• -508 on the Dow Industrials today, the same number of points lost on October 19, 1987.
• Bank of America had as much trouble closing the book on their offering as penny dreadfuls.
• Eerie silence on CNBC as no one even dared to ask if there is a bottom above zero.
• Cramer said that “a drop in the Dow to 7,700 is a very real possibility.”
• Time Magazine cover calling this The New Hard Times.
• Our stock scan produced 6 winners and 533 losers. Five of the six winners were ultra short inverse ETFs.
• Dylan used the “D” word in Fast Money while six of ten Americans see a depression as likely.
• The Economist says there is no end in sight to the financial turmoil.

Seems like we are at the give-up phase. More overnight after I have had a chance to meditate on the day’s events and scrutinize the market’s entrails.

52-Week Hi/Low Sentiment

We’ve come up with another take on 52-week high/low data. Our oscillator is built to fluctuate between +100 to -100 percent with zero as neutral. This way, we can compare today’s readings to that of other periods in history.

10-day Oscillator on the NYSE Daily Chart

Recall Justin Mamis wrote about using this information in The Nature of Risk. He showed a chart with a divergence on an intraday basis during the 1987 Crash and also watches the daily numbers.

Objective Buy/Sell Signal Sentiment Survey

The InVivo Objective Sentiment Survey tracks the number of buy and sell signals generated by InVivo Universal Stops amongst the constituent stocks of the S&P 100 and NASDAQ 100 indexes.

InVivo Objective Sentiment Survey

1. United Natural Foods, Inc. (NASD:UNFI)
2. Pall Corporation (NYSE:PLL)

The 50/200 “Cross”

The thesis goes something like this: the up or “golden” cross (50-day MA moves above 200-day MA) is supposed to be bullish while the down or “death” cross (50-day MA moves below 200-day MA) portends to weakness.

United Natural Foods (UNFI)

Daily Chart with 50- and 200-day Moving Average

Daily Chart with InVivo Swing Trading Tools

UNFI is in the food processing industry. Another example as we have seen in the last couple of weeks investors heading into the food stocks. The “people gotta eat” thesis is what the bulls most likely using.

Pall Corporation (PLL)

Daily Chart with 50- and 200-day Moving Average

Daily Chart with InVivo Swing Trading Tools

PLL is in the scientific & technical instruments industry. It has been consolidating between the 44 and 34 levels for many months. Perhaps the bears are trying to make a move. We shall see.

A Word About Stock Picking

What you should do with these ideas are up to you. We believe individual investors should make speculative trades in individual stocks only with mad money after fully funding retirement accounts according to a balanced portfolio strategy. Use a well-defined process to evaluate buy and sell signals. You may wish to investigate these ideas further with the following questions in mind:

• Which phase of the Investor Sentiment Cycle is this stock in?
• Is there a valid reason for entering this trade? Is there a technical trade setup on this chart?
• Is it smart to follow the dumb money? Read the landmark research paper by Mullainathan & Thaler.
• Is this a classic behavioral finance trap?
• Do I have a position sizing strategy? Are all of my eggs in one basket?
• What’s a good spot to place a stop loss?

The information found in this article is designed to be educational, to show readers how our swing trading tools can be used in conjunction with other technical trading approaches.

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. I don’t mean of course that in a bear market caused by a war, ammunition shares do not go up. I speak in a general sense. But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground. — Reminiscences of a Stock Operator

Readers frustrated by our lack of saying “buy this” or “sell that” might consider the immortal words of Edwin Lefevre.

I ended the article with: “As we can see from the above charts, they all are showing weakness. Weakness in Korea might mean weakness to spread to other emerging markets?”

Today Forbes did an interesting piece regarding South Korea being Asia’s weakest link:

South Korea Is Looking Like East Asia’s Weakest Link
Observers agree generally that a financial crisis like the one in the late 1990s is not on Asia’s horizon, though the region will undoubtedly be hurt by the global credit crisis. But analysts are keeping a close eye on South Korea, wondering if it is the most vulnerable East Asian tiger.

The country’s loans outstanding have far outgrown its deposit base, comparing unfavorably with the United States and the European Union. Moreover, credit growth in South Korea has outpaced the rise in domestic demand. Unlike other East Asian economies, which are net exporters of credit, South Korea is a borrower of credit from abroad, at a time when the global credit crisis makes borrowing expensive. These point to some worrisome signs for the country, amid a steep slide in its currency and looming dollar shortages for its financial institutions.

iShares MSCI South Korea Index Fund (EWY)

Daily Chart with 50- and 200-day Moving Average

Daily Chart with InVivo Swing Trading Tools

The lesson here for investors is the price action was saying ’something was not right’ even as early as February 2008 while analysts and the financial media were still going on about how great emerging markets will be for portfolios based on fundamentals.

Did South Korea’s market fundamentals all of a sudden change overnight? Of course not, but price action leads versus what the fundamentals are saying in good times and bad times.

“I like to listen. I have learned a great deal from listening carefully. Most people never listen.” — Ernest Hemingway

Once again, this is another great example why investors must focus on price action. You will be amazed how much there is to learn from just putting together the correct pieces of the puzzle instead of being distracted by noise.

I replied that showing overnight, 1- and 3-month LIBOR must have been the second sign. By Friday, there were a bunch of more dire magazine covers. Over the weekend, Newsweek ran an article titled The Fall of America, Inc.

While I said to my friend that we should hold out for the “death of capitalism” cover, there were indeed additional signs near the low of today’s trading when the Dow Industrials were down nearly 800 points:

10:51 AM Pete: -500 not bad
Teresa: Not bad, not bad. They have that “it’s not a bottom” tone to their voices
10:52 AM Pete: russia stopped trading today i think twice not bad lol
10:58 AM Pete: Emerging market stocks fell the most in at least two decades and exchanges in Brazil and Russia were forced to halt trading as the global banking crisis escalated in Europe and oil fell below $90 a barrel.
Teresa: Mark Haines
Pete: He is sad
Teresa: talking about the end of America
12:23 PM Pete: Cramer said on Today Show, “Whatever money you may need for the next five years, please take it out of the stock market right now, this week.”
12:57 PM Pete: Mr. XXXX said 99% of the emails he’s received indicate that people really think that the world is coming to an end.
12:58 PM Teresa: He did tell people to diversify, but maybe they did not listen. And we have zero email from members for some reason. Not one. Oh right, we got them out of the market, or they are hedged, or they decided to go for it with eyes open. In any case, no one is surprised.
1:00 PM Pete: Pope Benedict XVI says the global financial crisis show the futility of money and ambition. An American member of al-Qaida pointed to economic troubles in the United States as proof that “the enemies of Islam” face defeat, in an English-language video released Saturday.
1:34 PM Pete: Weird call — a family member asking me if put options are still available in stock market… told em STOP RIGHT THERE lol
1:35 PM Teresa: So we have a bottom indicator big time. There is panic. lol
Pete: Everyone freaking the @!$@#% out. Lots of 401K talk.
Teresa: VIX at 60 is NOT the time to buy puts.
Pete: He is down a good amount and pissed
Teresa: LOL. Well, he had a chance to sign up for our services…
2:32 PM Teresa: Maybe it’s another sign of the Apocalypse. Is the family member that wrote to you a bona fide civilian?
2:33 PM Pete: yea
2:35 PM Teresa: these guys look defeated on CNBC
2:36 PM Teresa: all the signs are here
2:39 PM Teresa: I tell ya, it would have been much easier to buy the dead mortgages to create social housing and restore the value of the CDOs because this is now what? $2 trillion of lost market cap? In 8 days?
2:56 PM Teresa: Look, Cramer doesn’t think that the downside is over [WATCH VIDEO]. Another sign.
Pete: He is THE SIGNAL
Teresa: It’s the bottom for today. Just gotta trade back up through the morning low.
2:57 PM Pete: lol
Teresa: NO ONE is talking the bottom now
3:00 PM Teresa: Maria looks SCARED. Look at her.
3:01 PM Pete: BUY MU? lol Or !@@#%%, Erin is taking my job.

I wrote about our 52-week high/low oscillator last night and provided historical charts. Let’s take a look at how things panned out today along with the Objective Buy/Sell Signal Sentiment Survey numbers.

Members, please CLICK HERE to continue reading.

• VIEW THE SPREADSHEET online and if you wish to save it to your own computer, click File > Export from Google Docs.

Using The Scan

The stock scan is designed to find stocks that are currently in play; criteria includes price movement, range and liquidity (500,000 shares on the day, 20-day average volume of 1.5 million shares).

By ranking and sorting the entire list according relative to performance against the S&P 500 and the NASDAQ 100 indexes, stocks with the most upside price momentum will rise to the top of the list while those with the most downside price momentum drift to the bottom.

Analysis and examples given below are designed to answer some of these questions. Please refer to the podcast for background information. We do not have a position in any stocks mentioned in this article.

Winners and Losers

The winner today was an inverse ETF. We will look at MBIA Inc. (NYSE:MBI).

Daily Chart with 50- and 200-day Moving Average

MBI is currently trading just below its 50-day moving average and its 200-day MA. Note that the 50-day MA may be positioned to upcross the 200-day MA, and traders that use “the cross” as a signal into the market on the buy side will be watching. There seems to be a small pennant or wedge forming here, and so long as volume contracts, MBI maybe poised to make another move up to test recent highs.

Daily Chart with InVivo Swing Trading Tools

MBI has been outperforming the S&P 500 since August after a transition period in July. At this juncture, the stock is a little weak because the green histogram bars are below the grey threshold line. The jury is out, and we’ll see shortly if this is a consolidation pattern that resolves higher.

MOS, HERO, MTL, RRI are at the bottom of the list, but since we’ve looked at all of these, let’s move to the next one up on the list, EXCO Resources, Inc. (NYSE:XCO).

Daily Chart with 50- and 200-day Moving Average

XCO is trading under both its 50- and 200-day moving averages. The 50-day MA is falling below the 200-day MA in a downcross.

Daily Chart with InVivo Swing Trading Tools

Since July, the stock has been underperforming the S&P 500 Index. Recent price action tells us that this stock is in a “waterfall” move down, most likely in the panic phase of the Investor Sentiment Cycle.

A Word About Stock Picking

What you should do with these ideas are up to you. We believe individual investors should make speculative trades in individual stocks only with mad money after fully funding retirement accounts according to a balanced portfolio strategy. Use a well-defined process to evaluate buy and sell signals. You may wish to investigate these ideas further with the following questions in mind:

• Which phase of the Investor Sentiment Cycle is this stock in?
• Is there a valid reason for entering this trade? Is there a technical trade setup on this chart?
• Is it smart to follow the dumb money? Read the landmark research paper by Mullainathan & Thaler.
• Is this a classic behavioral finance trap?
• Do I have a position sizing strategy? Are all of my eggs in one basket?
• What’s a good spot to place a stop loss?

Readers frustrated by our lack of saying “buy this” or “sell that” might heed the immortal words of Edwin Lefevre:

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. I don’t mean of course that in a bear market caused by a war, ammunition shares do not go up. I speak in a general sense. But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground. — Reminiscences of a Stock Operator

The information found in this article is designed to be educational, to show readers how our swing trading tools can be used in conjunction with other technical trading approaches.

The only decent news this weekend were reports that King Abdullah of Saudi Arabia is finally doing his duty, hosting peace talks in Mecca in an effort to come up with a political solution to end the war in Afghanistan.

52-Week Hi/Low Sentiment

The Quant and I put our heads together and I think we’ve come up with an improved way of using the 52-week high/low data.

I looked at two different time frames. First up, is a 10-day version:

10-day Oscillator on the NYSE Daily Chart

Next, I plotted a three-month version on a weekly chart:

CLICK IMAGE TO ENLARGE 3-Month Oscillator

Recall Justin Mamis wrote about using this information in The Nature of Risk. He showed a chart with a divergence on an intraday basis during the 1987 Crash and also watches the daily numbers.

Our oscillator is built to fluctuate between +100 to -100 percent with zero as neutral. This way, we can compare today’s readings to that of other periods in history.

The data that goes back the furthest is for the NYSE, so I resurrected my account at DialData, grabbed the data and of course, it does not match TradeStation. But still, once we applied our oscillator, the differences were negligible.

The reading of -82.31 is very low. Of the 463 months of data going back to the 1970s, October 2008 is currently the 14th worst reading.

We must be very careful. While this low in the making may prove to be tradeable, if you look carefully at the big weekly chart at what happened in the 1970s, there is precedent for sustained weakness over a period of years.

Objective Buy/Sell Signal Sentiment Survey

The InVivo Objective Sentiment Survey tracks the number of buy and sell signals generated by InVivo Universal Stops amongst the constituent stocks of the S&P 100 and NASDAQ 100 indexes.

InVivo Objective Sentiment Survey

• VIEW THE SPREADSHEET online and if you wish to save it to your own computer, click File > Export from Google documents.

Using The List

By ranking and sorting the entire list according relative to performance against the S&P 500 and the NASDAQ 100 indexes, the ETFs with the most upside price momentum will rise to the top of the list while those with the most downside price momentum drift to the bottom.

What you should do with these ideas are up to you. We believe individual investors should make speculative trades in individual sectors only with mad money after fully funding retirement accounts according to a balanced portfolio strategy. Use a well-defined process to evaluate buy and sell signals. You may wish to investigate these ideas further with the following questions in mind:

• Which phase of the Investor Sentiment Cycle is this stock in?
• Is there a valid reason for entering this trade? Is there a technical trade setup on this chart?
• Is it smart to follow the dumb money? Read the landmark research paper by Mullainathan & Thaler.
• Is this a classic behavioral finance trap?
• Do I have a position sizing strategy? Are all of my eggs in one basket?
• What’s a good spot to place a stop loss?

Readers frustrated by our lack of saying “buy this” or “sell that” might heed the immortal words of Edwin Lefevre:

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. I don’t mean of course that in a bear market caused by a war, ammunition shares do not go up. I speak in a general sense. But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground. — Reminiscences of a Stock Operator

The information found in this article is designed to be educational, to show readers how our swing trading tools can be used in conjunction with other technical trading approaches.

1. XenoPort, Inc. (NASD:XNPT)
2. RealNetworks, Inc. (NASD:RNWK)

The 50/200 “Cross”

The thesis goes something like this: the up or “golden” cross (50-day MA moves above 200-day MA) is supposed to be bullish while the down or “death” cross (50-day MA moves below 200-day MA) portends to weakness.

XenoPort, Inc. (XNPT)

Daily Chart with 50- and 200-day Moving Average

Daily Chart with InVivo Swing Trading Tools

XNPT is in the biotechnology industry. Investors have been looking for companies that won’t get affected by the slowing economy lately. Experts saying that place should be is health care and biotechs. We shall see.

RealNetworks, Inc. (RNWK)

Daily Chart with 50- and 200-day Moving Average

Daily Chart with InVivo Swing Trading Tools

RNWK is in the software & programming industry. Note that most stocks from the tech bubble have not retested the old highs from years ago. Perhaps something like this might happen to the latest bubble…

A Word About Stock Picking

What you should do with these ideas are up to you. We believe individual investors should make speculative trades in individual stocks only with mad money after fully funding retirement accounts according to a balanced portfolio strategy. Use a well-defined process to evaluate buy and sell signals. You may wish to investigate these ideas further with the following questions in mind:

• Which phase of the Investor Sentiment Cycle is this stock in?
• Is there a valid reason for entering this trade? Is there a technical trade setup on this chart?
• Is it smart to follow the dumb money? Read the landmark research paper by Mullainathan & Thaler.
• Is this a classic behavioral finance trap?
• Do I have a position sizing strategy? Are all of my eggs in one basket?
• What’s a good spot to place a stop loss?

Readers frustrated by our lack of saying “buy this” or “sell that” might heed the immortal words of Edwin Lefevre:

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. I don’t mean of course that in a bear market caused by a war, ammunition shares do not go up. I speak in a general sense. But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground. — Reminiscences of a Stock Operator

The information found in this article is designed to be educational, to show readers how our swing trading tools can be used in conjunction with other technical trading approaches.

The Strategic Performance Portfolio

This satellite portfolio was adjusted at the close on October 3 to the following percentages:

Members, please CLICK HERE to continue reading.

1. Capital City Bank Group, Inc. (NASD:CCBG)
2. TETRA Technologies, Inc. (NYSE:TTI)

The 50/200 “Cross”

The thesis goes something like this: the up or “golden” cross (50-day MA moves above 200-day MA) is supposed to be bullish while the down or “death” cross (50-day MA moves below 200-day MA) portends to weakness.

What you should do with these ideas are up to you. While we personally don’t trade based on this criteria, it always good to watch to see if traders take action. Quite often, the best trades follow the failure of these setups. We use a well-defined process to evaluate buy and sell signals. You may wish to investigate these ideas further with the following questions in mind:

• Which phase of the Investor Sentiment Cycle is this stock in?
• Is there a valid reason for entering this trade? Is there a technical trade setup on this chart?
• Is it smart to follow the dumb money? Read the landmark research paper by Mullainathan & Thaler.
• Is this a classic behavioral finance trap?
• Do I have a position sizing strategy? Are all of my eggs in one basket?
• What’s a good spot to place a stop loss?

Capital City Bank Group (CCBG)

Daily Chart with 50- and 200-day Moving Average

Daily Chart with InVivo Swing Trading Tools

CCBG is a regional bank. All the banks and financial related companies are waiting to see what Congress is going to do and how it will help the frozen up credit system.

TETRA Technologies (TTI)

Daily Chart with 50- and 200-day Moving Average

Daily Chart with InVivo Swing Trading Tools

TTI is in the oil well services & equipment industry. Crude oil prices is the only thing on traders watch list for now let’s see how lower prices will affect TTI.