NYSE & Nasdaq

Hi InfinitySL!

Welcome to the thread, and thanks for contributing, feel free to post anything related to US equities. Yes the Fed is super accommodative at this point and shorting stocks consistently has been super difficult over the past couple of years except for some stock or industry specific names. Broad based weakness has been absent for a while, everywhere I look I get the impression that this market still has room to go over the next couple of years. We are yet to see a climax to this boom, so to expect a bust at this point would be early. The market at this point feels like a well oiled machine with sector rotation as its core. Valuations are probably fair at this point and skepticism towards equities remains moderate, I will start considering shorting names when euphoria is high and when I get weakness from stocks that demonstrate the following:

1- Growth stocks that stretch far from valuations to form a bubble (we are yet to be in a bubble).
2- Fraudulent and misleading companies (this usually happens when expectations are high after companies promise what they can't deliver, flawed business plan, numbers that don't make sense...etc, this theme isn't fully in play yet).
3- Companies that are part of a weak sector/industry (No sector or industry has shown consistent weakness over the past quarter except for the gold miners).

For now I remain bullish, until technicals/fundamentals tell me otherwise.

I highly recommend this article, a must read on M&A and their affect on recognizing the market environment.

Can you only see american stocks/exchanges in freestockcharts ?

Yup, as far as I know you can only see US equities. What exchanges were you interested in?

I was interested in the main european exchanges, DAX, CAC40, PSI20, IBEX, EURO STOXX 50

If you want a free charts of those exchanges checkout marketwatch.com, otherwise take up a paid subscription.

Beware people, I see megaphones everywhere, which I consider a reversal signal. The first and second chart below illustrates the DIA and SPY , megaphones after a strong move like this can be seen in price action which makes higher and highs followed by lower lows simultaneously. This type of price action reflects the emergence of uncertainty, which is the mother of all bearish catalysts.

The NASDAQ in the form of the QQQ has been pretty week, as seen by the megaphone pattern in the middle of the right shoulder in a head and shoulders pattern. Needless to say, this pattern emerged at the end of a boom cycle fueled by Apple, which climaxed and went bust sending the entire technology sector down with it. Is this the beginning of a full blown reversal? I don't think so.

I remain bullish long term, but for the short term, I feel like this market is due for a correction. I give highest priority to price action and that is pointing south at the moment, I might be wrong in my analysis like anyone else in the business, but at least I did my due diligence.

Full Disclosure: Short NUAN

P.S. If your looking for fundamental charts to validate the above, this is the place to look.

For those that missed it, Berkshire Hathaway's 2012 Annual Letter by Warren Buffet.

http://www.berkshirehathaway.com/letters/2012ltr.pdf

The Dow Jones has had a 97.74% correlation with the XLI (Industrial Sector ETF) and has currently diverged. With the DIA (Dow Jones ETF) breaking past its megaphone pattern, while the XLI hit resistance at the top of its pattern which also coincides with its all time high. This should provide headwind to the DIA which is leading the market higher.




Megaphone patterns are still in play, I see them in most of the major indices. The S&P 500 has formed one at its all time high which is now resistance and it dates back to October 2007.

The USD is also rallying along with the SPY, this is unprecedented in recent times, and this rally will eventually be self defeating. The two can't rally together in this environment as a higher dollar reduces exports which subsequently reduces corporate earnings which should send equities valuations down.



As for sentiment as represented by the NAAIM (The National Association of Active Investment Managers), it currently seems to be at an extreme, this should serve as a caution that supports thesis that the long play is over crowded.

I am a contrarian in nature, and being the way I am forces me to not participate at these levels, I will continue to stand aside until this market pulls back or corrects and re-builds itself.

At this stage, I have a couple of short positions on and I also have a couple of long positions. I can't completely exit my long positions yet, but they are definitely making me nervous. I feel at ease with my short exposure.

I could be completely wrong with my analysis and the market could continue to march higher, if it does, I accept that I wont take part of the euphoria until it pulls back. If the market price action and fundamentals change and I get confirmation, re-entry is always a possibility.

split

wow, u kept all the thread by yourself?
good work, really!

Hey, thanks Poolsuckswat! I wanted a place I could share my ideas for everyone to see. Somewhere public, and this thread serves the purpose.

Okay, lets update the previous post above, what happened? Well, the environment for one has changed.

QQQ right shoulder megaphone pattern, not looking good for tech. This move is mainly fueled by Apple.
SPY poised for a breakdown, short term support tested three times.
XLI also poised to a breakdown below $40.00, industrial led the market higher, a breakdown is bearish.

Weakness is to be expected over the coming month at least...

It will be interesting to see how things pan out today...

HGG up 82.3 % since I last posted the setup here on this thread. It's hard to not make money when you buy things cheap.

"Investing, when it looks the easiest, is at its hardest."
- Seth Klarman

Investing in HGG at the time wasn't the easiest decision in the world given negative fundamentals that had surrounded the industry back then, but the stock managed to rip higher. I could have developed a 1 step thinking process by selling the stock short due to its downtrend and weak fundamentals, but chose to do things differently and developed a two step thinking process.At the time I thought to myself, this thing is down and has bad fundamentals, and everyone thinks it has terrible fundamentals. Buy! Because things could improve, given the not so bad fundamentals.

In this current environment, I struggle to be long. Maybe I am wrong and the S&P rallies another 20%, this rally however is way outside my comfort zone because to me, a decline of -15% is also a possibility which automatically reduces risk/reward ratios when taking investments into considerations. This article at ZeroHedge pretty much sums up my ideas at present.

http://www.forexfactory.com/attachme...1&d=1367900245

This thread isn't dead btw, its just that I am not comfortable investing at these levels, I cannot remember a market so disconnected from underlying economic data. I can't come up with a sound thesis here, doing so would be misleading and would be an invalid signal given the unfavorable risk/reward ratio.

WTF article of the day:

http://blogs.marketwatch.com/thetell...d-6-years-ago/

Major divergence in the prices of Lumber and the S&P 500 ETF (SPY). Decline in lumber prices could imply that the housing sector is doing as well as expect and hence that could imply that the economy is expanding as expected. This is just a dose of contrarianism, things are changing under the surface, these things could imply a different directional move to the downside in the future and they could also be corrected sending the market higher...

Hi Split, we are here!!! I wish i have something to post, but if the market is difficult for you these days, think what it is for me!!!!!

Hi Greg, yes the environment isn't optimal at the moment (as far as my analysis). The market could have changed however. I have a few charts, which I urge my readers to look at with an open minds. We are not in the same environment as in 2007-2009 (great recession) or 1999-2001 (internet bubble). Having said that, the charts below should be taken as a heads up sign that the market could be facing to headwinds, despite the positive economic data from the US yesterday including; better than expected consumer confidence level and housing data.



1. The first chart would be the SPY vs. LQD, the LQD is the investment grade ETF and has moved in tandem with the SPY since 2008. The correlation between them is currently 87%, which is significant. The LQD has recently diverged, and by looking at the chart, it could be seen that when ever that occurred a reversal eventually happened in the SPY. A rise in investment grade corporate bonds, means higher borrowing costs for equities. This automatically affects the financial performances of businesses which reflects itself with the decline in the SPY when ever the LQD declined.



2. Second is the chart between the SPY vs. Lumber prices, if the recovery is really that strong and housing is really recovering then why is lumber declining? I haven't found any convincing answer on the internet other than the fact that the housing sector must be slowing. Which is a contradictory indicator to expansion, which is contraction. Another possible headwind.



3. Third is the SPY vs. USD. The USD continues to strengthen in front of the SPY. Some analysts liken the situation to the market right before the internet bubble where they rallied in tandem and was a bullish indicator back then. I never the less consider this another possible headwind, We are not in a bubble and the US economy is barely recovering due to excessive easing.



4. Fourth is the SPY vs. Brent. The two have usually move together, until recent times when they diverged. Some consider the decline a consequence to the oil & gas shale drilling discovery. Some don't consider the divergence significant, due to the fact that lower oil prices should act as a tailwind to the US economy and its corporations. They may be right, the argument here is weak but never the less should be considered. The decline here is significant and should be considered. One of four scenarios could develop here:

1. Price of oil recovers and re-correlates itself with the SPY due to a recovering market.
2. Oil declines and the SPY declines with it due to a weaker economy and a supply overhand in crude oil.
3. Oil continues to decline while SPY rallies(continuous divergence). Unlikely scenario given the fact that OPEC is considering cutting supply to strengthen prices and the fact that a strong economy will drag oil prices higher.
4. Oil prices rise and the SPY declines due to headwinds in the economy and an oil prices rise due to an exogenous event.

5. The chart between the SPY vs. Copper. A divergence is crystal clear here, a decline in copper is a sign that the economy is contracting as opposed ti expanding. A rise in copper prices is consistent with strong manufacturing, which may not be the current case in the market. Another headwind.

I was inclined to add the relationship between gold and the SPY, but changed my mind as that requires a post on its own. All of these signs, may correct themselves as time passes and the market could continue to recover. And as stated earlier, the point of this post is to provide a heads up to changing market internals and not a sell short signal. We are in a far from equilibrium situation and the old rules may not apply at the moment due to the element of euphoria by market participants. If history is an indicator to this then, things usually end badly after this phase.