Wednesday, July 15, 2009

Bears Are Soiling Themselves........Not Me.......Other Bears (I already soiled myself around 3pm ET today)

Click on Charts to Enlarge

Despite anti gravity action in the market I don't have much to say. There are any number of cliches or analogies I could say here, but the bottom line is 1) the market is always right, and 2) there is has been no exit signal yet for the latest trade so there's not much to do.

The top chart above is the end of day short-term model I use for trades. This reached the highest level in its history (since 2002) during the day today. Check the comments section of today's earlier post for some background on other occurrences. Basically the other instances occurred near (just prior to major tops) or on the first explosion out of a major bottom. We certainly aren't in the second scenario, so on those grounds I would say we are probably in the first scenario.

The second chart is a longer short-term model composed of some different data. Only limited history is visible on the chart, but same story....happens coming off major bottoms or near significant peaks. Other than this March, all other signals led to almost immediate significant pullbacks.

The bottom chart is intraday cumulative TICK for the NYSE. Again this is the highest it has been in months (highest visible on the chart). Corresponding major highs typically lead to immediate pullbacks, or a narrower range day, followed by larger pullbacks.

From historical backtesting of prior major strong breadth days like today (last 3 days really), there are some clear guidelines for tomorrow. Downside risk is significantly larger than upside potential. Any gap down is extremely likely to be filled during the day. Expectancy is lower than random, due to losers being much bigger than winners.

From my experience after days like today, I expect to see a narrow range type of day to digest things, then expect the market to give back some recent gains following over the next few days. The associative cortex of my brain is telling me that I last felt like this around Jan 5 of this year. While the market is certainly in a different spot right now, I wouldn't be surprised if these price levels are not seen again for many moons after this week.


1 comment:

  1. Hey Pete,

    I exited out at $53.20. It was not a emotional exit. It was based on the % loss I was willing to take. I will take a look when it falls around $52. Just FYI.