Last week we discussed how market sentiment is just too hot and we most likeky will not sell off in a panic type sell off. Here’s the numbers for the week.
My little chart at the bottom of http://pv.ttthedge.com is broke :( because of the Labor Day Holiday. So I posted this one this week. Notice that all the Major Indices were down about 1% on the week with the Nasdaq 100 the strongest (Tom issued a buy signal on Tuesday) and the Small Caps being the weakest. The Dow however has shown considerable strength.
Tuesday’s selloff was very frightening. If you listened to CNBC and the Doug Kass updates you would all be convinced that the market was going into free fall. I lost some faith in my little pullback call from the Weekly newsletter and dug into more research and published this post Which line is longer? Left or Right?
I think it is worth the read if you did not get a chance. If anyone knows how to get it to Doug Kass it might save him some $$$$$. Eventually Doug will be right, as we continue to make higher highs here we will do so on lower and lower sentiment data and then bombs away. We are just not there yet. Soon maybe.
I confirmed with some of my other friends this weekend what they were seeing particularly in comparison to the 1987 crash. We have a little ways to go before that history repeats.
Our 52 Week NYSE New Highs:
If you were in the room on Thursday you would have know that by 11:00 am we were calling for a buy signal back into the market. We could tell via the 52 week new highs that were beginning to pile on that our 5 day momo indicator was going to turn at the end of the day. On Friday we were issuing very bullish New High reports all day. The Rut was troubling us but we knew if the RUT A/D could reach positive the market would light up.
We issue a new high report every 1/2 hour on our twitter feed.. which has moved now to http://twitter/redsdata. Robot postings on my regular twitter account http://twitter.com/redliontrader was lowering my search score so I needed to move it. This week we have added a score that ranges from 4+ to 4- to help interpret the NYSE data. You can read about the updated format at: http://www.redliontrader.com/2009/09/how-to-interpret-new-high-data.html
Pure Price:
The sisters have done their usual bullish job of climbing out of the recent pullback.. I did have to add some new % lines adding yellow as the 4% number, magenta as 5% and for the TF I needed to add green for 6%. These lines are based on this years high set on August 28th. I find the %pullback lines very useful in pointing out weakness and strength. Three of the sisters, YM, ES and NQ have climbed back to become close to the 1% level. TF is still back at the 3% level.
The NQ have been the strength returning, they have climbed 3 rungs from their pullback to nearly 5%. I ended the day on Friday holding a little more short than I wanted expecting a Gap down open on Tuesday with a rally. Instead it is clearly looking like a Gap up open with a ? Tonight’s research is going to be recent gap behavior so I can trade out of my positions. If I find anything good I will pass it along.
Our Zweig Panels
Our Zweig went oversold on Tuesday and we mentioned that since March 9th they only sit in that oversold area for 1 trading day. Anything longer would be change of character. The R2000 Zweig Breadth did stay 2 days, so a little warning shot on weakening sentiment? You can see that the broad market indicators on the left didn’t really break any new levels and as far as the Zweig is concerned the markets remain in Bull mode.
% Above 40 Day Moving Average
This was the chart that gave us a sell signal on 8/31, We used the turn up to cancel the sell Intraday on the 3rd and the New Highs and Tom’s Nasdaq buy signal triggered. Notice how this indicator is slowly bleeding off value. The slow downward slope on the yellow trend line will be our measurement moving forward this week. If we were to cross above that (i seriously doubt it) that would be extremely bullish. Most likely we will again turn at the sub 88 level and move sideways while the market moves higher.
What I am watching for on this indicator to predict the big-bang are values below 70 with a rally back up to 80, but failure to cross 80 or less, all the while making new market highs. See how we continue to climb even though this number creeps down? When we keep making highs with the value less than 80 watch-out. Until then the bull rules.. If history repeats and India can keep peace with Pakistan.
The Week Ahead.
The way is cleared now to retest and make new highs. Watch our postings on the NYSE new highs to see if we make new index highs on lower 52 week highs, this is the kind of weakening we are looking for. Today we were trapped without trading and the world went into in rally mode. As I write this late Monday afternoon the abbreviated futures market is closed and the YM (dow) and ES (sp-500) are up quite large. ES is up 7.75 over Friday’s close and YM is up 62 points. That certainly has trapped some bears, the question on tomorrow’s open is who has more fear
a) those that have ended with a free 3day windfall gift and afraid of loosing the profits
b) or the bears afraid that the stampede is in a full run again.
We will watch the open tomorrow, I would expect a sell-off at the open ( a little profit taking) and then a return to the highs. Much will be said about professional trading rooms back to full staff, it should be fun. I fully expect to make new highs this week although each new high should be harder and less difference from the last. If sentiment remains as strong as it is now without loosing steam during this week than Doug Kass better cover and wait because it means we have a little ways to go yet.
See you in the markets
Marlin Cobb – aka Redliontrader
ps. Remember it is ReUp time. From now until Sept 15th you can renew your service for 2010 at the same price as last year; $499 for trade room access with email or $125 for just email. After Sept 15th the price will go to $749 for the year for trade room access and $249 for our email service.. which is still a bargain.. imho. If you can find a better service I would like to know. If you can find a better service at this price I would really like to know that.
After Sept. 15th Tom and I will be scrubbing the Mailing lists.. so for some of you this might be your last weekly letter. I hope not. The strength of response to our current Early Bird special is forcing us up against some limits in rooms and mailing lists and increasing our costs. If you find value in our work please consider rejoining to secure your spot. Thanks to all that have read and responded.. you have made me a better trader. – See you in the Markets!
