Sunday, May 26, 2024

Controlled Sell Off

The market sold off early Wednesday, but retraced almost all of the move down by the close of the day.  It seemed too be a very controlled sell off as the volume wasn't really that heavy for a down day.  It followed the technicals fairly well all day.  While I thought it would rally up in the morning and sell off into the close, it didn't have the strength to start rallying until it sold off some more first.

(to watch video on youtube: http://www.youtube.com/watch?v=bs63pR2qzJ4)

Finally, around midday, the market bottomed and the charts all pointed back up and proceeded to rally into the close.  I think it will continue up tomorrow morning until about midday and then rollover into the close.  The market is certainly showing signs of weakening as it put in a deeper histogram bar this time.

Last week it wouldn't have dropped as much before rallying back up, which means there isn't too much longer before a sell off begins.  They seem too be doing everything they can to hold it up until the elections next week.  I have no idea if the high is in or not, but it feels like it is.

Mainly because of the time remaining before the elections and the time of the month.  The last days of October the mutual funds should be selling to lock in profits before the elections.  They can't take a chance on what the outcome will be, so the safe move is to sell ahead of it.

But, the short term charts are pointing up into tomorrow, so I do believe we'll see another chance to get short before the week ends.  I think Friday could see some selling as the GDP will be released in the morning (could surprise?), along with it being the last day of the month for the mutual funds to close their books on the quarter, spells a "down day" on Friday.

Reasons for a down day on Friday:

  • The short term charts (60, 30, 15, etc...) will likely peak Thursday by midday and rollover into the close.
  • The mutual funds need to close out the quarter by the last trading day of October, which means they will likely take profits by selling some of their core holdings.
  • Thursday will be the last POMO day for the week, allowing Friday vulnerable to any selling pressure as there won't be as much money available to buy up the market.
  • The dollar seems too be breaking out now, and that should put pressure on the market.
  • The VIX seems too be breaking out now too, and that shows fear in the market is coming.

Now... if it were only that simple, we'd all be rich!  LOL.  You and I both know that they are going manipulate the market to where ever they want too this Friday.  While the evidence points to a down day, if they want to rally it they will.  So too be fair, here are the reasons for an up day on Friday:

  • There are Weekly options expiring this Friday, and they need to pin the market where they pay out the least amount of put holders as possible.
  • The government doesn't like Friday's to be down, because they want to give the false illusion to the public that everything is "ok" going into the weekend, so they will go out and stimulate the economy by spending money they don't have.
  • The elections are next week and the government (or at least the Democrats) want to hold up the market until it's over with and blame everything on the Republicans on the coming correction.

So, which will it be... a positive close on Friday or a sell off?  Only time will tell, but I'm leaning toward a sell off... especially if we rally back up tomorrow morning to 1185-1190 area by midday.  Of course we could roll over tomorrow at the open, if the initial claims and continuing claims numbers are viewed as negative for the market.

While I expect them to be better then expected, if they are too good then everyone will think that the Fed's might raise rates soon, and that they might not get the QE2 money that everyone is expecting.  So, we really want them to met estimates or disappoint for that one more move higher in the morning too happen.

If they beat by a lot, I'd expect selling to happen pretty quickly.  I'd like too see one more move higher, and then rollover into the close tomorrow and early Friday.  But, you don't always get what you want.  If we rollover at the open, then things could get ugly pretty quickly.

Best of luck to everyone,

Red

Red
Author: Red

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ACP
ACP
13 years ago

I was thinking about the weirdness before and after the latest G20 and made some semi-conclusions:

First of all, just about every G20 member was all over Geithner for his request to “refrain from competitive devaluation” and exchanges were quite heated during the opening discussions. However, by the end of the meetings, everyone was satisfied with an agreement to do just that. One could deduce that Geithner must have made assurances/guarantees that aren’t being publicized, but may have been leaked in China, being that the HSI tanked yesterday. The HSI is currently trading slightly lower today also. Hmm…an agreement to buy dollars? An actual figure for QE?

Also, what the media stated was a “greenlight” for the dollar to fall farther, turned out to be quite the opposite.

Thirdly, if you look at the selling that occurred before May 6, the selling was sparse before the market tanked. Now, the selling is far more pronounced the last 2 weeks, while the price action was fairly tame. I think the pumpers who may have been caught off guard by the flash crash will now be more than ready to take advantage of the inevitable. Does all that make sense?

ACP
ACP
13 years ago

Lastly, POMO cash is just that, cash. At some point in time, primary dealers who have been pumping the market for the Fed will no longer see a favorable cost-benefit ratio to pumping the market upwards.

Geccko23
Geccko23
13 years ago

I was wondering what score we might get in the opening game of the World Series but once it got to 10-4 (at one point it was 8-4 looking like we could get an 8-5) things started to look bleak but it ended up 7-11 Giants. By the way, the last time the Giants won a championship was in 1954–56 years ago. And our triumphant triumvurate got their first win of the season 97-87.

DJ30
DJ30
13 years ago

Overall i cant say im more surprised then disappointed.I belive that alot of people out knew and expected the feds to float the market going into the elections.as ACP pointed out the POMO effect has been losing steam over the period of time since it was introduced till now.Today i will lean towards what red said rallying in early trading and hopefully topping out before midday.I will place alot of attention to the initial jobless claims coming out at 8.30 during pre market cause i see that report setting the tone for todays overall trading trend. If anyone disagree with what ive just said i hope we can have a discussion before trading starts as im still currently in the process of collecting any bits and pieces of info i can lay my hands on before trading starts.

DJ30
DJ30
13 years ago

News out

USD Unemployment Claims
Previous : 452k
Forecast : 453k
Actual : 434k

Red Dragon Leo
13 years ago

And the market rallies… go figure. Ok, now let’s see how high she gets today before running out of steam.

anoopsan
13 years ago

S&P 500 Futures before opening bell: CLICK HERE

DJ30
DJ30
13 years ago

hahaha nothing new about this red same BS rise and repeat.To be honest im actually surprised that its still not coming down best guess here would be that they are trying to hold till the POMO kicks in for another run.

DJ30
DJ30
13 years ago

anoopsan is there anything new on the DJ30 other then the 50 and 200 mda chart ?

anoopsan
13 years ago

Dragon Fly Doji of DOW Jones Futures: CLICK HERE

DJ30
DJ30
13 years ago

Thanks anoopsan well now everythings just a mess hahahah charts say down ,indicators say down ,news says up ,candlestick says up.HAHAHAHAH today im gonna flip a coin.

Red Dragon Leo
13 years ago

While we should go back up some over the next few hours, I’d say the high is already in for the day.

Mike
Mike
13 years ago

Agree, bears need follow-through with high volume selling to confirm the top is in. I don’t think this market will only correct ,instead it will just collapse 100 points or so on SPX. Here is the appropriate song to describe this manipulated market:http://www.youtube.com/watch?v=GUfS8LyeUyM

Red Dragon Leo
13 years ago

Well… not everyone knows, but a lot more know today then they did a few years ago. But definitely an appropriate song…

anoopsan
13 years ago

S&P 500 In a channel: CLICK HERE

anoopsan
13 years ago

Better stay out till things are clear DJ30

Mike
Mike
13 years ago

Looks like we go up to top of ED in a double-zigzag. Let’s see how far this rally can go.

Mike
Mike
13 years ago

Am buying a bit of UUP with tight stop. Figure risk-reward looks ok.

Red Dragon Leo
13 years ago

By the end of the day the 60 minute and 30 minute chart should be overbought. The 15, 10, and 5 should also reset from this mornings’ sell off and become overbought too.

Once they are all insync together the down move that follows should take out the supporting trendline from the rising channel. Will this happen tomorrow? I don’t know, as it depends on how long it takes to get the 60 overbought.

It will also depend on whether or not the market can take out these mornings’ high around 1190? If not, then any move up today will set up a bear flag for tomorrow morning and/or the last hour of today.

Mike
Mike
13 years ago

POMO money can’t support the market today. Houston we have a problem!
http://www.businessinsider.com/and-heres-a-fourth-reason-to-fear-an-imminent-selloff-2010-10

Mike
Mike
13 years ago

Election and FOMC( already factored in the market) disappoint plus mutual fund selling right now

Red Dragon Leo
13 years ago

What were the other 3 reasons?

anoopsan
13 years ago

TRIANGLE of Dow jones: CLICK HERE

DJ30
DJ30
13 years ago

Thanks anoopsan somehow i dont see the market coming back from this slide there is still time but right now it looks like Feds VS whole world and Feds dont seem to be winning this time

ACP
ACP
13 years ago

Could be the mutuals are bailing while the POMO money is being used to control the selloff. And remember cost-benefit to pushing a topping market upwards.

If you were a primary dealer (pretend you’re an evil scumbag), wouldn’t you wait until the oppotune moment, then use a few billion POMO dollars to tank the market? Way easier money than using those billions to push up the S&P another 3 or 4 handles.

Mike
Mike
13 years ago

Agree. Taxpayers money buying the mutuals

ACP
ACP
13 years ago

Yeah no kidding……every time I’ve seen total chaos like this, it usually results in everyone getting spooked out and bailing. Someone gave the controls to Cheech and Chong.

Mike
Mike
13 years ago

This 1st inflow in 6 months could signal a top. Usually the retail guys are the last one joining the rally.
http://blogs.barrons.com/focusonfunds/2010/10/20/ici-stock-mutual-funds-attract-1st-weekly-jump-since-may/

Red Dragon Leo
13 years ago

Once again I get the direction and time backwards… LOL! We sell off in the morning and rally into close, while I thought the exact opposite would happen. Go figure! That’s 2 days in a row that I got it reversed.

DJ30
DJ30
13 years ago

Any one feel like guessing where the DJ will end up tonight after the report came out it rallied to top out at about 11120 and then a nice long slide came into play and touched 11000 right now its hovering at 11030.Does anyone see a last min play that might push it up.Cause im not seeing anything and i dont want to be wrong espically this time.

Red Dragon Leo
13 years ago

Another flat day probably… LOL!

Red Dragon Leo
13 years ago

Absolutely amazing isn’t it? This market opened around 1185 this week and went up and down to end right back where we started from… nowhere!

Red Dragon Leo
13 years ago

Well… tomorrow is a wildcard day I guess. The charts are looking toppy right now and ready to rollover, but will they allow the trendline of support to break on a Friday?

We still have very low volume right now, which usually favors the bulls. Tomorrow must rally up or risk breaking this rising channel’s lower support line.

So what will it be? Sell off or rally? Gap up to breakout of the triangle forming, or gap down to break the support line?

zstockmiester
13 years ago

HAL cement in BP spill was BAD! avoid HAL

ACP
ACP
13 years ago

Hard to say. All I know is, there was major dollar manipulation today. I wouldn’t be surprised if the Fed had every one of its 400 traders on “dollar duty” today, pushing down the USD using every possible tool.

I bet they even have offshore accounts to mask their identity.

zstockmiester
13 years ago

MSFT, is your wild card…if it’s up 7% in AH today, do you think the QQQQ’s will be down on Fri? Vice versa could happen, I suppose.

zstockmiester
13 years ago

Hi Mike, do you have DOW 11,900 as a possible top, in your analysis…If not, I’d add that to your tool kit.

zstockmiester
13 years ago

Hi anoopsan,
add 8%, and then draw the resistance line…That’s what tech stocks are doing to me.

Red Dragon Leo
13 years ago

The UUP (the dollar) had 6.8 million shares traded at 3:30 yesterday. The average volume over the last 30 days was 1-2 million per 60 minute candle.

This was 6.8 million in the last hour of the day! That’s huge! The entire day yesterday was 15 million, while the average over the last 30 days was only 5 million. Talk about a short squeeze!

When this market finally tanks, the dollar is going rocket higher. As if that one day created 3 times the normal volume, that tells me there are a ton of shorts that will get squeezed hard when she finally starts moving up hard and fast.

Gitana
Gitana
13 years ago

I believe the max on DOW should be 11,500 if you are to consider 11,497 in oct 1999 the right shoulder, 13,895 in july 2007 the head, and now we are in the left shoulder and ready to fall

anoopsan
13 years ago

Triangle gives support: CLICK HERE

anoopsan
13 years ago

Thanks for the info Leo

ACP
ACP
13 years ago

Not to mention buy volume the last couple weeks is far higher and is accelerating far steadier than it was either before or after May 6…

Anonymous
Anonymous
13 years ago

MSFT surprised me I do not know anyone that has bought a new anything of late except the gov’t

Geccko23
Geccko23
13 years ago

AAII poll at 51+%bulls now and 21%bears. That is a really low bearish number. Nyse McClellan Summation Index has now dropped below its 20day average and it doesn’t appear to whipsaw once below that average. We’ve also had 2 days in a row decently down below the o line on $nymo. Perusing the blogosphere, it appears everyone is bullish now even the diehard bears who have been calling for a crash. According to Mahendra, we now start with the greatest bull market in history. Too bad he doesn’t realize that the Summation Index never reached a level from which bull runs start from. I need to put him on my watchlist for compromised analysts.

Robert
13 years ago

Would love to see a selloff. Gotta believe some profit taking will take place. Monday should be a big up day………….

ACP
ACP
13 years ago

Currency depreciation probably helped some, I would imagine, plus –

In last year’s quarter, Microsoft deferred some revenue from Windows sales. Had it not done so, net income would have been only 16 percent higher this year in comparison.

Geccko23
Geccko23
13 years ago

I have a high convergence of cycles for tomorrow. 770trading days from October 2007 high,417 tds from March 2009 low, 749 calendar days from October 10,2008 financial crisis low, 84 tds from July low, 58tds from August 9 high, 81calendar days from 08-09 while also 81 years from the October 29,1929 crash day….here are some others/ don’t know if they back an esoteric punch….186 and 176 calendar days from April high, flash crash day (could have some punch as 87 and 77numbers….by the way I did discover 586/87 B.C. is considered a vital date for the insiders)….It’s also 131,123 trading days respectively…..This weeks high in the SPY 119.76 minus the SPY flash crash number from last week of 106.46 is 13.30 while the high close this week of 118.7 minus that number is 12.24 (224 was SPs October 19,1987 close while 2246 was the Dow’s close the day before the crash). Dow closed at an interesting 11113.xx today (xx I believe was one of these crash signature numbers like 73).
I did buy another put today and tried to for copper but don’t think I got filled. Gold is churning sideways after its initial drop like the stock indices did from April 26 to may 3 (when my intermediate strength level cycle last appeared as a high)
I still can’t believe the level of bullishness now among bears who expect at worst for the market to hold up until the elections and fed meeting and just the level of apathy and non-participation on some of these bear boards)

anoopsan
13 years ago

S&P 500 Futures before opening bell: CLICK HERE

Red Dragon Leo
13 years ago

All the short term charts are in overbought territory and can roll over at any time now. I think we’ll go lower from here, as the downward sloping overhead resistance line seems to be holding the market back.

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