CanOz
Home runs feel good, but base hits pay bills!
- Joined
- 11 July 2006
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I don't know...maybe its just the macro bear in me but i think this thing is setting up for a low liquidity manipulated bull trap.
I don't know...maybe its just the macro bear in me but i think this thing is setting up for a low liquidity manipulated bull trap.
So exactly what then Joules, is driving the market higher?
The SPX chart just looks strange to me. Most bull markets don't consist of of impulsive drives higher and higher. Usually bull markets are just a consistent grind higher, if you know what i mean. I'm not trying to be right or wrong here, i just think that it doesn't look typical...but then what does these days.
CanOz
Yet option and futures trading suggested in early June that stocks would rally because investors were overly negative. Even now, this negativity persists””though not at the same extreme””which indicates the rally has at least several more months of life.
The equity-only put-call ratio””the daily sum of all puts traded on all stocks divided by the sum of the all calls traded on all stocks on the same day””is a reliable indicator.
THE TOTAL PUT-CALL RATIO also helps investors analyze investor sentiment. The ratio's 21-day moving average rarely rises above 0.90. Mostly, far more calls trade than puts. But when puts exceeds calls, and then peaks, it sends a buy signal for stocks.
Such a buy signal was telegraphed in the second week of June””and it remains in force. In fact, it was only this week that the 21-day moving average of the total put-call ratio fell below 0.90. In other words, total put buying remains rampant despite the rally. It only now has moved out of what is considered "oversold" territory for stocks.
Everyone talks about spot VIX, recently around 16, but VIX futures tell the real story. VIX futures, compared with spot VIX, are extremely expensive, even though it is common to hear people say the VIX is so low that it indicates investors are complacent and perhaps suggests a short-term market correction is imminent.
To understand what traders think about volatility, you must examine the prices of VIX derivatives. Now, traders are paying far in excess of spot VIX levels for VIX futures that expire in coming months. For example, spot VIX is near 15, but February 2013 VIX futures are at 26. It's further evidence that this stock market rally has few believers.
Much of this VIX futures buying is a direct result of the heavy demand for VIX exchange-traded notes, primarily the iPath S&P 500 VIX Short Term Futures, or VXX. Exchange-traded note managers buy VIX futures when new VXX shares are created, and then those VIX futures are rolled forward each day.
Heavy investor demand for VXX creates heavy demand for VIX futures. This, in turn, sharply boosts VIX future prices, telegraphing another contrary indicator. When fund managers decide that they need massive volatility protection for their stock portfolios, it is, by contrary analysis, bullish.
When the investing and trading public start believing in this rally, the put-call ratios will start to reverse and the term structure of the VIX futures will flatten. Only then will it be time to sell stocks. Until then, the market””hated as it may be””can continue to march upward against this tide of negativity.
Walter Murphy @waltergmurphy
Weekly Coppock for #SP500/$JNJ is o/s & bottoming. That's usually a good sign for the market.
on the upside, george (hoozyadaddy) soros is getting hitched to a woman half his age......
Long pre-nups
some interesting things found on the way to the open......
does the trans side need to always be confirming the indecies? can't the transports be in its own levels of participation without implying either way?
have you noticed no one ever mentions when the trans are neutral yet just as strong a signal......what exactly does the trans sector need to show (of itself) to confirm weakness and over what period?
Hey Joules,
I saw you guys discussing Trans the other day, and just now while looking at some white papers I came across this old list of Richard Donchians market "rules". I thought you might find this one interesting, as the interpretation might help answer your question
View attachment 48606
i.e. similar to many strategies seen on the blogosphere to invest in SPY when QQQ is outperforming SPY.
So Richard D didn't see it as a "divergence", e.g. be worried if transports don't confirm but rather don't participate if they aren't participating.
thanks, sinner ...... that's the 'who is lagging who?' question i posed earlier to open thinking about how to read the divergence and is it a - or + one......seems there's been a morph of the original idea into a text book translation from most talking heads.....
The second quarter earnings season is now completed, so below we highlight the final earnings and revenue beat rates. Of the 2,278 companies that reported between July 9th and August 16th (Alcoa's report date through Wal-Mart's report date), 58.7% beat earnings estimates, while 48.4% beat revenue estimates. The 58.7% earnings beat rate is the lowest reading seen since the bull market began in March 2009. The 48.4% revenue beat rate was also the lowest reading seen since the bull market began, and it's well below the average revenue beat rate of 61.7% that we've seen since 1998
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