR.

Hope you were able to avoid or take advantage of the carnage today. I’m still in cash.

I’ll have more around 6:00pm, +/-.

* * * *

6:30pm

Current SG status for the $SPX:

Strengthening, confirmed, Phase IV sell signal.

* * * *

The SG for the $SPX had a substantial sign of negative strength today. In looking back at other time periods, the intensity of this negative strength is comparable to those that occurred on 9/2 and 10/2 which signaled climax bottoms. However, there are a couple of missing factors.

On both 9/2 and 10/2 the $SPX came down hard on very heavy, capitulation-type volume. By comparison, today’s volume was light.

On 9/2 and 10/2 the $VIX had punched through its upper Bollinger Band (BB). At the moment, the $VIX is miles away from its upper BB.

On 9/2 the, P/C Ratio hit .92. On 10/2, the P/C Ratio hit 1.11. Today’s P/C Ratio reading is .88 showing plenty of complacency.

As a result of this mixed message, I’m reluctant to label today’s SG signal as a climax signal but instead will just say that it has the potential of being a climax signal. The 60min chart of the $SPX is very over sold right now, as it was coming into today’s session, and so a bounce could be in order but if a bounce should materialize extreme caution should be used as it is not likely that the SG for the $SPX will be able to produce a sign of positive strength for several days.

* * * *

Current SG status for the $COMPQ:

Strengthening, confirmed, Phase IV sell signal.

* * * *

The SG for the $COMPQ also had a significant sign of negative strength today which totally contradicts the $COMPQ’s minor decline. In other words, there are problems under the hood. Just as with the $SPX, this negative strength compares to the 9/2 and 10/2 periods but I don’t see anything else that would lead me to believe that the signal today warrants being labeled as a climax move.

Here is the conundrum. When the markets came down in February of this year signs of negative strength like the one we had today in the $SPX were common and at the time would not have been seen as climax moves. Day after day there were very strong signs of negative strength. What if we’re entering such a period? If I only look back at data through the early May period, then today’s signs of negative strength stand out, but if I go back to the February period, then today’s signs of negative strength lose some of their significance.

I only mention this because this entire move up from the 10/2 lows never had a positive sign of strength and so within that context today’s negative sign of strength may not be signaling the end of this minor pull back but may instead just be more evidence of the overall weakness of the move in the first place.

Regardless, I’m going to set up my daily chart to track this current move as a bull flag and we’ll see which side of this pattern the $SPX decides to go. I am more than a bit concerned with the M patterns that I’m seeing in the daily candles and the Stochastic on the $SPX. This M pattern could easily morph into a W pattern.

You can also see M patterns in the $TRAN, $RUT, and XLF. And I’m sure there are other indexes and ETF’s out there that are displaying the same M pattern. For those of you who don’t know, W patterns are good and M patterns are not so good.

How the SG’s reveal changes in market moves.

When I sit down to update the SG’s for the $SPX and the $COMPQ, I am looking at a row of six numbers. These numbers are in columns that, for the $SPX, are stacked up from the latest readings all the way back to January, 2009. For the $COMPQ, these columns only go back to August. Over the next few weeks I’ll be working on gathering data on the $COMPQ back to January. There is no way to import the information I use and so it all has to be taken down by hand.

From these numbers I am able to watch momentum and velocity build or wane for each of the four indicators and then I can compare these numbers with other time periods for reference.

Let’s say that on any given day one of the indicators has a reading of 10 and let’s say that on the next day this indicator has a reading of 13, and on the day after that it has a reading of 16. From those increases, I can see that momentum is building at about the same pace. As long as this continues, +/- a digit, then this indicates that the current move in the market will probably continue. But if these readings begin to decrease and do so for more than a day or two, then these decreases signal that the current move in the market is running out of steam and may soon slow and/or reverse.

As an example, the B Indicator, which I use to gauge momentum, reversed and began to move up on Thursday, 10/8. It moved up by about the same degree until this past Tuesday, 10/20, when it more or less came to a screeching halt. It then reversed course Wednesday, 10/21, and had a minuscule loss of momentum on Thursday, 10/22. This past Friday, the numerical loss in this indicator almost matched its numerical gains in the days leading up to this past Tuesday when it essentially stalled. I see this as evidence that down side momentum is increasing. At some point in the future, the numerical losses in this indicator will stall and then reverse and the cycle will start all over again.

Each of the other three indicators behave in the same way. Their numerical values either increase or decrease. I do have to interpret these increases and decreases a little bit and I do this by comparing these changes to other periods, but essentially the numbers speak for themselves.

I just wanted to make clear that, except for the rarely useful E Indicator, the SG’s are all about numbers. The E Indicator is purely visual but it only comes into play every once in a while and it is of no use right now.

* * * *

My interpretation of the COT Report

I’ve been watching the S&P large contract commercial hedgers over the past four or five weeks as they build their short positions while keeping their long positions fairly flat. Meanwhile over the past three weeks, the retail E-Mini traders have decreased their short positions while increasing their long positions. The E-Mini retailers are still decidedly net short but they are obviously getting religion on the long side.

What I think is going to happen here, if it hasn’t already started to happen, is that the commercials will start to sell their long side contracts to lock in gains. This will push the market down and then the E-Mini crowd, which may be all in, will start scrambling to limit losses. Thus, selling will beget selling with the potential for sending the market much lower.

This is pure conjecture on my part but since both sides will benefit either way, I say why not? Alex Roslin is going bearish the $SPX on Monday and he certainly knows more about the futures than I will ever pretend to.

* * * *

Lowry’s Data

Lowry’s is showing that their Buying Pressure Index has fallen this week from 128 to 114 while their Selling Pressure Index has climbed a little from 814 to 822.

That’s the lowest Buying Pressure Index reading since the week ending 8/28/2009.

* * * *

Sectors

$CYC:

The Cyclicals Index is holding up fairly well, so far. Of the 30 stocks in that index, only 10 are below their 20MA’s with 5 of those below their 50MA’s. AA hasn’t quite filled its earnings gap but it is getting close.

$TRAN:

The Transportation Index is not looking so hot. Of the 20 stocks in the $TRAN, 14 are below their 20MA’s and 12 of those are below their 50MA’s. I’m not sure what happened to the airline stocks, AMR, CAL, JBLU, & LUV, but they are all below their 50MA’s. I do know what happened to the railroad stocks, and you can check their progress here. Be sure to scroll all the way down to the bottom of the page to look at shipments of lumber and crushed stone.

$SOX:

Of the 18 stocks in the $SOX Index, 14 are below their 20MA’s and 9 of those are below their 50MA’s. This key index used to be so important in determining overall Nasdaq strength, but not anymore. SNDK, which was loved to death on its great earnings report, has already filled the gap from that day.

XLF:

Of the 25 heaviest weighted stocks in the 79-stock index that the XLF tracks, 11 are below their 20MA’s and 9 of these below their 50MA’s. JPM makes up about 12% of this index and JPM does appear to be under pressure and could easily drop below its 20MA. This would not be good for the XLF which closed on Friday 0.02cents above its 20MA.

* * * *

Add all this together, the COT Report, the low Lowry’s Buying Pressure #, trouble in the $TRAN, the $SOX, potential trouble in the financials, and SG’s that say that downside momentum is building, and you have a situation that says that this little pull back will most likely continue.

However, I am currently 100% cash as I would need some kind of downside confirmation before attempting to short any particular sector. It may turn out that before I really see an edge on the downside, the downside will be over and I’ll just go in on the long side instead.

Have a good weekend.

5:30pm

The market once again shows its mean side and I’m pretty tired of sounding like a broken record. Since I started getting really worried about this rally last Friday, the $SPX has only dropped 8pts, on a closing basis, and the $INDU is only down 21pts. So what’s the big deal? Look at the $TRAN, down more than 200pts since then thanks in part to disappointing earnings releases from CNI and now BNI. It was the $TRAN that signaled the last minor correction. The shippers got hit today, too. DSX, ESEA, EGLE, to name a few. Fertilizers, which have been pumped to the moon in the last several days, gave back a large part of those gains, especially AGU, but CF, POT, & MOS didn’t have such a great day, either.

The financial sector appears to have topped, and it did so on Wednesday, October 14th with, I think, GS’s earnings. All the biggies, JPM, GS, BAC, WFC, are under a lot of pressure and the XLF is already down about 4% since then. The $BKX is down even more, about 5.7%. This market cannot survive without the financials being front and center.

The $CYC, another very important index, at least to me, was down 1.5% today. The $SOX was down 3.2%, and the $RUT was down 2%. If it hadn’t been for MSFT’s and AMZN’s stellar reports, where might the sell-off have ended? And I wonder how long it’s going to take before the ether wears off and all those people who paid over $100 for AMZN come out of their daze and decide they better take profits before some other fool does.

We’ve had two distribution days this week: Wednesday & today. Based on what I expect to be some pretty serious signs of negative strength for the SG’s tonight, I think that we may get another major distribution day again next week.

But we’ll see. I still think there’s a chance we’ll go down and/or sideways for as many days as we came up off the October 2nd low. We may get a pull back more along the lines of the pull back that started in late June rather than the shorter term pull backs we’ve been getting since then.

I will up date the SG’s a bit later but I expect that I’ll be replacing ‘weakening’ with ’strengthening’ is each status line.
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7:15pm

Negative strength continues to increase.

SG status for the $SPX:

Strengthening, confirmed, Phase IV sell signal.

The D Indicator has now hit bottom and should stay at this absolute low level until weakness wanes and strength comes into the market.
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SG status for the $COMPQ:

Strengthening, confirmed, Phase IV sell signal.

The D Indicator has plummeted out of minor bullish territory two days ago all the way to its absolute lowest reading.

Interesting that since last Friday, the $COMPQ is only down 2pts.
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News that Carl Icahn has left YHOO’s board appears to be having a negative impact on the stock.

4:20pm

I need a sign of strength. You would think it would happen easily considering the rally today, but none of the rallies off the 10/2 bottom ever produced a sign of strength. It took the entire day for the $TRAN to be able to tack on 1.75pts. For the first time in I don’t know how long AAPL did not participate in the rally.

But none of this important as long as the trend is up. As we’ve seen in the past, the market can go up even while it’s weak.

They sure seem to love AMZN, AXP, & COF after the bell.

I did get out of DRV early in the session but I did give back quite a bit of profit. If I get a sign of strength, then I’ll look to get into a long position in the AH.
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5:45pm

Nothing has changed. Each of the four indicators had down ticks today. The down ticks in the most sensitive A Indicators for the $SPX and the $COMPQ were not as powerful today as they were yesterday, but the SG still produced down ticks in all indicators.

The D Indicator for the $COMPQ, which was still in bullish territory yesterday, dropped out of bullish territory today.

Based on the SG’s, this rally must be eyed cautiously, but it remains a rally, never the less. I think it’s going to be very simple. If the $SPX can get above and close above yesterday’s high of 1101.36 before it drops below or closes below today’s low of 1074.31, then the $SPX just might be setting up for another rally leg. On the other hand, should the $SPX go the other way, then this pull back may continue.

From the look of the AH markets, it appears in all likelihood that the rally is about to start another leg up.

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Current SG status for the $SPX:

Weakening, confirmed, Phase IV sell signal.
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Current SG status for the $COMPQ:

Weakening, confirmed, Phase IV sell signal.
:

Vi este video hace unos dias… y me dio mucha risa:

“…here and there, out and around, round and about, hither and fither, to and frow, back and forth, up and down, in and out, over and under, hippity hoppity, round the corner, over the river n’ through the woods, lickity split, clocking the jizz lmao, grinding the axe up to no good, licking the bun, good and plenty, lolly gagging around, making the rounds, painting the town red, packing the load, hugging a tree, skinning the dog, skip to my loo, sewing my oaths, passing the stone, shooting the breeze, jumping the fence, humping the horse, dancing a jig, zippin the sound, flexing the pants, roobin my do, cracking the pea, licking the chicken, pinching the penny, dosido SHUT UP!”

5:55pm

Every indicator dropped today for each of the SG’s. The SG for $COMPQ suffered more damage than the SG for the $SPX.
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Current status for the $SPX:

Confirmed, Phase IV sell signal.
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Current status for the $COMPQ:

Partially confirmed, Phase III sell signal.

The D Indicator for the $COMPQ is still in bullish territory. Unless there is a mega rally tomorrow, this indicator should drop back into bearish territory and then the SG for the $COMPQ will go to a fully confirmed sell.

Many, if not all, of the financial ETF’s and sectors closed out the session below their lows from last week. $RLX and the $RUT suffered the same fate. Of the major sectors, the $TRAN took the biggest hit but the $SOX didn’t hold up all that well, either. There were slight increases in volume for the $SPX, $INDU, & the $NYA, but the $COMPQ and the IWM saw some fairly substantial increases in volume.

The pull back that I’ve been expecting since last week is now here. I don’t know how long it will last or how far it will drop. The SG’s had increased signs of negative strength today and once this starts in earnest it usually goes on for a few days.

I am long DRV from yesterday and I have to tell you if I didn’t have the SG, I would have bailed early in the session. And look at TZA. I had that sucker at $11.01.

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