Overnight trading in the market was flat until about 9:00am when the futures began to trade lower, trading down 35 Dow points just prior to the open. As the moment, the indexes are mixed after a soft open, with Dow up 1 and the SPX down 2. The Transports are down down narly 50 points, or 1%, but the rest of the major indexes are mixed with little hint of direction.
The Oil market has strengthened, with the North Sea crude trading at $100 per barrel, while the WTC is trading cash up .64 at 91.41 Gold is down 2.90 at 1337.4 while Silver is down .006 at 28.45. The Euro is off a couple of ticks at 1.381 and the Dollar is up a couple of ticks at 77.08. The 10 Year Note is up a little at 3.44 while the long bond is flat at 4.60
After the excitement yesterday, the market is surprisingly indecisive. Everyone can see that we have major non-confirmations in the Dow Theory, and little or no support from the broader indexes. Surprisingly, after the rally Monday and Tuesday, the RSI and MACD in all the indexes has negatively diverged from the new highs. I keep looking around for confirmation that momentum has changed back to the up side, and I don't see it. Our Proprietary Momentum Change indicators have moved very little, still on a Sell signal first generated 1/20 and confirmed 1/28.
There is little or no news that should be capable of generating this sharp rally, after the move on 1/28. Market commentators are reduced to stating the market is up because the first day of the month is usually up. The mostly discredited ADP payrolls number printed 187,000 new jobs, against expectations of 140,000 and the 50,000 reduction of last months outlier print. Westinghouse reports earnings are up big, due to accounting changes, however, operating earnings reported up only 1.5% due to increased material costs and reduced sales volume. Can we hear "crushed margins"? Mr Market didn't like the news, bidding the stock 5 points lower on the open.
We were stopped out of our positions yesterday, and it is always discouraging to have a trade not work out. No trading indicator is fool proof.....and while our trading signals have been very accurate, money management discipline requires us to use stop loss orders. Our #1 concern is to not let ourselves get trapped in a market that is not moving our preferred direction. We recognize that there is always a new trading coming down the pike, and if our momentum indicators flip back to the Bullish side, we will act on the signal. But that is not yet the case.... our momentum indicators are still solidly Bearish, and we will look for a place to re-enter the market with new trades.
Best To Your Trading!
Bill
Wednesday, February 2, 2011
Tuesday, February 1, 2011
Spitting Black Feathers
Man, this nasty Black Crow is a really tough old bird! You know, the one baked up into this humble pie. After our Proprietary Momentum Change Indicators generated a confirming Sell signal on Friday, lighting up the maximum number on our signal scale, I thought the top was in. Not! The Dow and the SPX have both lifted to new highs.
But it still does not appear all is well with Mr Market's health. The RSI and the MACD are both flashing short term Negative Divergences, as well as long term divergences. The Transports, the SPF, the NDX and the RUT are still not at new highs, and it does not appear they can make it today. I will be interested in leaning what the Dow Theory Gurus have to say this evening about non-confirmations. As if anyone has any idea what any of this action has to do with the experience on the ground of the American Middle Class.
The latest headline measures of the business environment are pointing to an improving economy, yet the sub paragraphs in all of these reports keeps reminding us that margins are collapsing, pricing power is lacking, the housing market is again in decline for the past 4 months, and there is little evidence of actual growth that can be attributed to anything other than Government spending. The commodity complex behavior for the past 4 months, and especially the last 1 month, indicates escalating inflation in food stuffs and basic materials, the BDI continues to crash, nearing historic lows, and the Middle East appears to be catching fire. Yet the two most widely recognized measures of the health of the economy, the Dow and the SPX, are making new highs. Go figure.
We are stopped out of all 4 of our recommended trades this afternoon with small losses. Although our Momentum Change signals are still pointing to a lower market, the stop loss orders are designed to protect us from our selves....getting us out of a market that is not moving in our preferred direction, and also offering us an opportunity to re-establish our positions at better prices.
As my old friend and manager, Captain Gatorbait, used to say... "if this was easy, we would have 3rd graders in knee socks doing it."
Best To Your Trading!
Bill
But it still does not appear all is well with Mr Market's health. The RSI and the MACD are both flashing short term Negative Divergences, as well as long term divergences. The Transports, the SPF, the NDX and the RUT are still not at new highs, and it does not appear they can make it today. I will be interested in leaning what the Dow Theory Gurus have to say this evening about non-confirmations. As if anyone has any idea what any of this action has to do with the experience on the ground of the American Middle Class.
The latest headline measures of the business environment are pointing to an improving economy, yet the sub paragraphs in all of these reports keeps reminding us that margins are collapsing, pricing power is lacking, the housing market is again in decline for the past 4 months, and there is little evidence of actual growth that can be attributed to anything other than Government spending. The commodity complex behavior for the past 4 months, and especially the last 1 month, indicates escalating inflation in food stuffs and basic materials, the BDI continues to crash, nearing historic lows, and the Middle East appears to be catching fire. Yet the two most widely recognized measures of the health of the economy, the Dow and the SPX, are making new highs. Go figure.
We are stopped out of all 4 of our recommended trades this afternoon with small losses. Although our Momentum Change signals are still pointing to a lower market, the stop loss orders are designed to protect us from our selves....getting us out of a market that is not moving in our preferred direction, and also offering us an opportunity to re-establish our positions at better prices.
As my old friend and manager, Captain Gatorbait, used to say... "if this was easy, we would have 3rd graders in knee socks doing it."
Best To Your Trading!
Bill
Tuesday Morning
Mr Market has opened strong this morning, after trading higher overnight. Oil is off .28 at 91.91, Gold is off .20 at 1333.6 and Silver is up .086 at 28.255. The rest of the commodity complex is mostly higher, with wheat being the only donwn tick. The Euro is slightly higer at 1.3762, while the Dollar is off, trading at 77.37. The 10 year Note is off 5/8 at 3.453%, while the long Bond is down nearly a point a 4.63%.
The Dow is trading up 0.72% at 11977.53 and the SPX is trading up 1.06% at 1299.59. Both indexes are flirting with the highs of last week, while they are trading against the trend resistance lines and a double top. Other indexes are also trading about 1% higher but are still below last weeks highs.
Economic news this morning is mixed, with the best news being that the ISM has printed higher at 60.8 against expectations of 58.0, but digging through the sub-paragraphs, we learn that Prices Paid have surged to 81.5 vs expectations of 73.5 This continues to flash the RED Warning sign that all is not well with earnings expectations for 2nd and 3rd quarter earnings. It is hard to make earnings targets when pricing leverage is 0 while margins are getting crushed.
The crowds continue to grow in Egypt and Jordan has installed new government and Prime Minister. It appears the unrest in the Middle East continues to roll across the area as food inflation climbs to new highs. Rice yesterday closed limit up as the US rice crop is expected to decline to 1989 levels. I guess it really true that hungry people get mad.
No change to our Momentum Change signals.....indicators are still solidly in Sell mode. If we get new highs today in the SPX and DOW, it will not trigger new momentum change signal.. but that event could trigger our Stop Loss orders in some of the levered short positions. If that does happen, we will wait for another opportunity to re-enter the market.
Best To Your Trading!
Bill
The Dow is trading up 0.72% at 11977.53 and the SPX is trading up 1.06% at 1299.59. Both indexes are flirting with the highs of last week, while they are trading against the trend resistance lines and a double top. Other indexes are also trading about 1% higher but are still below last weeks highs.
Economic news this morning is mixed, with the best news being that the ISM has printed higher at 60.8 against expectations of 58.0, but digging through the sub-paragraphs, we learn that Prices Paid have surged to 81.5 vs expectations of 73.5 This continues to flash the RED Warning sign that all is not well with earnings expectations for 2nd and 3rd quarter earnings. It is hard to make earnings targets when pricing leverage is 0 while margins are getting crushed.
The crowds continue to grow in Egypt and Jordan has installed new government and Prime Minister. It appears the unrest in the Middle East continues to roll across the area as food inflation climbs to new highs. Rice yesterday closed limit up as the US rice crop is expected to decline to 1989 levels. I guess it really true that hungry people get mad.
No change to our Momentum Change signals.....indicators are still solidly in Sell mode. If we get new highs today in the SPX and DOW, it will not trigger new momentum change signal.. but that event could trigger our Stop Loss orders in some of the levered short positions. If that does happen, we will wait for another opportunity to re-enter the market.
Best To Your Trading!
Bill
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