EURYEN the tell...?

Insider Trading

....and will close my brief intermezzo on Liquidity and Flow.

Observation:

• the insider charts are the most revealing whenever they diverge from Mr. Market, meaning Insider buy when the market sells off or sell when others buy
• In 2009 we see that a fair amount of selling into strength took place on the insider front. The next weeks will reveal who is buying since Jul 8, but it appears that the insider already cashed in......around the time when we learnt that "the recession is over"

There is a MONSTER coming...

• Just looking at the Indicators we can observe a MONSTER DIVERGENCE where the VIX_OSC went opposite of Mr. Market
• If history is any guide then we enter a high propability phase for some major correction
• this does not exclude the possibility that the VIX_OSC sports another lower High over the next month or two
• Chances are that the Monster is fairly well developed
  

Margin Debt on the NYSE

• If the speculators are not buying, who then is pushing the S&P500 towards 1000?

Mutual Fund Flow data...

• The ICI data hints at a correction in August...
• If retail is holding back, who then is buying??? (HAL9000's or T800's??)

Good Exhaustion level in the NASDAQ

Volume and Equity Options signal danger....

• The following 2 Charts show 2 areas that ususally give you some idea of what's going on underneath the surface.
• The med. term Up/Total Vol picture shows a strong divergence....
• ...and the animal spirits seem to fade out.....

How long can the bull run......

The market is developing in a nice and powerful Tom De Mark Sequence, which historically runs for 13-14 trading days with a Standard Deviation around 4. Therefore we should see a correction in the next couple of days unless it stretches into the enxt week (which is possible given the power of the move)

Breadth gages like NH20 and Buying Pressure seem stretched and could roll over soon.

SUSI WEEKLY UPDATE

• The Bull ist still strong but feels tired
• watch the Megaphone pattern in the S&P500 it will either correct a bit and melt up to the top or fall through the bottom, it's either or.....
• many Institutionals don't trust the recent break out
• will the first SUSI SELLs stick ?

history rhymes

just this chart

Quick market commentary & HFT update

• We have reached a good exhaustion level in the NASDAQ Demand Pressure 2 (% above Volatility Band 2) whichshould provide good downside once the market flips

• Another good bloomberg video and a New York Times article that shows you that HFT Traders cannot hide anymore


• The HFT's ("HAL9000's") will play all the conventional analytical tools therefore it is no wonder that for instance more that more Patterns fail (my 2nd Derivative theme and here). This was my primary reason to develop SUSI to have tool that is not in the mainstream and also stresses more the liquidity aspect than staightforward price levels (which are easier to capture for the Hal9000's)


• The market has gone in overdrive which is typical for Megaphone patterns or broading tops


• Exuberance will have to face reality (see Fari )


• Fundamentals differ from the Exuberance (here and see here) and will catch up with the Market once the HAL9000 HFT Machines turn around. SUSI will tell us when the time has arrived which should be fairly soon


• Pls also bear in mind the differnt timeframes:

short term:bull

med term: bear market rally

long term: bear market

Good reversal level in the VIX_OSC

• Pls bear in mind that the VIX_OSC measures the relative realtionship btw the S&P500 and the VIX (frontrunning of the VIX)
• It is also important to note that most Sentiment Indicators tend to be confirming rather than leading Indicators (although the VIX_OSC seem to have some good leading qualities !!)
• It's just another piece in the puzzle that offers Mr. Market an opportunity (good probability) to retrace, we will find out whether he'll take it.......

VIX FUTURE shows scary resemblance to last year....

80% of Stocks are above their 200d MA !!

• this has been quite run with almost 80% above the 200MA
• From here you can now assess whether we are in a bear or bull market rally by observing whether the % of Stocks above 200MA will move to the bottom of the green box (bull zone) or whether it will revert to the red box (bear zone)....
  

The Liquidity Mirage or what you should know about High Frequency Trading

• This seems like an exotic topic for the trading aficinados only.
• This is also not a trivial topic.
• This is another example of how my 2nd Derivative theme, where the smartest and sharpest minds found ways to exploit "commonly accepted and employed procedures" of the "average" institutional investor.
• This is most likely right now the most profitable and risk minimal trading strategy on Wall Street. (Zero guesses $ 4bn for Goldman alone per year)
• This works because most participants (read YOU and YOUR investment and/ or mutual funds) don't even know that they are fleeced (you know about the old proverb saying that if you don't know who the sucker is it is most likely YOU...).
• This is completely legal !!

good Videos explaining the basics.....
http://zerohedge.blogspot.com/2009/07/joe-saluzzi-provides-further-color-on.html

http://zerohedge.blogspot.com/2009/07/themis-trading-principal-program.html


related white paper http://www.themistrading.com/article_files/0000/0348/Toxic_Equity_Trading_on_Wall_Street_12-17-08.pdf

or here

http://zerohedge.blogspot.com/2009/07/toxic-equity-trading-order-flow-on-wall.html



more background info on Program Trading on the NYSE
http://zerohedge.blogspot.com/2009/07/is-case-of-quant-trading-industrial.html



This also means that you have to be very careful with your standard VOLUME analysis, because the volume you see is a derivative of program trading and black pools and might not represent liquidity in the original sense.


hat tip to http://zerohedge.blogspot.com/ for their in depth coverage

SUSI SELL SIGNAL

• The S&P500 and the Dow are showing Sell signals
• The market is deeply overbought and could correct from here.....
• Still we have the 2 range defining "make or break" areas (875 and 950#s) that we have to overcme to this market a direction
• CAUTION: This is a fresh signal that could vanish if it doesn't get confirmed
  
  

NASDAQ Buying Pressure

• Nasdaq Buying Pressure is sizzling hot
• Buying Pressure2 signals an Overbought situation
• it seems like that the bear market rally has some unfinished business to do

Let's see what "turnaround tuesday" will bring us.....

SUSI WEEKLY UPDATE

• Like a steamroller did the action of the OX week not take any prisoners
• Only a few bearish calls still stand
• The overall Sentiment and Bias is bullish, but I'd be very careful here to buy into the new nirwana too early
• When Pro's like FARI HAMZEI (who has a distinguished track record in the trading community) hint into the same direction and my SUSI only needs very little to flip entirely and if the insane OX action relieved all the OVERSOLD pressures .......then ask ask yourself:

WHAT VIEW WOULD MAKE ME A CONTRARION ..?

new bull leg or an OX mirage.....

What weird week that is....

• we clearly broke the elliott wave falsification line and now need to break the former high (S&P 500: 950 area) for the bull case....
• the weird news flow from Roubini to Meredith W.....
• buying pressure and new highs have turned bullish
• Vix_OSC has turned bullish
• ...if SUSI can take out the previous MAY/JUNE SUSI readings then we'd be on to something really bullish, maybe even a late summer "melt up"

, but the fact that all happened in the OX (option expiration week) against the backdrop of lousy fundamental data (check out this CP info related to lending) like lending or employment, like production and hourly wages etc., makes me wonder if this "weird" momontum is sustainable???

In the end Mr. Market is always right and we have to respect this so let's have a close eye on the 950 area

What if SUSI is trying to warn us of a bull trap....?

If Mr. Market can continue to rise all bearish bets are off for the next weeks....

...but what if this was just an OX (option expiration week) bull fluke......

We have to stay open to all sides!!!

the perfect short squueze.....

...this doesn't have the look of a healthy rally

The benefit of the doubt still goes with the BEARS....

• The bias is still bearish
• Let's see what happens after Wednesday in the OX-(option expiration)-week when most of the institutional players have rolled their positions
• The bulls have to show more stamina to paint the tape bullish again (maybe they can come up with some new fairy tale from goldilocks to green shoots to "stimulus2: now it works"
• Also still open is the question whether the bulls can take the opportunity of the TimeClusters around end of JULY and manufacture a bottom or whether the bears will keep control.....

VIX Future is flying again.../GOLDMAN/ BUSTED CHART PATTERNS

The Vix Future is at 1.14x the VIX in the middle of the option expiration week.

Buckle up this could turn into a bumpy ride......someone here REALLY needed his options in the money this week.....

Pls also see sentiment trader on this.

Talking about risk pls see how Goldmann is pumping up the Value at Risk figures to really produce some exceptional numbers. This all shows that all you need is a rally, you double up on risk and VOILA you get a dream Q2. This unfortunately makes you very susceptible to BLACK SWANS or proves your ignorance of MORAL HAZARD. If you on top then manage to get MAMA BEAR of the FINANCIALS (Meredith W.) to change here short term view (now that she is independent, running here own research shop...) you have a fair chance to live through a short term (option expiration week!!) fairy tale....

Just as an aside has anyone noticed that we see more and more chart patterns go bust in a way as if some large trading book(s) is (are) trading against them as soon as they become obvious knowing that everyone is seeing the same. (my 2nd Derivative theme!)

This lead makes the the busted patterns your best bets to play the patterns. Tom Bulkowski as some some remarkable work on this. Take the S&P500 which seems to bounce on the neckline (busted pattern) in order to scare and shake out the pattern followers in order to set up for the kill (?)...just a thought....

Elliott Wave update

So far the the EW structure in the Market seem to support the notion of

a) a RETEST of the March Lows

and

b) the thesis of still more upside into late summer before

c) we continue with PAPA BEAR.....

SUSI WEEKLY UPDATE

• The bears have captured the TAPE (pls see here and here )
• lots of HS breakdowns
• Commodities and here particularly OIL and SILVER took it on the chin

We saw some dramatic action this week with alludes to the potential of more de-leveraging along the way. On the other side the markets seems short term oversold which should limit the near term down action and lead to some pause. The various TimeClusters around next week to the end of the month seem to hint into the same direction.

In order to paint a more green shoot friendly picture the bulls have to re-capture the tape by building up buying pressure.

ANATOMY of the DEFLATION TRADE

(courtesy of http://finviz.com/forex.ashx ) YEN Strength (De-leveraging Currency!) Dollar Strength (De-leveraging Currency!) relative weakness of Silver to Gold Oil weakness Commodity FX's are weak

Volume update

Volume still has room to go before hitting some short term targets.

If we can see "deeper" Indicator readings in the various Indicators than we should expect a more protracted correction. As you can see in the top o the chart the up/tl Vol Indicator likes "doubles" or "tipltets"....

A bounce from here might indicate more sideways rather than downside action going fwd.

Institutional Selling Pressure

Institutional Selling Pressure clearly shows a psychological change in the market. From now on the Bulls have to prove themselves because the overall BIAS has now moved to the BEARS.

Let's see how long the bears can keep up the pressure......

Potential Turn in the Vix Summation Indicator

The big brother of the Vix_OSC seem to turn.....

Breakdowns!!

The market get pulled down buy commodities and former leading sectors like Teck break down, which supports the more downside.

Green Shoots vs. Reality (0:1 after Friday's Employment data)

I cannot endorse enough the great posts over at the team from ZERO. Those guys are digging deeper and try to explain some of the things we notice here on the surface at REFLECTIONS.

Our mission is more on the descriptive side and blogs like ZEROHEDGE or Naked Capitalism or the weekly must reads from John Mauldin (outside the box and Frontline) (find all the links on the right side of our blog page where you see what we read...) or David "Rosie" Rosenberg (simply register it's worth it for your daily economics fix ) deliver you with some possible explanations.

You have to make up your own mind, but something doesn't feel right here with this mystical, green shoots monster rally that defies all economic fundamental data points.

In cases like this I always apply the "CSI" approach by asking ...

• "Who is profiting from this?",
• "What does it take to keep this current green shoots scenario alive?",
• "Will all this monetary stimulus lead to new home sales, new car sales, comsumption ?,
• "What are you doing on a personal level, spending or saving?",
• "Do we experience a fundamental psychological shift with respect to debt, like in the 1930's and will will this affect the next 80 yrs".......
• "Will people finally start to invest more time into their financial future than into the research of their next new car....?"

Against this backdrop.....

must see video:

http://zerohedge.blogspot.com/2009/07/themis-trading-principal-program.html

Great open question with respect to Sentiment:

http://zerohedge.blogspot.com/2009/07/who-is-selling-wholesale-vol-and-why.html

SUSI key sector update

Sentiment turned...

Selling Pressure confirms change....

SUSI WEEKLY UPDATE

• Key sectors have flipped on the employment data (=Deflation trade supportive)
• Oil seems in a tail spin, but also watch the relative weakness in DBA (Agro Commodities) (=Deflation trade supportive)
• Prec. Metals seem vulnerable (=Deflation trade supportive)
• Nasdaq and Russel2000 are now on sell (=Deflation trade supportive)

Conclusion:

Green Shooters and Inflationistas need to find their mojo back soon, otherwise the other guys will control the tape over the next weeks....

Deflation Trade back on again?

If the Deflation Trade is back on then we should see some strength in the Dollar Index again....

The DXY (Dollar) will be the tell, so have close eye on this. Greenshoots desire a weaker Dollar!

Mr. Market will tell....

Intermarket Analysis

(we use US listed ETF's for this Chart)

• Pls. observe some of the technical damage in the various markets, from FX to Fixed Income to Stocks
• The market looks tired
• The only one that still seems hot is the TED Spread ( 3months Eurodollar - Fed Funds). This is also the market where the FED can do the most and where they hope that this will translate into the others..... . This should stimulate the banks to lend in a perfect world of econometric models.....
• The next weeks will have to prove the greenshoots with earning, employment data, ISM data, Production & Capacity utilisation etc.

Conclusion:

The next weeks will be very exciting !!