Thursday 06 May 2010 AMC – Market Analysis
U.S. Markets – Thursday 06 May 2010 AMC
Originally Posted by Conrad on Thursday 06 May 2010
I already said it at the start of the week and with only two days left to go, I am maintaining my bearish stance to the end … Now Lows exploded to outpace New Highs for the first time this year by 109 to 101, the VIX also spiked to its year’s high only to make a modest retracement toward the close and volumes have been steadily increasing. The Tsunami hath cometh.
Direction for Thursday 06 May 2010; Down
… you can all stop sending me emails, smss and facebook mails. I don’t know why it is such a big deal because I didn’t make it happen. It just happened and it was timely since I had shorts on GS and ADM. But my C and DRYS and XHB got shellacked. Thank goodness for Puts coz they cancelled out my (paper) losses on my underlyings.
Market Internals for Thursday 06 May April, 2010 – 16:54 ET AMC
Leading Sectors: None
Leading Industries : gold- GLD +3.0%, gold miners- GDX +1.4%, Silver- SLV +1.2%.
Lagging Sectors: Financials (-4.1%), Consumer Discretionary (-3.5%), Energy (-3.4%), Industrials (-3.3%), Tech (-3.3%), Materials (-3.1%), Utilities (-2.7%), Health Care (-2.6%), Telecom (-2.4%), Consumer Staples (-2.4%)
Lagging Industries: solar power- TAN -6.5%, clean energy- PBW -5.1%, Finance RKH -4.4%/XLF -4.2%, India- INP -4.0%.
NYSE :
Higher than avg volume @ 2573 vs closing avg of 1165
Decliners outpacing Advancers (adv/dec): 178/3027
New lows outpacing new highs (hi/lo): 52/218
NASDAQ :
Higher than avg volume @ 4415 vs 2444
Decliners outpacing Advancers (adv/dec): 351/2439
New lows outpacing new highs (hi/lo): 60/190
Other Market Moving Factors:
• Technical levels breakdown as selling gains momentum
• Greenback gains again to stand at new 52-week high against competing currencies
• Weekly jobless claims count comes with little overall surprise
• Geithner to speak at 9:00 AM ET and Bernanke to speak at 9:30 AM ET
COMMENTARY
High Frequency Traders – A lot of the action in the sell-down was attributed to HFT, whether it was Fat Fingers, program errors or exchange system errors, it was the HFTs that gave the market it’s big swings as the market fell and Buy orders were filled at ridiculous prices against market-order Shorts that were placed in panic. Add to that the number of Shorties that covered as the market hit the year’s low in February at 9.900.
The main catalyst for the sell-off was the EUR/JPY around 2:06pm (ET). (The EUR/JPY has been the instrument of choice for carry-trades.)
Regardless of the reason, the point remains that there is something fundamentally wrong with Mr Market if its system can fail so miserably if it was an error and the HFTs including the market makers/specialists need to be watched (regulated) more closely (which will level the playing field for the private retailers).
We know it will never happen. Market politics will dictate that it will never happen. So take the ride and be prepared to smash and grab in a market that is expected to be like this for a long time to come.
TECHNICAL UPDATE – THURSDAY 06 MAY, 2010 – AMC
DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,520.32 -347.80 (-3.20%)
Volume: 459,882,732 from 218,831,496 the previous day (+110.15%)
Range: 9,869.62 – 10,879.76 (1,009.30 points)
Originally Posted by Conrad on Thursday 06 May 2010
The S&P500 and NASDAQ have closed below their 50DSMAs while DOW dipped below and rallied to close above it. These are nervous times with the benchmarks threatening to break below critical technical levels after breaching their 50DSMAs … S&P500 is only 15 points above its critical 1,150 support while NASDAQ’s levels of downside interest will be at 2,375 and 2,325. The DOW is barely above my short term XOP of 10,800 and my Jan 2010 XOP of 10,735.
All gone in one session. All three benchmarks are below those critical levels and below the 20, 50 and 100DSMA. I am so bearish now that I didn’t even bother to look for the next support. My focus now is on the upside resistance in case I need to cover my Shorts. Let’s not forget that there will be a few more idiots out there that will see this “dip” as an opportunity to buy again. I won’t be reversing so soon – I prefer to wait for the trend to stabilize before I jump in on a Long again.
NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
2,319.64 -82.65 (-3.44%)
Volume: 1,215,520,149 from 769,574,237 (+57.95%)
Range: 2,185.75 – 2,407.79
S&P 500 INDEX (SPX: CBOE)
1,128.15 -37.75 (-3.24%)
Volume: 8,503,952,800 from 5,344,326,800 (+59.12%)
Range: 1,065.79 – 1,167.58
Decliners outpaced Advancers by an average 10.33 to 1
on higher volumes (+93.63%) on Thursday (avg -3.29%).
New Lows have now clearly out-gunned New Highs for the first time, across the broader market and in thumping fashion by 408 to 112 (3.6 : 1). However, as I am looking at my market internals, I can’t see how this sell-off will have legs … in other words, this could be a case of the Sell-In-May nervousness that caused that odd capitulation. And to confirm that, NYSE and NASDAQ have cancelled all orders between that window.
Could it be too early to start scooping up “discounted” stuff? I’ll be patient and do the hardest thing … watch and wait.
Bonds were sent flying with the long end leading as Greece greased the skids and stocks managed to collapse in spectacular fashion. CNBC is reporting that the DJ was down the hardest since 1987. The problems of Greece were a big driver with black-boxes and funds all piling on, helping chase the risk players out, while safety buyers plowed into bonds. Global bonds – minus the usual suspects — were also bid on the day as were other measures of “quality” as markets melted down or up, as the case may be. The situation between now and tomorrow’s payrolls report is unlikely to change materially, so, while there will certainly be some corrective action, trade may be way vulnerable to the downside if the numbers come in well beyond expectations. While the facts on the ground are not going to change much, the outsized bounce seen will be a tough one to hold.
The curve was swung back to the flattest levels since the start of Dec, with the 2-10-yr yield spread flung to 255.8 from 271. The dollar ran higher, but was stalled as the euro regained some ground. The yen was a big beneficiary, seeing 88.26 from 93.98 pre buck and the best on the euro since 2001.
Treasury Yields AMC on 06 May @ 14:59hrs:
• 2 Year Note 0.84% -0.02
• 5 Year Note 2.14% -0.16
• 10 Year Note 3.40% -0.15
• 30 Year Bond 4.16% -0.23
2/30 Spread : 332bps (-21) … 2/10 Spread : 256bps (-13)
Now this is really flat. One more session like that and we’ll INVERT. If you’ve never seen a market capitulation, wait for the inversion (if we get it) and see what happens after that.
SUMMARY
Honestly, I am expecting a bounce on the market and it wouldn’t surprise me if it went into a 2% gain for the session.
On the other hand, I am still nervous about how skittish the market is and have no confidence about being bullish especially as Asia continues its sell-off and Europe looks like opening to the downside in a big way. The concern in not about a Fat Finger trade but more about Asia’s inherent realization of its over-bought status and regional measures to cool the property markets and Greece’s growing stress which was not helped by Trichet’s comments (or lack of committed comments) that would draw any sort of conclusion to this high level threat to the entire Union. This threat also threatens American banks who have recently revealed that their exposure to Greece’s debts could be considerable.
Finally add the potentially spicy Non-Farm Payrolls to this mix of Western Salad, Eastern Stir Fried Veg and S.E.Asian Rojak, and what you have is a market you should stay away from. If you don’t like the taste of this spicy vegetable recipe, then don’t order it. If you already ordered it, cancel it before they serve it. If they already served it, you may choose not to eat it. If its in your mouth, chew it well and savor its red hot sensation. If its already in your belly, Good Luck to your a** in the morning.
I am not calling Friday’s direction. The only way I am approaching the market today is to be extremely cautious either way.
Direction for Friday 07 May 2010; VOLATILE!
2010 Daily Directional Accuracy: 51/77 (66.23%)
Some were hit bad yesterday and some took handsome profits in the same session. Whatever your result, your psychology was tested and in most cases, found wanting. The lesson we take from this is that no system, software or experience can prepare you for this kind of market behavior.
The only thing that bodes well is to be be prepared through research and the skill to manage your emotions and psychology and to work the trade without bias and assumptions.
To the many emails, smss and facebook messages that were sent to me, my only advice is …
When the market is Fearful, what do you do?
Draw your own conclusions. And if you still don’t know, come to my TA Masterclass this weekend.
Have a Great Weekend!
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Thank God for Stop losses, I slept early last night and had no idea what happened until now