Sentiment & Selling Pressure update

VIX Future - Vix SPREAD: Q2 END action in full swing.....

SUSI WEEKLY UPDATE: Retest or Continuation?

(due to technical constraints related to our travel activity we run SUSI on a smaller UNIVERSE then usually but still hope to offer a representative sample)

• Mr Maket is retesting the Exhustion levels of the previous signals, which has led to a host of (weak) buy Signals.
  
  
• If Mr Market is taking out these upside Exhaustion levels (on the SUSI INDICATOR) then we could see another leg up even a "melt up" to 1050-1100 (S&P500) , ...
  
• ..if "he" fails then SUSI could trigger a series of SUSI Sell Signals (lower Indicator peaks) on the heels of the previous exhaustion signals. This would be very bearish.
  
  
• Pls also be alerted that this week is Q2 end, meaning most institutional participants will try to defend strong levels.
  
  
• Even more interesting is the fact that most charts show a TimeCluster (TC) around June 10 (+/-) which indicates a high probability pivot. If a HIGH or LOW we don't know at this point in time. (..or whether the MOMO is so strong that it will overrun the TC cluster...)
  
  This can mean that the market runs for another week and set a HIGH or that we see a sharp sell off next week into a swing LOW (Buy opportunity ?). Today's action indicates the former.
  
  
• Beyond that we notice a bounce of the zero level (not shown) by our VIX OSC, which further supports some positive Q2 end action

out on the road.... up until JUL20....

Your blogger is out on the road for the next couple of weeks and will post unregularly.

We will try to produce the weekly SUSI update from the road....but can't promise....

We will return towards the end of JULY.

thx for your understanding

New SUSI CHART

This chart shows how important it is to cluster. SUSI is just a high probability Indicator that needs support from other approaches....

VIX OSC- It's crunch time..

Volume confirms new distribution phase

20day LOWS and Selling Pressure hit trigger levels!

(Institutional Money portfolio )

• 20d Lows hit 20% trigger level (200 on the rescaled chart) for a change from a bullish to a bearish bias (see (1))
• Selling pressure is also hitting 20% trigger (see (2))

Conclusion:

• We have now officially (confirmed) entered the correction after yesterday's major distribution day
• The above chart indicates that this (double) confirmed situation can last for a couple of weeks before we see the next bullish confirmation or bearish re-confirmation
  
  

Elliott Wave update

The key question is now whether we see an ...

• A-B=C-D or ABC elliott pattern with a tendency to symmetry which can be interpreted as an Correction (=bullish) or ...
• an extended WAVE 3 (asymmetric structure) that could indicate an intermediate trendchange (=bearish)

Tonight we will also have a close look at our 20day Low run as well as our Vix_OSC and the Volume picture to gage whether today qualifies as a confirmation day to the bearish case.

SUSI WEEKLY UPDATE

SUSI is full of surprises.....

• So let's observe that SUSI is across the board bearish on commodities
• In the fixed income space she sees the recent sell off as exhausted and expects rates to come in
• FX on the other side is full of contradictions. You have the bearish exhaustion on the EURYEN (Proxy for reflation, and raising asset prices) vs. a more bullish call on Dollar weakness. I presume we have to wait for Mr. Market....
• The growth Geographies also seem vulnerable next to Europe and Japan
• The Nasdaq also is in a limbo with his relative strength on the one side and his complete exhaustion on the other.
• The precious metals seem to follow SUSI's Dollar call.....
• Last but not least (did you see FEDEX outlook this week...?) SUSI expects a bearish set up in the different sectors.

With lagging Commodities, Sectors & Oversees it is next to impossible to paint a bullish picture here. We could interpret this as a transitional picture that clearly needs more consisitency across the board and also more confirmations from the GOLDEN5.

Breadth & Volume update

The Breadth develops as projected in our last update.

Pls bear in mind that Volume as well as Breadth indicators like the % of stock above 50MA or 200MA have a tendency to either spike and turn or to spike and retest (with a spike of lesser intensity).

Summary:

• the correction has started
• the correction can develop into a retest with higher Prices and lower Indicator readings (divergence), which ultimately would be bearish
• the intensity of the earlier spikes alludes to a late summer retest of the highs (medium term bullish). In order for this scenario to materialize the market has to defend the march lows (i.e. no waterfall crash in the summer)
• the depth of the correction at this point is uncertain
• Once the correction gets confirmed and develops real momentum (20d Lows spikes, 10:1 Volume down days etc) a better assessment of potential targets is possible
  
  

Textbook Elloittwave Wave2

You rarely find such a clear cut wave structure. I know Elliottwave will be for most readers a more exotic form of analysis and the interpretation doesn't always seem conclusive, but a fair amount of participants apply these tools......

One of the most useful concepts of EW is the idea of SOCIONOMICS with tries to deal with Sentiments and Emotions as endogeneous factors of economic analysis, rather then exogeneous ones.

In plain english, Socionomics always starts with People/ Emotions and Sentiment as driving factors that later translate into stock prices and real event like wars, elctions etc. rather then the other way round where events like a 9-11 trigger the emotional change that triggers ....

for more info pls go to

http://www.elliottwave.com/

Todd Harrison's Minyanville and there particularly the daily 5 things series goes into the same directions....and also is really hillarious....

What makes the Guy from TRIMTABS so bearish ?

Question: What does it mean when Insiders are selling at record amounts, Companies are raising equity like there is no tomorrow and Liquidity flows into equities languish.....?

Answer: confidence in green shoots

from the always excellent chartstore.com

Zerohedge's Tyler Durden posted:

TrimTabs CEO Provides Realistic View On Economy

If the graphs don't tell the story try the video interview ....

...and now it's the NIKKEI's turn to exhaust...

Sentiment scenarios as guide to the next 6 weeks

How the correction will play out is uncertain, but our VIX gages like our Summation Index and our Vix_OSC might provide some scenario framing.....

The Breakout is here....

This must have been a field day for the bears, because we saw the break down yesterday with a late sign of indecision (throwback into the range) which has been convincingly followed through on the downside (aka CONFIRMATION) today with a late day push down.

This all is pattern textbook stuff and sets up for further downside (next target 880) and creates a preliminary bias to the downside that has the potential to run some weeks......

MARK FABER - The Frame of Mind of American Economic Policymakers

A though provoking article..

The Frame of Mind of American Economic Policymakers, Part I

The Frame of Mind of American Economic Policymakers, Part II

My only comment to Mark Faber's POW (prisoners of war) economy with respect to Inflation and Deflation is that in our real economy money is credit, which means that a reduction in Velocity (credit contraction) offsets some of the growth in high powered money (reserves). In plain english the money expansion goes straight to increased savings (debt repayment is also a form of savings) or demand for cash rather than into consumption or leverage. It's not all cigarettes in CREDIT ECONOMY. There will be a tipping point down the road which could flip deflation into (potentially uncontrolled <> HYPERINFLATION) Inflation.

And then in this week's ECONOMIST you read the lead article and you wonder whether politicians will really start to tell people that..

1. they have to work longer,
2. will have less pensions and
3. less healthcare.

....and you hope and pray that the answer will be yes and that they don't care about the next election and that the time has come for change.

SUSI WEEKLY UPDATE

The tide seems to turn in the near-term. The overall picture is certainly bearish for most of the Commodities, key Sectors and the EURO.

Mr. Market also might have overshot with the selldown in Treasuries, which seems to offer a tradeable bounce.

Further find some of the most extremes in Europe, China and the Nasdaq.

We find a major bear theme here continued and confirmed namely the fact that all markets still perform as one.

Whether this will lead to a waterfall of just a correction is uncertain at this point and has to evolve over the next 2-3 month.

pls also see Fari Hamzei one of the leading market timers on this....

MESSY Breadth Picture

The IM Portfolio is showing a messy breadth picture for this last leg of the rally.

(1) messy - green McClellan Oscilator with no clear broad participation

(2) a lower low in the green OSC as highlighed by the signal

(3) a fallin purple McClellan Summation Index

Breadth can be messy for some tim but tends resolve into a trend .....

Overall short term bias: BEARISH

Sentiment update

Pls see this post from the sentiment trader on the VIX futures which is consistent with our VIX OSC

http://sentimentrader.blogspot.com/2009/06/speculators-betting-on-spike-in-vix.html



The VIX OSC usually leads 1-2 months on average and we are getting close to the 2 months as can be nicely observed on the chart....

Bear Market Rally

Pls see below that after a waterfall crash like the in 2008 or 1929 a bear rally can easily run 22 (would translate into early AUGUST 2009) weeks and gain 48% (achieved).

In 1930 this was exactly the time when sentiment remembered the preceding bull and believed that the crash was just an anomaly and that the NEW DEAL, Bail outs & FED had regained control.

Even speculation and leverage was returning..........

It all reads like the textbook Elliott Wave description of a WAVE 2 aka. "THE PHONY" .

We don't know how long this one will run from a timimg perspective, but we do know that a correction followed by another surge or a deep dive from here are both within the realm of possibilities.

More Exhaustions & Signals

• EURYEN (lower chart) has been a good proxy for the rise and fall in asset prices (also a carry trade vehicle) and has triggered not only an exhaustion signal but also a DeMark Sequential Set up of extreme length. Of the 43 Sell set ups since 2000 none could be found that ran 22 days before it experienced a "flip".
• Additionally we now also have the Industrials (top chart) in the group that triggered a signal
• We further notice more and more TC (TimeCycles) spikes for mid to end july which could signal some turn in that period, either an extended top or a low of an upcoming consolidation

Pls bear in mind the nature and mechanics of Exhaustion Signals being MOMO (Momentum) extremes with the interpretation to signal MOMO exhaustion today with a high probability to turn the trend between now and approx. the next 2 weeks.

Lack of Confidence = >Busted Pattern ??

This was a great opportunity to leave 950 behind,

... Oil up big 72.50,

...USDJPY on the verge of the HS pattern with 97.61

....more greenshoots material out there retail sales, initial claims

BUT....

Mr. Market decided it's not good enough and fails or better falls back into the range.....

Pls also look at ZERO stressing the divergence btw. the Equity vs. the FIXED INCOME market.

It's a trading Range ......

The S&P500 is stuck in a trading range which could break out in any direction. (see here for more on pattern )

920-950 are the lines in the sand.

Dollar update

The key indicator you want to watch is the DOLLAR. Will the Dollar Index defend the 80 level ?
One Indication could come from the USDYEN where we could see a failed or busted Head & Shoulders Pattern.

Busted Pattern usually turn explosive into the other direction unless it's just a throwback or retest..... (pls see here for this) . So keep an eye on this, the next couple of days will reveal the nature of this Pattern.........

More Exhaustions & Signals

Look at the Signals......the right sectors like consumer, transports and emerging markets and commodities.....are exhausted  and also seem to show TimeCycles (see glossary).

It all feels like as if the market wants to roll over, as also shown by BREADTH, VOLUME, SENTIMENT, MOMO & Context as you can see here below.

If the market DOES NOT break over the next week or two and can overcome this GOLDEN5 setup, this would be BULLISH at least for the next months before Mr. Market will try again....

Golden5: Breadth & Context

A Breadth setup seems to evolve but still needs a confirmation (see glossary for more info on the concept).

High Golden 5 Probility Setup

The Golden5 concept aims for clusters that support an as cohesive and conclusive overall bias as possible in all 5 categories:

1-CONTEXT

= What are the relative strength in the Sectors/ the fixed income market/ macro indicators etc telling?

= Sector rotation vs. trend change

= Cycle/ Historical Analysis

2-MOMO

SUSI SIGNAL and /or SUSI EXHAUSTION and/or DeMark BUY and/or TimeCycles (TC) spike

3-Breadth

= Advance/ Decline Indicators (McClellan)

= Buying/ Selling Pressure Analysis and New High/ Lows20 Analysis and Delta Analysis

= % of stocks above the 200MA and/ or 50MA

4-Volume Analysis

= Individual Index volume pattern

= MA55 of up Volume/total Volume

5-Sentiment

= VIX Oscilator

= Vix Summations (of Vix OSC)

====>>

Once you have sufficient "GOLD" from the Golden5 at hand you then wait for a trigger or catalyst, which can be a PATTERN or a Moving Average Crossover or some Indicator Reading (RSI, Stochastics etc).

History Rhymes

Ron Griess over at the Chartstore had those interesting Charts where he compares the the March rally with historical bounces (75 & 82). Interesting enough those comparisons align well with the theme that we might have a more extended rally after some sort of correction.

The depth of the ensuing correction will tell us how far this analogy will carry, but we can clearly hint at the possibility that we might have reached some crossroad that could allow this correction to start right around this time period.

The notion of an extended rally is also reflected in some of the recent Volume analysis here on the blog where we observed a deeper penetration of the Bull market Range than initially anticipated.

Bottom line:
Short term view: bearish into mid July to end July (Will we test the March lows or even break or does Mr Market save this for September-October...?)

Medium term view: July to September rally could be possible (Will we take out the June Highs or follow the 2008 Path......?)

courtesy of the always excellent CHARTSTORE

Glossary

SUSI:

Susi is a time and price weighted Momentum Indicator that incorporates the Tom DeMark Sequential, Combo, MACD Elements over Daily, Weekly and Monthly timeframes. SUSI stands for some form of SUMMATION (SU...) and HistoryRhymes name. I also liked the idea of a "female" indicator with occasional idiosyncrasies that in the end always seems to be right...

Exhaustion SIGNAL:

Once Susi reaches a trend adjusted (different range for bear and bull markets) Extreme the System triggers a SIGNAL

SIGNAL:

BUY: if in a sequence of 2 short term cyclical SUSI lows the 2nd shows a higher low, meaning less downward momentum, then the system triggers a BUY SIGNAL

SELL: if in a sequence of 2 short term cyclical SUSI highs the 2nd shows a lower high, meaning less upward momentum, then the system triggers a SELL SIGNAL

Buying Pressure

Percentage of stocks that exceed their individual Upper Fibbonacci Band. We usually interpret a spike above 20% as a bullish short term trend change. (shows on the Chart as: 20)

Upper Fibbonacci Band = EMA(Close) + 1.62*EMA8(Daily True Range)

Trigger bull. Trend Change= 20%

Seling Pressure

Percentage of stocks that fall below their individual lower Fibbonacci Band. We usually interpret a spike above 20% as a bearish short term trend change. (shows on the Chart as: 20)

Lower Fibbonacci Band = EMA(Close) - 1.62*EMA8(Daily True Range)

Trigger bear. Trend Change= 20%

Buying Pressure2

Percentage of stocks that exceed their individual Upper Fibbonacci Band2. Short term upside exhaustion result in values around 10-15%. Medium/ Long term exhaustions trigger spikes in excess of 20%.

Upper Fibbonacci Band2 = EMA(Close) + 2.62*EMA8(Daily True Range)

Trigger short term upside exhaustion = 10-15%

Trigger medium/long term upside exhaustion = 20+%

Seling Pressure2

Percentage of stocks that fall below their individual lower Fibbonacci Band2. Short term downside exhaustion result in values around 10-15%. Medium/ Long term exhaustions trigger spikes in excess of 20%.

Lower Fibbonacci Band2 = EMA(Close) - 2.62*EMA8(Daily True Range)

Trigger short term downside exhaustion = 10-15%

Trigger medium/long term downside exhaustion = 20+%

EMA

Exponential Moving Average

MA

Simple Moving Average

IM

Institutiomal Money Portfolio with consists of "must have" large Cap. US Stock (approx 60.)

DeMark Signal

Tom DeMark Sequential and Combo setups.

TimeCycles (TC)

TC calculates High-High, Low-Low, High-Low, Low-High Fibonacci time retracements and additionally High-Low-High and Low-High-Low alternative time projections (A-B=C-D Pattern) over differnt timeframes and clusters all results into a barchart (dark red bars) form.

TC's signal potential crossroads for Highs or Lows that can be interpretated as timewindows with increased probabilites for trendchanges. Always use TC as an additional confirming indicator!

Option Flow (usually smoothed by the MA10days):

a) Call & Put Flow: We analyze option latters a add the product of number of options x price for calls and puts

b) $ weighted Call/Put Flow ratio: Call Flow/ Put Flow

c) $ weighted Call/Put ratio: $ weighted amount of Calls/ $ weighted amount of Puts

d) Spread or Strike Spread: ($ weighted Call Strike - $ weighted Put Strike) / (($ weighted Call Strike + $ weighted Put Strike)/2)

e) Net Premium: Call: (Option Price - Strike) x Option Volume ; Put: (Strike - Option Price) x Option Volume

f) Gross Premium: Call: OptionPrice x Option Volume ; Put: Option Price x Option Volume

g) adjusted Premia: we only look at Options with a min. lifetime of 6 das or more and 70 or less.

The adjustment tries to capture the 'normal' Hedger and/or Speculator that does not:
i) buy sizable lottery tickets in the OPEX in order to jsut play the OPEX
ii) buy longterm catastrophe insurance

example

OPTIONFLOW Analytics (OFEP, PO OSC, RGW etc.)

the tide is changing

Financials, Consumers and Materials are not driving the rally anymore. You have to wonder how sustainable a rally without those 3 can be....

SUSI NASDAQ SELL SIGNAL

A Market top is a process not a data point that needs to evolve. The more ripe situations we count the closer we get to the conclusion of the process.

Be careful to not mistake a Sector Rotations for a top.

Having the leading Tech Sector to trigger a Sell seems like a good start which needs to stick next week in oder to develop a top.

VIX OSC HISTORY

...to shed more light and historical perspective on the last post....


VIX Summation = Summation of the VIX OSC.

Observation: still upwards sloping! (needs a neg VIX OSC in order to turn: confirming, longer term Indicator)



VIX OSC:

Observation:

• Fear & Greed is always more pronounced on the downside.
• VIX OSC is a leading Indicator
• Lead periods can last up to a couple of months (current lead: approx 6 weeks)
  

Divergence btw the CASH and the Synthetic S&P 500

The Vix seems to develop a more bearish posture.....

Compare this to Zero's observation in the CDS market where the Credit Market also seems to change.

All in all this is exactly what this blog is about, trying to spot vestiges left there from the Elephants that have already left for greener pastures. With all the obvious manipulation going on it is the nature of being an Elephant is that he or she is a large animal that is not invisible no matter how hard he or she tries..........

But don't forget this is the Smartmoney we are talking about, meaning they will try to trick and play as good as they can to get you off their tails.

As a case in point revisit Friday's market with better than expected US payroll numbers, with the Market sitting on the verge of a monster break out (SP500 around 950), all stars were aligned, all in place for the "obvious" Monster-Rally and what did they do, they...

• ...killed Gold, Goldminers


• ...sold massively Oil at 70


• ...faded the 950 S&P500 break out


• ...brought the Dollar Index back above 80


• ...and what the hack happened with the 2 Yr Treasury, i.e. the Yieldcurve

The Elephants took plain and simply profits, after initiating some hedges in the CDS market and the VIX-Optionindex market and it all took place after the Banks had raised most of their needed equity.......these are simply the facts!

Weekly EXHAUSTION update

Format:
Category
latest SUSI/ Exhaustion SIGNAL
COMMENT

=================================



COMMODITIES
^XOI: BUY (01/06/2009)
OIL STOCKS, late stage high risk signal, which either explodes or implodes

COMMODITIES
CRB: SELL (04/06/2009)
Commodities

COMMODITIES
DBA: SELL (02/06/2009)
Agro Commodities

COMMODITIES
USO: SELL (04/06/2009)
OIL

Fixed Inc
^TNX: BUY (15/05/2009)
Mean reversion exhaustion trade possibility

Fixed Inc
TLT: BUY (27/05/2009)
Mean reversion exhaustion trade possibility

GEOGRAPHY
^SSEC: BUY (02/06/2009)
late stage high risk signal, which either explodes or implodes

GEOGRAPHY
EEM: BUY (29/04/2009)
Emerging Markets, old signal


GEOGRAPHY
EFA: SELL (12/05/2009)
EUROPE

GEOGRAPHY
EWZ: SELL (02/06/2009)
BRASIL

GEOGRAPHY
IEV: SELL (04/06/2009)
EUROPE

INDEX
^NDX: SELL (04/06/2009)
TECH

INDEX
^RUT: BUY (18/05/2009)
Sm CAPS

Prec.Metals
^XAU: SELL (02/06/2009)
Gold Miners

Prec.Metals
SLV: SELL (04/06/2009)
Silver

SECTORS
IYT: SELL (07/05/2009)
Transports

SECTORS
XLP: BUY (27/04/2009)
Staples, late stage high risk signal, which either explodes or implodes

SECTORS
XLU: BUY (27/04/2009)
Utilities, late stage high risk signal, which either explodes or implodes

SECTORS
XLV: BUY (22/05/2009)
Healthcare, late stage high risk signal, which either explodes or implodes

SECTORS
XLY: SELL (04/06/2009)
Consumer

SUSI TURN Indicator - TECHNOLOGY

The same concept (DR BRETT INITIATED) that I use with a "must have institutional holdings" portfolio and also tested here with the 50 largest holdings in the qqqq or Nasdaq100 Index.

The message is surprisingly similar or even stronger (bearish).

The key rules work as follows:

• look for deteriorating ratios for each of the 4 categories (20day new Highs, 20d new Lows, Buying Pressure, Selling Pressure) as turn indicators, see (1) + (2)
• look for breakouts in the 4 categories above 20 or 180 (it's all rescaled for graphical reasons) as confirmations of CHANGE
• check the overall "climate" (bear vs bull) by assessing which cummulated line is on top (either the quicker net 20d cum or the net pressure cum) , see (3) + (3a)

(pls bear in mind that the blue line represents the TREND adj. Nasdaq100 and not the INDEX itsself)

Conclusions:

Unless they blow out the a.m. set with relentless buying, expect a correction that could last at least a couple of weeks.....and then we see...

Silver SIGNAL

The Golden 5: VOLUME update

The Golden 5: Breadth update

Inspired by Dr Brett....

Following my theme of searching for traces of the Elephants, I've taken an approx.  60 Stock "Elephant" portfolio and have analyzed the 20 day Highs & Lows and compared them to my demand & supply pressure numbers (% of stocks outside of volatility bands).

The Idea is taken from Dr. Brett's work on 20d H/L's and his Demand/Supply gages.

Pls look at (1) first which then leads to (2)

(2)

(1)