Thursday 1 March 2012

Return of Volatility?

It was a volatile last hour in SPX without any clear direction.  How would you conclude today’s market action? Was it a retest of yesterday’s high? Do we have a confirmed top yet? One thing for sure, a strong market trend like this one does not die quickly. While SPX closed above 1370, DOW was below that psychological 13000 and Nasdaq below 3000. Today SPX was helped by the banks. Both GS and JPM broke to new highs.

Where we are in terms of sentiment? Per Reuters professional assets managers have the highest equity long exposure in 14 months and retail participation in equity mutual funds are also net positive. Is there anyone left in the game?

Our good friend Cobra was right in his last night’s assessment that yesterday we had a bearish engulfing candle in SPX which results in green close next day. I was doubtful. This is his chart from yesterday.

It is quite a big chart. To know more about bearish engulfing candle pattern, please read here: .  So from yesterday’s action, we have a two reversal patterns and a possible test of the high. And Fridays have been the most bearish day off late. Will we see the turn tomorrow? It is going to be a very crucial day.  We still do not have a 1% correction day and we are 60 days in the year!

The weekly BPSPX showed 1st tiny red bar:
Again, it is just a sign that the momentum is stopping. Not an invitation to short.

Apple showed the 1st intra-day red in 2012. Yesterday when the market was selling off, Apple was going higher. It seems they are selling it in strength. Because the strength of both SPX and Nasdaq is based on Apple, when Apple sells off, you will find the door too small for all to exit. Here is some interesting tit-bit from Let us call it $500 Billion dollar club. There are only six companies so far in this club.

It sure is going to be interesting.

It has been a strong up- trending market so far in 2012. More so, it is a Presidential election year and stakes are high. Central Banks all over the world is flooding the market with cheap liquidity, otherwise they will go bust. Most likely it is the beginning of the end game. In this stage we will find a blow-off top for the stock markets. But before that we will have to go through some panic which will justify more free money by Bernanke. He cannot dole out money if SPX is near 1400.

Because of so much money printing, gold is going to benefit along with equities. I think by year end we will see gold price in the range of $ 2000-$2200/ounce. Question is when is a good time to get in.

Today’s reminder of market manipulation came from oil complex. 1st the news of Saudi oil pipeline explosion pushed oil above $ 110 and then the denial after the market close. Someone wanted to offload the position. Good show!

In the mean time, not much change in the trend table.
In future I will be trading based on trend table. We have seen that even the best of signals fail in a strong trending market.

And here is some interesting news from around the world:

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  1. Now foreign central banks have started buying US stocks as well.

  2. look at nasdaq 16 aug 07 - 6 oct 07 and 8 feb 10 to 25 april 10. it was as trending as it is now. both ended in abrupt correction.

  3. reg. Israelis this news is total BS presuming jews are dumbest people in the world buying the top of the market from another jews in US. Do you really believe in it? :)

  4. BB..have u seen 1995 market chart..

  5. Closed AAPL short. Still holding FAZ and DUST, but may stop out of FAZ.