I don’t understand how such tiny volumes overnight can affect the market at the open in such huge ways. I’ve looked for articles and books that explain it, and haven’t found any. That’s huge leverage, and I’m wondering how the SEC isn’t investigating how this happens. I think it gives less credibility to the market, and influences the small investor to go find something else. Anyway, that rant over, here’s the information:
Since Sept 1, we’ve had 3 cycles on the S&P. From Sept 1-9 there was a down phase, 12-16 an upswing, 19-21 a down phase, 22-26 an upswing, 27-Oct 3 a down phase, and from Oct 4 to now an upswing. I recorded the overnight change for each day during those three cycles in the SPY and in SKF. Here are the results.
1. In any individual down or up phase, there is no trend in the overnight spreads. One might expect in a down phase, for example, the overnight spread to be down. It is not.
2. The SPY is flat from Sept 1 to today. The summation of the pop up overnight total is 12.08, and down is 13.88. So basically, it’s flat.
3. The SKF is up $2, from 72.81 to 74.95 today. That’s pretty flat, with just a $2 increase. However, the summation of the pop up overnight total is 31.65, and the down is 23.15, the standard deviation is .34, which is significant.
As we know, the SPY is an average of 500 stocks. The SKF is an inverse ETF of the banks, and is therefore a small (inverse) segment of the SPY. The data trend might indicate that if you invest in a small sector ETF, you need to stay in overnight in order to realize a net 0 gain, however if you invest in a broad-based ETF, it doesn’t matter if you stay in or get out to realize a net 0 gain.
A sample of 2 ETFs is too small to prove any theorem, and I’d love to continue this study, but it takes a lot of time to do all these calculations. If anyone knows of an automatic way to do it, let me know in a comment.
One more thing I’d like to mention in this post. My favorite indicator, which based on earlier analysis leads the market price, the $SPXA50 from Stockcharts,com is trending up. Based on where we are, it seems the market will extend higher. Here’s the chart:
I had commented earlier that at the turnaround on Oct 4, if we saw volume follow-through the next day or two, I believed we would get a higher high, and may break out of our trading range. We did see significant volume, and Based on the SPXA50, these seem to reinforce this probability.
I was looking for a turn-around, but I’m usually early. The SPXA50 says I’m early again.
Yen and Bucky the funding currencies!
ReplyDeleteRisk is on this moment!
"Emerging Markets Sales Fuel Pepsi Profits"- Ft.com
ReplyDeleteProbably same will happen to high-end retail sales.
Bulls are ignoring, the Yuan issue(CNY actually red) and Alcoa, and EU.
ICan
Is anybody watching GLD? Nice trend.
ReplyDeleteAPPL is doing nice nice. Reporting the 18th. Who wants to bet how much they beat estimates by? I'll bet 40%.
Not to comment about the debate last night, but it's kind of scary how these candidates don't have their facts right. Especially the attacks on the FED.
And I wonder if anybody other than Cain will put out a real plan. I wonder if it's a coincidence that his name is Cain, and his plan upside down is 666..........
Rock – “I’m wondering how the SEC isn’t investigating how this happens.”
ReplyDeletePersonally I believe the SEC is on an extended Three Martini Lunch and are not due back until around 2015.
Every eco system needs a wide verity of species for it to function in a healthy manner, now some species can increase or decrease in numbers and things will still flow smoothly, heck sometimes even who groups can be eliminated and the eco still functions…For a while.
It seems like the lack of the SEC regulating thing like HFT, CDS and a multitude of other shenanigans has started to create a vital shift in the eco system of Wall Street. The system has always been set up so that the strong preys on the weak, but that is the way it is in any eco system, however over the last few dozen years the strong have turned into predators and the weak have all but been eliminated, which has forced the predators to become even more ruthless and start victimizing the not so weak
In many ways it seems like we are finally getting to the point were there is nothing left but vicious predators to start attacking other vicious predators. How or when this all ends is anyone’s guess, but one thing that is clear is still the one thing Wall Street and the Fed’s seem to be blind to – They need the Mom and Pop investors to function in a healthy way.
Mangy Mutt
Rock - I am thinking the reason I am currently able to post from work is because I re-booted over the weekend and that re-set my ip address.
ReplyDeleteThanks for the earlier 411 and I will keep that in mind if non-posting continues in the furture.
Mutt
Rock – Because Cain killed his brother Able, in cold blood and then lied to God about it, there have been many stories written about Cain being cursed and having to walk upon the earth until the End of Days.
ReplyDeleteWell after 7 or so thousand years, it would make sense that Cain would understand man’s nature and be able to lift himself up to a place of power where he can hasten the End of Days and bring an end to his curse.
But Cain’s forehead was also marked in such a way that other men would know to leave him alone – That is why I always figured the real Cain was Mikhail Gorbachev
Mutt
AA misses big time.
ReplyDeleteLook at their chart. They're back to the close of yesterday.
Anybody not long?
Rock - AA competitor CENX is up.
ReplyDeleteCENX is one of the stock on my small list and it has done pretty well for me.
Although I have read your analysis and understand your view the market may just go up from here, I am not sold on it.
It would have been nice to be holding some CENX right now....But sadly I am not.
Regardless of the out right games that are currently being played on Wall Street, I believe the presure is down ward.
But because there is always another oppertunity I am waiting to see how things break.
Mutt
Rock(1:06)
ReplyDeleteIn a Zirp world, Pension funds and others have to take risk or else die!
Calculated risk that is. Even the so called best hedgies are suffering. i.e. Paulson et. all.
ICan
S&P 500 chart - trader's mkt.
ReplyDelete"13% on the S&P 500 since last Tuesday 3 pm" - fundmymutualfund.com
China's banks will need bailing out: Chovanec
ReplyDeleteChina bears, China bears everywhere.
@Emmy,
ReplyDelete"Chanos says China banks 'deteriorating', Vale poised to fall" -bloomberg.com/news/2011-10-11
He's still a bear despite govt. buying shares in 4 biggest lenders and short Vale(Iron-ore).
My question - Doesn't China have 3Trillion U$D reserves?
ICan
If anyone STILL questions what OWS is all about, they should read this (and get a freaking clue):
ReplyDeletehttp://www.huffingtonpost.com/2011/10/12/florida-attorney-general-pam-bondi-investigation_n_996541.html
"Arrest Bush When He Visits B.C., Amnesty Tells Ottawa" -www.theglobeandmail.com/news
ReplyDeleteIn other news, two unions in Canada have been ordered back to work by Cons govt. in Ottawa. The Canadian Postal workers and Air Canada employees.
Occupy movement has arrived in Canada in major cities - Vancouver and Toronto. The police are dreading it - remember G20 riots in Ontario.
ICan
China Bad Debt May Reach 60% of Bank Equity, Credit Suisse Says
ReplyDeleteHave I mentioned how much I value Michael Pettis? I really really do...
@Mannwich:
ReplyDeleteVery very sad. I just don't understand how people can do that to other people.
@Mutt:
ReplyDeleteCENX is a good choice for the recovery, when it comes. I think its financials are much better than AA. I used to play it but haven't lately.
Have to be careful with the metals and mining, they should lead us out of this recession, but with limited consumption, it may be awhile.
RE: China banks
ReplyDeleteReal estate volume sales is dramatically down in China the last 2 quarters. These sales are what is propping up the middle class, as we did in the US.
I got a call the other day from a realtor I was working with, and she said one of the properties I was considering had lowered their price 20%, and now it was a steal.
The SPY has fallen out of it's range established and started on the 4th.
ReplyDeleteIt's a buying opportunity.
Raj looks thinner. Maybe Jail is what he needs.....
ReplyDelete@Rock: your 9:35
ReplyDeleteThe SPY has made an almost perfect H&S on the 60 minute chart. As I remember, an H&S pattern breaks in the direction of the trend.
Rock - So if a Head and Shoulder traditionally represent the breaking of a trend, What is our trend? Up down or sideways?
ReplyDeleteMutt
@Rock: Agreed. Very sad. Under the corporate structure and culture where everyone can skirt individual accountability (and not actually have to face the victims from their behavior) and say "was just doing my job", every behavior can be rationalized. If you haven't done so, watch the documentary film "The Corporatation". Was made years ago but spot on as to what's happening today.
ReplyDelete@Mutt:
ReplyDeleteSorry to be unclear. We've had a trend up on the daily chart, the H&S pattern shows on the 60 minute chart. The trend over the last 5 hours is down. A break to the downside is indicated.
On the daily chart, there is no pattern break indicated. On the $SPXA50 chart in the above post, there is a clear uptrend indicated. When you draw a trendline along the lows since Oct 4 on the daily chart, you see today is the first day that that line is broken (nothing goes straight up forever). So I would expect the downtrend break as a result of the 60 minute H&S (which hasn't completed yet, maybe by the close) to be a short-lived break, and that we would (on the daily) continue our upswing towards 1240.
IMHO, the downtrend break could be a good short opportunity for a short time. But I'll play the tape, as usual, because I lose my opinion when the market's open so I don't lose my money.
If you're long and don't mind popping in and out, look for the break downward and pop out, maybe buy something like SKF (banks are sure to take it on the chin) then pop out of SKF and return long when the downcycle plays out.
I always draw channel lines (actually, the TDAmeritrade StrategyDesk draws them for me) and look for confirmed (by volume) breaks out of these channels.
I'm just a trend-follower.
That's my plan.
I was stopped out yesterday, and went into SKF around 3:45 yesterday.
@Mannwich:
ReplyDeleteI haven't seen that one. I want to rent a 3D movie to see it on my Plasma, so I'll get Corporation at the same time.
Raj goes to a maximum security prison. He got 11 years which means no min security prison is indicated.
ReplyDeleteHe needs a kidney transplant (any surprise? look at his bulk!) and his attorneys will appeal the sentence.
Anyone with enough billions can appeal and appeal and finally break-down the system when they find a bleeding heart judge.
Not "Corporatation" (sounds like something Vinnie Barbarino would have said), "CORPORATION". LOL. Get it, Rock. It's definitely worth watching, even though it was done years ago. Very prescient in its relevance to today's happenings.
ReplyDeleteBounce back day for TLT. On the rise again or does it still go lower?
ReplyDeleteMannwich - Personally I believe TLT will go higher.
ReplyDeleteEuropean banks and nations are on the verg of some type of default and it is my belief that when/if things start to crack people will be moving back into treasuaries.
Mutt
@MAnnwich
ReplyDeleteOk, Ok, my fingers never left my hand.....
And, I agree with Mutt. I'm thinking the short-term T's will be flat because people will be buying because this malaise shurely can't last longer than 3 more years, and the FED will be selling (at a huge profit).
I think the mid-term T's will go up, like Mutt said. The Fed is buying, and European funds, banks, and individuals will be buying.
Boy, I shure missed that one. Looks like the H&S is being spoiled by someone's eagerness to buy.
ReplyDeleteUnless we get a sell-off toward the end of the day, looks like the H&S call is wrong wrong.
Sorry.
But we need to get to 1230 to get back in-channel. Maybe Merkle or somebody will say something tonight.
Sina Rises Most in Three Months as Official Encourages Weibo Use
ReplyDeleteIn Cooling China, Loan Sharks Come Knocking
"Subprime is contained."
Greetings from somewhere in Southern NH! up far too late, heading to Salem tomorrow for some spooky fun then through western Mass down into Connecticut then back home on Sunday!
ReplyDeleteWill have some interesting observations from the trip, spent most of our time in Maine but made it up into Canada for a little bit.
See you all soon!
Do you think we might see a general shrug-off of weak earnings? AA and JPM misses were pretty heavy, and I think in a normal market, we'd see more than a Braxton Hick. Could it be that the media has prepared us for weak earnings and lower GDP, so it's OK and up up and away for the market? Or is it money flow-in from European investments?
ReplyDeleteIt may be false, but I'm playing the tape as it exists.
@Thor:
ReplyDeleteI hope you got to see the lobster pound by Campobello. And the tides. I used to have a cabin on Campobello.
Well, I can't watch streaming Bloomberg anymore. Bloomberg is using ooyala for some reason, and they want to run some strange software on my PC, and use my PC for some storage. I don't want anybody running something I don't have control over on my financial PC.
ReplyDeleteBe careful with your flash player settings, be sure tyou have the local storage turned off.
That's a security hole so big you could drive a desktop through it.
oooohhhhh my ex mother in law loves her apple a day!
ReplyDeleteWe need to get to 1225 to get back into our up channel established Oct 4.
ReplyDeleteShort the vxx.
Who owns the NYPD? And how is this not fascism?
ReplyDeletehttp://crooksandliars.com/susie-madrak/who-really-owns-nypd-turns-out-its-no
This is priceless. Bachmann wants to go back to tax rates under Reagan, which were HIGHER.
ReplyDeletehttp://2012.talkingpointsmemo.com/2011/10/bachmann-i-want-to-adopt-the-reagan-tax-plan-psstthose-taxes-were-higher.php
Greece will default on 50% of its debt. A 50% write-down will take place.
ReplyDeleteGold and copper are rising. "economic stability will result".
Now, PIIGS became
PIIS
Thank goodness Sweden isn't in trouble or it would be
PIISS
@Mannwich:
ReplyDeleteI hope you know the ownership of the NYPD is yellow press, right?
How do you mean, Rock?
ReplyDeleteI mean that police are A)sworn to uphold, and B)governed by the rule of law. As are we all.
ReplyDeleteBecause of budget limitations, overtime for police can't be paid by cities. You know that, right? And I'm pretty sure you realize the budgets are established as a result of duty sechedules. Coverage of an unplanned event isn't in the schedule.
Police departments don't have program managers like we have in the private sector. When there's a schedule aberation, a program manager makes tradeoffs to move schedules, and resources to overcome the aberation to management's satisfaction. You're aware police departments don't have that flexibility, right?
Moonlighting by you and me doesn't come under scrutiny. Why should moonlighting by a policeman? In the end, there can be no conflict of interest because of the rule of law. A policeman is not likely to take orders from anyone ordering them to violate the law, because of the potential loss of their pension and because if they lose their job, the conflict of interest will be on their record forever.
Police are human beings. Sometimes they overstep their authority. As I have done, in my career. As I suspect you have done, as well. That's why we have the court system, and people can bring the police that do this to task. Like the police that beat the guy in LA, and the cop who shot a handcuffed Mass Transit violator in San Francisco. Like you and me, those police will be (were) arrested and prosecuted.
To believe that police will take orders, and act on them, that are contrary to law is simply fallacy. To believe that police can be caught up in the emotion of the moment and react is logical and probable.
The article would have you believe that the police take orders contrary to law and the police act on those orders. With no evidence.
That's yellow press.
@Rock: I'd disagree with that and say that most sympathize quite a bit with whomever pays them. We've seen that "rule of law" takes a back seat (in many cases not even a seat) when such matters arise in recent years. Why would the cops be any different? It's human nature.
ReplyDelete@Mannwich:
ReplyDeleteIn many cases, the people violating the "rule of law" don't even know they're violating that rule.
For example, the robosigners were probably told that this was OK and the banks have authorized this practice in order to facilitate paperwork. Sounds logical. Sounds reasonable. Who could have thought signing someone else's name would be an actionalbe legal issue? Besides me, that is, because I have some limited legal training.
But police are expected to have a basic understanding of the law, and are sworn to uphold that understanding. I know a few police and every one I know has had basic legal training in college, and additional training is provided by the police force during their rookie years. I'm sure that doesn't pertain to every one, but based on my limited experience, the police I know do have that training.
When you're sworn to do something, I would disagree that it's human nature to against your oath. There are of course numerous excetptions, but I would disagree it the norm.
Perhaps we should swear banksters in. I wonder how many problems that would circumvent. It would certainly protect whistleblowers.
Who's there
ReplyDeletePolice!
Police who?
It's cold out side would you Police open the door and let me in?
Hmmm, although I do agree with Rock that the article amounts to “Yellow Press” I am not convinced an sworn officer of the law will not in fact violate that law if or when they are properly pressured.
We do not have to look any further then Abu Graue (Or however it is spell) to see on of a multitude of examples of how the moral compass of good people can get pointed in the wrong direction.
By nature we are social beings and that need to belong comes with a social structure.
Although Mannwich and I are equals on the internet, lets say he hires me to put in a fence, he now becomes my employer which means we are no longer equal.
Now lets say during the fence building process Mannwich tells me to put in an 8 foot fence, but I KNOW city ordinance only allows a 6 foot fence, well he is my employer, so I will do it. Now he tells me to build a section of the fence 3 feet onto his neighbors property, well I also KNOW this is wrong, but I already built a fence too tall and it is his request, so I do.
Police are no different especially if there is peer pressure from other officers to “Be one of the boys”
In the end police are not the uniform, nor code of conduct they are people and although the news article only gives us speculation I put very little past human nature.
Mangy Mutt
Bingo Mutt. Although I do get the essence of Rock's argument that police officers might be less likely to knowingly break the law since, unlike regular citizens, that's their primary job duty, in this day and age, I think that matters not nearly as much as it used to, given the corruption that pervades every corner of our culture. Everything can now be justified and self-rationalized. This rot starts at the VERY top, by the way. The Sheeple and Copples only take their cues from those above them.
ReplyDeleteInteresting article on European trade trends
ReplyDeletehttp://www.nytimes.com/2011/10/15/business/europes-consumers-are-pointing-the-way-down.html?adxnnl=1&ref=business&adxnnlx=1318687220-dw8pHhNLOOQMu1tzoIExRA
mike
Mornin' all! Looks like I got back just in time for the chaos to begin! :-) Exhausted from the jet lag, up at 5am, but will be on later once I get settled in!
ReplyDeleteHow was the trip, Thor?
ReplyDeleteSome of the blogs have been hacked?
ReplyDeleteMy computer wouldn't allow access to Trader Mark's "Fundmymutualfund" blog since this afternoon? Maybe he's sympathetic to the OWS?
@Anonymous
ReplyDeleteThat's weird...Mark should be legit.
Manny - AMAZING - I could go on and on and on about Maine :-) I can see why you like living in Minnie after NYC as well. I realized after being there a few days, that locals must just block out all the stuff that I was bitching about, people up in SF do the same thing with the homeless, and I suppose I do the same thing here with the traffic. . . although I do bitch about traffic quite a bit :-P
ReplyDeleteIn any case, I'm definitely a country boy at heart, I like the peace and quiet, the hustle and bustle of a place like NYC would have been amazing in my 20's, now that I'm (TWO WEEKS) about to enter my 40's, I'm much more interested in quality of life issues.
We met up with a friend who recently moved there because he got a promotion for the pharmaceutical company he works for. He lives in Hells Kitchen, new building, 475 Square feet large studio, he's paying $3700 a month for it, gets up at 5 in the morning to take the train an hour away in Jersey somewhere, doesn't get home till 8 at night, and then is out almost every night. I don't know how people do it!!
Anonymous! Ooooooh, how did you find out about that? That's horrible, Trader Mark is a good guy!
ReplyDeletesheesh, I go on vacation for two weeks and OWS grows legs and takes off. . . hey, remember, I went to Iceland and there was a Volcano, then Egypt and there was a revolution, London had riots six months after we were there and this time we vacationed in the good ole, USA. . . . :-P
ReplyDeleteI so hope this keeps growing, FINALLY, an alternative the the fucking Tea Baggers.
Trader Mark's blog is fixed now.
ReplyDeleteok - this is funny!
ReplyDeletehttp://badlipreading.tumblr.com/
HAS has shown great strength lately. I guess Grammy's gotta buy toys for grandkids.
ReplyDeleteI read HAS financials and latest reports. Solid outfit.
Turn around Tuesday? Disappointing earnings reports leads me to believe in Mutt's call, the pressure is down. IBM is down, and it's one of my tells. HP and Oracle are at risk.
ReplyDeleteWhat can hold our market up is people bailing out of Europe. Where else can you go? EWZ, another tell, has fallen from 70 to 55. That's quite a haircut.
I'm going to keep my shorts on, but still long AAPL because that's reporting tonite, and I expect a pop. It's trading around 13X. It's cheap. But I may exit all longs, depending on the tape.
Stocks are falling in Europe for a second day. Prepare for an up day here. If that money flows across the pond.
ReplyDelete@Thor: The rents there in NYC are just absurd. Gee, I wonder why that is? Connect the dots. But it is a fun place to be if you're young and/or have tons of money. I fit neither category right now, although we are likely going back for a visit in a month or so.
ReplyDeleteHow about this OWS stuff? I had thought this might eventually happen but, as always, was a bit early in that call. I believe this could be the first iteration of many similar, bigger and more intense protests in the coming years. Interesting times we are all living in.
Rock - I read an article last week about Barbie sales being through the roof.
ReplyDeleteAnd what can be wrong with that?
I want a big breasted doll to support me finacially too.
Mutt
@Mutt:
ReplyDeleteBarbie had a boob job. Reduction.
Now she's more normal. I hear. Haven't been to ToysRUs in awhile.....
David Brooks is at it today with more elitist sycophant hackery over at the NY Times. Ho-hum.
ReplyDeletehttp://community.nytimes.com/comments/www.nytimes.com/2011/10/18/opinion/the-great-restoration.html
CBOE put/call ratio:
ReplyDeleteMonday: 159.6%
Tuesday: 133.2%
Puts outnumber calls by a fairly wide margin. As Mutt says, pressure's downward.
GS missed earnings. Market's up.
ReplyDeleteHmmmmmmmm......
Why I don't trade pharmas.
ReplyDeleteI suspect this behavior goes on wherever there is this kind of regulatory approval:
FDA Chemist Pleads Guilty To Insider TradingLast update: 10/18/2011 12:34:40 PM
By Brent Kendall
Of DOW JONES NEWSWIRES
GREENBELT, Md. (Dow Jones)--A Food and Drug Administration chemist pleaded guilty Tuesday to charges that he made millions trading drug company stocks based on confidential drug-approval information. Cheng Yi Liang, 57, a longtime chemist at the FDA, pleaded guilty in a suburban Maryland federal court to two felony counts, one for securities fraud and one for concealing his trading activities.
Interesting little snapback rally today. We may have more room upwards here, maybe even into year-end, I think, but ultimately this puppy is heading down, down, down......
ReplyDelete@Mannwich:
ReplyDeleteSince the 10th, we've been in a tiny tiny trading range. Rock hawsn't made any money because the turn-arounds happen too soon and too quickly.
The range is 1191 to 1220.
In order to not fight the tape, you have only about 15 minutes, or less, to see the turn and get out of the way of the train.
This is not fun. But the volumes are so light, there's no institutional commitment, and most mom-and-pops are out of the way, so it's the HVTs that are making a mockery of the market.
If Europe would poo or get off the pot, we might see some movement. But short-term, I think the movement's up.
And I think the PM's will make announcements to keep it up there. I don't think anyone looks at fundys now. It's rather who's got the best headline.
I agree with Rock on the tiny trading range.
ReplyDeleteThe patterns that I have seen develope on the stocks I am watching are still in play, but the range they are trading in leaves (me) little to no oppertunity to get in and besides even if I was able to enter and exit properly the money would barely cover the trading fees.
However it seems like it is getting ready to break soon, but the big question is: In what direction?
Mutt
HFT's taking their profit at the end of the day. I'm thinking there will be a pop up overnight. So I'm staying long.
ReplyDeleteProbably kick myself in the morning.
25% of the volume in the last hour of the day. Looked for EU commitment, and got it from France and Germany.
Up up and away, I think.
INTC did nice. I'm still waiting for AAPL's report.
ReplyDeleteMy decision to stay long overnight is looking like a good one, so far in the after hours trading.
32 new highs today in the NYSE. Including Nordstrom's and Family Dollar.
ReplyDeleteHow's that for a market that can't figure out which way is up?
AAPL missed.
ReplyDeleteDown $40, around 10%, in after hours trading.
Ouch. My mother in law will be disappointed. Still it's higher than we bought, but I really expected a move higher.
Wow, AAPL finally missed.
ReplyDeletewhat a day, and I have the worst jet lag :-(
ReplyDeleteOoh, Apple finally missed. Could that be their turn and THE turn in many ways? I think so.
ReplyDeleteI forgot it was my day....I'll post later. Sorry.
ReplyDelete@Manny....see next quarters guidance. They only missed analysts estimates, which they have missed every quarter, haven't they?
ReplyDeletehttp://tech.fortune.cnn.com/
@Greg
ReplyDeleteThis is the time to buy. I got in at 374, and I'm really lucky. But this kind of pullback in such a strong stock is rare.
@Rock....even Cramer's trashing it this morning. Good contrarian indicator.
ReplyDeleteI see at as a sign that turn in the economy is truly upon us. I may be wrong though. Wouldn't be the first time.
ReplyDeleteBouncing back nicely now though. I went against my better judgment and took a nibble in low 400s.
ReplyDelete@Manny....you're an appleonian at heart. : )
ReplyDeleteNew post. Better late than never.
ReplyDelete