The S&P made new bear market lows today on the news that the House rejected the bailout plan. This new low gives us the opportunity to examine some technical indicators for evidence that the market's technical condition is not as bad as it seems at first glance.As you can see from the first two charts above this post, both the 5 (purple line) and 10 day(red line) moving averages of the daily advancing issues number for the NYSE are higher than they were 10 days ago at the September 18 low at 1136. This is a bullish indication and I think it means that these markets are about to rally.
Looking at longer term divergences we see from the second chart from the top that both the 20 day moving average and the daily readings of the number of S&P 500 issues trading above their 50 day moving averages stand well above the levels reached in July at the 1200 low. The 10 day moving average of the advancing issues number also stands above that low. Finally, the 20 day moving average and the daily count of the number of S&P 500 issues trading above their 200 day moving averages (top chart) is above its January, March, and July lows. This shows a market which is gathering strength for a big move to the upside.
18 comments:
Carl,
I realize the banks are capital impaired ... however, if the market is gathering strength to rally and we're seeing positive divergencies, what's it matter what Congress does? Isn't it all just noise?
Thanks,
Matt
Thank you.
Carl have you forgotten that over 800 stocks have been placed on a no short sale list? The amount of intervention has already propped up the market to allow the big boys to dump their shares at artificially elevated levels. We are back at the levels prior to the short sale ban being instituted. As I stated before...short sales were not to blame. Let's place blame where it is due. Do not believe that it is because Congress was being altruistic and wanted each family to own a home...the housing bubble was what fueled the last 5 yrs of "growth" and "prosperity". Being an economist you know that all markets will revert back to the mean from extremes. As the pendulum swings we will overshoot to the downside but that point has not occurred yet. Load the boat to the long side once we hit S&P 950. Citi is not in a better position than Wachovia...the government let them fail and the sun still rose. We have merely been prolonging the inevitable.
Carl, stick to what you know best, technical analysis. Stop telling people that Hank and Ben are heros or bailout is for the main street. The fact is you don't care about the main street.
I use to love coming to this site everyday. Not anymore.. Between the political ramblings, and the ridiculous bullish slant.
You have let your emotions get the best of you. I wish you the best, but you are doing a major disservice to your followers.
Eventually youll get a bull move if you keep at it- but by then your friends wont have any money left :)
gluck.. you need it.. and have a drink eh?
Carl
You see positive divergences-well we've been here before many times.Lagging indicators can lag quite a while-and divergences can diverge for sometime or no?
Contrary news items are all very well when the long term uptrend is in place-if not you are just continuing to pick bottoms-a very expensive business and foolhardy for any trader.
regards
RB
I wonder what sorts of arguments people made in 1930, 1931, 1932 etc ... yup, a market rally is imminent! Look more like a market crash! I'm sure the Asians will just love this!
Rick B.
rick b, it has been asked a few times now by readers in the comments if Carl has tested how his contrarian approach would have faired in the 1930's, but no reply
The best lesson learned in trading?
Having the patience to wait for confirmed signals ... proclaiming that this low will hold or that is non-sense ... the low breaks, you sell it .... high breaks you buy. Who gives a flying fcuk about the rest!
P.S. It's really a shame that you are a Democrat, Carl! I had respect for you but you seem to be ball-less ... Republicans have done more for this country than the Democrats can ever dream of!
Tom K.
Keep up the good work Carl. Your opinions are welcome here as well as you TA.
It is the partisan politics of the past 20 yrs that has caused the US to suffer on all levels. financially, socially, militarily, and spiritually we are being destroyed by the partisan politics and now in one of our darkest hours partisan politics still reigns. Government is a living, breathing entity that seeks to perpetuate itself and they are using hardship, fear and class division to gain more power and control. I'm not a Democrat nor am I a Republican...I am an American and we won't attain our greatness until the majority feels the same.
I am a democrat too. (well I would be if I could vote in the US) but this isnt the place for political comments.
Catherine
After a 8.7% drop in the SP, you're not tking any risk in perdicting a jump...sooner or later...
But, though i repeat myself, this is not normal market..Techincal, as well as more fundamental, approaches have their limits in those circumstances...Did your charts warned you about Walchovia overnight meltdown ?
there'll be a rally when the interbank rates mess will settle...By the way, there's earning season coming...
Good luck
Balsamo
Dear Carl:
How can you blame this on Republican's? The Dems have the majority and they still voted it down! "Main" street is willing to let Wall St. suffer ... big deal if you can't get a car loan or a student loan ... this way Americans will not consume more than they can afford. I love how CNBC is crying that people can't get student loans. Why not bail out the students who are entering the workforce with sizeable debt? Why not have secondary education free? Just a few things you lovely democrats could work on.
Bill T.
Chicago IL
Suspend what you believe....Trade what you see
hey guys!
McDonald's is hiring down the street from my house! I think if I work there for the next 10-15 years (overtime) I can climb out of the debt hole I'm in.
So much for trading off of negative magazine covers!
Thx Carl!
PS ... the S&P is going much much higher, I think in ummm, 35 years, yeah! Trade that!
Mike "The Sucker"
the point of recognition is when everyone universally trades based
on the same belief when this happens the headlines along with the front page covers prove correct . so far the front page covers have not worked as a contrarian indicator the bail outs have not worked and the indicators
also have not worked . what this means is we need to adopt to bear market indicators which people have not had to use in many many decades . instead of using advancing issues as a sign of bullish divergence you should be using declining issues as a sign of bearish divergences , when that indicators then fails to work then
you will see the market change from a primary down trend to a primary uptrend . today the 10 day trin closed below 1.00 which is
by itself showing an overbought market even after a 700 pt down day on the dow .
Biggest trade of the year on the short side and you completely missed it. How are those magazine and mainstream media news treating you?
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