Thursday, April 12, 2012

Pullback Over?

Time to show some charts. First, my favorite market leader, the SPXA50, the number of SPY stocks trading above their 50 day moving average:

As you can see, we’ve had a dip in the numbers, and haven’t reversed the trend yet. The dip wasn’t as low as they usually go, which means it was a weak pullback. But it was a pullback. Since we haven’t seen the trend change, I suspect there’s more down to go. So here’s the SPY chart, and my humble analysis

As you can see, the uptrend since November was broken (as we would expect from looking at the 3LB chart at the top). The downchannel which broke out of November’s upchannel is about ½ as wide, so the standard deviation on the downchannel is smaller. This means it’s easier to break out of the downchannel. I believe the algos are trendfollowers, so when the breakout happens, look out for significant pops to the upside. You can see a large down day, and we’re trading within that day’s range, so until we get out of the inside bar, we won’t know the direction of the market. Today looks like up to me, so today we may break out of that inside day trading. If we get out of the downchannel today, I suspect we will continue the November’s upchannel. If we don’t then look for a down day Friday.

A couple of things to note on this chart: the downchannel begins on the day of the highest high of the upchannel. Of course, you don’t know it’s a downchannel until the breakout happens and is confirmed by a second day. This downchannel is really short, only one day of real confirmation, with high volume as well, but the next day the volume was average, so no continued confirmation. Second, the Stochastics are oversold, and turning up. To me, I read this to mean the pullback’s over, and we will close above 138.40 today. If that happens, look for a move higher into the weekend, and a pop for Monday.

The last chart I want to present is AAPL.

Note it’s strong resemblance to the SPY. Could be that a) AAPL watchers play other stocks based on AAPL’s performance and b) AAPL is a very significant component of the marketplace. I use AAPL’s trend as a leading indicator of the SPY. Combined with a few others, like XOM and IBM, you watch those, and they will tell you the tells.

So after I posted this, I though you might like to see what the bots are doing. They are clearly trying to support the market by moving AAPL upward. There is a lot of non-bot pressure on AAPL downward, but look at what's happening:

For reference, look at the green line I drew on the volume, and you'll see what the trend was before the bots. Then suddenly at 13:09, the bots took over and started to control the tape. The first one at 13:11 or so tried to eat out all the sell orders, and was effective for 3 minutes. The next one at 13:33 tried the same thing and was successful until 13:39. Then another buy at 13:45 was unsuccessful. Again at 13:51, we see another attempt, which turned out to be successful and stop the fall at 621.

At 14:03, the bots tried another buy to push above the support line at 623 (in red) but was unsuccessful. I suspect another down leg as a result.

You'd think the bots would run out of money, right? Not so. They can borrow at 0% interest.


  1. @Rock, Apr 9, 2012 10:16 PM: wish you a very fulfilling retirement. From the little I know about you, tt seems you're worth it. :)

  2. And sry for not being around here much lately. I'm not trading anymore. Got a new job, as I mentioned before.

    Also, spending some of my free time on trying to figure out what's going wrong and how to fix it. will be my first try at it. First post will deal with the shameful deal that's called "ABACUS".

  3. The easier it reads for people, the further justice will get to..

  4. @Wolfstreet:

    good luck in your new job. Please dude drop in from time to time to let us know wassup over the pond. I'll check in over at vulgarizator from time-to-time.

    I dunno I'm worth much, but I'm making money almost every day at this trading thing. today's was kind of small, but all in all, this week's been pretty good for a market retracement week, since I don't short anymore (mostly). I will say that to keep up on everything is very time-consuming, and I wish my son or daughter would step in to partner with me. I think 2 or 3 people would do much better at this.

    They still haven't taken me off payroll. I think they're afraid I won't step in to help in the event of a catastrophe. They should know better by now.

    Anyway, will keep on keeping on trading. I've backtested and tested my new "longer timeframes" methods, and it's looking good, so that'll keep your brothers (wolves) from the door.

  5. Well, we had our "another down leg. Let's see what the bots are doing. Pretty much they've backed out of AAPL so the consensus is to let the market go. Take a look at XOM and IBM, You'll see the most volatility is when the bots are active. Thpical 3-minute volume on IBM for example are around 14000 over 3 minutes. You'll see some movement when that volume hits 40000.

    I'm definitely looking to trade the bots, in addition to the stocks. The bots are trend followers, so when trends are broken and the volumes rise dramatically, I think you'll see the price move in the newly trending direction. Check it out.

    Two more things to note: after today's pullback, we are exactly in the middle of the downchannel. Just for fun, I turned on bollinger bands, and it says we're at the bottom of the range. But the bands missed entirely Tuesday's down move, so I still like drawing the 2 standard deviation channel.

  6. In another news, the dying retail relic that is Best Buy - the CEO being investigated for misusing funds in relationship with subordinate:

  7. @Mannwich:

    You know, I never was tempted to do that. Well, not exactly true, the temptation was there, but I never once followed through. I was always afraid she'd call me out on something I could do to help her out, and if I didn't she might rat me out.

    So it was fear. Purely selfish fear.

    And I'm glad I had that fear. I wonder why these guys dont, they must be really arrogant.

  8. Isn't it interesting that N Korea can't launch a successful missile? I wonder why.

    Actually, I thought budgets were down and we weren't flying anymore. I guess the sat pics got us back in the air.

  9. Looks like AAPL is going below 600.

    This is a significant pullback. Watch this one and when it starts to turn, it's time to buy.

    They're saying iPad is not selling out in the stores. They're forgetting that AAPL has little to no marketing/sales presence in much of the world. And their P/E ratio is really cheap.

  10. Watch AAPL now. The trend from 15:15 was down on light volume, and the bots just did a 200K sell, and you're seeing AAPL trend downwards now.

    They're eating out all the sell stops, I'll bet there's huge order stuffing right now.

  11. So I said don't short strength. Never short AAPL. Well, I didn't follow my advice, and put together a little short (one half position) and have made some steak money.

    There have been some other short possibilities. I will enumerate them this weekend and put up a new post with the biggest losers.

    These biggest losers may be the value stocks that the big money boys invest in when the market turns. So I'll be watching these biggest losers for a potential pop in the ensuing weeks. Several have already made my setup criteria for a buy, I just haven't bought yet because as I said above, I believe there's more down from here, and won't buy until the SPY breaks out of it's established and confirmed downchannel. That of course could take one day, but I'll need to see confirmation, so I won't be afraid to wait a day and be late to the party.

  12. Rally fizzling here. Bad omen for Mr. Market, me-thinks.

  13. I'm out of my AAPL short now when it double-bottomed at 588, and turned it around to a 1/2 position buy for the run-up this afternoon. It's looking good. I have a stop back at 588 for a break even, but I think the people that said it'd never see the 500's again were buyers and are providing a lot of support.

  14. Bloomberg presented some margin data. Over the last 10 years, the sectors with the best margins were
    1. Biotech Life science, pharmas = 15%
    2. Banks = 12%
    3. Software and services 11%
    4. Household and personal products: 11%

    The worst were:
    Media, food, autos

    The companies with the highest margins were:
    Google, Microsoft, coke, Merck, Altria, Cisco, Intel

    The companies with the worst margins were:
    AIG, Sears, Ford, CBS, Time Warner

    Interesting information, eh?

  15. The SPY's had 3 days with lower lows and lower highs. We gapped up this AM, but the gap's filled, and even beyond. Right now, at 137.30, the SPY's almost dead nuts on the middle of it's downchannel I posted above.

    So I don't think of this as a rally fizzle. I think of it as the SPY's not in any jeopardy of breaking out of its downchannel yet. So the pullback's still on.

    It's taking me longer than I thought to put together the list of the poorest performers. Maybe later today.

  16. Looking at the SPY, we closed exactly on the middle of the down-channel, at 137.01.

    I'm thinking we will see a pop tomorrow morning, and I will sell into it, anticipating a close to the lower-side of the down-channel.

  17. OK, looking at the biggest losers: I have selection criteria such that I can trade safely. That is, the candidates have to have enough volume and enough market cap so I won't get in the way of the big boys, and nobody will notice my little bitty trades. I don't go under $10 or over $120 in price. The day I started the analysis is 10 days ago, the first day the SPY started it's downchannel.

    So here's the list:
    30%: HALO IVN VPHM

    Now doing a little homework, you can look up the P/E, free cash flow, and quarter on quarter profit margins, and decide if you want to enter any when the market turns.

    I like NTAP. They have 9.8% profit margin, 12% operating margin, and on 5B in revenue, they have 1.34B in operating cash flow and 376M in levered free cash flow. Not bad numbers, at all. No reason to be down 10%.

  18. Oh, and if you can't tell, I use fundimentals and psychologicals and structurals to determine what to buy, and I use the charts to tell me when to buy it.

  19. Time can lead us out of oversold (and overbought) conditions. At this time, the SPY is breaking out of it's downchannel, not so much because of price movement up, but because of time passing.

    Some might call this a consolidation, some might call it a "bear flag), that is, after several lower price bars, there is a trading range, sometimes upward sloping. This pattern is often followed by a downward move, continuing the downward pattern.

    I don't trade patterns, I trade the tape. But it leads me to believe this is a turn-around Tuesday, and tomorrow we might end up lower again, perhaps falling back into the downchannel, or equally likely continuing the bear flag pattern, waiting for some news to move the markets.

  20. Open gap down, but not down far engough to get us back into our defined downchannel. I think the trade will go higher today. Dollar's up (UUP) against the Euro this AM, and that usually means a down market, but the support for the stronger Euro may weaken over the trading hours. Will see.

    Anyway, I expect a close inside yesterday's range, and up from where we are now.

  21. Well, it looks like ol' Rock has locked another one. We have logged another flag day, inside trading.

    It seems Rock's the only commentator and poster left on this blog, so I guess I should say goodnight. and go search another venue.

    Thanks all for your input and for helping me become a better trader.


  22. @Rock: I'm still lurking here but have been tied up lately on other things. Hopefully you and others come back but if you don't it's been a nice ride and great to "know" you all. Everything runs its course eventually.

    Funny thing is - I actually think that a major top is forming right now. Just a funny inkling that I have based on some "Manny indicators". Of course, I'll probably be wrong but wouldn't it be incredible if we all left this blog just as THE major turn was forming?

  23. Rock - Mannwich, I am still lurking in the dark corners too, just been very busy with work and family.

    Rock, I have learned a TON and I mean TON of stuff from you, however I believe the market is being heavily maniputed by the Fed, HFT and other factors and currently my skill level is not there to feel comfortable jumping in.

    Just like with anything, you need to learn and practice what you learn and hone your skills from there.

    A good teacher does not just get up and start teaching one day, a good police officer takes years to get good at their job.

    I believe I have the ability to be a good trader and someday soon the time will be right for me and it has been nothing but a pleasure to learn from yours, Mannwiches, WolfStreets and many others experiences.

    Saddly, things have slowly turned and the core group has dwindled away - So if you do decide to close up shop, please let us know where you decide to hang your hat.

    The same with all others.

    Take Care.

    Mangy Mutt

  24. Ditto that, Mangy. Let us know where you end up, Rock. We shall follow.

    Too bad Thor has disappeared. I hope he's doing well.

  25. And there she goes. Got a bad feeling this time.

  26. Complacency still seems high to me, which is usually when Mr. Market gives us a lesson. Where's the PPT when you need him? Benny? Benny?

  27. One additional comment:

    A little boy goes to his dad and asks, 'What is Politics?'

    Dad says, 'Well son, let me try to explain it this way:

    I am the head of the family, so call me
    The President.

    Your mother is the administrator of the money, so we call her the Government.

    We are here to take care of your needs, so we will call you The People .

    The nanny, we will consider her the Working Class.

    And your baby brother, we will call him the Future.

    Now think about that and see if it makes sense.'

    So the little boy! Goes off to bed thinking about what Dad has said.

    Later that night, he hears his baby brother crying, so he gets up to check on him.

    He finds that the baby has severely Soiled his diaper.

    So the little boy goes to his parent's room and finds his mother asleep. Not wanting to wake her, he goes to the nanny's room Finding the door locked, he peeks in the keyhole and sees his father in bed with the nanny. He gives up and goes back to bed.

    The next morning, the little boy say's to his father, 'Dad, I think I understand the concept of politics now.'

    The father says, 'Good, son, tell me in your own words what you think politics is all about.'

    The little boy replies,
    'The President is screwing the Working Class while the Government is sound asleep.
    The People are being ignored and the
    Future is in deep shit."

  28. Rock that about sums it all up


  29. Thanks Rock, good one.

    Talking about politics, we've got French presidential elections here tomorrow. I believe there's going to be a massive vote for the "get out of the Euro" opinion. Probably won't make it into the second round though (surveys say second round will be the main 2 dinosaurs' parties).

    I know France doesn't account for much in the bigger picture, but still. Can make quite some noise in the markets.

    As Manny put it, would be cool if this blog would make an exit in tune with the biggest short ever.

  30. Take care all. Thanks for all the fun, kindness and insights. Thanks Rock for the lessons, as Mutt said, you've been a good teacher. Not sure I'll ever get back into the markets though.

    May you all be well and at peace.

  31. Looking like an ugly day in the markets shaping up today. I think we should all come back for a reunion if/when this shit hits the again, which could be sometime soon.

  32. Mannwich - it sure does look like an ugly day, but with all the market manipulation who knows where things will end up.

    Hey Wolfsteet, nice to see ya.

    Mangy Mutt

  33. @Mannwhich: I'll still be lurking around;)

    @Mutt: always a pleasure.

    Meanwhile, a little bit of nostalgia, for all my fellow bears who missed the bull market back in the beginning of 2009 (well, it didn't "miss" me at least!), always a fun watch: Hitler Misses the Bull Market.

    See you.

  34. Sorry I missed you Anonymous, but I was in the bathroom TCBing (If you know what I mean)

    Sadly we are winding down, there has been a lot of great effort and hard work, put into this sight, but unfortunatly the regular posters have slowly peeled away.

    And even though Rock is a store house, the few of us that remained had/have no trust in the current market and even though we do not want it to, life goes the way it wants to go.

    Mangy Mutt

  35. Disappeared into thin air!

  36. As opposed to obese air?


  37. I think our "shutting down" this blog coincided with THE market top. That's been my suspicion and I'm sticking with it.

  38. Manny you man this shop? Where do you hang these day?

  39. Hey, where is everybody? Isn't it time for a reunion, even for one day?!

  40. Anybody home? Is the blog gone?

  41. Manny, where are you these days?

  42. Hello all. Hope everyone is doing ok. For the record, I've dumped my SDS some weeks ago, and I've gone full long today.

    A sure sign that the crash is imminent. lol.

    Take care.

  43. Who was the anonymous? I can't believe folks still check this from time to time.

    Miss you all, but don't really follow economic news anymore and definitely not the markets. Had my fill I guess.

    Hope everyone is well.


  44. "Canadian to Lead Bank of England" Another GS pawn. gg

  45. Happy New Year.Enjoying my AAPL long position today. Yeah... Ive turned optimistic, who would have guessed? Tired of the end of the world cassandras.

  46. Geez, look at AAPL. Guess I shouldn't have spoken about me being long this stock. Glad I did break even some days ago on that one. Hehe.

  47. Heya this is kinda of off topic but I was wanting to know if blogs use WYSIWYG editors or if you have to manually
    code with HTML. I'm starting a blog soon but have no coding know-how so I wanted to get guidance from someone with experience. Any help would be greatly appreciated!

    Feel free to visit my web-site -
    my web site - adoption baby book

  48. Тhankѕ ѵеry intеresting blog!

    Alѕо vіѕit mу web blog: connecticut dumpster rental
    Also see my page > dumpster diving

  49. Havіng read this I believed it was rather enlightening.
    I appreсiаte you finding the time and еffort to put this short artiсle together.
    Ӏ once agaіn find mysеlf spendіng a ѕignifiсаnt amount of
    time bοth readіng and commenting. But so what, it wаs still worthwhіlе!

    My ωeb page ... dumpster rental service
    My page > rental trash dumpster

  50. Highly enегgetic blog, I loved that a lot.
    Will there be a рart 2?

    Here is my ωebpage ... dumpster rentals raleigh

  51. Great ωeb ѕite you have here.. It's hard to find high quality writing like yours these days. I seriously appreciate individuals like you! Take care!!

    my weblog order dumpster
    Also see my webpage > dumpster hire

  52. Wonԁerful, what a webpage it is! This web sitе proviԁes
    helpful facts tο us, keep іt up.

    Feel free to ѵisit my web sіte; dumpster rental

  53. Touсhe. Sound arguments. Keep up thе amazing wοrk.

    Αlso viѕit my homepage ... dumpster rental raleigh

  54. {
    {I haνe|I've} been {surfing|browsing} online more than {three|3|2|4} hours today, yet I never found any interesting article like yours. {It's|It іs} pretty wοгth enоugh fог me.
    {In mу opiniоn|Perѕonally|ӏn my view},
    if all {webmastеrs|sіtе οwnerѕ|ωebsi

    Fеel freе to surf tο my weblοg - tree dormancy

  55. I know this if off topic but I'm looking into starting my own weblog and was curious what all is required to get setup? I'm assumіng havіng a blog liκe youгѕ woulԁ cost a prеttу penny?
    I'm not very web smart so I'm not 100% sure. Any suggestions or advice would be greatly appreciated. Thank you

    Here is my web page: chatroulette

  56. WolfStreetInThePitAgainMarch 4, 2013 at 4:09 PM

    Mannn... was that a crazy fiesta there. AAPL 52 weeks low VS SP500 +0.46%.

    I'll cover my shorts tomorrow morning...

  57. Hi there everуone, it's my first pay a quick visit at this web site, and post is actually fruitful in favor of me, keep up posting these articles or reviews.

    my webpage: trash dumpster

  58. This ρost is іnvaluable. Hοw
    can I find οut more?

    Alѕo visit mу ωеblog dumpster rental

  59. Hello, I desire to subscгibe foг this website to obtaіn hottest updates, so wherе can i ԁo it ρlease help out.

    Feel free to visit my web-site dumpster rentals raleigh

  60. Excellent web site yоu've got here.. It's diffіcult
    to fіnd good qualitу writіng like yours nowadays.
    I truly appreciate indiviԁuals liκe you! Take care!

    Fеel fгee to visit my webpаge -
    dumpster diving

  61. If some one wants to be uρdated wіth hottеѕt technologies theгefогe he must be pay a quick visit this site and bе up to datе еνery ԁay.

    Feel free to suгf tο my pagе :: dumpster rental

  62. Ahaa, its good dialogue concerning this paragraph at this place at this website,
    I have read all that, so at this time me also
    commenting at this place.

    Feel free to surf to my website :: work online from home

  63. Excellent article. I definitely appreciate this website.

    Also visit my blog post ... online services trading

  64. Simply wish to say your article is as amazing. The clarity in your post is just excellent and i could assume you are an expert on this subject.

    Well with your permission let me to grab your
    feed to keep updated with forthcoming post. Thanks a million
    and please carry on the gratifying work.

    Stop by my blog post; how to make easy money online

  65. It's going to be end of mine day, but before finish I am reading this wonderful paragraph to improve my experience.

    My page ... how to earn extra money onlinehow to make money quick online

  66. Hey just wanted to give you a quick heads up. The words
    in your content seem to be running off the screen in Internet explorer.
    I'm not sure if this is a format issue or something to do with browser compatibility but I figured I'd post
    to let you know. The style and design look great though!
    Hope you get the problem fixed soon. Thanks

    Also visit my web-site get free money now
    Also see my page > earn money on youtube

  67. I'm not sure where you are getting your info, but great topic. I needs to spend some time learning much more or understanding more. Thanks for great info I was looking for this information for my mission.

    my weblog; how to get free online money

  68. I every time used to read piece of writing in news papers but now as I am a user of internet therefore from
    now I am using net for articles or reviews, thanks to web.

    Feel free to surf to my web site :: get money now free

  69. We are a gaggle of volunteers and starting a new scheme in our
    community. Your website offered us with helpful info to work on.
    You've performed a formidable task and our entire community can be grateful to you.

    Visit my page; ways to make money at home
    Also see my web page - best way to make money on line

  70. Definitely consider that that you stated. Your favourite justification seemed to be on the internet the simplest
    thing to consider of. I say to you, I definitely get
    annoyed at the same time as other folks consider worries that they just don't realize about. You controlled to hit the nail upon the highest as smartly as defined out the entire thing with no need side effect , folks can take a signal. Will probably be again to get more. Thanks

    Look into my web-site; send money online free

  71. Hi there it's me, I am also visiting this website daily, this web site is genuinely good and the users are in fact sharing nice thoughts.

    Feel free to surf to my webpage; ways to get free money

  72. Hi, I do think this is an excellent blog. I stumbledupon it ;) I'm going to return once again since i have bookmarked it. Money and freedom is the best way to change, may you be rich and continue to help others.

    Also visit my website - Make Money With Blogs
    my webpage :: how to earn money on youtube

  73. Hi there mates, pleasant piece of writing and fastidious arguments commented at this place,
    I am truly enjoying by these.

    Also visit my web site: ways to make money online for free

  74. What's up, just wanted to mention, I loved this blog post. It was helpful. Keep on posting!

    My web page: how to make money from home online

  75. WolfStreetBackInThePitMarch 22, 2013 at 2:15 PM

    Some short squeezing at play on Apple breaking the 460$ line? Hehe...

  76. Having a bad day here. Bought a stock which stochastics were in overbought territory, and which had already formed a "key reversal day" pattern. So many mistakes professor Rock would have yelled at me for. Got stopped out of that position, with a meaningfull loss. Meanwhile I' ve added to a little short winner position. We'll see...

  77. It's a shame you don't have a donаtе button!
    I'd without a doubt donate to this excellent blog! I guess for now i'll settle
    for booκmarking and аdԁing your RSS feed to my Goοgle account.
    I look forwaгd to fresh upԁates аnd ωill talk about this blog with my Facеbook grοup.
    Chat sоon!

    My web page: more bonuses

  78. I'm really inspired with your writing abilities as well as with the format for your blog. Is this a paid subject or did you modify it yourself? Anyway keep up the excellent quality writing, it is uncommon to see a nice weblog like this one these days..

    Review my homepage; binary options trading strategy

  79. WolfStreetStillInThePitApril 5, 2013 at 9:15 AM

    Markets were looking for an excuse to correct: seems they've found it today with horrible job numbers

    "The economy generated just 88,000 jobs in March - the smallest gain in 10 months"

    "Economists polled by MarketWatch expected the number of new jobs to increase by 190,000 last month"

    Good riddance to ya SP500.

    Meanwhile, I'm mostly long...

  80. There's certainly a great deal to know about this issue. I like all the points you've made.

    Check out my blog - earn money through the internet

  81. Τhanks for ones maгvelous posting!

    I dеfinitelу enjοyed reaԁіng it, you аre a gгeat аuthоr.
    I wіll гemember to bookmаrk your blοg and will evеntually come bаck down
    the roаԁ. I wаnt tο encοurage you tо contіnuе
    yοur great ωгiting, hаve a nice

    Here is my websіte ... More Bonuses

  82. There is certainly a lot to find out about this issue. I like all of the
    points you made.

    Feel free to visit my site:

  83. Wow, this paragraph is fastidious, my sister is analyzing these
    things, thus I am going to tell her.

    my site: squeeze page