Failed bounces....

The bulls tried hard to re-capture the tape, like on Day 1, but then on Day 2 they got cleaned out in the last hour as on the next following 3 days. They tried it again but although they entered into the days with opening gaps (thx to the miracle action in the futures market overnight that has propelled the market so many times since March and usually tended to stick...and laid the ground for another good day....) they got taken out to the cleaners again come 2:30-3:00pm (New York). Even positive action in Asia or Europe got just killed the last hour.

And then there was last Friday, "fantastic GDP" numbers and the again even on good news the market could NOT hold the early gains. If this were all because of Greece or news why didn't the market stay up until 11:00am ??? No, No.... this is all about FLOW, Liquidity, Profit Targets, Technicals and the fact that nobody wants to stay too long in an "overstayed, pale, long in the tooth" rally....

Let's see how this story continues.......

SUSI WEEKLY UPDATE

• The bear has taken control
• Mr. Market has tried to bounce this week a couple of times but failed
• a bounce from oversold levels is likely in the near future but the key question is: WILL it stick?
• we see a TCS cluster around Feb 10 & Feb 20, so maybe the 1st Impulse runs another week after we have now taken out 1085 (S&P500) and seem to sit on an airpocket (resistant free area) down to 1030...
• The Dollar is facing initial exhaustion, which indicates a bounce

The Market is running through the 1st Impulse wave that is usually followed by a Wave B or 2 that retraces 38-61% of Wave 1. Have we reached the end of Wave 1 yet? Mr. Market will tell us.

Pls bear in mind that oversold levels usually lead to bounces, but if a Market can NOT bounce then we could see some much deeper oversold levels in a very short time frame (FEB 10 or 20??). This could be a possibility, although a less likely one (a crash scenario is always unlikely!!), but one that is supported by the amount of breakdowns we saw Thursday and Friday in sectors like the S&P500, Energy (XLE), China, Brasil, Semiconductors and the relentless strengths of the DOLLAR. The Dollar INDEX will target 81.50 which should act like a magnet for the before described. If the $ slices through then buckle up.....

Tom DeMark Sequential (weekly) Projection of the Bear into Mar/Apr 2010

(Based on Dow Jones Ind. data from 1928 to 2010)

Sentiment: VIX OSC historical context

SPYDER and GLD FLOW update

SPYDER

GLD

Good solid Liquidation from the Large Traders (see light thin blue lines) which has put all traders below their respective VWAPs (Short term= 2000 minutes, Swing= variable measure which captures holding periods around 1 month)

(VWAP: volume weighted average price)

Economic Update

STATE STREET CONFIDENCE (measures real institutional asset allocations)

RETAIL MUTUAL FUNDS
MONEY MARKET MUTUAL FUNDS
MARGIN DEBT
ETF FLOWS


CREDIT MARKET

• Retail and Institutional Money gets sucked into Equities again (...can't afford to miss the rally...)
• Margin Debt indicates a huge increase in speculation
• Money Market Funds shows signs of complacency
• Most ETF Inflows are fading
• Fixed Income ETF were a safe haven in 2009
• Commodity speculators like ETF's
• Banking ETF's see already outflows again
• Credit/ Lending is still contracting at a devastating speed

Bearish footprints....

We need more open minds like Brian Pretti......

Rarely you come across material that continiously stimulates your thinking. I'm reading Brian for years and have enjoyed his MACRO/ BIG PICTURE view a great deal.

You find Brian at the enclosed links:

• The monthly MUST read OBSERVATIONS (free)

• MUST Listen AUDIO from Jan 23 (just fwd to the interview with Brian)

• Fanatstic piece on Jan 22: Yesterday Once More where he discusses the dichotomy we see between the fundamentals and the market.......

(also the archive is worth the read)

SUSI WEEKLY UPDATE

SUSI has done a fine JOB last week and warned BEFORE the big down week. We see a lot of lower lows in our SUSI indicator which supports the notion of a change of character in the Market.

The bears have captured the tape but expect the bulls to fight back.

Given the relentless tumble yesterday, the higher volume down days, all with later in the day "real" bear action a.k.a. LIQUIDATION, hints at a remote chance of a Monday CRASH ....

If we see no Crash then expect the trial of an unside retracement....

Expect an interesting week.

3 MONTH FLOW ANALYSIS: Banks, SP500, TECH, GOLD

XLF: FINANCIAL
OBAMA has done a fine HIT JOB and scared the large TRADER (light blue line to the right)

SP500: WEAK since November!!

TECH:

Look who really enjoyed the SANTA Rally (right side of the chart: light blue line), but experienced some serious outflows after last Friday's OPEX

GOLD:

The counterrally was NOT supported by VOLUME.

(ANALYSIS as of EOD THURSDAY, Jan 20)

INSTITUTIONAL CORE Portolio - BREADTH: Change of guards

VIX OSC enters BEAR LAND...

Major BREADTH SELL SIGNALL

A cluster of...

• Mc Clellan OSC (bottom of the chart) neg. DIV
• Mc Clellan Summation neg. DIV
• 61.8% Time Retracement
• Break-Down out of a ascending Wedge Pattern

....defines a TEXTBOOK medium Term SELL Signal.

Sentiment Sell SIGNAL

SELL SIGNAL from the Equity Options...

Shift to bearish bias after the OPEX

Another great Sentiment update (you find here) that shows that we probably need some time (and price reaction) to cure the bullish exuberance and complacency we faced over the last couple of month...

SUSI WEEKLY UPDATE: A Top in the making...

Observations:

• 87% Sell & 65% Exhaustion Sell: That is a lot (!!!) and at least tells us that we will see some kind of a break in the near future
• Whether we see a consolidation in TIME or in PRICE or in BOTH is hard to tell, but the sheer number of Divergences and Extremes hint at some cyclical event
• All SECTORS above are on SELL!
• OIL and Commodities (CRB) seem also ripe....
• Given the synchronization of the all Markets we have also seen a lot of TCS Cluster (around JAN14-16) around the JAN OPEX
• This Cluster also happens to coincide with the Fibonacci 61.8% Time Retracement of the CRASH

YES indeed, we had OPEX, TCS Cluster & 61.8% Time Retracement all on Friday.... in a Market close or at EXHAUSTION.

The old Bob Miner quote "When Time & Price collide Change is inevitable" comes here to mind....

Bottom line is that, if Mr. Market wants to turn into let's say a March Seasonal Low... this would be be a great opportunity to do so.

But who are we to tell Mr. Market what to do......

Sentiment at Extremes: How long can Mr. Market stem the tide ?

Our own VIX Osc. with his propensity to indicate turns by divergences seems to take another crack at it....

Institutionals don't hold much cash and are overweighted towards Bonds

Insiders are selling since May as they were buying in late 2007 and early 2008.

Source: http://www.sentimentrader.com/

Investor Intelligence has reached 2 yr Extremes with the Bull's and the Bear's reading.

Source: http://www.market-harmonics.com/


-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

All found here which is a great source for various SENTIMENT indicators

http://www.smallinvestors.com/Sentiment.htm

Market Exhaustion from a Breadth perspective

The least we should get is a multi month pause or sideways correction (like 2004 after the 2003 spike up).

A deeper deeper multi month correction is also possible.

VIX - VIX Future SPIKE and Change in Sentiment around Option Expirations

Here we have our old friend the VIX Future Spread which showed a 2 yr EXtreme las week...


The following 2 Charts show how the Sentiment Bias into an OPEX (Option Ex.) effects the Price action. We use the position of the Call/Put ratio of Equity options to the its 89d Moving Average to assess that with good results.

The bias was faily positive (green above blue line) into this Jan OPEX which gave us the late Santa and New Year rally. Look how coincidentally the Bias changed yesterday right around the time when most options expired or got rolled.....

GLD & SPY last 3 months FLOWS: Healthys look different...

From following this blog you now we look at the large Tarders line compared to the Price and look for divergences.

In both charts we see the big guys taking money off the table in a not to subtle way.....

High Yield Bonds...the new OIL....

Corporate Bonds are in a HYPER-MODE and should exhaust at some point in the near future.

Oil tumbled back then from 147 into the 30's and shows the normal characteristics of a parabolic move.

Credit would take the entire market as collateral damage with it should it collapse......

SUSI WEEKLY UPDATE

The Market seems hard to grasp. You look at Sentiment, you look at Equity Options, you look at Volume & Flows, you look at Momentum (SUSI), you look at the state of the deleveraging cycle and all point to some nasty surprises ahead.

Dispite all of the above the Market continues to rise and the "consensus" tell us us that we are about to make the error of too much pessimism and that the economy will surprise to the upside...(after Friday's disgustingly bad NFP Employment data)

All of this against the backdrop of the boundaries of our 1938 roadmap which also went close to the the 62% TIME & PRICE coordinates (S&P500: 1220 & mid Jan. 2010) and the fact that the dollar refuses to move down again (Euro up) after the first impulse wave up.


If you close your Mind, lock out your fears and emotions and just look at your dashboard you need to see at least some correction for the bull to be real, anything else will only further exhaust an already upside exhausted Market (remenber OIL last year, doesn't Corporate Credit/Bonds feel like this this year.....?)....

Santa Rally seemed rather technical than anything else..

So far Gold and the S&P500 seem to experience some bullish technical seasonality from the quants, that does NOT seem to be supported by institutional buying.

Fly in the ointment could become the financials that received a bit this week in a sector rotation out of tech into banks......

Sentiment: Investor Intelligence

• Bulls are fading
• Bears still absent
• Bullish Sentiment around yearend was at a 2 yr. extreme

...make no mistake....this is an absolute extreme


with courtesy of
http://www.bernieschaeffer.com/streetools/market_tools/investors_intelligence.aspx

Must see Video with former Bank Executive about the Banking Industry...

A Conversation With Peter Atwater
(a former JPM, Bank One .... Executive)
What will the future of banking look like?




courtesy of www.minyanville.com

Credit Contraction continues....

Europe:

US:

U.S. Consumer Credit Shrinks by $17.5 Billion, Biggest Decline on Record Consumer credit in the U.S. dropped a record $17.5 billion in November as unemployment close to a 26- year high discouraged borrowing and banks limited access to loans.

Animal Spirits seem to exhaust themselves

Breadth update

The Market seems to develop a Cluster of neg. Div's of the Mc Clellan Osc & Summation Index......

Look what the Shorts got for X-Mas.....

The SDS ETF is a 2x Short ETF of the S&P500 and seems to be fairly liked in the "Hedgie" community.

Following our blue large Traders line we have to conclude that at least some subset of the Trader's Universe has reloaded their short positions or at least is silently doing it......

VXX & $VIX : The start of 2010 will be much more volatile !

VXX & $VIX : The start of 2010 will be much more volatile !

great post from Serge over at the ETF Corner ......

Golden5: Volume: YEAREND ASSESSMENT

We've shown you the distribution in the SPYDER (as a proxy for the S&P500) before X-Mas and figured it would be illustrating to look representatively at the EEM (Emerging Markets ETF) to give you you another perspective of the institutional Money Flows. Emmerging Markets have been the HOT play next to Corporate Bonds (Investment Grade and espescially High Yield) since March, thus we feel strongly about the leading character of this market segment at this juncture.

Also look at this medium term up/tl. Volume 55 Moving Average, which tells a similar story.

A Final Observation....

The one thing you might have noticed, after having read through all YEAREND ASSESSMENTS, is the fact that all markets seem to have topped around AUG-SEP in terms of Investment Flows, Breadth, Sentiment & Momentum. Once you find these spikes the negative divergences (= "weakening of the interals") can start to develop. Each gage and each market is different and operates on its own timescale, meaning these processes need time to develop.

The journey might be differnt for each one but not the destiny....

(unless Mr. Market decides to surprise us with new Spikes...!)

(That all said pls don't forget that Mr. Market always opts for the path of maximum pain and a series of mature neg. Div's doesn't exclude the possibility of another swing to mature our Divergence even further. "Probabilties ain't Certainties"..... )