ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
Day-to-day, Mr. Market’s mood seems to swing dramatically up and down with little consistent rhyme or reason. The neat rationalizations of the bulls one day give way to the equally neat rationalizations of the bears the next day. For example, the market is very undervalued because of record low Treasury bill rates, highly stimulative monetary … Read more
Excitement over earnings almost trumped technicals today. The S&P 500 tipped over and then faded back ever so slightly from its 50-day moving average (DMA). Earnings news typically trumps technicals, but I was pretty convinced looming overhead resistance would hold firm no matter then news given the weak buying volume coming into today. Buying volume … Read more
Almost on schedule, the pendulum has swung back to “sell” on the S&P 500. The technical setup on the index shows extremely overbought conditions with buying volume falling just as the index reaches for overhead resistance (see chart below). Combine these conditions with the launch of earnings season, a new round of U.S. economic releases … Read more
It took a little patience, but the bounce from oversold conditions delivered in spectacular fashion on Wednesday with a 3.1% jump. The setup this time was a “bullish hammer” that formed ahead of the U.S. unemployment report last Friday. This is how I described the setup at the time: “The good news is that the … Read more
If the summer ends up trading in a range, it will have a wider berth than I had expected. This week the S&P 500 broke both closing and intra-day lows for 2010 and confirmed an unfolding downtrend. The index is down 8 of the last 9 days. The good news is that the S&P 500 … Read more
By now, I think we should recognize that low-volume rallies simply do not last – the odds tend to favor a return of most, if not all, those kinds of gains, sooner than later. Last week, I was particularly puzzled by a low-volume 2.4% rally on the S&P 500 that came on the heels of … Read more
Two weeks ago, I wrote “Sellers Step Out of the Way” to describe an impressive rally from oversold conditions on poor volume on May 27th. The S&P 500 closed up 3.3% that day, just short of the 200-day moving average (DMA). Today, the index finally hurdled over the 200DMA resistance for the first time in … Read more
As I feared might happen, the stock market has already fallen back into oversold territory as measured by the percentage of stocks trading above their 40-day moving averages (DMAs). This indicator, T2108, dipped under 20% and closed at 18.5%. This is the third oversold period in just a month, and this third time is not … Read more
T2108, the percentage of stocks trading above their 50-day moving averages (DMA), hit 21% on Wednesday. This milestone finishes nine days of technically oversold trading conditions as defined by T2108 dropping to 20% or below. I am reposting below a chart of the historical distribution of durations for oversold periods as a reminder that the … Read more
Sellers stepped out of the way today. Although volume was generally low on the major indices, stocks managed large gains that made up for yesterday’s ugly close and much more. In fact, today was the kind of day I was anticipating for yesterday’s trading. Stocks in my listing of potential buy candidates for this oversold … Read more