There will not be a video today due to the holiday.
The S&P is parabolic and I will not be a buyer until we break that pattern. I may not catch the absolute bottom, but at least I’m trading and not gambling.
The most concerning aspect of today’s selloff is the unimpressive volume. It did not even approach the volume we saw during the September lows. Today was not the bottom. This was not capitulation.
- TED spread at all-time high, 423 bps
- VIX finishes at 63.92
- Tomorrow:
- Before the bell: We see earnings from GE
- The anxiously awaited Lehman CDS auction
- President Bush will speak on the economy at 10am
Where might the S&P find support? Here are some potential levels presented on a monthly chart.
3:49pm
S&P catching a bid into the close. I’m not playing. I have no confidence this was capitulation given the unimpressive volume.
3:45pm
Gold above $920.
S&P nearing $910.
VIX approaching 64.
3:45pm
Not seeing any reliable signs of a reversal.
3:42pm
Gold spiking above $915
S&P under $920
3:40pm
Closing Imbalances are on the sell side… SPX approaching 925. Watch for a reversal but don’t buy blindly!
3:30pm
Gold has rallied sharply, once again above $900.
3:28pm
What is most concerning about today’s selloff is that the volume is not even as near yesterday’s. Granted, there are 30 minutes left of trading, but this is not capitulation, yet.
3:21pm
Crude trading under $85
S&P under $940
VIX above 60
No signs of a bottom yet.
3:13pm
VIX approaching 60.
The next potential support level for the S&P is 925.
3:10pm
ES 10-minute candle did not close in the upper 1/4 so not a reliable bottoming candle.
3:02pm
Dow is under $9000.
2:56pm
VIX 10-minute: Breakout?
2:35pm
As RK points out in the comments below, a 76.4% retracement for the SPX (Oct ’02 – Oct ’07) is 959.19. Today’s intraday low is 960.14. This is only a level of potential support where buyers may step up.
~ This price action is the most bearish I have ever seen and my 925 downside target looks like it may be too high. As severe as this fall has been, we are yet to see free-fall capitulation. The selling has remained too orderly for a bottom.
2:20pm
TED Spread near all-times highs at 414 bps.
2:19pm
XLF 1-minute: Breaking down?
2:11pm
ES 1-minute: Absence of Buyers
1:45pm
Reminder: Tomorrow morning, GE will report earnings. Traders will also be anxiously awaiting results of Lehman’s credit default swap (CDS) auction.
1:41pm
ES 1-minute: VWAP serving as resistance. Look for downside break.
1:21pm
In my opinion, there is no reason to be long this market until be break out of this parabolic fall.
1:17pm
This bounce is not on impressive volume, though it is the lunch hour… SPY 1-minute needs to break above VWAP before I get long. I remain skeptical of playing any counter-trend rallies until capitulation.
12:24pm
VIX 10-minute: Cup with handle?
11:52am
MS spokesperson: Deal with Mitsubishi is on schedule to close on Tuesday.
11:47am
Major indexes rallying back into positive territory.
11:45am
SPX 60-min: Parabolic Fall
~ Parabola patterns offer great trading opportunities when they reverse. But being early can be painful.
11:39am
Unconfirmed report: US gov’t reportedly evaluating injection of capital into US banks for common or preferred shares.
~ Source reports that the Treasury may begin capital injections before November.
11:14am
MS ticking higher on chatter that Mitsubishi could consider buying MS entirely for $20.
11:08am
QQQQ still in positive territory. If you want to play a bounce, buy tech.
11:03am
PRU -36%, SLM -26%, MS -23%, KEY -22%, SOV -22%
10:58am
I do not expect to see the market capitulate and bottom on a holiday. My 925 target is only 47 points away. I anticipate a Hope Rally, followed by a fast and furious sell to 925. If we can’t get a small counter-trend rally here, perhaps my 925 target is too high.
10:49am
Back to back wide range doji candles on ES 10-minute. Market may be trying to turn here.
10:44am
Gold is catching a bid.
10:37am
SLM -30%, PRU -25%, KEY -23%, MS -18%, FITB -17%
10:35am
Natural Gas Inventory data: +88bcf v 80 to 90 bcf expectation
10:25am
Market looks very weak. XLF back into the red.
10:17am
Crude has fallen in recent minutes, near 87.50. The dollar has moved to session highs.
10:10am
ES 10-minute has put in some long tails this morning whenever it trades under the 200MA. This is somewhat encouraging, but the volume is light on this bounce.
10:00am
ES has reversed lower. 10-minute trying to hold its 200MA (993.25).
10:00am
August Wholesale Inventories: 0.8% v 0.4%e (1.5% prior)
9:52am
Selling in treasuries continues this morning across the curve.
9:42am
ES just made a fresh session highs and is now threatening to reverse.
9:30am
Remember, the short selling ban on financial stocks is over now. Not sure exactly what that means for prices but I welcome the returned liquidity.
9:26am
ES 1-minute: A break above descending trendline should lift us to the double top level.
9:15am
Earlier this morning, the NYT reported that the US may take ownership stakes in banks via the Treasury Bailout facility.
~ Article notes that the recent bailout package gave the treasury the authority to inject cash directly into banks that request it. In return the law gives the treasury the right to take ownership positions in banks, including healthy ones. Article notes that the proposal would resemble the one announced on Wednesday in Britain.
9:04pm
The TED spread is above 400 for the first time ever to 409bps.
8:59pm
ES 1-minute
8:38am
Good morning. S&P E-Mini Futures (ES contract) is higher by 19 points to $1000.
Initial Jobless Claims: 478K v 475Ke
* NYSE Bullish Percent: Os (Negative) 9% – lowest since 1987
* S&P 500 Bullish Percent: Os (Negative) 7.9% – exceeds 2002 and 1998 lows
* Nasdaq Composite Bullish Percent: Os (Negative) 13.4% – lowest since 1987
* Nasdaq-100 Bullish Percent: Os (Negative) 4% – in 2001, this indicator actually reached 0
* Russell 2000 Bullish Percent: Os (Negative) 14.1% – equals January low
* NYSE High-Low Index: Os (Negative) 2.5%
* Nasdaq High-Low: Os (Negative) 2.8%
Where do you get this data?
watch this:
http://articles.moneycentral.msn.com/News/jubak-financial-crisis-end-of-the-world.aspx
Brains post from earlier:
What worries me now? I can point to alot of things to worry about, but what is most worrisome is the current market action and the lack of any sustained follow through in either price action or confidence. What is behind it? I am not sure, but I have a nagging feeling that the market is anticipating a precipitous event in the near term will enlight the rest of us about a problem that is real but on which there is little focus. The Paulson plan and the FED moves to un tighten the credit market are band aids to the real problem that is beginning to snowball. The RMBS, CDO’s and other mortage based toxic stuff is child’s play to the global deriviative market which is 700 trillion with a T large, as well as the Credit Default Swap market which is 62 Trillion, again with a large T. Makes 700 billion seem tiny, huh? Every time a bank, or other large company fails, CDS and deriviatives tied to that company’s demise are implicated. Who holds the CDS and derviatives? Who wrote them? Thats the problem with opacity, and I think why we are seeing hightened nervousness with interbank lending. Even Warren Buffet and Berkshire Hathaway have deriviative exposure in this market. This is from Buffet’s 2006 annual letter to shareholders: “Berkshire is also subject to equity price risk with respect to certain long duration equity index put contracts. Berkshire’s maximum exposure with respect to such contracts is approximately $14 billion at December 31, 2005. These contracts generally expire 15 to 20 years from inception. Outstanding contracts at December 31, 2005, have been written on four major equity indexes including three foreign. Berkshire’s potential exposure with respect to these contracts is directly correlated to the movement of the underlying stock index between contract inception date and expiration. Thus, if the overall value at December 31, 2005 of the underlying indices decline 30%, Berkshire would incur a pre-tax loss of approximately $900 million.”
Where are these puts valued now? I don’t know, but if Buffet is underwater on 14b in notional value puts, how many other less sophisticated risk takers in the insurance, banking, hedge industries have written CDS or derviative contracts that if marked to market renders them insolvent? Is the action in the insurers, and the need for capital raises in that industry group an indication of things to come? The government has alot of power and the ability to print money at will, but the scope and extent of the CDS and deriviative market which few are talking about is the one area that I don’t believe any government action is able to ameliorate. I get the sense the private market players understand this, and that is why they are hoarding cash and unwilling to have confidence in anyone else. JPM requiring Merrill to post 5 billion on a collateral call earlier this week and Merrill resisting on “principle grounds”. When put in this light, the real estate slide and the subprime toxic securities are old news (but on which all the focus is on at the moment) and minor compared to the current maket meltdown and corporate blowups and their concomittant affect on CDS and deriviatives. Just a thought.
This appears to be forced deleveraging of assets undoubtedly fueled by margin selling. Every sector is now beginning to get hit. I put this remedial long term SP500 chart up earlier. This is also an unwinding of borrow short, buy long.
Some general thoughts…
http://moneycentral.msn.com/investor/charts/chartdl.aspx?D4=1&ViewType=0&D5=0&ComparisonsForm=1&Symbol=%24INX&CE=0&ShowChtBt=Refresh+Chart&DateRangeForm=1&D3=0&C9=2&DisplayForm=1&CP=0&PT=11
. This is the 4th consecutive day that the VIX(VXO) has exceeded 50. In October 1987 the VXO was over 75 for 8 consecutive days, followed by 9 days at over 50 . 17 consecutive days. We are at day 4 and we just broke 60 for the first time late today.
. The TED Spread’s lack of immediate reaction to the global rate cut was telling. Preservation in the face of unknown risk is prevalent.
. At this point any rally will be violent as people try to simply break even at best. Many stocks had broken 5/10 year trends the last few weeks and confirmed them. Others had prior, and others yet, still have not. CSCO, EMC, INTC all sold for a fraction of their then current price to book in the summer of 2002 when the market had bottomed. They still were great companies, but the record revenues were gone, and the economy was in recession. And most importantly for a bear market when it eventually hits bottom… There Is No Reason To Buy The Stock… There isn’t a desperate line of people waiting behind you to resell to at a higher price. That’s as far they can go. Today’s tech high fliers will all go the same route, as impossible as that may still seem. This downtrend won’t end tomorrow or this week, or month, we will have violent counter trend rallies. The major ones this year were ~ 14% from the lows to the next short term high, making it even more diffcult was that many of them were hidden among intraday moves as well, that show up as tails on daily candles. That 14% is also comparative to the SP500 decline from 2000-2002, so it serves as decent ball estimate. Every piece of news is going to be psychoanalyzed by people looking for a permanent rebound and there will be plenty of traps for longs who get in early to ‘invest’.
.For long term investors, there is no need to rush. The market is not going to run away. It’s time to be patient. The NASDAQ 2000 peak is a good example of how slow the eventual recovery of lost ground can be. There will be plenty of opportunities for investors when the dust settles.
Michael, do you mind if I make this a post?
Sorry the comments got wiped out. Had some technical difficulties.
Craig,
You maybe right. Scary!
Is there a rule that capitulation has to occur all in one trading session? This month’s candle alone looks pretty frightening. Takes up almost have of my 2 year monthly SPY chart. We are on track to do around 10.8B in volume which is 2B higher than last month and 8B higher than the 60EMA.
Lord have mercy…and we still have 16 trading days left in October.
Not at all. I think it is non-sense trying to say which day was the bottom or waiting for it to occur. During the past big rally I could not even log into my account. If you don’t position yourself now you will miss it. Bottoming is a process, the ensuing rally is an event.
Everyone.
Here are your downside Volatility Bands for Friday in the SPY’s using Implied Volatility.
1.28 VB: 86.49
2.0 VB: 84.13
3.0 VB: 80.84
3.5 VB: 79.20
The worst case scenario would be for the SPY to drop to 80.84 to 79.20 range on Friday which is equal to 808.40 to 790.20 in the S&P 500. The way things have been going a 100 point drop in the S&P 500 is certainly possible if all hell breaks lose again.
Forgive Papa Bear if I am rambling too much. Let’s look at this and try to see the big picture and put all the signs, signals, and indicators together.
1) Bond market selling off surprised me lately. No “smart money” seeking safety.
2) Market lost more than 20% on this wave down. That’s a crash.
3) 99.9% of all technical indicators are saying this is a tradable bottom
4) Gold price is slightly declining. Again, no “smart money” seeking safety
5) TED is going crazy, yet economy is struggling along…no signs of panic yet.
My point is – life is normal after “trading hours”. So why the panic selling…
Perhaps….maybe….when Paulson/Congress announced Armagaddon is comming if no bail-out, the public panic…and there was and is a massive massive massive “bank run” on the saving accounts, brokerage accounts, and 401K funds. The more the market sell-off, the more panic “bank runs”.
Everybody is hoarding cash…after all, CASH IS KING!!!
The only way to bring cash back into the market is a BIG HUGE rally…a 1500 pts rally…Nothing calm the public down more than seeing others making lots of cash in the market.
After all, we are all human…and greed will overcome fear very quickly when money can be made…
I agree. Greed will always make a come back – put your faith in it! I bought as many stocks as I could during the afternoon panic. Who cares is the market goes down again tomorrow, in that case I will buy more. I think WFC was a steal today at 26.5 to 28 and I was proved right afterhours when Citi backed down from the Wachovia deal. WFC will also benefit from the historic amount of fund withdrawls that happened this week, nearly all of it will go to only the strongest banks (WFC is the only US bank with a AAA rating). I also picked up some lame stocks, you know the ones that you have been following for months but just couldn’t bring yourself to buy because the fundamentals are not that great. I only bought small positions in these and they will be sold into the rally. Things like Nvidia ($3 per share in CASH) and Advanta corp, I also picked up some JNK and I have a gain on that already (hmmm why a gain on a junk bond fund during a day like today). The fundamentals are scary, and I am sure the absolute bottom is not in but the time for making little day trades is over, now is the time to take advantage of an oppurtunity that we will probably never get again and start building long positions.
Wow, NVDA is a shocker there for me. Great deal. Cash is king, they don’t have to worry about financing at all, and yet they are in the same hole as everyone else. heck, i’ve lost 30% in the past week on the best debt collection firm in the business (PRAA)– tell me they aren’t going to do well the next couple of quarters!
I think you need to keep a perspective on the mkt psychology. I haven’t heard much of that lately, much more here about Eliot Wave theory instead.
The talking newsheads are comparing this to the great depression… it’s become fashionable to make jokes about the depression (SNL, or see the ‘website’ link for this post. I can only imagine what conan is saying). i think this is the first time in my life i’ve heard ‘fedora’ jokes on TV in my life.
This has come down too fast. There will be more downside most likely, but look at the chart the past couple of days. Seriously, the SPY is down 18% this week! There is also an article in the NY times talking about Boston Scientific, how Lehman’s bond losses triggered a large charitable trust to automatically sell off its Boston Scientific holdings.
Option ex is next week as well. for those who buy into OptionPain, there is some rallying to be done to minimize the put losses (almost the understatement of the year).
I also want to point out that at these levels we should all be bullish. I don’t understand how people can be so bearish when stocks are this cheap. I mean, where was all this bearishness last year at this time? That is when I was bearish and now I am bullish.
You want to make money in the market? Do the EXACT opposite of what you hear or read. Buy stocks when people are selling them to you for firesale prices. In a way the ‘premium’ you will collect is worth it to them for short term relief of the pain. Take advantage of this nonsense and certainly don’t be part of it. This is comparable to when I was buying in force during the July 15th low. In a matter of days some of the stocks I bought were up 50%, now come on… who sold them to me?