Wednesday, July 15, 2009

The dog that didn't bark

Here is an hourly chart of the e-mini day session for the past six weeks. The rally from Monday morning's early low has been almost uncorrected - a very unusual show of strength. In my judgment the Goldman Sachs and Intel earnings reports were not by themselves enough to push the market up like this in normal circumstances. But circumstances are not normal. There is a very large investment crowd that is betting that this market will go a lot lower because the economy is deteriorating. The earnings news has put a small hole in that particular balloon - the economy may in fact not be deteriorating. And so many are so under invested that it doesn't take much to scare them back into the market. I think there is much more portfolio reinvestment to come as bears gradually give up the ghost. This market is headed much higher.


sanjay said...

Short covering..I loaded up on my shorts here at SPX932...This level may not be seen in years...
Double shoulders made...short term target 820 SPX

TradingNuggets said...


You could be correct with your comments regarding econ is not deteriorating but I disagree.

Obiviously the charts say I'm wrong. The price action shows the March trend continuing. However...

Unemployement on a Federal level is almost 10%. Consumers are deeper in debt. Their retirement accts have been cut. Hrly work week is now 33 hrs. peoples' home are worth less than last year. Housing and auto sales are still declining and I don't see any evidence of any major "ramp up" in US company production.

I guess "less bad" is enough to spur the market. Still I don't see any 'green shoots" but that's just me.

Having said all that... you've been right on target with your analysis.


Andreescu said...

I shorted too at EOD...
Carl, VIX & SPX both closed in green, so the next day should be red ...what do you think?


iv said...

i agree Sanjay.....loaded up afterhours on my shorts

Kishore said...

Sanjay, Carl has an impeccable record of being right, most of the time!

Carl, I agree that GS and INTC earnings may not have much to do with the market going up so much in three days, but neither has the illusionary view that the economy may not be deteriorating.

Even though the economy is in terrible shape, the consumer, the banks, the state governments and the US government are all insolvent, the US government is jacking up the stock market, through manipulations, to postpone the dooms day scenario as long as they can.

At least, temporarily, what they have been able to accomplish is that the crowds stay complacent enough and not make a run to the banks to withdraw their deposits. The banks can't cover the deposits and nor can the FDIC. The dollar is about to become worthless and that may be only thing bullish for the stock market, and even that for how long??

Narayana said...

Why this rally could be a fake out:

TradingNuggets said...

After today, the weekly chart on the S&P has found some major support above the 5, 10 and 20 MAs. And it could go to 960/950 without much problem.

However, after saying that, I will not be in any LONG positions over the weekend and may go SHORT a few contracts over before close on Friday.

Just a hunch something major is going break this next week more geopolitcal or global economics with China and Russia that will "spook" the market. If soemthing like happens I will tell you what I had heard earlier this week.

Just my op.

Again, Carl has been right on the money. Thank you for all your posts and guidance.


Anonymous said...

The point of sentiment analysis is not to say that people in the majority are stupid. It is simply to understand where the majority are located and their degree of committment. It's like political or military analysis. Either side could win, but you have to know what your best chances are for winning given your analysis. That's where Carl excels.

Market Karma said...

Sanjay / Catherine,, the SP500 is very near short term statistical resistance but I would use this event, if it does take place, to lighten longs rather than sell short. A lot of markets are coming together to reinforce the growing positive risk appetite out there. -MK

Anonymous said...

I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.