Market Clues
News from Market Clues
 Add Market Clues Blog to My Yahoo!Links: MyClues Home Page Thermopower, a breakthrough alternative energy, carbon-free and completely clean RSS Feed Market Clues Subscription Information Page Time & Cycles TFNN - Tom O'Brien T Theory - Terry Laundry Elliott Wave International's Market Report My Yahoo! Google News "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around [the banks], will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." "I place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt." --Thomas Jefferson
"I sincerely believe, with you, that banking establishments are more
dangerous than standing armies; and that the principle of spending money to be
paid by posterity, under the name of funding, is but swindling futurity on a large scale."
|
|
| Sign up now for a 3-month free trial to Market Clues! Just click the PayPal button below to start your subscription with a three-month free trial period. |
Thursday, March 29, 2007
Bullish Divergence
The stock market rallied Thursday as the smart money's campaign to shake shares from weak hands appears to have come to a close. After retesting prior lows, it became clear that the sellers had given up. Helping the recovery was lagging news of a strong economy with falling inflation, something that the Fed is forecasting for this year. At the same time, oil prices were strong, something which confirms economic strength and not weakness as the media is wont to do.
The days results were as follows:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.39% | +48.39 |
| DIAMONDS TRUST SER 1 (DIA) | +0.24% | +30.00 |
| Ultra Dow30 ProShares (DDM) | +0.45% | +55.39 |
| UltraShort Dow30 ProShares (DXD) | -0.61% | -74.88 |
| S&P 500 (index) | +0.37% | +46.00 |
| S& P DEP RECEIPTS (SPY) | +0.11% | +13.01 |
| Ultra S&P500 ProShares (SSO) | +0.18% | +21.68 |
| UltraShort S&P500 ProShares (SDS) | -0.14% | -16.84 |
| Russell 2K (index) | +0.19% | +23.30 |
| ISHARE RUS 2000 INDX (IWM) | -0.05% | -6.21 |
| Ultra Russell 2000 ProShares (UWM) | -0.07% | -8.58 |
| UltraShort Russell 2000 ProShares (TWM) | -0.56% | -68.53 |
| NASDAQ-100 (index) | +0.07% | +8.20 |
| NASDAQ 100 TR SER I (QQQQ) | +0.11% | +14.13 |
| Ultra QQQ ProShares (QLD) | -0.12% | -15.22 |
| UltraShort QQQ ProShares (QID) | +0.15% | +18.29 |
| S&P MidCap 400 (index) | +0.00% | +0.15 |
| ISHARE SP MC 400 INX (IJH) | -0.20% | -24.76 |
| Ultra MC400 ProShares (MVV) | -0.69% | -84.42 |
| UltraShort MC400 ProShares (MZZ) | +0.33% | +41.18 |
| Amex Gold (index) | -0.52% | -63.84 |
| MKT VECT GOLD MNRS (GDX) | -0.48% | -58.96 |
| Semiconductor Sector (index) | -0.94% | -115.37 |
| Ultra Semiconductors ProShares (USD) | -1.50% | -183.97 |
| UltraShort Semiconductors ProShares (SSG) | +1.70% | +208.51 |
One note of caution was the reversal of leadership as the blue chips led the broad market, rather than the other way 'round. This is not bullish for the market and must be reversed on Friday to maintain the up trend in the near term.
Also, note the tracking errors exhibited by the ProShare ETFs, which diverged markedly from their underlying benchmarks. This is a serious drawback to short term traders, who may find to their dismay this behavior is typical of ETFs, but not to futures.
Today, for subscribers, we discuss the probable direction of oil prices and their effect upon the stock market. Just follow the Notes link below for that discussion.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Wednesday, March 28, 2007
Midpoint of the Range
The market moved down to the midpoint of its month-long trading range on Wednesday, where it made a stand:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -0.78% | -96.93 |
| DIAMONDS TRUST SER 1 (DIA) | -0.72% | -89.06 |
| Ultra Dow30 ProShares (DDM) | -1.25% | -154.68 |
| UltraShort Dow30 ProShares (DXD) | +1.62% | +200.23 |
| S&P 500 (index) | -0.80% | -98.75 |
| S& P DEP RECEIPTS (SPY) | -0.73% | -90.25 |
| Ultra S&P500 ProShares (SSO) | -1.47% | -182.29 |
| UltraShort S&P500 ProShares (SDS) | +1.63% | +202.63 |
| Russell 2K (index) | -0.59% | -72.81 |
| ISHARE RUS 2000 INDX (IWM) | -0.51% | -63.83 |
| Ultra Russell 2000 ProShares (UWM) | -0.90% | -111.46 |
| UltraShort Russell 2000 ProShares (TWM) | +1.68% | +208.84 |
| NASDAQ-100 (index) | -1.08% | -134.30 |
| NASDAQ 100 TR SER I (QQQQ) | -1.07% | -132.46 |
| Ultra QQQ ProShares (QLD) | -2.07% | -256.93 |
| UltraShort QQQ ProShares (QID) | +2.28% | +282.83 |
| S&P MidCap 400 (index) | -0.44% | -54.76 |
| ISHARE SP MC 400 INX (IJH) | -0.52% | -64.25 |
| Ultra MC400 ProShares (MVV) | -0.81% | -100.14 |
| UltraShort MC400 ProShares (MZZ) | +1.19% | +148.09 |
| Amex Gold (index) | +0.30% | +37.00 |
| MKT VECT GOLD MNRS (GDX) | +0.48% | +59.71 |
| Semiconductor Sector (index) | -1.35% | -167.63 |
| Ultra Semiconductors ProShares (USD) | -3.05% | -377.53 |
| UltraShort Semiconductors ProShares (SSG) | +3.04% | +376.74 |
Strength was evident in some leading sectors, such as the gold mining stocks and S&P 400 MidCaps. Sentiment remains overly-bearish in the OEX option pit, while the QQQQ (NASDAQ-100 Trust) traders are modestly bullish on a rally breaking out.
This trading range may be with us for months, since the market historically has spent about two-thirds of its time simply marking time.
If the monthly seasonal is on time, it will arrive Thursday. And, with it, the prospect of a reversal for at least a few days.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Market Retests Monday Lows
Stocks retested their Monday lows Tuesday, with most indices holding above them:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -0.58% | -71.78 |
| DIAMONDS TRUST SER 1 (DIA) | -0.38% | -47.13 |
| Ultra Dow30 ProShares (DDM) | -1.40% | -174.66 |
| UltraShort Dow30 ProShares (DXD) | +0.21% | +25.76 |
| S&P 500 (index) | -0.62% | -77.11 |
| S& P DEP RECEIPTS (SPY) | -0.24% | -29.61 |
| Ultra S&P500 ProShares (SSO) | -1.28% | -159.62 |
| UltraShort S&P500 ProShares (SDS) | +0.14% | +17.37 |
| Russell 2K (index) | -0.87% | -108.20 |
| ISHARE RUS 2000 INDX (IWM) | -0.49% | -60.77 |
| Ultra Russell 2000 ProShares (UWM) | -1.54% | -191.88 |
| UltraShort Russell 2000 ProShares (TWM) | +1.02% | +127.70 |
| NASDAQ-100 (index) | -0.72% | -90.04 |
| NASDAQ 100 TR SER I (QQQQ) | -0.70% | -87.25 |
| Ultra QQQ ProShares (QLD) | -1.08% | -134.54 |
| UltraShort QQQ ProShares (QID) | +0.19% | +23.75 |
| S&P MidCap 400 (index) | -0.48% | -59.48 |
| ISHARE SP MC 400 INX (IJH) | -0.12% | -14.67 |
| Ultra MC400 ProShares (MVV) | -0.82% | -102.74 |
| UltraShort MC400 ProShares (MZZ) | -0.12% | -15.54 |
| Amex Gold (index) | -1.44% | -180.16 |
| MKT VECT GOLD MNRS (GDX) | -1.72% | -214.34 |
| Semiconductor Sector (index) | -0.67% | -84.12 |
| Ultra Semiconductors ProShares (USD) | -0.48% | -59.39 |
| UltraShort Semiconductors ProShares (SSG) | +0.50% | +62.28 |
Once again, after a couple of days of corrective moves, OEX options sentiment has dipped back toward the overly-bearish level. Sentiment has been very supportive of the market recently as the VIX Index indicates a great deal of fear is in the market. On Tuesday, it closed at 13.48, a level about 39% above its year low and down about 50% from its year high. This big swing in VIX keeps the crowd hedging their stock positions -- and tends to support the market into options expiration.
The media is maintaining its fixation upon the "subprime mortgage" story, in conjunction with a Congressional investigation. One congressman opined that for every situation Congress investigates, they either overreact or simply do nothing. This "tempest in a teapot", along with the lead up to the next conflagration in the Middle East (Iran), serves to build a solid Wall of Worry for the market, as well as heat up the price of oil.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Monday, March 26, 2007
End of Quarter Gyrations
Stocks dipped on "bad news" about housing, although it was a suspiciously "well-supported" dip from the looks of Money Flow -- buyers were eagerly buying the dip for whatever reason they had. As it was, the day was down in places and up in others, although not a great deal in either direction:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -0.10% | -11.94 |
| DIAMONDS TRUST SER 1 (DIA) | -0.26% | -33.03 |
| Ultra Dow30 ProShares (DDM) | -0.34% | -42.42 |
| UltraShort Dow30 ProShares (DXD) | +0.33% | +40.96 |
| S&P 500 (index) | +0.10% | +12.08 |
| S& P DEP RECEIPTS (SPY) | -0.13% | -16.54 |
| Ultra S&P500 ProShares (SSO) | +0.21% | +25.73 |
| UltraShort S&P500 ProShares (SDS) | +0.21% | +26.13 |
| Russell 2K (index) | -0.04% | -5.09 |
| ISHARE RUS 2000 INDX (IWM) | -0.27% | -34.22 |
| Ultra Russell 2000 ProShares (UWM) | -0.10% | -11.89 |
| UltraShort Russell 2000 ProShares (TWM) | +0.68% | +85.16 |
| NASDAQ-100 (index) | +0.50% | +61.99 |
| NASDAQ 100 TR SER I (QQQQ) | +0.41% | +50.92 |
| Ultra QQQ ProShares (QLD) | +0.77% | +96.51 |
| UltraShort QQQ ProShares (QID) | -0.51% | -63.86 |
| S&P MidCap 400 (index) | -0.05% | -5.83 |
| ISHARE SP MC 400 INX (IJH) | -0.74% | -91.83 |
| Ultra MC400 ProShares (MVV) | -0.54% | -66.77 |
| UltraShort MC400 ProShares (MZZ) | +0.47% | +58.05 |
| Amex Gold (index) | +0.69% | +86.24 |
| MKT VECT GOLD MNRS (GDX) | +0.78% | +97.14 |
| Semiconductor Sector (index) | -0.10% | -13.02 |
| Ultra Semiconductors ProShares (USD) | -0.73% | -91.19 |
| UltraShort Semiconductors ProShares (SSG) | +0.91% | +113.23 |
Day-traders were happy with the results. We are likely to see buyers continue to support the market on dips as the quarter winds down to Friday, at which time money managers' portfolio portraits will be taken to the benefit of their owners.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Sunday, March 25, 2007
"Buy the Dips" Unpopular, But Very Profitable
Year after year, the weak hands of the crowd are quick to sell short on bad news. And, year after year, the smart money buys the dips. Thus it is that the rich get richer and those who follow the advice of the permabears get poorer. Here's a tabular summary of last week in the stock market:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +3.15% | +380.91 |
| DIAMONDS TRUST SER 1 (DIA) | +3.01% | +363.85 |
| Ultra Dow30 ProShares (DDM) | +5.95% | +720.56 |
| UltraShort Dow30 ProShares (DXD) | -5.67% | -686.14 |
| S&P 500 (index) | +3.54% | +428.88 |
| S& P DEP RECEIPTS (SPY) | +3.51% | +424.50 |
| Ultra S&P500 ProShares (SSO) | +7.04% | +851.47 |
| UltraShort S&P500 ProShares (SDS) | -6.84% | -828.05 |
| Russell 2K (index) | +3.92% | +474.51 |
| ISHARE RUS 2000 INDX (IWM) | +3.71% | +448.85 |
| Ultra Russell 2000 ProShares (UWM) | +8.01% | +969.07 |
| UltraShort Russell 2000 ProShares (TWM) | -7.63% | -923.61 |
| NASDAQ-100 (index) | +3.00% | +362.48 |
| NASDAQ 100 TR SER I (QQQQ) | +3.01% | +364.44 |
| Ultra QQQ ProShares (QLD) | +5.64% | +682.61 |
| UltraShort QQQ ProShares (QID) | -5.63% | -681.60 |
| S&P MidCap 400 (index) | +3.86% | +466.89 |
| ISHARE SP MC 400 INX (IJH) | +3.93% | +475.84 |
| Ultra MC400 ProShares (MVV) | +8.39% | +1015.18 |
| UltraShort MC400 ProShares (MZZ) | -7.57% | -916.31 |
| Amex Gold (index) | +3.65% | +441.28 |
| MKT VECT GOLD MNRS (GDX) | +3.83% | +463.69 |
| Semiconductor Sector (index) | +1.54% | +186.63 |
| Ultra Semiconductors ProShares (USD) | +3.19% | +386.40 |
| UltraShort Semiconductors ProShares (SSG) | -2.98% | -360.11 |
Last week, the market rocketed back up, erasing virtually all of the losses from the Yen-carry, subprime, monster-behind-the-door bad news campaign concocted by those whose dour outlook exceeds Dickens' Scrooge. That the permabears' influence is still so large on the public psyche is amazing when you think about all of the opportunities the public has lost to make money in the stock market over the years. The most influential permabear is still pounding the table to get anyone who will listen that the world is coming to an end Monday morning. Barnum's observation about a sucker born every minute still rings true today. Human nature is hard-wired to expect the most unlikely outcome -- disaster -- instead of the most likely outcome, which is a continuation of the overall trend. Why else would the Chicken Littles be so successful in being wrong all the time?
But, if you missed the rally because you sold and "forgot" to repurchase, don't feel bad. Like the bus, another will come along if you only have the patience to wait for it. Just be sure to tune out the drone of the always-wrong permabears and be sure to catch it.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Thursday, March 22, 2007
Consolidating the Fed Rally
The stock market spent Thursday resting after sprinting higher on Wednesday afternoon. That it did not give back any of its gains is a sign of great underlying strength in this uptrend. Consolidation theory says that this pattern is generally followed very quickly by new highs.
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.11% | +13.62 |
| DIAMONDS TRUST SER 1 (DIA) | +0.13% | +16.02 |
| Ultra Dow30 ProShares (DDM) | +0.34% | +42.55 |
| UltraShort Dow30 ProShares (DXD) | -0.41% | -51.33 |
| S&P 500 (index) | -0.03% | -4.34 |
| S& P DEP RECEIPTS (SPY) | -0.08% | -9.56 |
| Ultra S&P500 ProShares (SSO) | -0.05% | -5.70 |
| UltraShort S&P500 ProShares (SDS) | -0.36% | -45.35 |
| Russell 2K (index) | +0.06% | +8.02 |
| ISHARE RUS 2000 INDX (IWM) | -0.09% | -10.85 |
| Ultra Russell 2000 ProShares (UWM) | +0.11% | +13.61 |
| UltraShort Russell 2000 ProShares (TWM) | -0.09% | -11.27 |
| NASDAQ-100 (index) | -0.37% | -45.48 |
| NASDAQ 100 TR SER I (QQQQ) | -0.36% | -44.84 |
| Ultra QQQ ProShares (QLD) | -0.60% | -74.09 |
| UltraShort QQQ ProShares (QID) | +0.79% | +97.94 |
| S&P MidCap 400 (index) | +0.23% | +28.21 |
| ISHARE SP MC 400 INX (IJH) | +0.41% | +51.16 |
| Ultra MC400 ProShares (MVV) | +0.65% | +80.38 |
| UltraShort MC400 ProShares (MZZ) | -0.04% | -4.42 |
| Amex Gold (index) | -0.31% | -39.04 |
| MKT VECT GOLD MNRS (GDX) | -0.35% | -43.45 |
| Semiconductor Sector (index) | -1.28% | -159.71 |
| Ultra Semiconductors ProShares (USD) | -1.60% | -199.02 |
| UltraShort Semiconductors ProShares (SSG) | +1.45% | +180.14 |
Yet, the OEX speculators, always quick to call a top, were heavily buying puts again on Thursday, which just confirms the outlook for the market: Maximum Pain for bears.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Wednesday, March 21, 2007
Federal Reserve Meets, Lifts Market Out of Ditch
The Federal Reserve's Open Market Committee met on Tuesday and Wednesday, then released this statement at 2:15 pm EDT:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.
Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
The Fed's statement immediately set off strong buying, goring the bears mightily. They had been big put-buyers over the last several weeks. By the close, the market had retraced all of its February and March losses greatly diminished the size of the bears' trading accounts. This is yet another example of how futile it is to be bearish in the face of a strong uptrend.
Here are the specifcs of the day's results:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +1.30% | +159.42 |
| DIAMONDS TRUST SER 1 (DIA) | +1.20% | +147.07 |
| Ultra Dow30 ProShares (DDM) | +2.45% | +301.25 |
| UltraShort Dow30 ProShares (DXD) | -2.43% | -298.71 |
| S&P 500 (index) | +1.71% | +209.89 |
| S& P DEP RECEIPTS (SPY) | +1.65% | +202.23 |
| Ultra S&P500 ProShares (SSO) | +3.30% | +405.53 |
| UltraShort S&P500 ProShares (SDS) | -3.01% | -370.11 |
| Russell 2K (index) | +1.70% | +208.88 |
| ISHARE RUS 2000 INDX (IWM) | +1.90% | +233.79 |
| Ultra Russell 2000 ProShares (UWM) | +3.51% | +431.04 |
| UltraShort Russell 2000 ProShares (TWM) | -3.69% | -453.73 |
| NASDAQ-100 (index) | +2.21% | +271.87 |
| NASDAQ 100 TR SER I (QQQQ) | +1.93% | +236.85 |
| Ultra QQQ ProShares (QLD) | +3.70% | +455.11 |
| UltraShort QQQ ProShares (QID) | -3.89% | -478.20 |
| S&P MidCap 400 (index) | +1.43% | +175.94 |
| ISHARE SP MC 400 INX (IJH) | +1.42% | +174.14 |
| Ultra MC400 ProShares (MVV) | +2.98% | +366.26 |
| UltraShort MC400 ProShares (MZZ) | -3.11% | -382.62 |
| Amex Gold (index) | +2.52% | +309.18 |
| MKT VECT GOLD MNRS (GDX) | +2.27% | +278.85 |
| Semiconductor Sector (index) | +1.86% | +228.04 |
| Ultra Semiconductors ProShares (USD) | +3.32% | +407.79 |
| UltraShort Semiconductors ProShares (SSG) | -3.68% | -452.20 |
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Tuesday, March 20, 2007
Market Marches Valiantly Higher
It may not have been an impressive rally, but the market did continue to rally Tuesday on moderate breadth (2.36:1 advancers to decliners). NYSE new 52-week highs improved to 135 versus only 10 new lows. Even though a Federal Open Market Committee meeting started Tuesday which may result in news-driven volatility on Wednesday, the advance occured in the face of a stronger Japanese Yen, something which heretofore would have led to a triple-digit loss for the Dow. This was a market which was bound and determined to rise:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.51% | +61.93 |
| DIAMONDS TRUST SER 1 (DIA) | +0.44% | +53.99 |
| Ultra Dow30 ProShares (DDM) | +1.01% | +123.57 |
| UltraShort Dow30 ProShares (DXD) | -0.95% | -115.72 |
| S&P 500 (index) | +0.63% | +77.43 |
| S& P DEP RECEIPTS (SPY) | +0.55% | +67.15 |
| Ultra S&P500 ProShares (SSO) | +1.16% | +141.91 |
| UltraShort S&P500 ProShares (SDS) | -1.16% | -142.33 |
| Russell 2K (index) | +0.86% | +105.04 |
| ISHARE RUS 2000 INDX (IWM) | +0.75% | +92.18 |
| Ultra Russell 2000 ProShares (UWM) | +1.73% | +211.10 |
| UltraShort Russell 2000 ProShares (TWM) | -1.38% | -168.27 |
| NASDAQ-100 (index) | +0.44% | +53.92 |
| NASDAQ 100 TR SER I (QQQQ) | +0.72% | +87.59 |
| Ultra QQQ ProShares (QLD) | +1.34% | +163.67 |
| UltraShort QQQ ProShares (QID) | -1.24% | -151.44 |
| S&P MidCap 400 (index) | +0.83% | +101.62 |
| ISHARE SP MC 400 INX (IJH) | +0.84% | +102.78 |
| Ultra MC400 ProShares (MVV) | +1.63% | +199.20 |
| UltraShort MC400 ProShares (MZZ) | -1.64% | -200.67 |
| Amex Gold (index) | +0.66% | +80.65 |
| MKT VECT GOLD MNRS (GDX) | +0.95% | +116.44 |
| Semiconductor Sector (index) | +0.95% | +116.74 |
| Ultra Semiconductors ProShares (USD) | +1.04% | +127.55 |
| UltraShort Semiconductors ProShares (SSG) | -0.97% | -118.14 |
OEX option operators continued to add to bearish bets that the market will soon be heading much lower, while NASDAQ-100 Trust operators had confidence that would not be so for some time to come. Usually, the Trust operators are the smart money when it comes to options.
Despite the positives, prior corrections have generally shown multiple retests of the lows and this one is unlikely to continue advancing monotonically higher. There have been exceptions, but they are very few indeed in all of market history.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Monday, March 19, 2007
Three Straight Weeks of Abject Fear
In the last three weeks, the stock market, as measured by the S&P 100 Index (OEX), has been virtually unchanged, albeit accompanied by an increase in intraday volatility. On each and every one of those 15 trading days, speculators transacted a greater number of dollars in puts than in calls. That's the longest run of abject, day after day, bearishness that we could find in the current decade. Clearly, something has spooked the public and spooked it extremely well. It's especially amazing when you consider that the market was making all-time highs just a month ago -- and, is only down a few percentage points from those very recent highs.
On Monday, the slide into Quad Witching Friday last week was reversed and the market gained back its losses on excellent breadth (a 3:1 Advance:Decline Ratio, a 5:1 Advancing:Declining Volume Ratio, only a handful of new lows and about a hundred new highs -- all signifying a very healthy market):
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +1.04% | +126.07 |
| DIAMONDS TRUST SER 1 (DIA) | +1.02% | +122.95 |
| Ultra Dow30 ProShares (DDM) | +1.80% | +217.88 |
| UltraShort Dow30 ProShares (DXD) | -1.87% | -226.74 |
| S&P 500 (index) | +1.09% | +131.82 |
| S& P DEP RECEIPTS (SPY) | +1.21% | +145.87 |
| Ultra S&P500 ProShares (SSO) | +2.45% | +296.68 |
| UltraShort S&P500 ProShares (SDS) | -2.26% | -273.39 |
| Russell 2K (index) | +1.03% | +125.08 |
| ISHARE RUS 2000 INDX (IWM) | +1.14% | +137.63 |
| Ultra Russell 2000 ProShares (UWM) | +2.13% | +257.83 |
| UltraShort Russell 2000 ProShares (TWM) | -2.31% | -279.62 |
| NASDAQ-100 (index) | +1.01% | +122.47 |
| NASDAQ 100 TR SER I (QQQQ) | +1.03% | +124.31 |
| Ultra QQQ ProShares (QLD) | +2.02% | +244.01 |
| UltraShort QQQ ProShares (QID) | -1.82% | -220.71 |
| S&P MidCap 400 (index) | +1.05% | +127.48 |
| ISHARE SP MC 400 INX (IJH) | +1.07% | +129.24 |
| Ultra MC400 ProShares (MVV) | +2.23% | +270.22 |
| UltraShort MC400 ProShares (MZZ) | -2.28% | -276.09 |
| Amex Gold (index) | +1.03% | +124.61 |
| MKT VECT GOLD MNRS (GDX) | +1.28% | +154.56 |
| Semiconductor Sector (index) | -0.60% | -72.04 |
| Ultra Semiconductors ProShares (USD) | -0.80% | -96.60 |
| UltraShort Semiconductors ProShares (SSG) | +1.22% | +147.09 |
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Saturday, March 17, 2007
Fear Equals Buying Opportunity
Our option fear gauges continue to show extremes present despite last week's bounce. In fact, the level of fear in the market at this time is similar to levels it has reached at significant bottoms in the past.
The stock market retested its correction lows last week and soared away from them with flying colors, proving once again that, over a long time horizon, it's the bulls who make money while the bears end up living under bridges. Yes, over the short run, the attraction of a quick profit on a volatile dip sets the bears' eyes gleaming with greed. But, over the long run, the bulls get to enjoy the fact that dips are the stock market equivalent of a clearance sale, allowing them to buy at a discount for the longer term uptrend.
No, this doesn't mean the correction is over. This might be the halfway point, or less. But, that doesn't make us bearish at all (after all, we warned of a coming correction, and were quick to liquidate to build up cash reserves knowing this correction was coming). It simply says we have substantial and immediate profit opportunities ahead to put that cash to work and buy while stocks are on sale. These dips are buying opportunities in a long term uptrend.
Friday's market continued to hobble along under the grip of Quadruple Witching Day, not able to find a real trend to hang its hat on:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -0.49% | -59.58 |
| DIAMONDS TRUST SER 1 (DIA) | -0.61% | -73.88 |
| Ultra Dow30 ProShares (DDM) | -0.80% | -97.74 |
| UltraShort Dow30 ProShares (DXD) | +0.89% | +107.94 |
| S&P 500 (index) | -0.38% | -46.55 |
| S& P DEP RECEIPTS (SPY) | -0.67% | -81.95 |
| Ultra S&P500 ProShares (SSO) | -0.85% | -103.46 |
| UltraShort S&P500 ProShares (SDS) | +0.82% | +99.64 |
| Russell 2K (index) | -0.61% | -74.18 |
| ISHARE RUS 2000 INDX (IWM) | -0.51% | -62.54 |
| Ultra Russell 2000 ProShares (UWM) | -1.31% | -158.72 |
| UltraShort Russell 2000 ProShares (TWM) | +1.12% | +136.05 |
| NASDAQ-100 (index) | -0.15% | -18.54 |
| NASDAQ 100 TR SER I (QQQQ) | -0.14% | -17.01 |
| Ultra QQQ ProShares (QLD) | -0.37% | -44.84 |
| UltraShort QQQ ProShares (QID) | +0.22% | +26.15 |
| S&P MidCap 400 (index) | -0.55% | -66.78 |
| ISHARE SP MC 400 INX (IJH) | -0.56% | -67.51 |
| Ultra MC400 ProShares (MVV) | -1.31% | -159.90 |
| UltraShort MC400 ProShares (MZZ) | +1.24% | +150.62 |
| Amex Gold (index) | +0.68% | +82.76 |
| MKT VECT GOLD MNRS (GDX) | +0.31% | +38.16 |
| Semiconductor Sector (index) | -0.49% | -59.22 |
| Ultra Semiconductors ProShares (USD) | -1.23% | -149.16 |
| UltraShort Semiconductors ProShares (SSG) | +1.02% | +123.57 |
It won't be too long before the market is hitting new highs. There's plenty of solid evidence that says that's the likely course for the market, reserved for subscribers at the Notes link below.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Thursday, March 15, 2007
Levitation Day
The market was levitated higher on Thursday as option sellers bought back virtually worthless puts. This is a monthly exercise carried out in the week before the third Friday of the month and delayed an anticipated retest of the recent lows.
Although not all puts had yet to reach the worthless state by close of trading Thursday, it's safe to say that the majority did so and were hastily retired as the opportunity to do so presented itself. Indeed, the QQQ reached the magical pain point for option buyers, then promptly slipped beneath the waves. Although the NASDAQ-100 Index itself showed a gain for the day, this ETF which supposedly tracks the index, did not. The difference: profits for option manipulators, or more politely, "tracking error". OEX and other, less manipulable indices, didn't quite make it there. Here are the day's results:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.22% | +26.28 |
| DIAMONDS TRUST SER 1 (DIA) | +0.11% | +12.96 |
| Ultra Dow30 ProShares (DDM) | +0.17% | +20.16 |
| UltraShort Dow30 ProShares (DXD) | -0.03% | -3.99 |
| S&P 500 (index) | +0.37% | +44.70 |
| S& P DEP RECEIPTS (SPY) | +0.14% | +16.55 |
| Ultra S&P500 ProShares (SSO) | +0.46% | +56.30 |
| UltraShort S&P500 ProShares (SDS) | -0.46% | -55.42 |
| Russell 2K (index) | +1.02% | +123.42 |
| ISHARE RUS 2000 INDX (IWM) | +0.67% | +81.67 |
| Ultra Russell 2000 ProShares (UWM) | +1.59% | +193.08 |
| UltraShort Russell 2000 ProShares (TWM) | -1.37% | -166.09 |
| NASDAQ-100 (index) | +0.08% | +9.54 |
| NASDAQ 100 TR SER I (QQQQ) | -0.23% | -28.22 |
| Ultra QQQ ProShares (QLD) | -0.28% | -33.85 |
| UltraShort QQQ ProShares (QID) | +0.52% | +63.39 |
| S&P MidCap 400 (index) | +0.68% | +83.02 |
| ISHARE SP MC 400 INX (IJH) | +0.67% | +81.09 |
| Ultra MC400 ProShares (MVV) | +1.33% | +161.68 |
| UltraShort MC400 ProShares (MZZ) | -1.26% | -152.42 |
| Amex Gold (index) | +1.99% | +241.97 |
| MKT VECT GOLD MNRS (GDX) | +2.36% | +285.80 |
| Semiconductor Sector (index) | +0.13% | +15.88 |
| Ultra Semiconductors ProShares (USD) | +0.45% | +55.18 |
| UltraShort Semiconductors ProShares (SSG) | -0.28% | -34.16 |
Helping the market, too, was bargain-hunting in stocks which had been sold down earlier in the week on a wholesale (basket trading) basis. But, with the Yen rebounding during Friday's session in Tokyo, it's clear that the Sumo wrestler is back for a rematch with the US market. And, our advice for investors not to chase the rally proved very sound.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Wednesday, March 14, 2007
A Stormy Day, But One Which Ended Well
Wednesday threatened to be a repeat of Tuesday's down market, but that Sumo wrestler from Tokyo named Yen apparently decided to give up and go home early.
The rising Yen pressured stocks lower in the morning. And, traders also blamed Daylight Savings Time for some of the plunge. It seems that because the US went on DST three weeks earlier than the Continent this year, it meant that Europe stays open an hour later than normal and close-of-business there falls right in the middle of the New York lunch break -- with the result that fewer buyers were on hand to absorb the onslaught of sell orders from European investors who did not wish to hold stock positions overnight.
Just when the stock market was retesting last week's lows, though, the Yen suddenly reversed course and lost all of its gains for the day. That event bolstered confidence and the market came right back, erasing a 136-point deficit in the Industrials and surging higher to close with a gain of 57 points:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.48% | +57.44 |
| DIAMONDS TRUST SER 1 (DIA) | +0.53% | +63.86 |
| Ultra Dow30 ProShares (DDM) | +1.03% | +124.74 |
| UltraShort Dow30 ProShares (DXD) | -1.30% | -156.70 |
| S&P 500 (index) | +0.67% | +80.80 |
| S& P DEP RECEIPTS (SPY) | +0.75% | +89.97 |
| Ultra S&P500 ProShares (SSO) | +1.51% | +182.63 |
| UltraShort S&P500 ProShares (SDS) | -1.40% | -168.99 |
| Russell 2K (index) | +0.85% | +102.68 |
| ISHARE RUS 2000 INDX (IWM) | +1.13% | +135.95 |
| Ultra Russell 2000 ProShares (UWM) | +2.29% | +276.65 |
| UltraShort Russell 2000 ProShares (TWM) | -2.33% | -281.72 |
| NASDAQ-100 (index) | +1.20% | +144.91 |
| NASDAQ 100 TR SER I (QQQQ) | +1.46% | +176.71 |
| Ultra QQQ ProShares (QLD) | +2.78% | +335.22 |
| UltraShort QQQ ProShares (QID) | -3.01% | -362.93 |
| S&P MidCap 400 (index) | +0.41% | +49.07 |
| ISHARE SP MC 400 INX (IJH) | +0.32% | +38.27 |
| Ultra MC400 ProShares (MVV) | +0.73% | +88.55 |
| UltraShort MC400 ProShares (MZZ) | -0.77% | -93.09 |
| Amex Gold (index) | +0.71% | +86.34 |
| MKT VECT GOLD MNRS (GDX) | +0.57% | +68.26 |
| Semiconductor Sector (index) | +0.50% | +60.21 |
| Ultra Semiconductors ProShares (USD) | +0.01% | +1.77 |
| UltraShort Semiconductors ProShares (SSG) | -0.48% | -57.51 |
With this kind of volatility, major changes are happening in the stock market. Where there is change, there is opportunity!
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Stronger Yen = Weaker Stocks
The stock market followed the script we had laid out for it almost perfectly on Tuesday. The retest of recent lows we had been expecting came in right on time -- with a little help from Japanese exchange rates to "grease the skids" to the downside.
What goes up -- Japanese Yen -- must push US stocks down. That was never more true than the past few weeks in the markets. On Tuesday, the Japanese Yen reversed to the upside after falling for the last week, during which time the US stock market breathed a sigh of relief and worked its way higher. But, that 900-pound Sumo wrestler from Tokyo beat the US stock market to a pulp on Tuesday, as the following one-day results illustrate:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -1.97% | -242.66 |
| DIAMONDS TRUST SER 1 (DIA) | -1.73% | -213.06 |
| Ultra Dow30 ProShares (DDM) | -3.55% | -437.21 |
| UltraShort Dow30 ProShares (DXD) | +3.47% | +427.99 |
| S&P 500 (index) | -2.04% | -250.91 |
| S& P DEP RECEIPTS (SPY) | -1.94% | -239.40 |
| Ultra S&P500 ProShares (SSO) | -4.08% | -502.41 |
| UltraShort S&P500 ProShares (SDS) | +3.70% | +456.17 |
| Russell 2K (index) | -2.54% | -312.73 |
| ISHARE RUS 2000 INDX (IWM) | -2.56% | -315.82 |
| Ultra Russell 2000 ProShares (UWM) | -5.11% | -628.97 |
| UltraShort Russell 2000 ProShares (TWM) | +5.33% | +656.73 |
| NASDAQ-100 (index) | -1.93% | -238.04 |
| NASDAQ 100 TR SER I (QQQQ) | -1.94% | -239.47 |
| Ultra QQQ ProShares (QLD) | -3.79% | -466.49 |
| UltraShort QQQ ProShares (QID) | +3.96% | +487.82 |
| S&P MidCap 400 (index) | -1.99% | -245.30 |
| ISHARE SP MC 400 INX (IJH) | -1.81% | -222.63 |
| Ultra MC400 ProShares (MVV) | -3.87% | -476.85 |
| UltraShort MC400 ProShares (MZZ) | +3.87% | +476.38 |
| Amex Gold (index) | -3.73% | -459.49 |
| MKT VECT GOLD MNRS (GDX) | -3.88% | -478.08 |
| Semiconductor Sector (index) | -1.66% | -204.84 |
| Ultra Semiconductors ProShares (USD) | -3.81% | -469.38 |
| UltraShort Semiconductors ProShares (SSG) | +4.17% | +514.10 |
Putting everything on a similar scale, the rise in the Yen amounted to only 113 Dow Industrials points, but the currency packed a killer punch for stocks.
And, if you think being invested in Japanese stocks might be a safe haven, in a word: don't. The Nikkei 225 Index is off 3% (the equivalent of about 370 Dow points) and is retesting its prior low as well.
The only market which benefitted from the rising Yen was our bond market, where prices rose back to retest their prior highs on a "flight to quality" move. The rise in bond prices is equivalent to a Fed rate cut. In fact, it's even more stimulative to the mortgage market than the Fed because mortgage rates are set by the bond market, usually the 10-Year Note rate, and not by the Fed itself.
Journalists are peppering the public with bearish stories which are typically "planted" by the big money interests in order to cause the public to worry and sell their shares. Those interests are well practiced at this financial game, allowing them to buy when the public is in a panic. You won't hear much about the "subprime mortgage" market going bad and spilling over into the economy, for example, at the top, but it will be repeated over and over in mantra-like fashion to "shake the tree" and allow the big money investors to accumulate the falling shares. That's how the rich get richer and the poor get poorer, for the public will hide in the safety of money market funds during the next rally in stocks. By the time the public jumps back in, the big money interests will be only too happy to oblige them -- by selling some of their shares which have elevated in price!
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Monday, March 12, 2007
Sleepwalking Higher
Stocks rose on Monday as expected, but it was a somnolent session indeed. Volume has been slackening on the rally after peaking on the decline early this month. This is not a great sign and suggests the possibility of a retest of the recent lows is still alive. Of course, that's also the majority opinion, so the market may have something up its sleeve to fool the masses. We will discuss that in tonight's Notes page, linked below for subscribers.
In any case, the session saw some gains:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.34% | +42.30 |
| DIAMONDS TRUST SER 1 (DIA) | +0.13% | +15.97 |
| Ultra Dow30 ProShares (DDM) | +0.31% | +38.34 |
| UltraShort Dow30 ProShares (DXD) | -0.12% | -14.41 |
| S&P 500 (index) | +0.27% | +32.82 |
| S& P DEP RECEIPTS (SPY) | +0.15% | +18.31 |
| Ultra S&P500 ProShares (SSO) | +0.41% | +49.83 |
| UltraShort S&P500 ProShares (SDS) | 0.00% | 0.00 |
| Russell 2K (index) | +0.50% | +60.98 |
| ISHARE RUS 2000 INDX (IWM) | +0.18% | +21.96 |
| Ultra Russell 2000 ProShares (UWM) | +0.60% | +74.19 |
| UltraShort Russell 2000 ProShares (TWM) | -0.29% | -35.18 |
| NASDAQ-100 (index) | +0.74% | +90.49 |
| NASDAQ 100 TR SER I (QQQQ) | +0.54% | +65.69 |
| Ultra QQQ ProShares (QLD) | +0.92% | +113.41 |
| UltraShort QQQ ProShares (QID) | -0.72% | -88.56 |
| S&P MidCap 400 (index) | +0.40% | +48.50 |
| ISHARE SP MC 400 INX (IJH) | +0.13% | +16.18 |
| Ultra MC400 ProShares (MVV) | +0.48% | +58.95 |
| UltraShort MC400 ProShares (MZZ) | -0.32% | -39.61 |
| Amex Gold (index) | +1.41% | +172.92 |
| MKT VECT GOLD MNRS (GDX) | +1.63% | +200.14 |
| Semiconductor Sector (index) | +0.89% | +109.83 |
| Ultra Semiconductors ProShares (USD) | +1.96% | +240.23 |
| UltraShort Semiconductors ProShares (SSG) | -1.96% | -240.61 |
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Saturday, March 10, 2007
Market Shrugs Off Hedge Fund Blues Last Week
The stock market's brief dip of two weeks ago has shown that, technically and fundamentally both, the market is in great shape. And, as far as sentiment is concerned, the crowd is pouring almost all its money into puts, insurance against further downside. This three-legged stool of fundamentals, technicals and sentiment has more than enough support to keep the uptrend in the stock market alive.
Fundamentally, the S&P 500 Index is estimated to have a year-end PE Ratio of 14.57, which is very low with long term interest rates below 5%, as they are now. The faster-growing S&P 400 MidCap Index is estimated to have a PE ratio of 16.68 by year-end (source: S&P Corporation).
Most bears look at the S&P 500 Index and point to the fact that it's basically been trading in a range this whole decade. However, that's only half (or less) of the story. For one thing, most other measures of the broad market -- and even the stodgy old Dow Industrials -- long ago soared well past their old high-water marks. Moreover, although the S&P 500 Index at 1402 is well below its 2000 peak of 1553, including dividends in the index puts it at 4708 at the end of February. Dividends, which represents a real return to shareholders, actually subtract from the value of the nominal index and distort the true return from it.
Technically, the selloff in late February came with little sign of weakness. There were no breadth divergences at all, which usually mark an important top. In this respect it was very similar to the May selloff last year -- and we know how quickly the market recovered from that one. The dip was a buying opportunity in an ongoing uptrend, exactly the kind of opportunity the savvy investor is always looking for. That's why we were quick to jump in and we've been rewarded (that doesn't preclude a retest of the lows, which is entirely possible and cosistent with last year's correction).
Finally, sentiment provides the third leg for the stool. Index option traders are falling all over themselves to buy put protection. As we move toward options expiration this Friday, those expensive puts are rapidly plummeting toward zero. As the price falls, the writers of those puts, who sold stock index futures short as a hedge against the short puts they created, are buying back those stock index futures and levitating the market.
Now, once the puts are bought back, that levitation pressure will ease. We might very well get another dip and another opportunity to buy on the cheap.
The only real fly in the ointment is the role hedge funds have played in the correction. When they engage in outrageous speculation with the Yen-carry trade, they are putting the entire economy at risk of a financial meltdown analogous to Chernobyl. The leverage which caused the Crash of 1929 and subsequent Depression is small potatoes compared to the leverage employed by these funds, who borrow Yen in Japan and use it to invest in non-Yen assets, in process selling the Yen short. When the Yen rallies, they lose money and have to repurchase Yen to cover their margin calls. This forces them to liquidate markets they have profits in -- and which fundamentals say are not overvalued -- putting tremendous selling pressure on them and roiling the markets. That 400-point down day in the Dow was simply a mechanical sell program which threw the babies out with the bath water so that hedge funds could cover their losing currency gamble.
Had the Yen continued to rise last week instead of fall, we might have seen the Dow continue down. Imagine waking up in the morning to find that the Dow was down 3000 points. It could happen and there's not a thing the regulators are doing to prevent it. This lack of regulation of "Hedge Funds Gone Wild" is setting the system up for a huge crash. And, don't think it's only the rich who will get hurt -- the hedge funds' biggest customers are pension funds. Yes, that's right, if you have a pension fund, it may very well be invested in an over-leveraged hedge fund.
Of course, if we do have a financial meltdown, the regulators will all testify they couldn't see it coming. They always say that. And, they said they couldn't have foreseen hijackers flying airliners into the World Trade Center, either. If you believe that, we have a bridge we'd like to sell you.
The real problem here isn't just the fact that too much leverage is being used. If it were confined to the currency arena, it would be contained. The problem here is that when a large hedge fund gets overextended and is losing billions, it is forced into non-related markets, like commodities, stocks and bonds, and a fire sale takes place, reducing the value of those markets to a degree far greater than any actual losses that hedge fund might be facing. That's because the pricing of all assets is entirely dependent upon the last sale price, no matter what the size of the transaction -- that's a law of the markets. This shock to the financial system ripples throughout, causing non-related parties to suffer huge losses, additional liquidation in unrelated markets, and so on, until the ultimate integrity of the system is compromised. These are the "fingers of instability" that John Mauldin is always warning about. And, it could certainly happen. Picking up the pieces after such a meltdown is far worse than preventing the problem before it happens.
In any case, historical market action has shown that the very best time to buy into the stock market is at the bottom of a crash. Even at the bottom of the 1929 Crash, the market gained over 46% during the next six months before turning down again. This just points up the fact that buying crashes and using a trailing sell stop is the best strategy of all for long term investors -- and beats buy-and-hold by a country mile.
Friday's market had an upward bias, as expected:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.13% | +15.62 |
| DIAMONDS TRUST SER 1 (DIA) | +0.15% | +18.97 |
| Ultra Dow30 ProShares (DDM) | +0.44% | +53.84 |
| UltraShort Dow30 ProShares (DXD) | -0.33% | -40.97 |
| S&P 500 (index) | +0.07% | +8.40 |
| S& P DEP RECEIPTS (SPY) | +0.03% | +3.48 |
| Ultra S&P500 ProShares (SSO) | +0.55% | +67.71 |
| UltraShort S&P500 ProShares (SDS) | -0.50% | -61.05 |
| Russell 2K (index) | +0.51% | +62.63 |
| ISHARE RUS 2000 INDX (IWM) | +0.32% | +39.29 |
| Ultra Russell 2000 ProShares (UWM) | +1.34% | +164.48 |
| UltraShort Russell 2000 ProShares (TWM) | -1.15% | -140.67 |
| NASDAQ-100 (index) | -0.41% | -50.32 |
| NASDAQ 100 TR SER I (QQQQ) | -0.09% | -11.41 |
| Ultra QQQ ProShares (QLD) | -0.35% | -43.29 |
| UltraShort QQQ ProShares (QID) | +0.25% | +31.03 |
| S&P MidCap 400 (index) | +0.35% | +42.69 |
| ISHARE SP MC 400 INX (IJH) | +0.28% | +33.89 |
| Ultra MC400 ProShares (MVV) | +0.69% | +84.47 |
| UltraShort MC400 ProShares (MZZ) | -0.72% | -88.88 |
| Amex Gold (index) | -0.31% | -38.47 |
| MKT VECT GOLD MNRS (GDX) | -0.83% | -102.31 |
| Semiconductor Sector (index) | +0.70% | +85.77 |
| Ultra Semiconductors ProShares (USD) | +0.81% | +99.59 |
| UltraShort Semiconductors ProShares (SSG) | -1.06% | -130.16 |
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Thursday, March 08, 2007
A Yen to Rally
The Japanese Yen was again the focus for stocks Thursday. Overnight trading saw the Yen retrace all of its gains this week and this weakness in the Yen was an all-clear signal to stock traders to rally. The US markets gapped higher and were able to hold on to most of their gains into the closing bell:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +0.56% | +68.25 |
| DIAMONDS TRUST SER 1 (DIA) | +0.66% | +79.95 |
| Ultra Dow30 ProShares (DDM) | +1.10% | +134.56 |
| UltraShort Dow30 ProShares (DXD) | -1.07% | -130.99 |
| S&P 500 (index) | +0.71% | +86.89 |
| S& P DEP RECEIPTS (SPY) | +0.85% | +103.09 |
| Ultra S&P500 ProShares (SSO) | +1.23% | +149.65 |
| UltraShort S&P500 ProShares (SDS) | -1.29% | -157.80 |
| Russell 2K (index) | +0.67% | +82.03 |
| ISHARE RUS 2000 INDX (IWM) | +1.35% | +164.74 |
| Ultra Russell 2000 ProShares (UWM) | +1.78% | +217.14 |
| UltraShort Russell 2000 ProShares (TWM) | -2.01% | -245.37 |
| NASDAQ-100 (index) | +0.91% | +111.17 |
| NASDAQ 100 TR SER I (QQQQ) | +0.68% | +82.84 |
| Ultra QQQ ProShares (QLD) | +1.86% | +227.09 |
| UltraShort QQQ ProShares (QID) | -1.72% | -210.14 |
| S&P MidCap 400 (index) | +0.73% | +88.79 |
| ISHARE SP MC 400 INX (IJH) | +1.00% | +121.35 |
| Ultra MC400 ProShares (MVV) | +1.88% | +229.74 |
| UltraShort MC400 ProShares (MZZ) | -1.77% | -216.03 |
| Amex Gold (index) | +0.08% | +10.10 |
| MKT VECT GOLD MNRS (GDX) | +0.68% | +83.22 |
| Semiconductor Sector (index) | +1.80% | +219.16 |
| Ultra Semiconductors ProShares (USD) | +2.57% | +313.84 |
| UltraShort Semiconductors ProShares (SSG) | -2.57% | -312.76 |
Thus, there is one overriding factor that is controlling the movement of stock prices right now. Although we expected to see a rally at some point Thursday, our expected retest of the lows did not occur before that rally got started. That retest is likely still out there somewhere in the future. With the Japanese fiscal year ending on March 31st, the retest appears to have been delayed until later in the month.
Thursday evening/Friday morning action in the Yen saw it continue modestly lower, thus making it appear that the stock rally would continue on Friday. Or, perhaps the stock market will stop obsessing about the Yen and start focusing on fundamentals, for the US Employment Report is due out early Friday morning in Washington. From the advance data, there's a pretty good chance the report will be weak and lead to a rise in bond prices (drop in long term interest rates, which is bullish for stocks) as traders factor in a Fed ease sooner rather than later.
The other structural factor that's supporting higher stock prices in the next few trading days is the Wall of Worry which has grown up over the last week of volatile up-and-down trading. The unwinding of these bearish bets will put upward pressure on the market as it usually does leading into options expiration on the third Friday, now just a week away.
Although put purchases continue to float the market on a sea of bearish bets, NASDAQ-100 Trust traders (QQQ) are loading their boats with calls. There, the Wall of Worry may have a small leak developing into a much larger one.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Wednesday, March 07, 2007
Employment Report for February Shows Moderate Growth
The government's Bureau of Labor Statistics (BLS) releases its February Employment Report on Friday. But, the ADP Employment Report was released on Wednesday. The ADP Report summarizes data from ADP's large database of businesses and is a much larger sample of the US private economy than the BLS'. Citing an expanded base of businesses included in the latest survey, as well as improved seasonal adjustment procedures, ADP statisticians claim that their report has a close correlation to the final government report, but may not be close to the figures initially released by BLS. Of course, investors know the government report is very inaccurate in its initial release, so the ADP report is probably a truer reflection of the current state of employment in the US.
While 100,000 new jobs were added in the service sector last month, goods-producing sectors shed 43,000 jobs, netting out new jobs at a below-average of 57,000, which compares unfavorably to the prior three-month average of 99,000 new jobs.
The report made an interesting comment about where the new jobs are being created:
"Other new detail in The ADP National Employment Report shows that employment at small and medium size businesses employing less than 500 workers grew 86,000, while employment at larger businesses declined 29,000. Over the last six months, small and medium size businesses accounted for most of the growth in private nonfarm employment."
It's no wonder that the small-cap and medium-cap stock indices' performance have been far better than the stodgy blue chips: those sectors are where most of the growth in the US economy is occuring.
Slow growth in new jobs is in line with an indicator we track which shows the current state of the economy. It's true that the economy went into a slowdown in January and February, now confirmed by the ADP Report. However, it's also true that the economy has picked up steam in the last few weeks according to the indicator we track, suggesting that once we start getting reports from March, they are going to paint a much more optimistic view of the economy.
As for stocks, they couldn't hold their magnificent gains from Tuesday and, just as we suspected, gave some of them back (although the stronger sectors put in a slight gain for the day):
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -0.12% | -15.14 |
| DIAMONDS TRUST SER 1 (DIA) | -0.05% | -6.00 |
| Ultra Dow30 ProShares (DDM) | -0.24% | -29.35 |
| UltraShort Dow30 ProShares (DXD) | +0.41% | +50.65 |
| S&P 500 (index) | -0.25% | -30.10 |
| S& P DEP RECEIPTS (SPY) | -0.10% | -12.23 |
| Ultra S&P500 ProShares (SSO) | -0.44% | -53.17 |
| UltraShort S&P500 ProShares (SDS) | +0.39% | +48.19 |
| Russell 2K (index) | -0.41% | -49.53 |
| ISHARE RUS 2000 INDX (IWM) | -0.13% | -15.84 |
| Ultra Russell 2000 ProShares (UWM) | -1.51% | -183.80 |
| UltraShort Russell 2000 ProShares (TWM) | +1.05% | +128.41 |
| NASDAQ-100 (index) | -0.40% | -49.02 |
| NASDAQ 100 TR SER I (QQQQ) | -0.40% | -48.43 |
| Ultra QQQ ProShares (QLD) | -0.92% | -111.87 |
| UltraShort QQQ ProShares (QID) | +0.91% | +111.63 |
| S&P MidCap 400 (index) | +0.22% | +26.58 |
| ISHARE SP MC 400 INX (IJH) | +0.30% | +37.15 |
| Ultra MC400 ProShares (MVV) | +0.25% | +30.14 |
| UltraShort MC400 ProShares (MZZ) | -0.36% | -44.31 |
| Amex Gold (index) | +0.01% | +1.76 |
| MKT VECT GOLD MNRS (GDX) | +0.03% | +3.21 |
| Semiconductor Sector (index) | -0.45% | -55.07 |
| Ultra Semiconductors ProShares (USD) | -1.38% | -168.38 |
| UltraShort Semiconductors ProShares (SSG) | +1.57% | +191.52 |
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Tuesday, March 06, 2007
Yen Falls, Pumps Stocks Higher
The Japanese Yen fell Tuesday, resulting in higher stock prices, as the pressure to unwind Yen-carry trades eased. The correction in the market of the last couple of weeks has been caused mainly by selling of commodity and stock positions financed by investors who borrowed Japanese Yen and sold those Yen funds in order to purchase non-Japanese securities, such as those denominated in Dollars, Pounds or Euros. This Yen-carry trade creates a short position in Yen for those investors and a rise in the value of the Yen translates into losses which must be covered, resulting in the sale of profitable positions in other commodities, such as Gold or stocks around the world.
When the Yen falls, as it did Tuesday, that pressure to sell is greatly reduced. This resulted in a powerful, planet-wide stock market rally. In the US, the results were impressive:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | +1.30% | +157.18 |
| DIAMONDS TRUST SER 1 (DIA) | +1.46% | +176.30 |
| Ultra Dow30 ProShares (DDM) | +2.77% | +333.82 |
| UltraShort Dow30 ProShares (DXD) | -3.06% | -368.40 |
| S&P 500 (index) | +1.55% | +186.70 |
| S& P DEP RECEIPTS (SPY) | +1.71% | +206.18 |
| Ultra S&P500 ProShares (SSO) | +3.45% | +416.31 |
| UltraShort S&P500 ProShares (SDS) | -3.37% | -406.02 |
| Russell 2K (index) | +2.47% | +297.72 |
| ISHARE RUS 2000 INDX (IWM) | +2.53% | +304.59 |
| Ultra Russell 2000 ProShares (UWM) | +5.62% | +677.22 |
| UltraShort Russell 2000 ProShares (TWM) | -5.74% | -691.42 |
| NASDAQ-100 (index) | +1.76% | +212.17 |
| NASDAQ 100 TR SER I (QQQQ) | +1.66% | +200.12 |
| Ultra QQQ ProShares (QLD) | +3.65% | +440.36 |
| UltraShort QQQ ProShares (QID) | -3.65% | -439.29 |
| S&P MidCap 400 (index) | +1.62% | +194.96 |
| ISHARE SP MC 400 INX (IJH) | +2.18% | +262.32 |
| Ultra MC400 ProShares (MVV) | +4.07% | +490.81 |
| UltraShort MC400 ProShares (MZZ) | -3.90% | -470.02 |
| Amex Gold (index) | +3.48% | +419.86 |
| MKT VECT GOLD MNRS (GDX) | +3.14% | +378.62 |
| Semiconductor Sector (index) | +1.66% | +200.53 |
| Ultra Semiconductors ProShares (USD) | +3.78% | +455.08 |
| UltraShort Semiconductors ProShares (SSG) | -3.62% | -436.01 |
Investors need to realize that world markets are going to be considerably more volatile in the future due to this factor. Japan is showering the world with liquidity -- borrowed funds at ½% interest rate are attractive to investors who can earn several times that rate in non-Japanese investments. This is a double-edged sword, carrying with it the volatility of the fluctuations of the value of the Yen against other currencies.
It's time to get to used to volatility which is more in line with historical norms than investors have seen in the past couple of decades. A daily fluctuation on the upside or downside of 1¼% in the Dow should be considered a normal day in the stock market, much as it has in history.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Monday, March 05, 2007
Complacency to Panic in a Week
Things certainly occur fast these days. Was it just a week ago that OEX traders were blase about the dip? Just one week later, they were heavily buying puts and expecting a crash. In the March OEX option series, put dollar volume swamped call dollar volume by more than a 3:1 ratio. If all these put buyers are able to reap a profit by expiration Friday in nine trading days, we'll be sorely surprised.
The market remains tense and sore after a rough week of correction. The early Monday morning
plunge was interrupted by a short-covering rally as stocks circled the wagons. But, afternoon
selling resumed the decline. By the end of the day, even the stronger sectors were badly
bruised:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -0.53% | -63.69 |
| DIAMONDS TRUST SER 1 (DIA) | -0.55% | -66.10 |
| Ultra Dow30 ProShares (DDM) | -1.11% | -134.00 |
| UltraShort Dow30 ProShares (DXD) | +1.89% | +228.38 |
| S&P 500 (index) | -0.94% | -113.97 |
| S& P DEP RECEIPTS (SPY) | -0.95% | -115.31 |
| Ultra S&P500 ProShares (SSO) | -1.98% | -239.31 |
| UltraShort S&P500 ProShares (SDS) | +2.01% | +243.54 |
| Russell 2K (index) | -2.01% | -243.31 |
| ISHARE RUS 2000 INDX (IWM) | -2.12% | -257.11 |
| Ultra Russell 2000 ProShares (UWM) | -4.33% | -524.29 |
| UltraShort Russell 2000 ProShares (TWM) | +4.35% | +526.41 |
| NASDAQ-100 (index) | -0.76% | -91.87 |
| NASDAQ 100 TR SER I (QQQQ) | -0.78% | -94.11 |
| Ultra QQQ ProShares (QLD) | -1.38% | -167.07 |
| UltraShort QQQ ProShares (QID) | +1.54% | +187.02 |
| S&P MidCap 400 (index) | -1.77% | -215.02 |
| ISHARE SP MC 400 INX (IJH) | -2.18% | -263.86 |
| Ultra MC400 ProShares (MVV) | -4.43% | -536.98 |
| UltraShort MC400 ProShares (MZZ) | +4.46% | +539.70 |
| Amex Gold (index) | -2.57% | -311.22 |
| MKT VECT GOLD MNRS (GDX) | -2.02% | -244.34 |
| Semiconductor Sector (index) | -0.75% | -90.33 |
| Ultra Semiconductors ProShares (USD) | -2.13% | -258.17 |
| UltraShort Semiconductors ProShares (SSG) | +0.60% | +72.39 |
Fortunately, there are definite signs of an end in sight. See the Notes link below for details.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Saturday, March 03, 2007
Fear Breeds Opportunities
Last week's dip within a strong uptrend provided investors with an excellent time to buy. Fundamentally, there was no reason for the market to react as negatively as it did, but psychologically, the dip was a normal human reaction to fear. Now, fear is a much more powerful emotion than greed (as evidenced by the popularity of investment advisories bearish for the last two decades and who have missed out on the market's better than 1000% gain since 1987).
Fears which came to the surface, catalyzed by China's very reasonable attempt to quell an overheated stock market, included:
- The US economy is facing a recession this year.
Journalists, known for being even more wrong about markets and the economy than even options traders, reported that Alan Greenspan had predicted a recession in 2007. Despite the fact that the report was false and that Alan Greenspan's record of predicting both busts and booms in the economy is atrocious, the story continued to be repeated every day and all week in newspapers across the country, quickly reaching the status of Urban Legend.
In the real world, there are no reliable indicators which point toward a recession in the US this year. Instead, they are pointing toward an economy picking up its growth rate to 3-3¼% from last year's 2% rate. At the same time, inflation is falling into the Fed's desired 1-2% range.
- The Chinese economy is slowing drastically and, being the engine of worldwide
economic growth, will pull the world's stock markets under.
This is demonstrably false since the Chinese government is simply protecting the market from getting into a position similar to the Japanese market of the 'Eighties: overvalued and prone to crashing. Eliminating "irrational exuberance" helps keep the market from inefficiencies of asset distribution and promotes the working of the free market. The US could take a lesson from the communists in this area.
- The Yen-carry trade, where investors borrow money from Japanese banks at incredibly
low rates and invest the money in other markets which pay much higher rates, will be unwound,
causing massive selling pressure.
This fear is false as well since the Japanese loan rate is still incredibly low at just ½%. Currency adjustments do affect the yen-carry trade, but there is no reason to believe the USD will fall against the Japanese Yen over any reasonable time period unless the US goes into a recession or the Japanese economy goes into a boom. The chances of either of those events is essentially zero over the foreseeable future.
- The growing malaise in the housing market, and most especially the so-called "sub-prime"
market, will spread to the rest of the economy.
Again, the probability of the housing market bust leaking into the economy is almost zero. All reliable indicators show no sign of recession, which would be the only reason the housing bust could affect the overall market.
Now, one thing that is evident over time is that severe corrections are a bull market phenomenon. Bear markets tend to exhibit corrections as well, but there they are manifested as sharp rallies. In an overall uptrend, the rate of advance is generally fairly low and last a very long time, but the corrections against that uptrend tend to exhibit very high momentum. This is why the majority is usually wrong: the severity of corrections produces a corresponding fear reaction, causing the timid and weak investors to flee stocks for "safer" investments like money market funds or bonds, while the gentle advance in the major trend produces a much milder emotion: complacency (which is why trailing sell stop orders are used to take profits and to "refuel the account" for buying the dip).
One way to measure complacency is by use of the VIX index, which measures the implied volatility of S&P 500 index options. That measure soared 83% last week as short term traders rushed to buy a massive amount of puts. Before last week, that gauge had been hovering at the 10 level, a level which is historically very low. The sharp rise in VIX is very similar historically to the rise which occured in 1995, right at the beginning of the greatest bull market of the 20th Century. Investors suddenly realized that there is risk in the market and bid up the price of puts, doubling the value of VIX by the 8th of March. But, as we said, sharp corrections are a phenomenon of a rising market and this rising trend in VIX is actually a confirmation that the market may have entered a stronger trend to the upside. The dip is just the market's way of redistributing shares from the weak hands who are easily scared out of their positions into strong hands who recognize opportunity when it comes knocking.
The weak hands tend to fall into a trap of believing that a rising VIX is a sign of a bear market. A look back at market history shows that short term corrections indeed associated with a rising VIX as that strong emotion, fear, bids up puts. But, when viewed with a longer term perspective, a slowly-rising trend in VIX during the latter half of the 'Nineties was clearly a hallmark of a strong bull market.
A correction within an ongoing uptrend provides investors with an excellent opportunity to take profits, then buy back in for the resumption of the uptrend, which could come as early as this week.
Friday's market retested the week's lows. For the week, the market definitely shook the weak hands out:
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -4.22% | -533.38 |
| DIAMONDS TRUST SER 1 (DIA) | -4.31% | -545.28 |
| Ultra Dow30 ProShares (DDM) | -8.65% | -1093.71 |
| UltraShort Dow30 ProShares (DXD) | +8.73% | +1104.68 |
| S&P 500 (index) | -4.41% | -557.95 |
| S& P DEP RECEIPTS (SPY) | -4.56% | -577.10 |
| Ultra S&P500 ProShares (SSO) | -9.38% | -1186.84 |
| UltraShort S&P500 ProShares (SDS) | +9.81% | +1240.66 |
| Russell 2K (index) | -6.18% | -781.23 |
| ISHARE RUS 2000 INDX (IWM) | -6.28% | -794.81 |
| Ultra Russell 2000 ProShares (UWM) | -12.45% | -1575.01 |
| UltraShort Russell 2000 ProShares (TWM) | +14.16% | +1790.56 |
| NASDAQ-100 (index) | -6.19% | -782.42 |
| NASDAQ 100 TR SER I (QQQQ) | -6.14% | -776.84 |
| Ultra QQQ ProShares (QLD) | -12.66% | -1601.06 |
| UltraShort QQQ ProShares (QID) | +13.43% | +1698.92 |
| S&P MidCap 400 (index) | -5.06% | -639.55 |
| ISHARE SP MC 400 INX (IJH) | -5.18% | -655.21 |
| Ultra MC400 ProShares (MVV) | -10.11% | -1278.71 |
| UltraShort MC400 ProShares (MZZ) | +10.81% | +1367.11 |
| Amex Gold (index) | -9.47% | -1197.94 |
| MKT VECT GOLD MNRS (GDX) | -9.92% | -1254.77 |
| Semiconductor Sector (index) | -5.56% | -703.18 |
| Ultra Semiconductors ProShares (USD) | -12.42% | -1571.44 |
| UltraShort Semiconductors ProShares (SSG) | +14.98% | +1893.96 |
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Thursday, March 01, 2007
"Hyperactive 3rd Graders Playing Musical Chairs"
That was how Sam Stovall of S&P described the last few days in the stock market and it very succintly sums up the action. The government of China engineered a domestic stock market decline to quell rampant overspeculation and the contagion then spread around the globe within hours. The Chinese market, miniscule in size compared to the rest of the world's markets, has had an out-of-proportion reaction and that's certainly not an adult response to what is clearly a rational pricking of a nascent bubble and not the end of the great Chinese growth engine. Yet, the Chicken Littles on Wall Street (and even more so in Europe where they should really know better) are running around, crying that the sky is falling.
Meanwhile, nothing has changed in the economy. In fact, the lagging economic reports are just beginning to throw cold water on the idea the bond market has been having about there being a recession and for a need for the Federal Reserve to cut rates later in the year. It's true that bonds are up this week, but that was mostly due to Chicken Littles fleeing the stock market and buying bonds as a "safe haven." When the reality of a very strong economy -- including an inflation rate that's still above the Fed's target range -- finally sinks in, bonds will fall like the sky the Chicken Littles are so afraid of.
Thursday's market opened with a retest of Tuesday's lows and lower lows were put in for most of them. But, the buyers showed up and pushed the market back up the hill so that, by the close, most of the losses had been recouped. All this gave the adults in the market a grand buying opportunity, of course.
| Security | Percentage Change | Change in Dow Industrials Points |
|---|---|---|
| Dow Industrials (index) | -0.28% | -34.29 |
| DIAMONDS TRUST SER 1 (DIA) | -0.18% | -22.00 |
| Ultra Dow30 ProShares (DDM) | -0.51% | -63.02 |
| UltraShort Dow30 ProShares (DXD) | +0.33% | +40.96 |
| S&P 500 (index) | -0.26% | -31.83 |
| S& P DEP RECEIPTS (SPY) | -0.30% | -36.56 |
| Ultra S&P500 ProShares (SSO) | -0.34% | -42.27 |
| UltraShort S&P500 ProShares (SDS) | +0.67% | +82.27 |
| Russell 2K (index) | -0.33% | -39.92 |
| ISHARE RUS 2000 INDX (IWM) | -0.51% | -62.25 |
| Ultra Russell 2000 ProShares (UWM) | -0.72% | -88.10 |
| UltraShort Russell 2000 ProShares (TWM) | +0.67% | +81.70 |
| NASDAQ-100 (index) | -0.48% | -58.28 |
| NASDAQ 100 TR SER I (QQQQ) | -0.46% | -56.63 |
| Ultra QQQ ProShares (QLD) | -1.04% | -128.04 |
| UltraShort QQQ ProShares (QID) | +1.25% | +153.33 |
| S&P MidCap 400 (index) | -0.20% | -24.15 |
| ISHARE SP MC 400 INX (IJH) | -0.32% | -39.49 |
| Ultra MC400 ProShares (MVV) | -0.93% | -114.44 |
| UltraShort MC400 ProShares (MZZ) | +1.07% | +131.01 |
| Amex Gold (index) | -1.96% | -240.28 |
| MKT VECT GOLD MNRS (GDX) | -1.88% | -230.61 |
| Semiconductor Sector (index) | -0.83% | -101.56 |
| Ultra Semiconductors ProShares (USD) | -2.18% | -267.72 |
| UltraShort Semiconductors ProShares (SSG) | +4.26% | +522.26 |
Will the market retest the lows again? Well, all we can say is that the hyperactive children seem to still be coming to work on Wall Street. And, China probably hasn't finished pricking its bubble, so there may very well be additional buying opportunities in the days ahead.
Additional stock market commentary -- for subscribers only -- can be found here: Subscriber Notes (if you're reading this in plain text format or on the blog, visit the MyClues Home Page and click on "Subscriber Notes" in the Quick Links section at the top of the page).
Is Your ISP Censoring Your Email? Internet email is dying, being choked to death by spam and overzealous service providers. If you're not getting these updates via email and you should be, switch to RSS, the spam-free alternative. For instructions, just visit: http://www.marketclues.net/rss.html.
Subscriber Links: MyClues Home
· Quarter-Hourly Chart Comments
· Detailed Comments . . . .
Subscribe to: Posts (Atom)
Archives
04/01/2004 - 05/01/2004 05/01/2004 - 06/01/2004 06/01/2004 - 07/01/2004 07/01/2004 - 08/01/2004 08/01/2004 - 09/01/2004 09/01/2004 - 10/01/2004 10/01/2004 - 11/01/2004 11/01/2004 - 12/01/2004 12/01/2004 - 01/01/2005 01/01/2005 - 02/01/2005 02/01/2005 - 03/01/2005 03/01/2005 - 04/01/2005 04/01/2005 - 05/01/2005 05/01/2005 - 06/01/2005 06/01/2005 - 07/01/2005 07/01/2005 - 08/01/2005 08/01/2005 - 09/01/2005 09/01/2005 - 10/01/2005 10/01/2005 - 11/01/2005 11/01/2005 - 12/01/2005 12/01/2005 - 01/01/2006 01/01/2006 - 02/01/2006 02/01/2006 - 03/01/2006 03/01/2006 - 04/01/2006 04/01/2006 - 05/01/2006 05/01/2006 - 06/01/2006 06/01/2006 - 07/01/2006 07/01/2006 - 08/01/2006 08/01/2006 - 09/01/2006 09/01/2006 - 10/01/2006 10/01/2006 - 11/01/2006 11/01/2006 - 12/01/2006 12/01/2006 - 01/01/2007 01/01/2007 - 02/01/2007 02/01/2007 - 03/01/2007 03/01/2007 - 04/01/2007 04/01/2007 - 05/01/2007 05/01/2007 - 06/01/2007 06/01/2007 - 07/01/2007 07/01/2007 - 08/01/2007 08/01/2007 - 09/01/2007 09/01/2007 - 10/01/2007 10/01/2007 - 11/01/2007 11/01/2007 - 12/01/2007 12/01/2007 - 01/01/2008 01/01/2008 - 02/01/2008 02/01/2008 - 03/01/2008 03/01/2008 - 04/01/2008 04/01/2008 - 05/01/2008 05/01/2008 - 06/01/2008 06/01/2008 - 07/01/2008 07/01/2008 - 08/01/2008 08/01/2008 - 09/01/2008 09/01/2008 - 10/01/2008 10/01/2008 - 11/01/2008 11/01/2008 - 12/01/2008 12/01/2008 - 01/01/2009 01/01/2009 - 02/01/2009 02/01/2009 - 03/01/2009 03/01/2009 - 04/01/2009 04/01/2009 - 05/01/2009 05/01/2009 - 06/01/2009 06/01/2009 - 07/01/2009 07/01/2009 - 08/01/2009 08/01/2009 - 09/01/2009 09/01/2009 - 10/01/2009 10/01/2009 - 11/01/2009 11/01/2009 - 12/01/2009
