A Bullish Down Day?

U.S. Markets – Wednesday 20 January, 2010 AMC


Originally Posted by Conrad  on Tuesday 19 January 2010 View Post
I can’t call this any other way seeing how DOW is finding it tough to break 10,725.00 while its volumes continue to display divergence. Furthermore, it’s hard to see the banks propping up the market especially after JPM and C gave us less than happy results … And let’s not forget that IBM has already set a tone.

Direction for Wednesday 20 January, 2010; Down

It’s not so bad … it’s only the worst day of the year and the biggest ranging day since 27 November 2009. Can’t say that it wasn’t expected. Also can’t say I’m not expecting worse. It has to happen some time. In fact, I think the bulls got lucky with the 100 point recovery in the afternoon. I wanna see how long this Plunge Protection Team can keep this up.

Market Internals for Wednesday 20 January, 2010

Leading Sectors: None.
Leading Industries : Commercial banks- KBE +1.3%, Reg Bank RKH +1.3%, US Dollar index- UUP +1.2%

Lagging Sectors: Financials (-0.13%), Tech (-1.46%), Health Care (-0.53%), Consumer Staples (-0.99%), Consumer Discretionary (-1.17%), Industrials (-1.25%), Energy (-1.74%), Telecom (-1.42%), Materials (-1.51%), Utilities (-1.05%)
Lagging Industries: Silver- SLV -4.8%, Gold Miners GDX -4.1%, TAN -4.0%, Solar – KWT -3.9%, China 25- FXI -3.8%, SLX -3.1%, SLX -2.9%, iShares Brazil- EWZ -2.9%, Coal KOL -2.9%, Base metals- DBB -2.8%, SPDRS metals/mining- XME -2.8%, Crude/WTI oil- USO -2.7%, OIL -2.7%, Gold- GLD -2.3%, Oil Service OIH -2.3%, Shipping SEA -2.2%… Nat gas- UNG +1.5%, US Dollar index- UUP +0.6%, US bonds- TLT +0.6%

NYSE :
Lower
than avg volume @ 1055 vs closing avg of 1212
Decliners outpacing Advancers (adv/dec): 787/2249
New highs outpacing new lows (hi/lo): 168/2

NASDAQ :
Higher
than avg volume @ 2357 vs 1984
Decliners outpacing Advancers (adv/dec): 729/1968
New highs outpacing new lows (hi/lo): 82/9

TECHNICAL UPDATE: WEDNESDAY 20 JANUARY, 2010

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,603.15 -122.28 (-1.14%)
Volume: 203,272,322 (+5.79%)
Range: 10,517.30 – 10,719.92 (202.62 points)

Originally Posted by Conrad  on Tuesday 19 January 2010 View Post
That’s the second time in three sessions that DOW has touched that XOP without breaking above it … Once again, the market rallies and volumes drop. DOW’s volumes were down as much as half from Friday’s volumes.

People have asked me if this rally since Mar last year is sustainable and I have said no, it is not. But the market rallied anyway.

Today, if they ask me the same question, I’ll have a different answer;

Any attempt to sell off this market is unsustainable.

Just looking at the massive 200 point sell down yesterday and that very impressive 100 point rally after lunch convinced me that if you short this market, you’re likely to get slaughtered every time. EVERY TIME! There is something very bullish about this market and it’s just not right. And as long as I see these kind of attitudes, I’m staying long because the risk of shorting this market is just too much to take right now.

Originally Posted by Conrad on Tuesday 19 January 2010 View Post
Decliners outpaced advancers by an average 2.6 to 1 on higher volumes (+80%) on a down Friday (-148pts).
Advancers outpaced decliners by an average 2.7 to 1 on lower volumes (-47%) on an up Tuesday (+138pts).

Decliners outpaced advancers by an average 2.8 to 1 on slightly higher volumes (+5.79%) on Wednesday (-122pts).

There is no denying that the market prefers to sell than buy. But just look at the afternoon NYSE internals according to Briefing.com …

Look at the spreads between the Up and Down Volumes and the Adv/Dec … there was a steady increase in Up Volumes between 12;00 (20% up) and the close (53%) hour on hour, while Down Volumes were up 19% (hour on hour) at noon and decreased to 13% by 15:00 and closed at 37%.

The Decliners also fell off in the afternoon while the advancers picked up the pace the whole afternoon. Even the TRIN fell from 1.87 from 11:00 to 1.24 by the close, in a steady retreat.

Although this was a down day, it was actually more bullish than it appeared to be. It is going to be hard to keep this market down.

Treasury Yields :

2 Year Note 0.88% -0.01 • 5 Year Note 2.41% -0.03
10 Year Note 3.65% -0.04 • 30 Year Bond 4.53% -0.05
2/30 Spread = 365bps (-4) … 2/10 Spread = 277bps (-3)

Originally Posted by Conrad on Tuesday 19 January 2010 View Post
The spread is narrowing and the curve continues to flatten modestly. The lack of interest in the 30yr prevails as money continues to run out of the shorter term contracts, presumably into the other money markets.

The curve continues to flatten. But unlike Tuesday’s lack of interest in selling 30s and 10s, Wednesday’s buying of those longer term bonds confirmed the lack of confidence in the short-term market.

Originally Posted by Conrad on Tuesday 12 January 2010 View Post
With the start of earnings season, I am expecting ranges to expand on the intraday and it will not surprise me to see DOW making 100+ to 150+ point-days from now on. The market is due for a correction and a massive down day could push DOW to the 10,500 level for support …

Judging by the way the market refuses to go down, one has to wonder what it will take to get a 30% to 40% correction if the market continues to be this greedy. A technical thing like a breach of the 10,500 support? Or maybe a break below the 50DSMA (which is creeping up steadily), or both? … I don’t know … but I do know that when it happens, we will understand the true meaning of “capitulation“.

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