Short squeeze at will!
Take a look at this 15-minute chart of SPY
Seems like market squeezes the shorts at will. On Thursday, market used a better than expected consumer survey to pop the shorts dry at the open. On Friday, it took its time in a choppy fashion and then ran the shorts out of town into the close.
Spikes like that can be forced liquidation, if so, with that kind of volume (you do the math to get the dollars involved), some big account(s) was fed to the sharks in one swallow. They can also be someone who wants to buy on close no matter what. Why would a genuine buyer wait out a dull day when he can easily accumulate only to run the tape and outbid himself.
Of course, on days like this, you will hear and read that it was PPT, or CPT, or GS, or the FED, or whomever. My question is: if those who claim PPT, CPT or any other acronymic entity have that kind of power to take them to the cleaners at will really believe what they say, why do they play the short side in a mid-term uptrend in a tight range? Are they insane? Or do they only cry foul when their bearish bias takes the better of them and clouds their judgement?
it is what it is and price is all that matters.
I have been saying (ad nauseam) that the bears are finished. I mean some of the bears of the previous drop have either turned bullish, or are still bearish but enjoying the counter trend rally (inside or on the side line with their capital intact). Some other bears of the last drop are still making noise but market has taken care of their capital through endless squeezes.
Isn’t the inability of the shorters to break the index below a certain level that is being watched by everyone proof enough of a serious lack of Bear power?
To get incessant selling, market needs new bears with stamina to withstand bounces and programmed spikes like the one we saw late Friday. That kind of stamina comes from capital and confidence. Those who have capital and confidence are either the bears that went to the side line in March, or the crowd that (bull or bear) that have been enjoying the rally.
Is it the time for the turn? I wish I knew, but I don’t. All I know is that nothing has changed and S&P is still in a tight range, and both bearish and bullish options are still open. I also know that it is completely up to buyers (be them PPT, or CPT, or HAL 99-99 super computer, or your own friendly fund manager) to stop buying and/or start selling for the market to turn.
From an Elliott Wave point of view, both bearish and bullish counts are still open. However, the inability of the shorters to inflict lasting damage and the low volume Yo-Yo action suggest the higher probability for a sideway wave B or a sideway wave 4 at this point
Bear in mind that the bearish short term counts are still very viable. I will take them seriously again if I see some evidence of selling.
For the day, volume was below average (what else is new?), and breadth was positive.
Notice the turn on RSI and Stochastics before getting into oversold areas! They confirm the underlying bid that has come to help the index at the bottom of the range. I would be wary of a short position if they keep going up.
Also notice that MACD has not opened, which is typical of a tightly range-bound action.
Advance/Decline line seemed like it was dipping a few days ago, but it has turned course for now, and Net new high has been in positive territory for a few days.
McClellan Oscillator has turned up without getting seriously oversold, and that also is bullish as this time.
Forgetting about the noise that comes from perma this and perma that, and just looking at the price action, we see that we have been in one month worth of a lateral move. One month of no real change.
Much bull and bear capital has been evaporated trying to game and time the market.
There are some intermediate sell signals that still are present, but there, also, are some short term improvement in the underlying technicals of the price action, absent the volume, of course. more of this type of short term improvements may mend the intermediate picture and close the sell signals.
Sideways moves are regarded as continuation patterns. They say there is higher probability for them to break to the side of the trend leading into them, which was up. I say be aware of what others say, but stay open and be prepared for both outcomes.
It may be a bit late to play the range, and a better trade may be in waiting for the resolution of the between 875-885 and 925-930. An adventurous speculator may place bets outside the range up or down using options, or spreads.
I heard on TV that a pundit said that VIX was too low and danger lied ahead because of that. In my not very humble opinion, that is absolute nonsense.
First of all, VIX at 30 is not low by historical norms, as you can see from this chart
Secondly, those who look for numbers off VIX to predict market’s next move are playing with fire. The trend of VIX is far more important than an arbitrary number. If you remember, when market was in free fall, all sorts of experts and pundits were calling bottom after bottom because VIX was at 50, then 55, then 60, then whatever, all the way to 80+. They were all spectacularly wrong – month after month. The number VIX registers only tells us about perceived volatility and expensiveness of options.
It is the trend of VIX that can be used as an indicator, in conjunction with other indicators, to asses overall sentiment and market direction.
One again, it is just one indicator and not the only indicator.
VIX has been trending down, and that has been supportive of the market’s rally. Danger may indeed lie ahead but not because VIX has fallen to 80 from 30.
Let us not forget that the most important indicator is the price itself, then come momentum and breadth. Every other indicator is complementary at best. Anybody who says otherwise is either misguided or misleading, and that, also, is my not very humble opinion.
To Wrap Up:
Index is in a range (875-925), and has kept both bullish and bearish scenarios alive.
Friday saw a late spike towards the top of the. Another push like that above 935 and the danger of a melt up becomes very serious
Bulls need to stay above 912, and recapture the 920 area
Short term trend is up. Mid-term trend is up. Long term trend is down
Resistance is 920, and 935 (Jan 2009 top). Support is 912, 900, 875-885 (neckline and base of a potential short term W bottom) and the frequently contested 850
There are still multiple sell signals on price, momentum, and breadth, to reverse that, buyers need to bid the tape, or cause spike rallies like the one from late Friday.
Bears do not matter at this point, watch for signs of distribution to see if bulls have turned or not.
Food for Thought:
Let’s take a look the following 60-minute chart of S&P