Stocks Need to Make a Stand

By Chris Ciovacco | May 23, 2012 | 8:07 AM |  0 CommentsTweet This

The video below covers:

1. All-World Stock Index ex-U.S.
2. Fibonacci retracement levels
3. Trends
4. Support
5. DeMark (day, week, month)

 

 

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A Million SPX Put Contracts Traded …a Contrarian Timing Signal

By Bill Luby | May 18, 2012 | 7:43 AM |  0 CommentsTweet This

With a half hour to go in yesterday’s trading session, over one million put contracts had already been traded on the S&P 500 index, which is about 2 ½ times the average daily volume. This elevated put volume comes on top of 913,000 SPX put contracts on Wednesday, which was the second highest for 2012.

The one million level is rarely seen in SPX puts and generally indicates an extreme amount of hedging on the part of institutional investors, as well as increased speculative activity.

Looking at the chart below, which goes back two years, one can see that in those rare instances when put volume (vertical red bars on lower half of chart) reached one million, this typically coincided with a bottom in stocks.  [Edit:  the finally tally wass 1.28 million SPX puts, the highest total since August 9, 2011]

In addition to puts in the SPX, I also closely follow the ISEE equities only call to put ratio. The indicator I have developed which is based on the ISEE is now showing is greatest contrarian bullish bias (due to a preponderance of put volume) since the end of June 2010, just two days before the SPX put in an key bottom at 1010.

Of course, history is not guaranteed to repeat itself or even rhyme in the face of the current worries about Greece and Spain, but the odds now favor stocks finding at least a short-term bottom very soon.

 

[source(s): LivevolPro.com]

Disclosure(s): Livevol is an advertiser on VIX and More

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A Rare But Intriguing Setup Based On The Recent Weak Closes

By Rob Hanna | May 18, 2012 | 6:20 AM |  0 CommentsTweet This

@mnkahn

Regardless of whether the market has closed up or down, SPY has consistently closed near the lower end of its range over the last 5 days. Below is a list of all the instances where SPY closed in the bottom third of its daily range for five days in a row, and their returns over the next two days.

What I find most remarkable about this study is not the fact that all 6 instances closed higher 2 days later, but that the last 5 never saw any drawdown over the next 2 days.  That means they gapped up on day 1 and went 2 days without filling.

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Risk is Relative

By Matthew Bradbard | May 18, 2012 | 6:17 AM |  0 CommentsTweet This

Energy: The selling is slowing as Crude has reached extremely oversold levels.  Aggressive traders should be scaling in on weakness and as I’ve said of late the closer prices get to the $90/barrel the more aggressive a buyer I would be. $90-92.50 is my advised buy window in front month futures. Obviously I would be buying forward contracts though so to stay with the trade on a bounce that gets legs. RBOB penetrated $2.90 breaching the 200 day MA after being above that critical level for the last five months. I think it could get ugly very short term but we should be close to our value zone. If Crude holds near $90/barrel there should not be more than 10-15 cents of risk in RBOB…trade accordingly. Heating oil is approaching six moth lows losing just shy of 2% today. Hedgers are advised to lock in prices at these lower levels. My take is we are very close to a turning point. If for whatever reason prices settled below $2.75 back to the drawing board because we’re likely headed lower. The 8 day MA continues to act as solid support as natural gas crept to eight week highs today. We could inch higher but when the 8 day MA is breached step aside. That level come is at $2.50 on June.

Stock Indices: Equities were hit again today making it five straight sessions down 1.3-2.0% today depending on the index. Prices are now within 1.5% of my forecast from last week. Support is seen in the S&P at 1285 followed by 1245 on a meltdown and as for the Dow 12125 followed by 11800.

Metals: Gold has completed a 61.8% Fibonacci retracement and hopefully some regular readers were buyers in the last 24 hours. I put out a buy recommendation at $1535 two weeks ago and though prices got there quicker than I had anticipated it is now water under the bridge. Prices have closed nearly $40 off that level. As long as $1535 in June holds on a closing basis I like bullish exposure. Upside targets are $1615 followed by $1650 and then I’ll re-evaluate. Silver got some legs today as well picking up 3% to trade in the green for only the second time in two weeks. There is more risk in silver longs as $27.15 is eyed as support. From here I expect a bounce back near $30/ounce. Copper tried to gain but trades above $3.50 were rejected. As long as stocks continue to come under pressure I would expect copper to leak lower. My next target is $3.35 -3.38 in July.  

Softs: Those still in cocoa should ride this trade lower…first target in July future 2180 followed by 2150. Unfortunately some may have been stopped only to see prices collapse the next session...that is trading. Day four of the sugar appreciation as prices have advanced just shy of 4%. This represents about 40% of the anticipated move. My suggestion is long futures and some sort of options protection. Cotton may trade lower but it will be without my client as prices appear to be over extended and a snap back is due in my opinion. Coffee is still having trouble getting above the 50 day MA as three days of attempts have been rejected. Look for a pop when prices breach that level which should set up a good bearish trade entry…stay tuned.

Treasuries: Wow…30-yr bonds gained over 1% to reach levels not seen…well let’s see my charts only go back to 1992. Money is clearly going into Treasuries and although the returns are low its better than losing elsewhere…that’s the logic I’m hearing. 10-yr notes and 30-yr bonds are at contract highs and have not seen a top yet in my opinion. As long as prices stay above their 9 day MAs they’re headed higher. In full disclosure I have no long exposure with clients.

Livestock: Cattle appear to be breaking out of the sideways congestion deciding their next direction is up. I do not wish to have bullish exposure but forced into the trade I would rather be long than short. Lean hogs have gained seven out of their last nine sessions with prices reaching three week highs. I suggest bullish exposure with a target at the 38.2% Fibonacci level just below 90 cents in the June contract.

Grains: In four sessions corn has picked up 50 cents completing a 50% Fibonacci retracement at today’s highs. Prices did close above a down sloping trend line that had capped previous rallies for the last three months. I would be taking partial profits though we could see an additional 15 cents in July futures. In three days wheat has rallied over 60 cents lifting prices above it’s down sloping trend line as well. I hope several followers listened and caught these moves! Greedy traders could milk this for another 15-20 cents but I’d be scaling out of longs as this money came quick for recent long entries. Soybeans are 65 cents off support but I just cannot convince myself to buy at these levels for clients…call me stubborn. I am holding out for a lower long entry willing to miss upside form here.

Currencies:   The 3.5% appreciation we’ve experienced in the dollar in the last three weeks is in its ninth inning in my opinion. The weakest links in the Forex sector to me remain the Loonie and the Cable. Now with the Pound under the tend line that held all of 2012 fade rallies. Our first objective has been reached, from here 1.5650 in June.

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Why, After A New Low, I Prefer An Emotional Open

By Rob Hanna | May 17, 2012 | 8:40 AM |  0 CommentsTweet This

On Monday the SPY closed at a 50-day low for the 1st time since the beginning of October – just over 150 trading days ago.  Not only is it at an intermediate-term low, it is strongly oversold on a short-term basis based on several measures.  Many traders are therefore looking for a bounce.

Strong bounces from intermediate-term lows are often initiated by a large move overnight.  Big gaps in overnight action will often create strong emotion at the open and can help to spark a bottom (at least a temporary bottom).  To illustrate my point the study below looks at 3 scenarios.  Each scenario shows results of buying at the open the day after a 50-day closing low and selling at the close.  The only filter I use to distinguish is the size of the opening gap.

Let’s first look at small (or non-existent) gaps.

Results here appear weakly bearish.  This isn’t very surprising considering the market is obviously downtrending if it is making 50-day lows.

But now let’s see what happens when SPY gaps down over 1%.

Much more volatility among both winners and losers.  More often than not the emotion has at least temporarily washed out the selling and the net results have been solid intraday gains.

Now let’s look at results if the market gaps up over 1%.

Here again we seen bulls have won out a little more often than bears.  Like the last scenario the big gap serves to increase volatility in both winners and losers, and the net results show strong intraday gains for the bulls.  In this case the upside edge is not due to a “washout” of selling, but more likely it is panic buying as those that were short overnight are afraid that the market is going to run away from them - so they rush to cover, creating what is often referred to as a short-covering rally.

In either case, when trading at new lows, the emotion generated by a large opening gap can often ignite a flurry of price movement that is not seen following small overnight moves.   More often, but not to an overwhelming degree, that flurry of price movement will result in strong intraday gains.  This is why I become more interested in buying emotional opens following new lows than I do when the market opens flat.

 

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Stocks Need to Make a Stand

By Chris Ciovacco | May 23, 2012 | 8:07 AM |  0 CommentsTweet This

The video below covers:

1. All-World Stock Index ex-U.S.
2. Fibonacci retracement levels
3. Trends
4. Support
5. DeMark (day, week, month)

 

 

...

A Million SPX Put Contracts Traded …a Contrarian Timing Signal

By Bill Luby | May 18, 2012 | 7:43 AM |  0 CommentsTweet This

With a half hour to go in yesterday’s trading session, over one million put contracts had already been traded on the S&P 500 index, which is about 2 ½ times the average daily volume. This elevated put volume comes on top of 913,000 SPX put contracts on Wednesday, which was the second highest for 2012.

The one million level is rarely seen in SPX puts and generally indicates an extreme amount of hedging on the part of institutional investors, as well as increased speculative activity.

Looking at the chart below, which goes back two years, one can see that in those rare instances when put volume (vertical red bars on lower half of chart) reached one million, this typically coincided with a bottom in stocks.  [Edit:  the finally tally wass 1.28 million SPX puts, the highest total since August 9, 2011]

In addition to puts in the SPX, I also closely follow the ISEE equities only call to put ratio. The indicator I have developed which is based on the ISEE is now showing is greatest contrarian bullish bias (due to a preponderance of put volume) since the end of June 2010, just two days before the SPX put in an key bottom at 1010.

Of course, history is not guaranteed to repeat itself or even rhyme in the face of the current worries about Greece and Spain, but the odds now favor stocks finding at least a short-term bottom very soon.

 

[source(s): LivevolPro.com]

Disclosure(s): Livevol is an advertiser on VIX and More

...

A Rare But Intriguing Setup Based On The Recent Weak Closes

By Rob Hanna | May 18, 2012 | 6:20 AM |  0 CommentsTweet This

@mnkahn

Regardless of whether the market has closed up or down, SPY has consistently closed near the lower end of its range over the last 5 days. Below is a list of all the instances where SPY closed in the bottom third of its daily range for five days in a row, and their returns over the next two days.

What I find most remarkable about this study is not the fact that all 6 instances closed higher 2 days later, but that the last 5 never saw any drawdown over the next 2 days.  That means they gapped up on day 1 and went 2 days without filling.

...

Risk is Relative

By Matthew Bradbard | May 18, 2012 | 6:17 AM |  0 CommentsTweet This

Energy: The selling is slowing as Crude has reached extremely oversold levels.  Aggressive traders should be scaling in on weakness and as I’ve said of late the closer prices get to the $90/barrel the more aggressive a buyer I would be. $90-92.50 is my advised buy window in front month futures. Obviously I would be buying forward contracts though so to stay with the trade on a bounce that gets legs. RBOB penetrated $2.90 breaching the 200 day MA after being above that critical level for the last five months. I think it could get ugly very short term but we should be close to our value zone. If Crude holds near $90/barrel there should not be more than 10-15 cents of risk in RBOB…trade accordingly. Heating oil is approaching six moth lows losing just shy of 2% today. Hedgers are advised to lock in prices at these lower levels. My take is we are very close to a turning point. If for whatever reason prices settled below $2.75 back to the drawing board because we’re likely headed lower. The 8 day MA continues to act as solid support as natural gas crept to eight week highs today. We could inch higher but when the 8 day MA is breached step aside. That level come is at $2.50 on June.

Stock Indices: Equities were hit again today making it five straight sessions down 1.3-2.0% today depending on the index. Prices are now within 1.5% of my forecast from last week. Support is seen in the S&P at 1285 followed by 1245 on a meltdown and as for the Dow 12125 followed by 11800.

Metals: Gold has completed a 61.8% Fibonacci retracement and hopefully some regular readers were buyers in the last 24 hours. I put out a buy recommendation at $1535 two weeks ago and though prices got there quicker than I had anticipated it is now water under the bridge. Prices have closed nearly $40 off that level. As long as $1535 in June holds on a closing basis I like bullish exposure. Upside targets are $1615 followed by $1650 and then I’ll re-evaluate. Silver got some legs today as well picking up 3% to trade in the green for only the second time in two weeks. There is more risk in silver longs as $27.15 is eyed as support. From here I expect a bounce back near $30/ounce. Copper tried to gain but trades above $3.50 were rejected. As long as stocks continue to come under pressure I would expect copper to leak lower. My next target is $3.35 -3.38 in July.  

Softs: Those still in cocoa should ride this trade lower…first target in July future 2180 followed by 2150. Unfortunately some may have been stopped only to see prices collapse the next session...that is trading. Day four of the sugar appreciation as prices have advanced just shy of 4%. This represents about 40% of the anticipated move. My suggestion is long futures and some sort of options protection. Cotton may trade lower but it will be without my client as prices appear to be over extended and a snap back is due in my opinion. Coffee is still having trouble getting above the 50 day MA as three days of attempts have been rejected. Look for a pop when prices breach that level which should set up a good bearish trade entry…stay tuned.

Treasuries: Wow…30-yr bonds gained over 1% to reach levels not seen…well let’s see my charts only go back to 1992. Money is clearly going into Treasuries and although the returns are low its better than losing elsewhere…that’s the logic I’m hearing. 10-yr notes and 30-yr bonds are at contract highs and have not seen a top yet in my opinion. As long as prices stay above their 9 day MAs they’re headed higher. In full disclosure I have no long exposure with clients.

Livestock: Cattle appear to be breaking out of the sideways congestion deciding their next direction is up. I do not wish to have bullish exposure but forced into the trade I would rather be long than short. Lean hogs have gained seven out of their last nine sessions with prices reaching three week highs. I suggest bullish exposure with a target at the 38.2% Fibonacci level just below 90 cents in the June contract.

Grains: In four sessions corn has picked up 50 cents completing a 50% Fibonacci retracement at today’s highs. Prices did close above a down sloping trend line that had capped previous rallies for the last three months. I would be taking partial profits though we could see an additional 15 cents in July futures. In three days wheat has rallied over 60 cents lifting prices above it’s down sloping trend line as well. I hope several followers listened and caught these moves! Greedy traders could milk this for another 15-20 cents but I’d be scaling out of longs as this money came quick for recent long entries. Soybeans are 65 cents off support but I just cannot convince myself to buy at these levels for clients…call me stubborn. I am holding out for a lower long entry willing to miss upside form here.

Currencies:   The 3.5% appreciation we’ve experienced in the dollar in the last three weeks is in its ninth inning in my opinion. The weakest links in the Forex sector to me remain the Loonie and the Cable. Now with the Pound under the tend line that held all of 2012 fade rallies. Our first objective has been reached, from here 1.5650 in June.

...

Why, After A New Low, I Prefer An Emotional Open

By Rob Hanna | May 17, 2012 | 8:40 AM |  0 CommentsTweet This

On Monday the SPY closed at a 50-day low for the 1st time since the beginning of October – just over 150 trading days ago.  Not only is it at an intermediate-term low, it is strongly oversold on a short-term basis based on several measures.  Many traders are therefore looking for a bounce.

Strong bounces from intermediate-term lows are often initiated by a large move overnight.  Big gaps in overnight action will often create strong emotion at the open and can help to spark a bottom (at least a temporary bottom).  To illustrate my point the study below looks at 3 scenarios.  Each scenario shows results of buying at the open the day after a 50-day closing low and selling at the close.  The only filter I use to distinguish is the size of the opening gap.

Let’s first look at small (or non-existent) gaps.

Results here appear weakly bearish.  This isn’t very surprising considering the market is obviously downtrending if it is making 50-day lows.

But now let’s see what happens when SPY gaps down over 1%.

Much more volatility among both winners and losers.  More often than not the emotion has at least temporarily washed out the selling and the net results have been solid intraday gains.

Now let’s look at results if the market gaps up over 1%.

Here again we seen bulls have won out a little more often than bears.  Like the last scenario the big gap serves to increase volatility in both winners and losers, and the net results show strong intraday gains for the bulls.  In this case the upside edge is not due to a “washout” of selling, but more likely it is panic buying as those that were short overnight are afraid that the market is going to run away from them - so they rush to cover, creating what is often referred to as a short-covering rally.

In either case, when trading at new lows, the emotion generated by a large opening gap can often ignite a flurry of price movement that is not seen following small overnight moves.   More often, but not to an overwhelming degree, that flurry of price movement will result in strong intraday gains.  This is why I become more interested in buying emotional opens following new lows than I do when the market opens flat.

 

...

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