There are signs in the charts that an aging rally may be over the hill. I’m not a good chartist, so my points must be viewed as a proposal for discussion, not action.
The first chart (click any chart to view at full resolution):
The VIX (red) made new low at May 12, while S&P is quite below the top from May 2nd. Next:
Put/call ratio made a new low today, but S&P did not follow. Those two charts above show the divergence between very high complacency and the market.
Now the financial stocks. I believe that financials must lead the rest of the market in declines or advances, especially now, when the credit crunch is in full force.
As you can see the financial sector (red) was leading S&P most of the April but started to trail after April 20 and now the charts are just forking away. Either financials must run at least 5% this week or the two-months rally is over and we are back to the regular bear scheduling.
In other times the 5% rally in XLF would be possible, but not now. Look at the T-bills chart:
The treasury chart looks awful. If the market rallies it may further diverge money from bonds to stocks. So the Feds and PPT will do whatever they need to to scare the markets from stocks into safety of bonds. Let see how they’ll do that this time
8 Comments
Libor is bogus?
We all recall that few weeks ago there was a scandal that Libor is misreported as some banks were quoting below their actual borrowing costs. Let me remind that Libor is made by just phone or mail quote from several banks.
Now the next problem is that the number of reporting banks is going down. Some time ago there were 16 banks, now only 5 banks. So if 11 banks can’t or don’t want to get a credit for some reason (maybe they don’t like the terms?) - is the quote from only 5 banks enough to make a benchmark the world is looking at?
Let me remind that most of the adjusted-rate mortgages in US are benchmarked against Libor. Millions of people financial health depends on some Mr. Roberts who can or can’t get a credit.
My source is bloomberg radio, few days ago.
Hey Roxy, glad to see Doc has invited you to start a page, good decision on his part.
Today T-bills (as measured by TLH) bounced up again, but only partually compensating for yesterday crash. The chart can be viewed as a potential head-and-shoulders but the price is bouncing around the neckline for two weeks already. I’m pretty sure that the smartest brains at PPT are scratching their heads every morning to find out how to prop up the bonds. They read the charts very well.
Thanks Ron! Also thanks to coolienne, Darth Toll, Akacoat, Shankar Khadye, eh, Sweden and all Swedish people, Justenuf2bdangerous, Kimo and all others!
My guess that the market is rolling over remains unshaken after today action.
The S&P topped at 1420 intraday, short of 1422 maximum two weeks ago and bounced back. Volatility
index made an intraday low of 16.19 (probably a glitch related to coming option expirations but
anyway), which is quite lower than 17.97 posted May 2. So record low volatility does not
produce record prices. Not good.
The KRE (index of regioanl banks) declined by 0.38%. Small regional banks are the bones of the
mainstreet economy. It’s not a rally and it’s not a recovery if they are down.
Finally, the bonds started very well today but ended with another decline. I think the chart looks very bad.
It seems to me that today rally was just money rotating from stocks into bonds. By doing that they shoot the
economy into the foot
I am glad to see you blogging here.
My guess that the market is rolling over remains unshaken after today action.
That makes one of us. At this point I have just seen too many occasions when this market has come back from the dead. So I am still in ‘I will believe it only when I see it’ mode. But this just means I may miss the beginning (and likely the end) of a move, so profits might not be maximized. Big deal. The main thing is to make money, and sometimes the best way to do that is by avoiding losing it.
Thera are obviosly many ways to look at the market.
Read this article at The market Oracle.
S&P Developing Bullish Pattern, While Crude Oil Still Refuses to Rest
http://www.marketoracle.co.uk/Article4722.html
Personaly I am short the market but it hurts! The VIX at 16 signals that something will happen soon!
One Trackback/Pingback
[…] about the level of confidence about a medium-term top? I think it works the same. At May 13 I was able to come with correct signal that the market is expected to top, but I was not that confident in my finding and yes, I was […]
Post a Comment