Thursday, March 1, 2012

Market Madness Daily Market Update - 3/1/12

It's that time of day once again people (and algo bots).

Daily Market Recap - 3/1/12
The big news of the day is probably the spike in crude. Light Sweet (/CL) topped $110 today before settling down a bit to a still crippling $108.70 as this is written. The impetus for this was apparently a pipeline explosion, with Bloomberg reporting "Oil Advances to $110 on Report of Pipeline Explosion in Saudi Arabia."

Another big mover today was our preferred volatility proxy, the VIX. The VIX binary options contract posted a large decline of over 6% on the day, back down to 17.26 from its 18.43 close of yesterday. This seems somewhat odd behavior given the day's action in the underlying index of the S&P. While the S&P did post a respectable gain today it was a relatively bumpy ride getting there. We would have expected a more modest decline, all else being equal, than that which we did see.

This will probably surprise well...none of you. But by market open this morning the /ES futures had more than recovered overnight from their 10+ point fall immediately following yesterday's close. Red futures, green indices is, however, par for the course this year so nobody should have been surprised.
The SPX spent most of its morning oscillating around that 1370 level of the 2011 highs before climbing as high as 1376 in the afternoon, falling rapidly back down to test that 1370 level, and bouncing just as rapidly back up to finish meaningfully above that level, at 1374. A gain of over 8 points for the day, or 0.62%. We mentioned yesterday that to be convinced this bull market has real legs we would have to see a couple things happen. Well one of those things mentioned was successful tests of the 1370 level as newly minted support. We can now log one successful test of that area as support. That is certainly a positive sign anyway.

Moving on to the small caps, RUT had yet another pretty ugly day. It also had the wildest ride of the major indices today, reaching as high as 823.79 before moving back on down to finish the day at 815.3, a 0.5% gain. This utterly fails to undo any of the chart damage done over the last couple days and technicals continue to weaken for this index. As we can see both MACD and our RUT/COMP ration readings are also experiencing further deterioration.
If you were looking to grasp at straws for a reason to be bullish on this index I suppose you could take some heart in the fact the the rate of decline in relative strength vs. both the SPX and COMP has slowed. That is decidedly weak, however, and I would hope buyers have better reasons than we could come up with.

And last on the list for today's recaps, the COMP index. This index had the best day of the majors with a 22 point gain, or 3/4%. We don't have much comment here today other than to say that this index remains the strongest of them (certainly on a strictly technical basis) and the one least likely to see the first signs of selling appear. If such a thing ever occurs, that is.

Until next time...
Stay safe out there!

Bullion Dealer Explains Metals Plunge

Thursday morning the London Bullion Dealer, Sharps Pixley, is reporting that a "massive 31 tonne sell order triggered gold and silver price collapse." And, being bullion dealers of course, they see this as a great buying opportunity. However, we here at Market Madness are also fans of the precious metals and also see this as a buying opportunity.

It now seems likely that this event is indeed probably what at least started the sell-off.
See ya for this evening's daily Market Madness Recap!

Wednesday, February 29, 2012

Market Madness Daily Market Update - 2/29/12

Some people sold some stuff today! A thing simply unheard of these days. How droll.

Before jumping into the indices we bring you our Financial Markets Headline of the Day:
Apple Is Now Worth A Staggering $500 Billion -- Can It Hit $1 Trillion?
Double from here? Bullish sentiment has gotten way ahead of reality me thinks. Of course, Apple could hit a trillion valuation...depending on Bernake's printing prowess.

Daily Market Recap - 2/29/12
Starting off our Daily Market Recap we take a gander at the SPX (S&P 500 index), which has had its best start to the year since 1991, on our standard daily candle chart.
Despite having a not so swell day itself, shedding 6.5 points (-0.47%), the SPX continued to gain in relative strength against the small caps. In fact the trend has only accelerated today, with a jump of over 1.2% in the SPX/RUT ratio. A fairly significant one day move for that measure. The VIX saw a modest gain of around 2.5% on the day after moving with the S&P for the bulk of it. Watch the VIX closely in coming weeks as it may signal a reversal before index prices do. It has been acting skittish lately.
(In after hours news, ES futures plunged as much as 7.25 points from its closing level immediately after the closing bell. As of this writing it has since fallen even further (after an attempt at recovery) and the /ES is now down about 14 points in total from markets close! On no apparent news that we could find. Very interesting.)

Moving on to small caps we find that they had a horrible day. Indeed it was the worst day for the small cap RUT index so far this year. Price is now sitting right at an important support level at 810 and if we see a convincing break of that level we think it will unleash some selling. So watch this closely in the coming days. MACD and Relative Strength also continued to weaken significantly today. Lots of warning signs here and somehow we doubt the selling (in there is any) will be confined just to this index when it comes.

Lets take a quick look at Tech and Semiconductors. Although the NASDAQ comp. had its 2nd worst day of the year it is still in pretty good shape and has not broken trend yet (thanks to Apple no doubt).
If selling is to break out it is unlikely in our view that this will be the index it breaks out first in. Barring an Apple share price shock of course. Semiconductors, in contrast, appear to be rolling over and poised for a sell-off. We don't follow this index religiously but it can sometimes act as a leading indicator, so we do recommend our readers watch it.

Before signing off we wanted to touch on the metals, which took a beating today. Yesterday we brought up the strong possibility that metals could encounter another "smack down" event. Our original thesis for this outcome was Central Bank intervention but the balance of evidence strongly suggests that the price declines were much more a function of Bernake (and CB friends around the world) suggesting there may be no QE to infinity. A jarring announcement to both QE cheerleaders and Gold Bugs alike. This seems most likely to have caused the sell-off. As opposed to the CB shenanigans we had previously contemplated.

Stay safe out there!
Market Madness

Silver Smack Down!

Yesterday we noted the amazing run up in silver so far in 2012. But we also mentioned the possibility of yet another precious metals smackdown writing:
"Will it once again reach for the sky, only to be once again smacked down with a vengeance?"
That has now clearly been answered.
The reason such an outcome was so predictable is that Central Bankers don't like soaring metals prices because it makes them look bad and damages credibility.

See ya after closing bell!

Tuesday, February 28, 2012

Market Madness Daily Market Update - 2/28/12

Maybe not so much "madness" in the markets today really. But an interesting day to watch nonetheless.

Markets finished largely higher today after another relatively volatile day. Despite moderate gains in the S&P, with Financials and Tech as the leaders we only achieved a drop of 1% in the VIX, after yesterday's 5% jump.

But...BUY BUY BUY! "(channeling Jim Cramer)
New post recession highs are in! DOW above 13k!
I'm "reliably" told, quite frequently, by many friends on CNBC that this means we should be buying with both fists so we don't miss out like suckers!
Are you buying into the Market Madness yet? We're not quite sold yet ourselves and will need to see at least two things before jumping in to any large degree. 1) Fundamentals strengthening. More follow through on the positive economic metrics that have started showed up of late (surprising us we must admit) would be a good start. 2) Price confirmation from here. I'd like to see a convincing stand above this level, with consolidation and tests of the level as new support. If I saw those two things I think I would have to change my thesis.

We're going to take a closer up look at the SPX and RUT today with some intraday charts using 30d/1h candles. First the SPX where we can see that even on an intraday basis it never really has broken its trend line since the rally really got its footing after the Christmas break. And actually appears to be strengthening with each test of that line. But if this rally is to continue small caps and other high beta issues must join in the party.

Which brings us to a look at the small cap RUT index. Also utilizing 30d/1h candles for this chart.
We see quite a different story here. Here we have a trend line that goes back five months being broken last week. And failure to recover and get back above it since that time. Worse than that the index has been utterly flat going back to the 2nd of Feb. Nearly a whole month now. Pretty ugly. This was also the only major index today to finish in the red, by about 1/3 of a percent, the same amount the SPX finished in the green by. This performance will need to change soon for this rally to have real legs.

And to update on silver from earlier, futures finished up at roughly where they were when the mid-day update was posted, at around $37 flat. Take a look at this jump. Impressive!

Best of luck to all from Market Madness.
Be safe out there!

Intraday Update - Metals

As many may be aware, the precious metals (which we are fans of here at Market Madness) have been on fire so far this year. Outperforming near everything but Crude and AAPL. Silver has been especially buoyant and today has shot up another 4% to flirt with the $37 handle, before cooling off just a tad. Gold is no slouch toady either but silver is clearly the big star at the moment.
Will it once again reach for the sky, only to be once again smacked down with a vengeance?

Monday, February 27, 2012

Market Madness Daily Market Update - 2/27/12

Flat Indices, Soaring Volatility

Good evening!
It was a seemingly uneventful day by looking just at the closing numbers on the various popular indices. But those closing numbers are hiding quite a lot of intraday activity.

Starting with the COMP today we have little comment but to note that after a moderate dip lower at the open it quickly fought back up to flat, and remained there for the rest of the day where it also finished. The same basic story applies to the DOW but that index finished slightly green instead of red, after roaring back from its early dip. Almost as boring as the closing numbers alone would indicate.
One headline of note concerning the DOW however, coming courtesy of ZeroHedge:
(Dow Jones Crosses 13,000 22 Times And...Closes Under)

The small cap Russell 2000 (RUT) also finished essentially unchanged (-0.03%). However, the story is somewhat more interesting here. As has been noted in earlier Market Madness Recaps this index had left the rally party in early February and has yet to rejoin the fun since. Today it experienced a larger early morning drop than other indices before turning around with the rest of them and getting back to flat. The result is further weakening in relative strength versus large caps but this is not yet nearly enough to support the idea of a reversal. Despite the fact that I personally believe one could come at any time. It's just not what the technicals are saying.

Moving on to the S&P it was a more notable day in some respects. The SPX managed to drift up to finish at about 2 points by close, recovering much better than other indices from the early morning selling. In fact it roared all the way back from almost a 10 point deficit, to at one point 6.5 points in the green. This was a break just barely above its 2011 high (1370.58) on the intraday basis. But, of course, finishing a good 3 points below that mark on the far more important daily basis.

Despite the better gains of this index it had a more volatile day than others and far more volatility than we are used to seeing these days. This is clearly reflected in a whopping 5% jump in the VIX today. Another flashing warning sign I suspect.
But, can anything stop this market's optimism? Sure doesn't seem that way lately but alas, all good things must come to end eventually my friends.

And also in other news...
Greece has finally been declared in "selective default" by S&P Ratings.
Does this have any practical meaning? Probably not.

Stay safe out there!

S&P 500 challenging 2011 highs

Well as has been par for the course lately futures leaked down over the Sunday off hours, only to come roaring back and into the green after markets open. Overnight futures weakness followed by trading hours strength has been a very common sight so far this year. And then the daytime strength has mostly been enough to put us in the green by a few points, day in and day out, resulting in the vapour volume, volatility-free drift upwards we've had. Friday's volume on the NYSE was at decade lows (ex holidays). We keep this up soon there will be nothing but computer left trading. This is NOT a healthy market in my view.

As of this writing the S&P has pushed right up against those 2011 highs at 1370.58, getting as close as a measly 10 basis points from that level (1370.48). Will she break out? I honestly don't have a clue but if it does it is going to act as a loud "buy signal" for a lot of traders (though not this one).

Don't forget to come back for your daily markets recap this evening, and every evening!
Stay safe out there!

Sunday, February 26, 2012

Market Madness Weekly Recap - 2/24/12

Time for our Sunday weekly market updates. I hope everyone had a great weekend!
Lets start with everyone's favourite volatility proxy, the VIX. As we can see in this (2 year/Weekly bars) chart below this index is sitting very close to strong, multi-year support at around 15 points. Frequently periods of extremely low volatility like this end in huge spikes to the upside. However, it can sometimes hang out for an unpredictable bit before doing so. And when trading VIX products timing is even more important than usual. MACD does appear to be beginning to turn, and stochastics have also turned up from their oversold levels. That points to a weakening trend and potential reversal but until we see some confirmation from price, the trend remains downward, for now.
Next up is our favourite index to follow here at Market Madness, the S&P 500, or SPX. The index inched higher on the week after a more volatile ride than we've seen on average this year (a year in which volatility has been nearly non-existent so far). Note that we are bumping right up against those 2011, multi-year highs at around 1370. Next week will be an important one to watch as we interact with this meaningful level. My bias is to the downside but it's important to keep an open mind and just watch what happens and be ready to react, if necessary. MACD is still strong on the weekly frame and Stochastics, while overbought, have not yet turned. This would suggest the upward trend could still continue, however, and certainly doesn't support my bearish bias.
Unlike the large cap SPX, the small cap RUT index still has some room overhead before reaching its "post-recession," 2011 highs. Small caps have been an interesting area to watch over the last few weeks. Since about the beginning of February, the index has basically stalled out, remaining flat and developing a weakening technical picture. If selling is to suddenly start breaking out, this is where we would look for it to happen first. MACD readings remain fairly decent but Stochastics look to be beginning to turn down from overbought levels. It is early in the turn however, and could easily reverse.
Lastly, but certainly not leastly (ok so there is no such word as with it), we have that good old bubblicious tech index, the NASDAQ Composite. In contrast to the other indices we cover, the COMP broke its 2011 high ceiling early in the month. Indeed, it has even made brand new decade highs! Mostly drug kicking and screaming up there by Apple, the index behemoth. The resulting carnage of a crash in AAPL share price at this point would be a hell of a sight to behold. Though painful. The damage would be far and wide, and certainly not contained to apple shareholders, or even the nasdaq. Lets hope it doesn't. MACD is still strong, and even strengthening; while Stochastics have just begun to potentially turn down out of overbought territory. But really, all you need to know about this index right now is "what is apple's share price doing?"
In summary the balance of indices remains strong and technical analysis suggests trend continuation is the most likely outcome for the immediate future. What the fundamentals are saying, on the other hand, may be an entirely different story. I remain quite bearish in my macro view for a multitude of reasons. But many other intelligent, knowledgeable people disagree, and are in fact cautiously optimistic. There's no substitute for doing your own due diligence and coming to your own informed opinion on the macro landscape. Good luck out there! Cheers, Curtis