Market Commentary as of Friday, June 12, 2009

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Fari Hamzei

As you can see in the charts below, starting with the left hand side, the rising S&P-500 Cash Index has been accompanied with lower and lower directional momentum, and thus creating a "bearish divergence" with the SPX.

In the right hand side chart, we show two proprietary modified Breadth (Advance Decline) data subgraphs. The longer term sub-graph (SP1) shows a modified cum A/D line superimposed with its sigma channels. The lower subgraph, MoMo, is a short-term A/D Oscillator. Notice the long-term vs short-term are also in a very pronounced "bearish divergence" pattern.

THIS TECHNICAL ANOMALY WILL NOT LAST FOREVER. It will resolve itself sooner than later. What is currently unknown is that the proper catalyst for the upcoming reversal.

If you are LONG, watch your trades very closely. If you plan to STAY LONG, start looking for some portfolio insurance (O-T-M Index /ETF Puts).

Market Timing Commentary as of Friday, June 5th, 2009

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Fari Hamzei

A mixed picture at best, is one way to describe the latest US Equity Market charts and internals line-up.

And I am standing by my May 22nd short bias on SPX for Timer Digest's "Timer of the Year Competition." That being an intermediate term signal, my charts and indicators tell me to give this short a bit more time to work itself out. Here are some reasons why:

1. SP-500 Advance Decline Line Diverging (in an "M" pattern) from the Cash Index itself is trading higher (Chart 1, 2nd subgraph).
2. Volatility Indices receding again (setting up for a "W" before spiking higher - Chart 2).
3. Signs of Bond Vigilantes coming back -- TBT price action and options activity.

Notice of Change of Bias with Timer Digest

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Fari Hamzei


Dear Jim,
Please log me in as SHORT on SPX as of Friday, May 22nd, 2009 Close of 887.00.

Have a great Memorial Day Weekend......Go Danica Go !!!

A Quick VXO (the original VIX) Update

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Fari Hamzei

In my last webinar, on May 9th, I talked about VIX/VXO/VXN complex trading below 30. But as you recall, I talked about not the absolute level of this complex, but rather, its relative level (in Sigma Levels).

As you can see from the chart below, today, we broke 30 on VXO but we did NOT get to trade at -3 Sigma Level. That level now stands at 26. That is our next goal post. A bounce from 26 should mark a short-term "maxima" in prices for this leg.

More on this and other Mark Timing Tools, this Saturday in my webinar.

Market Timing Charts Update

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Fari Hamzei

We had a few emails asking us for a quick update on our Market Timing Charts given the price action we have experienced in the last couple of days. Here they are:

Worth noting:
A) McClellan Oscillators have entered a slight oversold condition (down to less than -100 readings in three trading days).
B) SPX failed to touch its 200-day Moving Average.
C) NDX closed below its 200-day Moving Average. We talked about this possibility in our last Saturday Webinar
D) Down to Up Volume Ratios in NYSE and NAZZ were 11 and 22 to 1, respectively.



Note: Huge drop in DJ Trans and Russell 2000 to -1 sigma level. Bad leading indicator for the economy (going forward) and risk-takers (weak hands in small caps got their head handed to them).




Note: VXO bounced off -2 sigma yesterday and jumped today. Never made it to -3 sigma (our target). May Options X is here in the earnest.

Market Timing Commentary as of Friday, May 1st, 2009

Tweet Market Timing Commentary as of Friday, May 1st, 2009

Fari Hamzei

As we mentioned on Twitter Saturday morning, we observed that market Vols are continuing to collapse [in a ~ 5.5-week cycle]. To see this from a better perspective, this week for the first time, we have included a second "Sigma of the Vols" chart. This second chart is Weekly. It allows us to step back and see a better picture. Even though to a naked eye, it looks as if the Vols have receded quite a bed (vs. last Fall high readings), both in absolute and relative values, the true short/term undercurrents are not so clear. This week we plan to data-mine our real/time datafeed for more unusual block-trade activity and it should be a good tell. More on that issue next week in our Saturday webinar. Suffice to say, that we are reading a few NYSE large liquidity providers may have had a lot to do with this.

In any event, our first target south for the Vols shall be -2 sigma on the Weekly chart. That puts the VXO/VXN/VIX Complex at approximately a 30 marker.






As we discussed last Sunday on this Blog, this week, as expected, NASDAQ-100 (NDX) tested its 200-day Moving Average (white curve in the right hand graph in the Timer Chart below) and the 1400 psychological level. The Timer Chart also shows that the McClellan Oscillators for NYSE and NAZZ eased off by Friday May 1st Close with readings of +133 and +67 (down from +167 and 86), respectively.

What is more important is that the Bearish Divergences we continue to see develop further in Prices vs McClellan Oscillators. Somewhere in here, somehow, a catalyst will force the Prices to give in. Again, brace yourself with a of tad of O-T-M ETF Puts as a low cost insurance here for your portfolio.


As the next chart, (our WEEKLY Wyckoff) shows, the volume was lower this week than last on higher index prices. Again this is not good.

Next notice DJ Transportation Index (lower left subgraph) is flat (and parallel with its 20-week Mov Avg -- thin yellow line) here. This Index normally telegraphs market expectation of general economy as a whole 6 to 9 month hence. It is FLAT here.

The lower right subgraph, the Russell 2000 (RUT), our favorite Small Caps Index, which gives us a sense of relative risk-taking by market participants in aggregate form, has a more gradual upward sloping graph and a lower Sigma Level compared to NASDAQ-100 (NDX), right above it. Market participants are piling into big caps to seek refuge from the market risk of small caps.

THIS IS NOT GOOD AT ALL for the LONG side of the Market.

Bottom Line: We should see some indices' price retracements soon. Maybe the catalyst will be the Money Center Banks Stress Tests Results, to be released a few trading hours before the April Non-Farm-Payroll, that which is slated for release on Friday May 8th at 0830 EDT.

Trade Well This Week.....

Market Timing Commentary as of Friday, April 24, 2009

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Fari Hamzei

As we mentioned in our Saturday Webinar, we think this week the key chart is NASDAQ-100 (NDX). With the 200 day Moving Average at 1399, a test of 1400 psychological level is a given.

The McClellan Oscillators for NYSE and NAZZ began heading up again on Thursday and Friday with readings of 167 and 86, respectively. Given the intensity of the advance we have had from March 9th lows, we should NOT categorize these readings as overbought. Since the index levels are just above +1 sigma, we expect a tad higher readings this week on both these Indices and Indicators before a pullback.

Notice CIs are lit RED and in case of NDX, it still has an upward slope.


What is more important is the Bearish Divergence we continue to see in Prices vs McClellan Oscillators. Somewhere in here, the prices will give in. Brace yourself with a of tad of ETF puts a low cost insurance. Also worth noting is a slight upward bias in volume at both exchanges.

Vols are continue to get washed out of our system. That is a good sign. Again, we will go into full alert if we see a -3 or -4 sigma reading for VXO and/or VXN (see chart below).


We remain midly bullish for a few more days but one must be very alert here.

Timer and Vols Charts (used in our last Webinar)

Tweet Timer and Vols Charts (used in our last Webinar)

Fari Hamzei

We are Overbought with McClellan Oscillator reading of +223. Notice CI is lit RED but still with positive (rising) slope.


Vols are beginning to get washed out of our system. That is a good sign. We need to see a -3 or -4 sigma reading for VXO and VXN.

Get our options trades and market commentary faster on Twitter

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Fari Hamzei

Here is our account http://twitter.com/HamzeiAnalytics

Follow us on Twitter -- it is FREE !!

It Is Time

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Fari Hamzei



Historically, a major bank bailout by Government is very bullish for the stock market 6 to 12 months hence.


Generous government financing announced today by Treasury Secretary Tim Geithner will underpin the so-called Public-Private Investment Program aiming to rid banks of up to $1 trillion in toxic asset-backed securities which are road blocking the economic recovery. Dept of Treasury kicked this Program off with $75-$100 billion that comes from its existing $700-billion bailout fund approved by Congress last fall. Both FDIC and Federal Reserve are also partners in this program to provide additional debt financing as a way to leverage up both TARP and TALF resources. This morning, both PIMCO and BlackRock have expressed strong interests to participate. This is all very good news.


This Program could be classified as the Mother of all Bank Bailouts. I say could, because, given all the recent false starts, it may take the Treasury up to couple months to properly set the Program up and then up 3 to 6 months to see any concrete results.
Given Stock Market is a forward discounting mechanism, it may be the right time to slowly step back in. As many of you know, to conserve capital, we scaled back our trading tremendously since October-November timeframe as our equity markets became over driven by outsized fear and not by logic. Now, with the events of last two weeks, my thinking is that we may want to slowly put our toes in. Initially, our trades will not be swinging for the fence. We need to hit a few singles and doubles first.


Given how everyone is on a very tight budget these days, we offer two avenues:


A) For the next three months, we will email 2 trades per month (from entry, stop management and exit instructions) to all MSA Members free of charge. This List has over 10,000 opted-in (3X of last year) and it may take several minutes to email out the order to all. The trades will be biased both long and short. As in the past, each trade will offer a rationale, a clear entry instruction (normally at a limit price) with a stop management price once we are in. Exit orders will be either limit or market orders.


B) Reduce our monthly fee by 50% for those who want to receive 1 to 3 trades per week very fast. Again, they will be both biased long and short. Here is the link http://www.hamzeianalytics.com/phoenix_spring_special.asp



And, do not miss our webinar this weekend. We will go over these items this Saturday and answer any questions you may have.

I think the worst is over

Tweet I think the worst is over

Fari Hamzei

Last Wednesday thru Friday, NDX $wPut/Call Ratio hit 4.6, 5.9 & 40+ on huge $wVolume ($700M, $2.4B and $7.4B, respectively). That is a lot of put buying by the institutions (NDX options are NOT for mom & pop traders, even at normal vol levels (VXN stayed above 60 last week)). The last time we saw these $wPCR levels for NDX, it was during the 2001-2002 dotcom debacle.

For those of you who remember my calls on CNBC back then, the readings at these levels for NDX are very bullish 1 to 3 days forward. We should expect 100 pt move in NDX in 3 days (registered 41+ today) which means, most likely, the AAPL earnings report tomorrow after the close, will be viewed very favorably.

In addition, a major perma bear threw in the towel today, LIBOR had eased off overnight and US short-term interest rates went up. In the last hour, there was a lot of mutual fund buying today. This is all good for equities.

Bottom Line: The chance of revisiting the Oct lows is now highly diminished albeit not zero.

Warren Buffett has been buying here

Tweet Warren Buffett has been buying here

Fari Hamzei

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors."

from http://www.nytimes.com/2008/10/17/opinion/17buffett.html

China is closed right now. This news will get more exposure over the weekend. Stay LONG !!!!

We like DDM, MOS, KBR, JPM, GS, MS, GE, DD, HIG, HPQ, QQQQ and SPY here.

Reg FD: We have established, for some of our affiliates (family and friends), long positions in the above names in the last two weeks for a long term hold (with no use of margin or leverage).

Comments for Timer Digest as of Friday, September 26, 2008

Tweet Comments for Timer Digest as of Friday, September 26, 2008

Fari Hamzei

As I sat down to write the commentary for today, Friday, September 26—given what we have gone through in these tumultuous past two weeks—I recalled the words of wisdom of a respected colleague and good friend. These words were bestowed on us as the first salvo in the first chapter of Master Traders by none other than one of the greatest market tacticians in recent years, Jeff deGraaf, CMT, CFA, formerly of Lehman Brothers.

"In the market, arrogance without fear will eventually break you. Fear without arrogance will leave you paralyzed at the most inopportune time. The delicate balance of fear and arrogance fosters appropriate aggressiveness without the recklessness."

As Washington continues to bicker over the fate of our frozen credit markets, while investors worldwide hold their breath, and with Presidential and Congressional elections in less than 40 days, I see our forward near-term game shaping up as a binary trade, with a 1 or 0 outcome. Since the ZERO outcome is not acceptable to our way of life in this great nation, we will march forward with a strong LONG BIAS. Our markets are eager to ratchet up as soon as the Proposed Treasury Authority to Purchase Troubled Assets is approved by both houses of the Congress and the news hits the wires.

For this play, we prefer the financials, capital goods, technology and consumer cyclicals.

My Market Timing Comments for Timer Digest as of Friday, September 19, 2008

Tweet My Market Timing Comments for Timer Digest as of Friday, September 19, 2008

Fari Hamzei

Last week, we experienced an extremely oversold market that led to a classic capitulation as our global financial system shook to its core. This was telegraphed by very high “new lows” readings, high “down-volume to up-volume ratio” readings, and also very high VXO and VXN readings (based on our Sigma Channels patterns). Sunday marks the Fall Equinox. As I have written every year, within +/- 2 days, Fall Equinox often marks a key reversal for the markets—in this case, mostly likely to the upside.

Comrade Paulson (who was just awarded his second Order of Lenin Medal for his Thursday Night Massacre of Net Short Hedge Funds) and Uncle Ben timed the US Government's $700+ Billion taxpayer (read: poor) bailout of our investment banks (read: super rich) extremely well—just hours ahead of expirations of September Equity Index Futures and European-style Equity Index Options. (Seriously, I consider this a brilliant move that truly did save the integrity of our equity and credit markets and, perhaps, Capitalism as well, from a meltdown).

For the next two weeks, we suggest that you stay the course and keep your longs in tact. We expect a "local" peak around Oct 2nd / 3rd and a "local" trough by Election time (Nov 4th).

Comments for Timer Digest as of Friday, September 12, 2008

Tweet Comments for Timer Digest as of Friday, September 12, 2008

Fari Hamzei


Last Wednesday (before the close) we wrote you the following:

all eyes are on LEH ..... Fed will stand ready to protect the 4th largest investment bank as Treasury stepped in to protect the housing market (by buying 80% of FNM & FRE) last Sunday.

STAY LONG for now...

---

as of the Close today, very little has changed:

LEH will be sold in an orderly manner, most probably to the BAC-led group. LEH does not have a liquidity crunch like BSC did back in March. GM & F (and Chrysler) will be helped out too with retooling loans. As I wrote to you a few weeks back, it is election time and the politicians will have no other choice but to push to the right our Economy's structural problems and past the November Elections.

With Housing (Mortgages) and Autos [temporarily] fixed (but not cleaned up, and more like, band-aided for now), the market should get less risk averse in the coming weeks.

For now CONTINUE to STAY LONG......

Have a great weekend.....

Go Chicago Cubs !!!!

Notice of Change of Bias

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Fari Hamzei

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From: Hamzei Analytics LLC Admin [mailto:Admin@HamzeiAnalytics.com]
Sent: Monday, September 08, 2008 7:31 AM
To: MSA (M_S_A@HamzeiAnalytics.com)
Subject: Notice of Our Change of Bias

This morning Timer Digest has confirmed our Change of Bias as of Sunday afternoon ~ 3 pm EDT.

F

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From: Timerdiges@aol.com [mailto:Timerdiges@aol.com]
Sent: Monday, September 08, 2008 6:07 AM
To: Fari@HamzeiAnalytics.com
Subject: Re: URGENT>>> how late can I change my bias today (Sunday) on SPX Short I put on August 22nd ???

September 8, 2008

Fari

We will log your S&P 500 Buy signal as of the 09/05/08 close, but confirm that this is what you want to do.

Technically you have until 4:00 AM ET to receive the previous market close.

Thank,

Jim

---

In a message dated 9/7/2008 3:04:10 P.M. Eastern Daylight Time, Fari@HamzeiAnalytics.com writes:

From: Fari Hamzei [mailto:Fari@HamzeiAnalytics.com]
Sent: Sunday, September 07, 2008 2:04 PM
To: Jim Schmidt (Timerdiges@aol.com)
Subject: URGENT>>> how late can I change my bias today (Sunday) on SPX Short I put on Aug 22nd ???

Comments for Timer Digest as of Wednesday, September 3, 2008

Tweet Comments for Timer Digest as of Wednesday, September 3, 2008

Fari Hamzei

Reading that FNM & FRE have approximately $223 Billion of debt maturing in September. Warren Buffet, in an interview back on August 22nd, called it as he saw it: "[They] don't have any net worth...the game is over..."

Barron's valued them recently at approximately negative $50 Bils each.

And, yesterday, Fitch Ratings slashed its debt ratings for preferred stock of Fannie Mae and Freddie Mac's from "A" to "BBB-," the lowest investment grade rating.

Balance these with a comment from a former advisor to China's Central Bank (holding some $376 Billion in US GSE debt):

“If the US Government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic. If it is not the end of the world, it is the end of the current international financial system.”

-- Stay SHORT Broad Indices and Financials, this could get very ugly very fast....

Let me clear something up once and for all

Tweet Let me clear something up once and for all

Fari Hamzei

This morning emails are continuing to pour in and I feel it is better I write to all of you all at once, clear some air and get every body focused back on the markets and the week ahead. My only request is that, after reading my explanations, whether you agree with it or not, let's just move on by NOT replying to this email and spare me of your response. We all have a lot to prepare for this coming week. Thanks for your understanding in advance.

First and foremost, I am not a political observer. And my market comment last Friday for Timer Digest was not supposed to be interpreted as a political statement. At Timer Digest, the Top Ten market timers (out of approximately 150 timers) are encouraged, twice a week, to email in and highlight what each of us observe as key issues facing/impacting the markets in the short term. Our comments are posted on Timer Digest's hotline on Wednesday late afternoons and Saturday mornings.

Second, I am a die-hard Reagan Republican. As the part of my preparation for the markets, I read a lot of market-related reports, on a daily basis, from highly regarded authors and I was simply highlighting what issues this fragile market might be reacting to, including, but not limited to, the general elections, the bond and commodity markets, hurricanes, and the Russian behavior in the Caucasus.

If you carefully review the minute by minute trading data on Friday (after a series of better-than-expected economic sentiment data during the first 30 min of regular trading), market began selling [hard] exactly when McCain Campaign confirmed the rumors that Gov Palin was indeed Senator McCain's choice for his VP. Markets, in aggregate, are smarter than any one of us and we should heed their hidden message. (sometimes we do not get it right, including yours truly, back in May 19th --oh, well !!).

IMHO, what Senator McCain did is most unnerving -- he gave away a very tight election at the time us Republicans must endure the many failures of Bush-Cheney era. If you look at this morning's highly rated CBS "Face the Nation" or NBC "Meet the Press", both anchors, Bob Schieffer and Tom Brokaw, opened with or brought up same concerns I wrote to you and Timer Digest on Friday.

I think I will sit this election out. My Republican vote won't make a difference in IL where I reside now or back in CA where I lived most of my adult life. And by doing so, I think it may help me be more objective, and less emotional, than the previous five presidential elections I eagerly participated in.

About the Top of the Republican Ticket:
I've been privileged to work with the best and the brightest this great country has to offer and in the process it has raised my standards very high. I just can't vote for a guy who came in 5th from the BOTTOM at Annapolis (for your info, I got into Princeton Engineering School at the age of 16, having been admitted to Annapolis, MIT & Cornell but finally opting for Princeton). For admission to Annapolis, as an allied officer, I received an appointment from President Richard Nixon. At Northrop Grumman, I was honored to work on US Navy F-18A Hornets and in my last two years there I reported to the Father of the Stealth Bomber (USAF B-2 Spirit), which some geopolitical analysts believe, its mere existence, crumbled the Soviet control over Eastern Europe.

And the Veep:
State of Alaska is less populated than the City of Chicago with a windfall budget surplus that you and I pay for at the gas pump. Per capita, that is an outlier fiscal condition. Lower 48 Governors are vastly better experienced as they operate in a more "normal" fiscal conditions. And before that, Gov. Palin was a mayor of a town with 9,000 people. These short and very limited experiences do not train her to be one heart beat away from becoming the Commander-in-Chief of the sole superpower the Free World has. This I know. I grew up and worked in the Military Industrial Complex in my backyards (in Washington & Los Angeles).

Read this http://www.ktva.com/ci_10339580?source=most_emailed

and this http://thebruceblog.wordpress.com/2008/08/29/interesting-mccain-chose-palin-when-she-is-under-scrutiny-and-investigation/

These are issues that Dems will bring up in the Presidential Debates.


About the Democratic Ticket:
oh, BTW, Senator Obama, although I understand he is very smart, IMHO, is not qualified either and does have a number of unsavory associates. Senator Biden is a wild card and gaffe central.


If these two tickets are the best this Great Land can come up with, then, it is indeed a very sad commentary on the State of Our Union.

Comments for Timer Digest as of Friday, August 29, 2008

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Fari Hamzei

nothing new to add .....but

For Senator McCain who is 72 years old and has had four bouts with cancer to have chosen someone so completely unqualified as Gov. Sarah Palin to be a heart beat away to become the CINC, is shockingly irresponsible. Suddenly, Senator McCain's age and health become central issues in the campaign, as does his judgment.


Market should sell hard as Obama/Biden Victory is all but guaranteed now.

So in effect, as Labor Day approaches, we are walking into a perfect storm, with Elections outcome (as discussed above), Financials in disarray, Czar Putin on a rampage in the Caucasus and Hurricane Gustav heading right into the Gulf of Mexico with elevated water temperatures.

My God save and protect the Union....

Notice of Change of Bias on SPX and My Comments as of Friday August 22, 2008

Tweet Notice of Change of Bias on SPX and My Comments as of Friday August 22, 2008

Fari Hamzei


Dear Jim,

I am reversing my existing LONG position (from April 10 @ 1360.54) and going SHORT S&P-500 Cash Index (SPX) as of the Close Today at 1292.20 (almost touching its +1 sigma).

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We have a rough patch ahead of us. The problem is the unresolved turmoil in the Credit Markets as we enter the season of high volatility for our Equity Markets. Brace yourself (and your portfolio).

Here is our Timer Chart: