Behind the Headlines

Squidoo

noreply@blogger.com (Quick Takes Pro) — Fri, 27 Jan 2012 19:42:00 +0000

My intern told me about another social site called Squidoo. I put up a post - they call it a lens - but now what? Am I really that old that I don't get it? Well, that's why I got a college-aged intern so you can't say I am not trying.

Anyway, it is a story about why you should know the trend. Check it out at http://www.squidoo.com/charting-the-markets. And while you are there, hit the like or tweet buttons at the bottom. I want to see if this stuff works.

Ganja Mon!

noreply@blogger.com (Quick Takes Pro) — Thu, 26 Jan 2012 14:21:00 +0000

Rise up this mornin'; smiled with the risin' sun.
Three little birds pitch by my doorstep
Singin' sweet songs of melodies pure and true; saying,
"This is my message to you-ou-ou.”

Singin': "Don't worry about a thing, ‘cause ev-ry little thing gonna be all right."
Sayin': "Don't worry about a thing, ‘cause ev-ry little thing gonna be all right!"

Three little Birds - Bob Marley & The Wailers (1977)

The Fed passed out the joints and the market smoked them. More free money!

ZIRP until late 2014. The three little birds (Bernanke, Geithner and apparently Elijah the prophet) were indeed singing sweet songs of hope.

Too bad gold said otherwise.

Don't worry about a thing? Be afraid, be very afraid. (The Fly, 1986).

More on Spirit

noreply@blogger.com (Quick Takes Pro) — Tue, 24 Jan 2012 18:33:00 +0000

No, this is not another of my now famous rants against the airlines and Spirit Air an particular. No, this is about the spirit of the analysis of charts. You can check out an old blog post on this topic here. This is how it began:

I often look at charts with my right brain to try to understand what they are really telling us. This is different from the left brain approach we all take as we mark up the price action with circles and arrows and a paragraph on the back of each one explaining what each one was (Alice's Restaurant fans, anyone?). Seriously, we look at a handful of indicators, draw trendlines as if they really mean something and then come to logical conclusions about the odds of the market going this way or that.

It's good to see I was a song lyric fanatic back in 2009. But here is something I wrote this morning in Quick Takes Pro (when are you going to take your free trial?)

Q - How complete does the closing of the gap (or the window) need to be? Especially when the "stem(s)" (for lack of a better word) appear close to closing the gap, but the rectangular boxes (candlesticks) are separated?

A - First, we have to reiterate that we see no reason why any gap or window needs to be closed before a trend can progress. How else can breakaway and continuation gaps be explained? But that was not the question.

If you are a stickler, then gaps/windows are not closed - period - unless they are closed completely. Bar charts measure it with highs and lows but candles have more leeway. Some patterns require shadows (wicks, stems) to overlap or not overlap, depending on the pattern. Others ignore shadows and only deal with real bodies (the fat part of the candle).

Our view is that we need to respect the spirit of any pattern and not worry too much about the letter of the law, so to speak. Opens and closes on doji candles need not be exactly the same. Island gaps reversals (abandoned babies) need not have actual gaps. Why? Because 24-hour trading, decimalization, derivatives, etc… have changed the landscape and what constitutes an open and a close is now a very fuzzy proposition.

The financial markets are radically different than they were last century, last decade and even last year. The spirit of the tools still works because humans do the same old dumb (and occasionally) smart things over and over. It is the actual rules of the analysis that are questionable so keep it simple and you should be fine.

Schwing!

noreply@blogger.com (Quick Takes Pro) — Wed, 18 Jan 2012 20:08:00 +0000

If you are a Wayne and Garth fan, you know what the title means.

I took a look at the leading sectors in the market today (Wednesday) and just scrolled through their charts. Nothing fancy. What I saw in the home builders sure looked like it needed "schwing!" as its caption. Same for semis. And electrical components.

One of my warning stocks was Home Depot, which was in a solid up trend since last summer. Why is that a canary in the coal mine? Because it is a superstar that goes up no matter what. If it went down, then watch out. Well, it did not go down. And in fact, it deserves a schwing of its own.

I am the Vampire Squid of Wall Street!

Even the Vampire Squid (that would be Goldman Sachs) gets a schwing, or at least a "shproing" since it is still in a low-level range.

Semis are not overbought but homies and Home Depot are.

I wonder if the market got drunk again on global QE (thanks IMF!) and now it is thinking with its schwing, if you know what I mean. Sentiment is rather bubbly, too, making this whole rally look like a house of cards.

Party on Garth!

Black Eye Friday

noreply@blogger.com (Quick Takes Pro) — Fri, 13 Jan 2012 16:11:00 +0000

Synchronicity, serendipity or a simple case of "it just figures." That's what Friday's sell off feels like after nothing but bullish action in the stock market all year. True, most days left spinning top candles of uncertainty so the rally is far from powerful. But up it went, volume be damned. Volume? What volume?

And then there's Maude, er, a stern warning that Europe will be downgraded. Did anyone NOT see that coming? But it was indeed a black eye on a Friday and Jamie "King of the (Financial) World" Dimon did not help. He called JPM's earnings "mildly disappointing," which when coming from a CEO really means "we are in deep yogurt."

On a personal level, my server company moved me last night and this morning my newsletter archive was unavailable. And so were a few of the bookmarks I use to streamline the website editing and permissioning process. Another black eye for me.

And then the President does something very Ron Paul-esque. He wants to combine several Federal agencies to help streamline business. Of course, a day earlier he wanted to raise the debt ceiling by a whopping huge amount. So, small government types who had their panties in a bunch Thursday got a black eye when they got something they wanted Friday and could not criticize the "Socialist."

Newt got one when his capitalism attack on Willard, er, Mitt backfired. Barack got one when it was revealed Bain Capital helped on the auto industry rescue. And then Europe got another one just a day after some rather positive bond sales.

Let's not forget Jon Huntsman's black eye for finishing behind Stephen Colbert in a South Carolina voter poll.

It's time for the weekend. Ketel, rocks, twist, repeat.

Musings on Market Analysis

noreply@blogger.com (Quick Takes Pro) — Wed, 11 Jan 2012 20:30:00 +0000

Technical analysts have been fighting the ignorami and kool aid drinkers who profess that there is no value in looking in the past to try to predict the future. Tell that to the patrons of your local OTB as they pour over racing forms to check their mudders. Or your favorite Wall Street analyst as she talks about the trend in earnings (uh, trend - that a technical analysis term).

But lately, since 2008, I have to admit there is something to the argument that charting is less worthy than asking a company how they are doing and publishing a buy rating. We're doing great! Buy our stock!!

Mouth breathers.

But again, there is something to the argument that you cannot use charts to predict the future. No, I have not jumped ship. But think about how charts work. They let us know what investors did in the past and then tell us if we have similar conditions in place. Let me reiterate - Investors tend to do similar things when faced with similar situations.

Note I did not use the word "same." You know, that whole "history rhyming" thing. Nothing repeats exactly but human nature is a constant and that is what charts help us exploit.

Charts measure the mind of the market and that means the collective thoughts of the masses. A free, liquid market is critical and right now with the small investor gone and the gubmint meddling in ways that have never been seen before there are no masses to analyze. There is nobody waiting in the wings for a chart to break out. More likely, there is a scalper looking to get out at the higher price and that is not how it is supposed to work.

Sure, I still use charts and there is still a good deal of value. Let's just say that a large box of salt grains is always at my side.

I had a little conversation with Alan Newman, proprietor of the unique CrossCurrents newsletter. He wrote in his latest missive:

The financial markets have metamorphosed into the wildest of beasts, untamable monsters that would not resolve in traditional bull markets as commonly expected.

I said that I have suspected for a while (since 2008) that all of our analyses do not work as expected any more and will only get worse. He answered:

Obviously, I'm very worried about the capital formation system (at least it used to be). And you have pinned another important factor. TA can't possibly work as well as it used to because TA in its essence, is a distillation of sentiment (which affords us the right perspectives). With the public gone, sentiment ain't what it used to be. But it does work.

Two different paths to the same view.

The point of today's ramblings is that the pros are just as frustrated as everyone else. We need the government to step aside and let the market purge itself of all the garbage that has built up in the name of saving it. When true market forces come back into power, so, too, will the public.

As Colin Quin would say, "that's my story and I'm sticking to it."

Careful with the Dollar ETF

noreply@blogger.com (Quick Takes Pro) — Mon, 09 Jan 2012 19:44:00 +0000

In doing research for this afternoon's Barron's Online column, I found an article by Richard Bloch on Seeking Alpha. It tells us what we should have already known about the currency ETF - that conditions in the futures market make a difference to this ETF. It is the same problem that the USO oil ETF faces with contango - or, higher priced later-dated futures contracts. Everytime the fund has to roll to the new month, investors lose value. That's one reason they created the USL version of the oil fund that seeks to mitigate the problem by using 12 months worth of contracts.

Anyway, this chart should drive home the point. The US dollar index has been steadily outperforming the dollar ETF for many months. For those who want to dig deeper, the trend before March 2008 was down - meaning the opposite. I'll leave it to you to figure out what the structure of the futures market was back then (contango, backwardation or something else).

Airlines survey

noreply@blogger.com (Quick Takes Pro) — Sun, 08 Jan 2012 22:02:00 +0000

This survey says American Airlines has the worst customer service of the major domestics. And it says Delta had the biggest turnaround. I still think Delta is a flying sardine can with crappy seats, no room and lots of fees.

Worst Domestic Airlines

We've been restricting ourselves to JetBlue and Southwest. I did have a rather nice experience on Virgin America but they do not fly nearly as many routes in the US as I'd like (this one was Vegas to NY - had to take Delta on the outbound - ugh).

Woozy Canary

noreply@blogger.com (Quick Takes Pro) — Wed, 04 Jan 2012 14:14:00 +0000

In this morning's Quick Takes Pro newsletter, I wrote up a few of last year's leaders that actually fell significantly on a day when the Dow came roaring out of the gate (mixed metaphor - horses do not roar - but you get the point). Here is one of them - MasterCard.

Since this was one of 2011's superstars, it is troubling. I get that the loser banks rebounded big time but why was this sold hard instead of just ignored?

The canary in the coal mine is still alive but a bit woozy.

Trannies up even with higher oil

noreply@blogger.com (Quick Takes Pro) — Tue, 03 Jan 2012 16:13:00 +0000

I can see why everyone is so excited.

But just as a follow-through day happens 4-7 days after the supposed change, so too might be the return from a long, long break.

Full decade forecast

noreply@blogger.com (Quick Takes Pro) — Thu, 29 Dec 2011 23:11:00 +0000

This is the chart subscribers saw a few weeks ago and Barron's Online readers saw, albeit with some of the markings removed, in today's column.

I do believe that there is an 18 or so year cycle of secular bull and secular bear markets. The current secular bear started at the 2000 peak. This chart shows where most of the cyclical bull and bears fall within.

Yes, this chart shows a lower low in 2016 than we may see in 2012. But it is not as low as the one in 2009 and it sure does follow the road map of the 1970s (the previous secular bear).

The Year That Really Wasn't

noreply@blogger.com (Quick Takes Pro) — Fri, 23 Dec 2011 15:31:00 +0000

Oh there was plenty of action but if you look at where the stock market was at the end of last year even your saving account interest might have beaten it.

Oh, it looks like a rally this month but the current price is pretty much where it was at the end of November.

And November, which came in like toxic waste and left on a Justin Bieber high - guess what? Just about the same price as when October ended.

Remember that monster October rally? Well it left things where they were in when we last serenaded jolly old St Nick.

So, for the August "crash" and the Japanese tsunami dip and the pre-Halloween "the financial system did not collapse" melt-up 2011 looks to be leaving us where it found us.

A Happy and Merry to all! I am not sure if I'll have anything to post here on the blog during the final week of the year so keep tabs on the Facebook page. And if you want to give me a little end of year gift, how about "liking" it? It's just a little click over there on the right side of this very page.

Dividends

noreply@blogger.com (Quick Takes Pro) — Tue, 20 Dec 2011 01:14:00 +0000

Today's column was about how two telecoms stocks - AT&T and Verizon - could provide a place to hide at the same time getting paid a healthy dividend to to so. I tried to make the point that just because you find a big name stock with a big dividend yield does not mean you can buy just anything.

Being the technician I am, any stock with a low P/E and high dividend yield still has to pass muster (or does it have to cut the muster, or mustard?). The chart cannot be in a big ol' bear trend. It cannot be at a new high with a bearish momentum divergence. And it cannot be breaking down below support. Getting the picture? The chart has to be at least stable.

Telecoms from around the world now sport some mouth watering dividend yields. Surely, a 10% yield not only cushions the downside but also gives off at least a little - and rare - current yield. But what happens when the stock falls 10%. Bye, bye yield.

Check this chart of Philippine Long Distance.

It is now near the top of a giant range and looking a bit overbought in this weekly time frame. Although it sports a hefty 4.6% dividend it can still fall 15% and remain in the range. Dividend no mas, three times over. But at the bottom of the range it would look tasty indeed.

Then there is Frontier Communications, mentioned in the column. The stock lost more than half its value this year and is well below its 2007-2009 bear market low. yet, it sports a 15.2% dividend! Wow, what a deal!

Not so fast. While fundamentally oriented investors might say there is enough cash flow to keep paying it, the charts suggest something entirely different. After all, bad news often shows up in the technicals before it shows up in the quarterly earnings report. Somebody always knows something and acts. Then the ripples in the pond spread out, causing more people to act until the bad news emerges. Its not the charts that drive the fundamentals. Rather, it is the market sensing what is coming.

So, if you are looking for a nice cash cow to keep your wallet stuffed, make sure the cow is not dead and just bloated with the escaping gasses of decay. Find these stocks using fundamental screens but buy them only when the chart says Bossie is mooing contentedly in the fields.

Protect Profits by Having a Plan

noreply@blogger.com (Quick Takes Pro) — Thu, 15 Dec 2011 21:03:00 +0000

Yet another piece I wrote for Scottrade - this one in November 2009. Given what just happened in gold, it might be a nice read today.

After the last two bear markets, most investors understand that they have to have a plan to protect their portfolios. Traders live and die by this. They are taught that knowing when they should sell is more important than when to buy.

In other words, they recognize when it is time to cut their losses. Investors should understand this, too.

How many of us are guilty of thinking that a lower stock price is always a better value? This was the case in November 2007 just after the last bull market peaked as analyst forecasts were still rather rosy. And during the 2008 bear market it was also the case, as we often heard news reports that "the financial crisis is near its end" or that "housing is about to bottom."

Were all the profits you booked over the 2003-2007 bull market protected? Did you have a plan to take at least some money off the table when it became clear that the market was no longer healthy?

The market usually gives off many signals when the good times are about to end. One example is deterioration in market breadth, when the average stock starts to stumble well before the major indexes peak. Stocks with marginal fundamentals are left behind, unlike in bull markets when investors buy anything and everything.

Another example comes from the rising trend itself. In a healthy bull market, the general direction of the market is clear, even with the normal sequence of rally and pullback. However, when the rallies start to shrink and the pullbacks start to grow, we can get a good idea that the trend is changing.

For most investors, knowing what to watch and having the time to watch it can be a problem. Therefore, they need a more mechanical plan.

How do investors create such a plan? A tool called a "stop" or "stop loss" order is one way to help mitigate losses. Basically, you determine how much money you are willing to lose on any investment - how much you are willing to risk - and if the stock reaches or surpasses the price you specified, an order will trigger to sell. Stop orders allow you to ride an upswing and limit your losses on a downswing even if you're not watching the market every minute.

If you just bought the stock, you take your loss and move on.

If you owned it for a while and you have a profit, you set your stop based on today's price, not the price you paid. You may still walk away with that profit, but keep in mind that once the order triggers, it becomes a market order and could execute well below your stop price if the stock takes a sharp drop. Using stop orders can be an excellent strategy to prevent loss, but it can also be very unpredictable if the market or the stock is particularly volatile.

Remember, big losses can begin with small losses.

While it is always possible that the stock will rebound, causing you to sell a good investment, you can help mitigate losses during a bear market with carefully placed stop orders. You are managing your risk. And you will live to invest another day.

No matter which way you think the market is heading, if you own stocks you must know what has to happen to cause you to sell. Sometimes it is a change in the fundamentals, and other times the market reacts in advance to tell you something is wrong. That will be the time to consider managing risk rather than seeking that last nickel of profit.

Value from CNBC

noreply@blogger.com (Quick Takes Pro) — Wed, 14 Dec 2011 20:29:00 +0000

It is a national pastime of traders to make fun of CNBC and I won't argue on most of it. But I have always thought that there are some smart people there and perhaps it is the mandate to provide a constant stream of advertising selling content that marginalizes them.

Anyway, this morning, they put up an Intrade chart of Obama Reelection futures. It showed a steady decline this year with an Osama bump and even a little strength this month. Here is that chart - followed by a chart of the S&P 500.

Do you see any similarities? Forget the news. What we see here is the same shape in Obama's prospects as we see in the stock market - only lagged by perhaps two weeks.

Forget unemployment. If the stock market tanks before the election you can welcome President Newt or President Mitt or President The Donald. Well, maybe not that last one.

Just Another Manic Market

noreply@blogger.com (Quick Takes Pro) — Tue, 13 Dec 2011 15:05:00 +0000

Did you ever see the market go this way and that?
Go this way and that way,
And that way and this way
- a children's song (sort of), possibly Scottish

or, if you are a 1970s psuedo-punk like me:

Well we can't take it this week
And her friends don't want another speech
Hoping for a better day to hear what she's got to say
All about that Personality Crisis you got it while it was hot
But now frustration and heartache is what you got
- Personality Crisis, New York Dolls (1973)

Honestly, I really have nothing new to say. Financial markets are being wagged by the dogs of Europe and nothing else matters. Perhaps options expirations this week will give money managers the reason to try to push the market higher but one sneeze from MerKozy and bye bye profits.

What do you do? Unless you are a day trader or a gambler (there is a difference), protect capital unless you see a really compelling setup.

And as for the title of this post - Manic Monday, The Bangles 1986 (written by Prince the symbol)

Buy the rumor, sell the news

noreply@blogger.com (Quick Takes Pro) — Fri, 09 Dec 2011 01:28:00 +0000

Buy cheap, sell dear. Or, buy on the rumor that good stuff is going to happen and sell when it does, or does not come true. That seems to be what happened Thursday in the stock market.

Here is your headline:
U.S. stocks lost sizeable ground Thursday as public sparring among European Union members jolted the market late in the session.

What? More than a dozen countries with different languages, customs, history and cultures did not fall into line behind Queen Germany? I am shocked! and by shocked I mean not surprised at all.

The only surprise is that it happened Thursday and not after the Friday summit.

Do you get the feeling that the term summit is overly generous? Sort of when failing K-Mart joined forces with failing Sears. Maybe Xerox can hook up with Kodak. Or RIM can marry Palm. Oh wait, Palm did the nasty with flailing Hewlett Packard. Didn't HP buy Compaq, too? It's the Oakland Raider strategy of scooping up the league's cast offs and somehow making a team out of the drek. But I digress.

Now we are in an analytical pickle. There still is time for some bold action, such as printing trillions of euros and getting it together on selling bonds. Or letting Greece fade off into the deep like Leo did in Titanic. That would really screw things up because as it stands today, the S&P 500 has failed again- for the fourth time - at the 200-day average.

The third time may be charm but the fourth time is a just bad odor following you around.

Song Lyric for the Week

noreply@blogger.com (Quick Takes Pro) — Wed, 07 Dec 2011 18:17:00 +0000

I was writing about how the market is in a stall right now as it awaits Europe's decision or lack thereof. This lyric popped into my head. Perhaps this is the market singing to MerKozy and friends.

I'm leavin' it all up to you-ooh-ooh
You decide what you're gonna do
Now do you want my lo-o-ove?
Or are we through?

- Dale and Grace (1963)

The Waiting is the Hardest Part by Tom Petty was too easy.

Relating Charts to Market Analysis

noreply@blogger.com (Quick Takes Pro) — Mon, 05 Dec 2011 16:24:00 +0000

Here is another article I wrote for Scottrade way back when (Jan 2010). Again, I figure the statute of limitations has run out for an article I wrote for free so here it is - for novices.

To many investors, technical analysis is either an unknown world or something rather suspicious. However, even for the skeptical there are many benefits to be had. The most important is simply figuring out if your stock or the market as a whole is in a bullish or bearish trend.

Why is that important? Knowing the trend dictates the strategy. For example, in a bull market, traders buy dips while investors may simply buy and hold. Certainly, the latter was a great plan from 2003 to 2007. It did not work so well in 2008 when the bear market was in full force.

Charts Simplified

Let's talk briefly about what technical analysis, or just simple charting, is all about. First, analysts of all types use charts even if they shun technical analysis. What is always reported in the news? The trend in employment, earnings growth, projected sales and the Fed funds rate. All of these data are displayed in chart form to show how they have changed over time.

Charting stock prices is no different. With one picture, we can see where a stock has been so we know right away if the current price is relatively cheap or expensive. Clearly, saying a stock has a price of $50 is meaningless if we do not know if it traded at $40 or $60 last month, or if we do not know if earnings have been growing at the same rate.

Historical Analysis with Charts

When the stock market peaked in October 2007, analyst estimates for earnings were still strong and everything seemed to be status quo. Buy stocks, watch them go up, sell at a profit. Not bad.

Further, market psychology, or attitude, was very good. After all, the market survived the extreme sell-off of August 2007 when news of the sub-prime mortgage crisis broke. The Standard & Poor's 500 shook it off and rallied to new highs in short order.

So, when prices pulled back again in November of that year, it appeared to be another buying opportunity. Good stocks were on sale again, but this time, price gains did not last. The market sold off again in December, and that time, there was no new high first. Something was different.

When prices slid below the panic lows of the previous August, chart watchers knew the trend had changed. The strategy had changed from buying dips to selling rallies; essentially a plan for getting out of the market.

What really had changed? The fundamentals were still good. Analysts still maintained buy ratings. Bear Stearns and Lehman Brothers were still alive and well.

Simply stated, the market was in a declining trend. Rallies were sold earlier and declines had to extend lower to entice demand, and that is what happens in bear markets.

Conversely, at the March 2009 low, the fundamentals looked very bleak, but stock prices started to rise. It is hard to justify, even in hindsight, that the price chart said the trend had changed to a bull market (there were other technical reasons, however). But for investors missing the March to June run, they got their signal in July. After a rather sizable pullback, prices moved on to new highs. Stronger rallies and quick, shallow pullbacks became the norm - exactly the opposite of what happened in 2008.

Charts & Trends

Clearly, simple chart reading will not point out major tops and bottoms as they are happening. However, the market will often tell us sooner rather than later when the existing trend is over, and the best way to read any possible signals is to read and analyze basic price charts.

The charts may signal the end of a rising trend when conditions become similar to those of previous bull markets. Rallies usually become weaker and pullbacks may have to go lower to entice buyers. There is no magic bullet for reading charts and using them to anticipate trends - if there were, we would all be rich. Different analysts interpret charts different ways, and it's up to you to do your own analysis and decide where you think the market is going.

As they say, the trend is your friend. Finding the trend, not predicting the future, is the goal. Once that is done, investors can use the trend to help them decide to hop on for the ride or simply step out of the way.

D-Day for Europe

noreply@blogger.com (Quick Takes Pro) — Sat, 03 Dec 2011 00:42:00 +0000

Supposedly December 9 is decision day for Europe as they meet in a summit (ooh, it must be important - will they serve beer?) that could determine if they can rescue themselves. Woudn't it be cool if they met in Normandy?

Buy the rumor, sell the news. We had the "buy" part this week. Next week, unless they come up with something brilliant and totally expected we may see "selling the news."

I have more questions than answers:
Why did Treasuries rally a lot Friday? I thought this was "risk on" week.
Why did the dollar reverse to the upside?
Why did gasoline rally so much Friday?
Why are pizza stocks flying? Don't say because people stopped going out fancier. These stocks were hot in October as the market was saying "I'm baaaack."
Did anyone notice the Chinese market is sucking wind and has given back most of the gains it made the day when they changed reserve requirements?
Who saw a one-day dip in LIBOR (it was back up Friday)?

A lot of these are not good signs for the stock market so if QE-Europe fails or stalls or looks like it will not happen, well, D-Day here we come.

I am pooped

noreply@blogger.com (Quick Takes Pro) — Thu, 01 Dec 2011 16:14:00 +0000

No blog today as this week has fried my brain and thrown a lot of technicals out the window for a while.

As they say, " Sometimes the best trade is the one you do not make."

Ghost in the Machine

noreply@blogger.com (Quick Takes Pro) — Wed, 30 Nov 2011 21:37:00 +0000

From Wikipedia:

The "ghost in the machine" is the British philosopher Gilbert Ryle's description of René Descartes' mind-body dualism. The phrase was introduced in Ryle's book The Concept of Mind (1949) to highlight the perceived absurdity of dualist systems like Descartes' where mental activity carries on in parallel to physical action, but where their means of interaction are unknown or, at best, speculative.

That sure looks like the stock market this week to me. One third of Wednesday's volume took place in the "clean up" bar after the close. That is where all the late data gets dumped and from the size of it we can surmise a lot of market on close orders.

I'd like to think of it as the smart money getting out while the getting is good.

Here is a chart of the NYSE composite with volume and that ghostly current day's volume spike. Looking at this as a snapshot of heavy volume on a big up-day belies the absurdity of the intraday action. It looks like it could be a follow-through day (FTD) too but again not when we dig deeper.

And speaking of FTDs, the three places on this chart where they could possibly appear are highlighted. Today's rally took place before the FTD window opened - 4-7 days into a rally attempt. That means is still qualifies as short-covering.

Ratio Ratio

noreply@blogger.com (Quick Takes Pro) — Tue, 29 Nov 2011 19:21:00 +0000

I must be going crazy penned into my office for days writing story after story while it is 60 degrees and gorgeous outside here in the Northeast (yes, I saw the rain this morning). The song Radio Radio by Elvis Costello comes to mind as I write this about Ratio Ratios.

Here is another one of those ratios derived from the markets and not from some analysts' guesswork. This one is the copper/gold ratio in the form of the JJC copper ETN divided buy the GLD gold ETF.

When the economy is hot, copper is in demand and gold is out of favor. The ratio should trend higher. And when the economy is not, copper is not in demand and gold is everyone's baby. Teh big blue Landry arrow is pointing down.

Indicator Whackadoo

noreply@blogger.com (Quick Takes Pro) — Mon, 28 Nov 2011 20:21:00 +0000

Twas the day after Thanksgiving break and all through the house,
Everyone was buying stocks......everyone.

A little stunted poetry by yours truly. The stock market did one of its patented gap up go nowhere after that moves today as the Dow traded at about up 300 points until the final hour. What I found fascinating was that breadth indicators were completely and massively lopsided during the morning hours. Everything (almost) was up and all (almost) breadth indicators were pinned at extremes.

A hat tip to RAI Bob Shohet for posting this stuff to the pro chat room we frequent. He pointed out that the Arms index (TRIN, for you indicator neanderthals) was at a level that was likely a multi-year if not all-time low. What that meant was the all the king's issues and all the king's volume were in the hands of the bulls. Green everywhere and a lot of it, at least on a relative basis.

The ratio of up to down volume was something like 150 to one in the early going. That's a stampede in my book.

But as I was writing my column for Barron's Online I noticed a lot of fading going on. Stocks that were up 5% were up 3%. Stocks that were up 2% were flat. I took that as a lot of people fading the rally.

As they say, the market does not like group think (actually, I just made that up but it is not a unique insight). When everybody is in a buying mood, you know it is something up with which the market will not put.(C'mon, where are the Winston Churchill fans?)

Another ratio

noreply@blogger.com (Quick Takes Pro) — Tue, 22 Nov 2011 21:00:00 +0000

If you've been following me at all you know I look at a few ratios just like your favorite CFA. Only my ratios come from the market and not someone's subjectively inputted spreadsheet. Does anyone really know what earnings will be next year and what the right discount rate is?

Anyway, this is the ratio of the junk bond ETF to the high grade corporate bond ETF. Basically, when the ratio is going down, junk is underperforming quality and that suggests risk-off. And when the ratio is rising, invetors are getting more aggressive with junk as they chase yield - or throw caution into the wind.

With a hat tip to the Dave Landry big blue line, the trend is still down. This is one of the ratios I used in July to foreshadow the July breakdown in stocks.

And please do not call that an inverted head-and-shoulders. Things that do not actually trade need to be given a lot more rope than a tight pattern can offer.