"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Thursday, November 7, 2013

Signs of Internal Weakness Showing up in the S&P 500

Attempting to short this market has been proving very difficult for all but the most fleeting of trades as the mania in US equities continues unabated. There are some signs however that this market is losing some upside momentum. Not that this has tended to matter all that much these days since the bullish traders have been well rewarded for buying every single dip in the market. It takes some very sharp moves lower to dissuade a winning strategy.

This is a 4 hour chart of the emini S&P 500. Notice that the market ran up to the all time high above 1770 and failed to extend. This is leading to selling in the session as this is a short term sell signal for technically oriented traders.

Also notice that the volume has been drying up as the market makes all time highs once after another. It does seem as there are beginning to be some skeptics as to how much longer this can keep up and how much higher stocks can move.

Note also the negative divergence, another technical signal that upside momentum is waning.



I would expect that this index could see a dip down into the support zone I have marked on the chart. If the trend of buying dips continues, the bulls will show up again to feed on some more stocks as they position for yet another move into a new all time high once again. If this support level fails, we may have something a bit more serious at work here, although call me a doubter at this point.

Believe it or not, the VIX actually moved a bit higher today, for a change. A bit of nervousness or just another round of profit taking? We'll see.

38 comments:

  1. I came across this rather interesting article on reasons to own gold....some great points to consider. Always good to be informed, positive or negative:
    http://www.zerohedge.com/news/2013-11-05/mike-maloneys-top-10-reasons-buy-gold-silver

    ReplyDelete
  2. Dan

    I think it might be profit taking.
    Armstrong is probably right (I hate stoking that man's ego) when he says that money will run from bonds to stocks.
    It is another bubble in the making but I have given up on hating it.
    It will not last but it probably will go much higher than we think.
    Yet more market distortions created by the central banks.
    We probably will go through a period of time where there will be euphoria, where the miracle of infinite printed money will be declared a success...the mania phase.
    That is when we should start to get very afraid.

    Just my guess, if I really knew I would be a wealthy man...I am not.

    ReplyDelete
    Replies
    1. Dean;

      I suspect you are right... I did want to mention the technical deterioration however - not that it will make much difference at this point since stocks are about the only game in town right now.

      Delete
    2. SP I'm short only on the very short-tem - few days, with an extended target at 1715, not lower.
      I took the double top because of Bollinger Bands getting in phase 4 (top Bollinger diving down, end of bullish impulsion), MACD daily reversing on the same levels as before and crossing, 2h MACD diverging x times and finally plunging, so stop loss above Bol Sup and first target at 1750 made it worth it.
      Conclusion : one can be short and short the market on short term, and yet be neutral or even bullish on longer time units. I for sure won't try to stay contrarian to the long term bullish trend on SP500 at the moment. This was a contrarian trade, i.e quick entry, quick win, quickly out.

      GOLD : it is funny to see that the velocity is decreasing and since 1800-1180, market is looking for an equilibrium price before the next impulsion.
      That price may be around 1310 $, as since a few days we remain stuck in this boring range.
      Well, 1310 is the 38% Fibonacci retracement level of the whole long term bullish market from 2000 (around 300 to 1940).
      Interesting if we stabilize there.
      Maybe we just saw the whole 2 year correction of the 12 years bullish long-term market.
      If so, and if the price equilibrium is indeed 1300 area and prices don't collapse anymore, well...that's pretty cool for all the long-term bulls out there!
      So I'm monitoring this area carefully, on a quarterly time unit, i.e until the end of the year. This area is meaningful in the long term time units, so it's not about prices dropping to 1275 for a few days, but more about where we are going to end the year and if globally volatility will keep decreasing and prices remain close enough of the 1310 area.

      Delete
    3. P.S : for the record again, SP short 1372 (area of the 2 days ago top), stop loss 1387 now down every day following the diving down Bollinger Sup (that's why it's useful to have a contrarian trade when the Bollinger are helping you with the stop loss!!), one third of position out yesterday at 1350, next target 1330 (1/3), last target mlh inf of upwards pitchfork on the daily time unit and upwards Bollinger Band on the daily time unit as well, around 1315 $.

      Delete
  3. Marks' going to have another field day today.

    ReplyDelete
  4. Jobs report beat expectations by almost double.

    ReplyDelete
  5. Banana republic. http://www.zerohedge.com/news/2013-11-08/whopping-932000-americans-drop-out-labor-force-october-labor-participation-rate-drop

    ReplyDelete
  6. Gold Bugs obliterated today.

    Look at all the desperate fund managers "buy the dip" in the bank stocks.

    BitCoin now over $350.

    So now you know what the Chinese are buying and selling these days....

    LOL....

    ReplyDelete
    Replies
    1. mark,

      what about u, Mark. How did your trading go? Do you trade or do you just remark as the events unfold?

      Delete
  7. Ben has ruled only second to Nero
    Greatest achievement in history steal from the poor and enslave all but stockholders

    ReplyDelete
  8. Let's keep making up numbers to push this phoney baloney recovery higher

    ReplyDelete
  9. NEM, MUX, TRX 52-week lows

    Wow. Total destruction in this sector.

    What a horrific investment for those who bought the stories hook, line, and sinker.

    ReplyDelete
    Replies
    1. Bad data. MUX is ~15% off 52wk low and up over 2% so far, flirting with multiple bottom. But obviously you got your dig in TRX.

      Many miners actually logged decent earnings Q3-shuttering marginal projects, cutting back on development in crazy banana republics, etc.

      What if, what if, the economy is actually improving? GDP growth good in Q3, unemployment staying tame. But you still can't taper/QE must go on because of interest rates & concomitant derivatives...So could be explosive for stocks & inflation + so possibly silver, no? To quote a great asset manager I follow, "Inflation is just around the corner, we just don't know which corner."

      Delete
  10. ALgorithm field day. Keep cheering!!!!! Go Ben go!!!

    ReplyDelete
  11. For Americans in general the eventual awakening will be ugly and bloody.

    ReplyDelete
  12. http://www.zerohedge.com/news/2013-11-08/consumer-confidence-collapses-lowest-dec-2011-biggest-miss-2006
    Wow better start manipulating this stat in order to continue this lie

    ReplyDelete
  13. Jim Willie's favorite "too big to fail" bank stocks going vertical.

    See? It pays to stay fully invested in Fed-sponsored and approved sectors.

    ReplyDelete
  14. Look at PSLV vs. SLV. Physical market premium is increasing. Market is not buying fully this take down.

    ReplyDelete
  15. http://www.zerohedge.com/news/2013-11-08/guess-how-many-north-carolinans-have-signed-obamacare-website
    But gun sales hit all time highs. Guess all the Obama care will be needed for politicians

    ReplyDelete
    Replies
    1. I am not political - but I think you will see a mad dash for Obamacare the second week of December.

      Delete
  16. As usual all the gold pumpers are calling it "manipulation" lets sue someone cause my investment is going down. But don't acknowledge the spectacular jobs report. It's like Armstrong says when gold goes under $1000 that's when they'll finally shut up and just face reality. Man I'm glad I awoke from that spell.

    ReplyDelete
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