Today’s rumour was floated by none other than Dow Jones. It seems Greece FinMin said that some Technical Issues are to be resolved before money can be had. But nobody fell for that pixie dust today. Did anyone really buy at the close yesterday? I doubt it. And yet it was the dumbest rally I have ever seen in life. Yesterday the volume was next to non-existent and it was so easy for the HFTs to manipulate the market. Somehow we are relieved to know that Newton’s law of gravity still works here in USA. Volume picked up today as markets sold off a little. We are yet to see a 1% or more correction in 2012. Although SPX did not make lower low, the fact that volume increased on a down day and the day was red despite making a new high, is good news for those who are short. It was a bearing reversal day and now all is needed is good follow through.
Coming back to the ongoing Greek drama, as per the last bailout condition, Greece was to privatize its public sector and raise $ 50 billion. So far they have raised $1.5 billion. No wonder that nobody wants to touch them with a bargepole.
Per AP: "There are many in the euro zone who don't want us anymore," Venizelos told the country's president, Karolos Papoulias, earlier in the day. Greece, Venizelos added, had to persuade the skeptics that the country could stay in the currency union and regain lost ground in reforming its economy."We are facing a situation that is particular because we are constantly being given new terms and conditions," he said. And regarding the response of the President, you may read the following: http://www.businessweek.com/news/2012-02-15/greek-president-slams-german-insults-as-bailout-talks-stall.html
It seems both Germany and France agree that Troika needs a permanent presence in Greece with authority to implement the programs and a separate escrow account is needed to monitor the use of funds. Talk about trust issues! What was unthinkable few months ago, is now an accepted fait accomplice. EZ is ready to cut off the ties; http://www.athensnews.gr/portal/11/53282 EZ thinks that they are ready with sufficient firewall to prevent any contagion and they may well be right. If you remember way back when Mexico defaulted, the stock markets rallied after that.
Coming back to the market, the trend change is unconfirmed as of now. I am waiting for VIX to close above its 50 DMA. Right now it is just about touching it.
The chart is too compressed so you may find it little hard to read. Whenever VIX has crossed its 50 DMA, it has been accompanied by a stock market correction. Simple. Today VIX closed above the upper line of BB. So tomorrow we might see some bounce in SPX. But I am not going to buy anything now. I believe we will see some decent selling in the coming days and that will be followed by a renewed up move which may last till end of March. But we will cross the bridge when we come near it. As of now, we are still waiting for the pull back.
It is going to be interesting till end of February to say the least. So keep your seat belt fastened. Just because we cannot see the danger does not mean there is no danger. So trade safe.
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BB, thanks for your daily posts! And, yes I agree with the other commentaries - it provides much more guidance and benefits to your readers if you clearly pronounce your opinion, even if wrong. At then end, its not so much the opinion which counts, but the ways how you arrive at that opinion (by critical assessing the various peace of data). That's why your post is so great!
ReplyDeleteA Question: If I recall correctly somewhere you wrote that "topping is a process". Could you describe more about the signatures of this process? (e.g. consecutive days up/down etc...). Thanks!
Ringo, Thanks for your kind words. When I say that "Topping is a process', I mean that it its like an overfilled dam. For e.g. now all the technical indicators are showing extreme overbought conditions and sentiments are showing that everyone is a bull ( 7 bull for 1 bear). It is like there is no body left to buy. The dam is filled to the brim.
ReplyDeleteNormally, price action tends to go back and test the previous highs or lows. That repeated test and failure is a topping process.