This was an interesting session which got much more interesting after-hours. There was a distinct change of character in today's buying compared to the last few days of basically drifting higher. Today buyers were really motivated -- probably equal parts short-squeeze and fear of missing the rally kicking in. That buying lifted the S&P 500 away from its June highs and into clear breakout territory. It also pushed the Dow to a new 2009 high. But some earnings disappointments after-hours negated the bulk of the day's gains. So suddenly the very steep July trendlines are in jeopardy and some of the indices are in danger of failed breakouts.
The last price I saw on QQQ in the after-hours session was 38.83 so its July trendlines will likely be tested right at the open tomorrow.
It's a similar story in the Nasdaq...
Ditto for the S&P with the additional threat of a failed breakout above the June highs.
Worden pointed out the possibility of a broadening top (aka megaphone) formation on the Dow. A very similar pattern exists on the S&P chart too.
Here are some of the big cap stocks (MSFT, AMZN and AXP) that disappointed in tonight's earnings reports. As you can see, serious damage will be done to their technicals tomorrow if they open where they ended the extended hours session.
The other day I said that I wouldn't be surprised to see the Nasdaq fill last Wednesday's gap. It's now a long way from that but Microsoft has a good chance of doing just that tomorrow.
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Up | Up | Up |
| Intermediate | Up | Up | Up |
| Short-term | Up | Up | Up |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
*sigh*
EVERY SINGLE BLOG is bearish bias! It's really unbelievable. I owe you, fmmf, financial ninja, mish, zero hedge, calc risk, wall street 24/7, and many others a 1000 thanks for opening my eyes to what traders and retail investors look at on a daily basis.
However, its absolutely shocking how unanimously bearish all of you have remained! No one can let it go!!! No one is going to finally say "you know, the rally is real. The fundamentals are slowly getting better and valuations are actually attractive, and y/y comparisons are about to get VERY juicy once we get into Q4. I imagine a year from now, many of these blogs will have died out as thousands of perma-bears can't bring themselves to admit they were wrong and instead go back into hibernation."
The unbelievability high negativity and skepticism is exactly the fuel needed to continue the market rally much longer than many foresee. A huge wall of worry still lies ahead and the market will continue to climb it. Every "savvy retail investor" will get crushed going short on every pop. Endless excuses of "no liquidity" or "manipulation" or "short covering" or "valuations are off the charts" will always catch a small audience and will be the cause of pullbacks along the way up.
Every blog is tyring to "predict the next wave down" instead of "look for the buy-able dip." As long as I continue to see that mentality spread across the blogs that were DEAD ON during the crisis and are now DEAD WRONG during the recovery, I will be buying the dips.
I too have sided incorrectly. I bought SSO at S&P720, and proceeded to trade in-and-out of it instead of just riding it the entire way. I too got "shook out" on many occasions as it is VERY SCARY to ride a true bull market during its early stages. The returns are so great because the fear is so high.
Oh well...live and learn. I guess the lesson is this:
Only a select few will make money in the stock market through trading (especially during bear markets and consolidation periods). These individuals clearly see what the masses are thinking, and go directly against it when the masses are in clear agreement. At the end of the bear in March, shorts were making easy money. But when the curtain falls, every one of them tries to cling on to the party and simply can't accept that CHANGE really has occurred. We cling on to our ideals not accepting that things REALLY have changed in a split second.
If anyone has a doubt that the average joe is still bearish..just read any marketplace.com featured comment or financial blog or any conversation on the street. No one is talking about the recovery. Everyone is extremely skeptical. Those skeptics will slowly buy in over time causing more and more fuel for the rally.
Of course, that can all change on a dime, but I wouldn't count on it.
So what are you trying to get at Mike? ;-)
But seriously, a buyable dip is exactly what I'm looking for. I'm sorry if I've given you a different impression. All I've been saying for the last week or so is that I wouldn't put new money to work in such an overbought environment. I never said I'd be a seller. This move has been a rarity. I think CNBC said this is the best stretch for the Nasdaq since 1992. So I think I have good reason to not want to chase.
As for whether the rally is real or not, I don't pretend to know. But I'll look for buying opportunities as long as the trend(s) tell me to.
It would be interesting to compare the level of bullish/bearishness in the blogosphere between now and say, 2003. I would imagine sentiment remained bearish through much of that year and beyond. The irony is that being a bear in 2003 was wrong...until late 2007 when all the dire predictions finally unfolded. To the extent that today's bears are critiquing structural issues in the economy, it probably still pays to be attentive. In between crises, collapses, whatever...the stock market is of course free to do its magic levitating act. :)
Every single blog having a bearish bias is a good thing though. Every substantial rally that has occurred in the past always starts out with a lot of skepticism.
That type of psychology is pretty much a given I would say.
The psychology of markets will never change, the key is just trying to read between the lines so you can benefit.
I am looking for a buyable dip too. I am not sure if it will come tomorrow.. but tomorrow will probably be a low volume Friday so that would be ideal for a pullback to support as Trader Mike was indicating.
You're right about bears not belieiving this rally. What's next? No one knows. A data point for your consideraton: after the great crash of 29, stocks rallied to the area of very sifnificant resistance, flirted with the 30 week sma average for a bit and then went down again. We're in the first part of that scenario now. I wouldn't be suprised if the same happens again as the economic fundmentals are so terrible that they will finally be reflected in prices. So, a bit more lateral-up movement and start back down in the fall? That would be my best guess, but I'm not doing any trading based on it! If and whem we go back down in the fall, it wouldn't surprise me if the decline was gradual with plenty of pull backs on the way: just to keep everyone guessing.
Very odd comment by Masland! Perhaps he should use some of his 'bull money' for a reading comprehension course? Anyways, this action is just so interesting. Futures are now green. A trader could not possibly ask for more.
Some of you must be new to trading. If you really think a new bull market is anywhere close to starting you've been watching too much CNBC.
The big money -program trading, hedge funds, etc., know exactly what's going on. This is a bear market rally. It only seems like something more significant because that's what the media is telling you to think.
All you have to do is study a chart and you'll realize we're getting one of the strongest and biggest bear market rallies of all time because we're in the midst of one the strongest and biggest bear markets of all time.
Sooner than later the S and P will head South again, back towards those March lows and when it does everyone on CNBC will act like they knew it was coming all along.
I think the old trend line for that trading range is still in place. Internal trend lines are another type of trend line. Don't know what that megaphone line is. Just need to move the blue support line up to the original trend line support on the range and you'll see the failed signal.
whoops. sorry. was talking about the Dow
And it depends on what style of trading one prefers. Lately, momentum traders have been getting beat up pretty good while swing traders (or buying on the dips) continue to do very well. So it seems many leading stocks are not performing as if they were in a true bull rally - good reason to be cautious.
Who knows, perhaps the market remains in a trading range until interest rates are allowed to climb higher.