In a day of many Government figures taking to the air waves the major indices tried to rally from a very oversold condition but weren’t able to wave the rally towels for more than a few hours. The Treasury and the Fed are launching the Term Asset-Backed Securities Loan Facility (TALF) which they suggest can potentially provide up to $1 trillion in loans for businesses and consumers.On the economic front, pending home sales in January fell 7.7%, much worse than the expected 3.5% decrease. The economic news continues to look bad. This market needs to see a strong bounce from these oversold conditions. Meandering around at the lows and consolidating will likely not sustain any kind of bounce that will hold. It would be a negative sign to work off oversold conditions while churning. Anyone (including myself) that has been attempting to trade for an oversold bounce has been getting stopped out or is sitting under water. These traders will get gun shy as the lows continue to grind out and many will stop trying to trade for the bounce. This is what the market needs in a way, as traders attempt to trade off the lows and there are no bidders willing to bid up and buy at higher prices… these traders have to turn and sell. If there were no traders to sell at higher levels, there are likely no more bottom fishers to sell to either so they have to sell at lower prices along with the momentum short sellers. When this occurs the market is driven to new lows. Eventually an oversold rally will appear and when we get one that can run for more than a day we will likely see a fierce move run up. For now we continue to struggle with finding any traction to hold as the markets are showing no confidence in the remedies suggested by Washington. We need a good excuse to rally, and we had appearances by both Ben Bernanke and Tim Geithner to help provide one. Neither had anything much new to say and the market failed another intraday attempt to generate the elusive oversold bounce.
News of additional bailout terms for AIG after it lost $61.7 billion in the fourth quarter set the stage for another day of selling on Wall Street. Warren Buffett felt that the US economy would be in "shambles" for the remainder of the year after suggesting late in 2008 that buying US stocks would be a good idea. The Oracle of Omaha had his worst year in 2008. The major indices responded with the DJIA falling to levels last seen in 1997. The SP-500 fell to 1996 levels after the worst first two months in its history. We cannot get any kind of catalyst to give bidders reason to bid up for stocks. Any strength or bounce is sold as we continue to drop to lower levels.
Unlike Thursday when the market attempted to bounce intraday the Index Put Call Ratio was .76, this led to the rally being short lived and we experienced more downside pressure.This morning as the selling continues the Index Put Call Ratio is sitting near 1.5. If we see a intraday rally, we will want to keep a check on the Put Call numbers. If it were to drop below 1 the rally will likely not last. We need to see this Put Call remain high and any rallies not be embraced from the outset to have any sustainably for more than a day.I will try and post these numbers if I see significant changes.
The group ended the week positive with a .37% increase giving the group a 4.30% gain for the quarter. This is by far an extraordinary performance given the market condition. Grant wins GOLD for the third time this quarter and continues to lead the group in medal points and equity. Susie gets Silver and Bob takes the Bronze.Spike members Ian F, Nihat K, and Rick K win 20 dollar credits this week. Rick had a 13.93% gain betting on a bounce with the financials this week. Congrats to all this week’s winners.
Did the cut in dividends of GE put a bottom in the stock? During Bear Markets when the unthinkable becomes the prudent thing to do, it sometimes signals a bottom. This idea was unthinkable not long ago… now the market may praise it actions.If we close above 9.31 today on increasing volume we may have a good clue to the answer.
The markets pulled back from yesterday’s gains as we get more talk out of Washington. Semi’s, Banks and Gas sectors were in the green while Healthcare, Airlines, and Transports were the weaker sectors. Many traders’ look to the Semi’s as a leading indicator. Semis were the stronger sector today.The market did not seem overly excited with last night’s speech by President Obama as the market continues to search for more clarity. Some info came out today but we need more clarity each and every day. The markets may want to back and fill and test the recent lows again. The important issue will be how we react if we probe the 740 lows.
GE will need to close above 9.31 this week to trigger a bullish divergence in MACD on weekly. If it closes above 8.82 today it will confirm a daily bullish divergence in MACD. A move above 9.26 today turns its intraday trend from down to up after forming a higher low at 8.71 today. The key will be can buyers……
The markets erased yesterday’s losses with short covering and buying due to the much oversold conditions we have experienced and comments made by Bernanke during the day. I would have preferred to seen a panic washout of those lows, but the market does not always give us what we want. Tonight Obama speaks and I am sure the markets will react in some way to his wording. The economic news continues to be poor and will continue to do so for several more months. The markets will try and price in its expectations and the market always turns before we see any improvement in the economic numbers. The market wants some clarity and direction. It is searching for less uncertainty and a reason to rally. The rally will only be a bear market rally as the bear continues to be in control. We will only know it is over after the fact… will the bear end with a growl or a whimper?
I revised tonight’s comment about the Oscillator. TradeStation had a data correction and this did NOT close at a historic close. It did close at -359.
Monday’s after option expirations are typically down days and today was no different. The DOW closed down 250 points, the lowest closing level since May 1997. The selling was steady all day in face of short term oversold conditions. The McClellan Oscillator mentioned the past few days closed at -359. This is near the recent record set on November 9th when the Oscillator hit -407. The percent of up volume was over 80% negative, the 21 day MA dropped to 40%. Below 40% typically signals we are near a bounce within a day or two. November 9th and November 20th we registered a 33% reading. We also saw a 34% reading on October 27th.