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Go to: Top | Short-term Outlook | Int-term Outlook | Equity Updates | Indicator Summary | Commodity Updates
Short-term
Outlook (1-5 Days):
Go to: Top | Short-term Outlook | Int-term Outlook | Equity Updates | Indicator Summary | Commodity Updates
Intermediate-term Outlook (1-3 Months):
Today's Update: We will remain Neutral for now.
Why: On
April 15th, the Dumb Money pushed up to 75%, and the
spread between that and the Smart Money reached to -45%.
In addition, we got a tremendous surge in the number of
bearish (for the market) Indicators At Extremes.
After we got the expected weakness and volatility exploded
higher, we experienced a very unusual situation with the "shock
day" on May 6th. We looked at somewhat similar days
on
May 7th, and the conclusions were clear - a
short-term rally was likely, probably being capped at a
62% retracement of the crash, then a re-test of the
panic lows. Since late May, we've looked at
quite a few bullish intermediate-term studies - we got
a major surge in pessimism, then several positive breadth
thrusts and positive price performance, all in the context
of an ongoing bull market. That has led to consistent
and significant gains when looking over the next 2 weeks to
1 month. However, June 4th's Payroll Report kneecapped
the nascent rally attempt and took us to a new closing low.
That is very unusual given the studies we discussed and
cannot be dismissed. But since we have seen a lot of
give-up among
Rydex traders
and
small options traders, and the S&P made another go at a breakout
above resistance, we were willing to give the
bullish outlook another shot. On June 22nd the S&P
fell back under its breakout level, and has since moved to a
new closing low, so we are standing aside in the
intermediate-term until a clearer picture emerges.
Recent Studies:
Two up days after a month without (6/04):
Bearish
Multiple breadth thrusts (5/28): Bullish
Extremely high ADX reading (5/27): Bullish
Oversold Indicator Score (5/21): Bullish
Sentiment:
Trend:
Back to mostly neutral readings.
Mixed long-term trend signals. Sup /
Res:
Other:
R: 1140; S: 1040 Nothing notable.
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Short-term Outlook
| Int-term Outlook |
Equity Updates |
Indicator Summary |
Commodity Updates
Equity Indicators - Updates and Extremes Upside Follow-Through From A Low I've received quite a few questions since yesterday
afternoon asking about the upside follow-through to Wednesday's big up
day. Since we didn't roll right over, that means we must have seen
a major low, right? Well, maybe. The concept of follow-through days
varies depending on the source - some give the market a week-long window
to rally, others require an increase in volume, still others suggest
that we must get over certain price resistance. But let's keep things simple. Let's look for any
time the S&P set at least a three-month low within the past few days,
then jumped at least 3% off that low, then rallied another 1% the next
day. The S&P 500 cash index didn't quite rally 1% yesterday, but
most other broad indices did, and its +0.94% gain was close enough to
consider for the jist of the study. The table below shows every time this has occurred since
1928. Since volatility tended to be greater prior to 1950 or so,
most of the occurrences are stacked prior to then. The table shows how many days it took until the S&P fell
back to a new low. If there is just a "-" in that column, then it
means that the S&P never violated the low prior to the 3% rally day.
In other words, it marked a major low. The Max Loss and Max Gain
columns show the worst and best performance during the next six months.
Date
Days Until New
Low Max Loss Max
Gain Out of the 20 precedents, 11 went on to make new lows,
averaging 30 trading days to do so. Out of those failures, the S&P
managed to tack on a median gain of +2.4% before it rolled over and
closed at a new low. Twice, it managed to rally more than +10%
before it failed. 9 of the instances marked major market lows. Out
of those, the S&P gained a median of +26% during the next six months.
But because volatility was often excruciatingly high at these points,
there was also a median drawdown of -5.3%. Overall, I don't see much yet that would suggest a
higher probability that this was a major low as opposed to another
head-fake. Given what we discussed
Wednesday and
Thursday, some aspects of sentiment support it, but just because we
got one day of follow-through after the 3% rally isn't enough to stamp
it as a confirmed bottom. If the S&P rallies an additional 5% or so from here,
then the odds will improve that the recent low will not be
violated...but then we'll already be 10% or so from the low, and much of
the benefit will already be spent. So I'm not using yesterday's
follow-through as a major determinant of whether or not this is another
fake move - the price pattern over the past few days just hasn't been
consistent enough, or predictive enough, for me to use.
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Short-term Outlook
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Equity Updates |
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Equity Market Indicators
Notes: In mid- to late-May, we saw as many as 40% of our indicators at a bullish (for the market) and as little as 0% at a bearish one. That was the widest spread since March 2009, though it has gotten as high as 50% - 70% at some of the true panic lows over the years. On June 29th, we got another spike in bullish indicators above the 30% level...but again it's below what we've seen at many of the prior major lows.
More history:
* New extreme
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Bonds, Commodities and Currencies - Updates and Extremes
Nothing notable for today.
Jason Goepfert Founder, Sundial Capital Research, Inc.
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July
9, 2010,
8:15am EST
Neutral
Since June 24, 1067
SPX
Bearish For The Market
Bullish For The Market
