Please Note: These charts are from the end of regular trading hours on Thursday, July 23, 2009.
MSFT, AMZN, AXP, COF, BRCM and JNPR all reported after the 4 pm NYC close today and they all missed, some by little, and MSFT & AXP, by not so little. All were taken to the woodshed for some much-neglected discipline. They are down, some heavy, in the after hours trading. We live and trade in a very frothy world, the management teams, were repeatedly reminded.
And for Reg. FD purposes, our Phoenix Traders went long JNPR Aug A-T-M Puts yesterday at about 2pm EDT. And, today at about 212 pm EDT, we doubled that position, very near the market high. After JNPR reported a double digit fall in revenues, a slide in margins and gave a disappointing outlook, I was asked on Twitter, why AAPL long calls on Tuesday and JNPR long puts today? My answer was simple: trading is all about market intel [something you won't find on CNBC]. We both laughed it out loud.
Let's go thru some charts. First my favorite, Sp1-MoMo chart. "Let's get really overbought" was name of the game today. After all, the venerable money manager Bill Miller of Legg Mason, wrote last night "the worst has passed" and "bargains abound in the US stock market" to his Legg Mason Value Trust fund.
NYSE Advance/Decline Line closed +2088 and SP1 back again above +2 sigma with MoMo at +45. Remember, as I mentioned in the last Friday video, posted further below, we could stay here and see these types of high readings both in relative (SP1) and absolute (MoM0) terms for some time. No guarantee we will just fall off the cliff here just because we are overbought. As always, I look for the requisite "catalyst" in geopolitics, Fed, White House, Wall Street, Pentagon, Big Oil, etc etc.
Next is our Wyckoff Chart. Notice we have moved 1,000 DJIA points in 9 trading days (spanning some 4 sigmas). Today, DJIA closed for the first time over 9,000, trading above last Jan 2nd high and came within 200 pts of Nov 4th Election Day price range.
In like fashion, DJ Trans moved some 4.5 sigmas: (Economy going forward will do well -- what commercial real estate problems, consumer credit, forget about it -- Washington will save 'em too -- and please, quit complaining about retail vacancy rates on Miracle Mile). And, RUT (risk-loving is back, its Index Futures at one point were up almost 4% today) and NAZZ Composite (closing higher 13-days in a row) all screamed in unison: Xmas is here early. Yeah, for sure !!
But not our beloved Vols. There were smarter of the bunch, and they stopped dropping in face of rapid ascend rate in the equities. VXN rode down the -2 sigma line, three days in a row last week, and as expected (as in last Friday video), it pulled backup, albeit, very very slowly until today. Both VXO & VXN closed higher today, as smart money started to buy some puts for downside protection. And Market Makers smelled it and adjusted those bid/asks, albeit by rapid-fire algo trades.
One fund rolled UP its SPY August downside protection at 92 strike into December 95 strike, for some 72,000,000 shares of SPY (S&P-500 ETF) it holds. Yes, 720K put contracts on SPY, a "jaw dropper," was one trade today that cleared at the ISE in NYC.
Last but not the least, here is our Timer Chart. With NYSE McClellan Oscillator (MO) at +226 and NAZZ at +144, with CI Indicators lit RED, SPX at +2 sigma, NDX above +2 sigma, we are short-term overbought again. Just look at Up/Down MO for NAZZ, it is almost +210. With Volume, being a coincident indicator, we should brace for a pullback.
Now with MSFT latest report, the TechLand recovery roadmap got a lot fuzzier. And with AXP and COF results showing consumer finances remaining in stress, the retail spending should remain below trend.
Now I said the same thing some eight weeks ago and nothing happened. We simply traded in a range. This time, it may be different. Tomorrow could be for the history books as the spin meisters will try to put a fresh new lipstick on this pit bull.
A Note of Thanks: We are immensely indebted to our learned colleague, Steven Sears, the Editor of The Striking Price Column at Barron's for his valuable & speedy research regarding the SPY trade today.
Brad Sullivan owns seats on both MERC & CBOT Exchanges, and trades for his own hedge fund in Chicago. His comments posted in our HFT Premium Chatroom, is read each day by many active index, debt and commodity futures traders. Read Brad's Recent Posts Ashraf Laidi, Chief Global Strategist at City Index / FX Solutions, oversees the analysis and forecasting functions of key currency pairs as well as decisions and trends of the major global central banks. Mr. Laidi is also responsible for education and informing clients on the essential dynamics underpinning the FOREX markets. Prior to joining CMC, Mr. Laidi has worked for such varied organizations as the United Nations, the World Bank, and Reuters. Mr. Laidi regularly provides expert opinion to various electronic, print and the broadcast media outlets. Mr. Laidi has appeared regularly on CNBC, Bloomberg, the BBC and PBS' Nightly Business Report. His insights also appear in the Financial Times, The Wall Street Journal, Barron's, The New York Times, CBS Marketwatch, TheStreet.com, Futures Magazine and a host of other international publications. Read Ashraf's Recent Posts Ethan Premock, started his day-trading and swing-trading career back in early 2007 trading both individual stock option contracts and index futures contracts. Ethan has developed a unique trading style in which he uses a very disciplined technical analysis structure of several components to ensure human emotions will not interfere with the potential for high absolute returns along with consistently applying clear rules for trade entries and exits. Read Ethan's Recent Posts Steve Shobin, Vice Chairman & Chief Investment Strategist for AmeriCap Advisers, LLC, is a veteran of more than three decades on Wall Street where he was a Managing Director at Lehman Brothers, Inc. and a First Vice President at Merrill Lynch. Mr. Shobin was a senior member of the research divisions at both firms. During his tenure, he developed unique methodologies for projecting the long term trends of stocks and industry groups, incorporating various techniques for controlling risk. Mr. Shobin has advised some of the world's largest mutual funds, hedge funds, and institutional investment managers on stock selection and portfolio structuring. Steve has been a member of the Institutional Investor All-American Research Team in 1997, 1998, 1999, and received a #1 ranking in the year 2000 just as he was leaving Lehman to join AmeriCap Advisers.
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