Feb 102015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

The S&P500 rebounded from recent weakness and ended at the highest close of the year. Declining oil prices were no longer an excuse for traders to sell stocks as oil gave up a portion of recent gains.

The headline justification for today’s rally was a softening of the standoff between Greek leadership and the ECB. Greece’s new leaders are discovering there is a difference between making campaign promises and being held accountable for the unintended consequences of those decisions.

While the Greek situation could continue to unravel, anyone who fears a Grexit already sold. Those that are left demonstrated they are mostly indifferent to the whole situation and are just as likely to ignore the next round of headlines out of Europe.

When the market is sitting 1% from all-time highs in spite of the fearful headlines, it shows it doesn’t care about these concerns because they are already priced in. Market strength in the face of fear mongering is a buying opportunity. That doesn’t mean the rally is invincible, only that bears will need to come up with something new and unexpected if they want to break the market.

Technically the market is acting well. We found support near 2,050 and the 50dma, setting the stage for today’s upside move to 2,070. The pain trade is betting against the bears since further upside will force them to cover their shorts.

While I expect higher prices in the near-term, I remain cautious further out. The last few years have been an easy, elevator ride higher, but a recent increase in realized volatility shows the market’s personality is shifting. At this point I’m far more likely to sell a breakout to all-time highs than buy it. But I reserve the right to change my mind as new information comes to light.

Jani

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 Posted by at 9:55 pm on February 10, 2015
Feb 092015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

Stocks stumbled for a second day on intensifying rhetoric from Greece’s new leadership. That was enough to spook European markets and bring ours down in sympathy. But the low-volume, 0.4% loss was almost sleepy as compared to recent volatility.

While the S&P500 failed to hold 2,050 support, there was little urgency from participants to sell the violation. Owners seem fairly comfortable with these headlines and price-action. That confidence would crumble if losses accelerate, but as long as owners continue holding, we won’t have the supply necessary to pressure prices.

Last week’s rebound relieved bulls, but sentiment remains cautious. AAII and Stocktwits sentiment measures saw a big drop in bullishness last week, no surprise given recent headlines. But stable prices in the face of fear-mongering means most of it is already priced in. Those afraid of these headlines had plenty of time to sell, meaning anyone still holding stocks is demonstrating a willingness to own this risk.

While any number of geopolitical situations could flare-up, stability around 2,050 for a couple more days tells us the market is inclined to continue higher. When the market has every reason to sell off, but it insists on going higher, don’t fight it. On the other hand, if we cannot hold the 50dma Tuesday, we have a date with the 200dma.

Jani

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 Posted by at 8:14 pm on February 9, 2015
Feb 052015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

Stocks continued the rebound, adding another 1% and closing just shy of January’s double tops at 2,065. Volume was average, but lower than the last six days of elevated trade.

While the market surged 15-points at the open, from there it was one of the most benign days of the year as we traded inside a five-point channel between 2,055 and 2,060. I cannot remember the last time we saw such laid-back intraday trade. We finally “broke out” to the upside in the final minutes of the day, if you count a two-point move to 2,062 as a breakout.

Just a few days ago I was talking about 120-point intraday swings and now a two-point surge at the close is the best we can do. Amazing how quickly things change. Calm, rational, stable trade is good for the markets, suggesting this is more than a dead-cat bounce.

Sentiment remains in the toilet. Stocktwits’ SPY stream is 55% bearish while the latest AAII survey showed bearishness surging 10% and bullishness plunging 9%. It appears recent volatility and fearful headlines have discouraged a large number of retail investors.

But just when things look the worst is usually when they turn around. This is where the last of the hopeful holdouts call it quits and sell their stock at a discount because they cannot stomach the thought of another downday. But once they finish selling, supply tightens up and we bounce. And so far that is exactly what’s happened.

Everyone who fears falling oil prices, Euro uncertainty, and volatility sold to thick-skinned bargain hunters willing to hold the risk. The current crop of owners demonstrated a willingness to own this uncertainty. That’s why when oil falls or tensions flare up in Europe, the market is indifferent. The new owners don’t care about those issues. Right or wrong, prices remain firm when no one sells.

Friday morning we get employment. While this is usually good for a few minutes of volatility, it’s been years since an employment report changed the direction of the market. The talking heads love to hype it up, but it will be ancient history by lunchtime.

Technically the big milestone is 2,065. We were turned back twice in January at this level and a lot of traders will be watching it. If we break it, expect a wave of breakout buying and short-covering. From there we will have to see how the market behaves before deciding if this bounce has the resilience to continue to all-time highs.

Jani

 Posted by at 10:20 pm on February 5, 2015
Feb 042015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

Stocks slogged through most of the day in the red, taken down by a huge drop in oil prices. A late-day rally shook off the early doldrums, pushing us into the green, but that was short-lived as a last-minute headline out of Europe sent the market tumbling into the close.

As dramatic as that sounds, the day was a fairly benign relatively speaking. The market traded sideways, mostly staying between 2,040 and 2,050. This compares favorably to the massive swings we’ve seen in recent sessions.

With oil down as much as 9%, it was constructive to see the market slip only a fraction of a percent. That shows a big chunk of the oil story is already priced in. Anyone afraid of plunging oil prices sold weeks ago, and is why today’s oil dip didn’t concern current owners much. In fact, it was quite bullish to see the market break into the green toward the end of the day. That is, until the ECB rained on our parade.

Without getting too technical, the ECB decided to play hardball with Greece’s newly elected, anti-austerity leaders. This high-stakes game of chicken roiled markets in the final minutes. But the question we have to ask is if Greece still matters? We’ve been down this road before. Back then numerous financial institutions were vulnerable to a Greek default, but this time it is less of a surprise and the bulk of Greek debt is held by governments. While German taxpayers won’t be happy, at least this time it shouldn’t threaten to seize European banking flows.

But that kind of thinking uses logic, not the market’s strong suit in uncertain times. This afternoon’s sell-first, ask-questions-later later mentality could send prices careening dramatically lower Thursday. But at the same time, many traders who lived through multiple Greek crises could see this as just another Red Herring trying to get them to sell their stocks for a discount. Fool me once, shame on you; fool me twice, shame on me. It will be interesting to see which mindset traders show up with Thursday morning. So far overnight futures are down modestly, suggesting the Greek story is not spiraling out of control.

Technically, the market struggled with 2,050 resistance the last two days. Look for a surge of breakout buying and short-covering if we get through this level. That should push us to 2,060, which will be a far larger test of this young rebound since that is where we stalled multiple times in January. On the downside, be wary of an inability to reclaim the 50dma and 2,050. If the market cannot keep recent gains and slips under 2,020, then we will most like continue sliding through the 200dma.

Jani

 Posted by at 10:06 pm on February 4, 2015
Feb 032015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

Stocks exploded higher for a second day. Some claimed headlines out of Australia, Europe, and the oil market were the catalyst for this rebound, but the market’s stubborn resilience at 2,000 was telling us days ago that it wanted to go higher. When prices refuse to break down on bearish headlines, it doesn’t take much to send us higher.

Volume was well above average as shorts were squeezed when we crossed technical resistance at 2,020 in early trade and broke above the 50dma late in the day. Any short with disciplined stop-losses was sent scrambling by this strength. We closed just a hair under 2,050 and this will be the next meaningful level the market needs to summit if this rebound is to continue. But the bigger test will be the third attempt at 2,060, a level two previous rallies stalled at in January.

Sentiment remains fairly bearish. While today’s rebound softened some of that pessimism, the 70-point rebound has been so swift, few have had the opportunity to buy back in. That means there is still a huge pool of recent sellers that need to get back in if the market keeps going up. Reactive sellers become reactive buyers, and the volatility continues.

An increase in volatility is a common symptom of changes in trend and I remain wary of this market over the medium-term, but as a swing-trader is hard not to exploit this bounce for a quick buck. I’m not sure if we will set new all-time highs, but breaking 2,060 and triggering another round of breakout buying and short-squeezing seems likely.

Jani

 Posted by at 9:19 pm on February 3, 2015