Lebowski Research Institute for Capital Gains

If You Think You Have an Edge In this Market, You Better Think Again...07/31/10

2010-07-31T10:36:00.003-04:00

Posts have been sparse since the flash crash on 05/06/10 because there's nothing extraordinarily exciting happening in this market. Plainly stated, the market had been impaired since the most hated uptrend from 03/09 ended with the flash crash. There are some significant internal issues that are impairing the market right now; 1) there have been huge and unprecedented outflows of funds from equity markets into bond funds, 2) there has been a huge reduction in the number of organic buyers (and sellers) actually trading the market, 3) the carry/FX trade has increased volatility in equity activity and swaps, and 4) algos and HFT systems have dominated buying and selling activity in the absence of organic participants.

Let's look at at least one consequence of all the stuff above--It might relate to number 3 and 4 above primarily, but it doesn't really matter. Here, I'm looking at the actual tape instead of falling back on some bullshit concept of "seasonality" and hoping for some magical return of buyers in September (which I don't expect).

If you take the lower level TICK readings, between +/- 200 and establish a running 5 day average, you get something that looks like the chart below. The lower level TICK readings reflect more organic buying and selling the market. Algos have increasingly used large buys and sells (large TICK readings) to push the market directionally, thus, I'm isolating the lower end of the activity to parse this out. This lower level activity does follow the large pushes and pulls, but also occurs consistently in the ABSENCE of large TICK readings.

Here we are...

Notice that up until the flash crash we generally had a normal pattern of + TICK activity (buys) outpacing - TICK activity (sells). I'm only showing activity going back to 08/09 here just to make a point on what's going on.

At the flash crash date notice that something happens. We no longer have peak areas where buys outpace sells (aka: a pullback), but something else begins. Notice that the buys and sells are essentially tracking one another VERY CLOSELY. There have been perhaps 3 "bursts" in buying activity since the flash crash, but they are short lived and muted to say the least. If you look back historically this does not specifically occur in other "pullbacks", nor does this specifically coincide with "seasonality".

Bottom line, on the short and intermediate term, there is not really an edge to the market right now.

One thing to watch for is decreased intraday volitility, and more persistent uptrends. We might see this in the coming month, but historically August is not a gang buster, specifically for particular sectors. Another tactic that is useful is to watch specific trending statistics in sectors.
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Areas/Levels to Watch 05/03/10

2010-05-03T22:32:00.003-04:00

60 minute bars

Follow daily breadth and buy strength on Twitter posts EOD.
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Hairy Top(s) May be In 03/11/10

2010-03-11T21:27:00.003-05:00

We should see soon. If you are not familiar with the concept visit BZB Trader -- the link is at the right and on the image.
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Completely Coked-Out Market 03/07/10

2010-03-07T22:07:00.006-05:00

Check out the new 20 day readings from Friday's close.

(NYSE NASDAQ NYSE_AMEX ARCA SMCAP OTC OTCBB)

Can you see what has happened the next trading day after a spike above 3900?

Party friggin on dudes...

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Watch These Levels...03/02/10

2010-03-02T21:28:00.002-05:00

Yep; stay nimble...

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"Steady Lads" - 2/21/10

2010-02-21T17:02:00.003-05:00

There is pretty good agreement regarding the overbought condition on a lot of indicators, but it's not clear when the pullback will occur. We've been drifting up on vapor volume and short covering, just inside the boundaries of a bunch of indicators that would trigger a sell (think VIX as one example). The momo of nearly all sectors except utilities, bonds and floating rate funds is essentially non-existent.

I would certainly stay very nimble here just in case lightning strikes.

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Into Free Air Dudes - 02/16/10

2010-02-16T20:33:00.004-05:00

...If the bulls can hold it, and if there is a radio blackout.

The constraint is...

Party hard...
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Sick Dudes; Sick 02/10/10

2010-02-10T20:16:00.002-05:00

About 20 fewer than yesterday.

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New 20 day Highs Ticked Up Slightly Yesterday 02/10/10

2010-02-10T09:27:00.001-05:00

But, absolutely nothing to write home about.
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Uplifting Chart of the Week - 02/07/10

2010-02-07T19:55:00.003-05:00

100 Period Rate of Change (ROC)

Red: 200 MA; Green: 100 MA; Brown: 50 MA
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Tomorrow...02/04/10

2010-02-04T22:16:00.008-05:00

If you follow the twitter posts, charts (BSS and hybrid stuff) were put up before the open today showing the confluence of data indicating a possible failure. Check those out if you didn't see them. Bottom line--BSS is conforming VERY well, showing decreasing buy strength with a bit to go. VWAP(5) delta was posted during the day with important levels that were tested and exceeded. Also, VIX reversal regions were shouted out as they developed.

All in all, this is a very orderly and QUANTITATIVE sell off. What I mean by that statement is that very precise price levels are being followed. If you don't follow TICK the way I do, you did not see the absolutely huge institutional sells (sequential TICK blasts of >1000) coming in, but, they were not necessarily done at market. Thus, the monstrous red candles characteristic for last year's forced selling were just were not there. Now, the advance/decline metrics reflected the pullback alright, but the whole show was orderly today.

Remember the twitpic post yesterday on TRIN?

One of the many indicators that telegraphed this pending action.

Ok, let's look at New 20-Day Highs (total market)-just a chunk of historically relevant daily stuff.

Look at the circled yellow regions. Sorta looks similar doesn't it? The quants thought the same thing and jumped the gun a bit 4 days ago--yesterday and today they were saying "holy fuck!". BLS, GS, and NFP actually caused a cold boot. The Eurotrash/piggies also helped by stabbing themselves repeatedly in the eyes--now the carry traders of the last six months are in the funnel big-time.

Back to Fibs...

SPY is there.

The Q's overshot and are getting squeezed between the '07 downtrend and the 03/09 uptrend. Tomorrow and the next day will resolve it.

IWM is also caught between the 03/09 uptrend and the '07 downtrend that was mastered a while back. Odds are for a retest on the downside. Also probably on tap tomorrow and the next few days. The RUT is expected to implode at tops, and no one gives a flying-fuck about a small-cap index, no?

Didn't do the mid cap chart, but they are actually more important here because they led this little bounce. Same basic fib story for them, so, imagine the red and green fib lines being tested.

On other fronts...

The EWT folks have woodies bigger than last time I mentioned them, so, we'll also see how their spontaneous/premature ejaculations fare tomorrow and the coming week.

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Possibilities for a Few Days Out - 02/01/10

2010-02-01T18:21:00.005-05:00

Ok; the parabolic SAR and Buy/Sell hybrid data that was previously posted nailed today's action. Well, a broken clock is right two times a day, no?

Let's look at some more data.

SPX daily/1 minute, BSS and the Chimera system.

Look at the BSS chart. We've put in a lot of energy just slowing the downtrend today. Now, this could be a complete head fake (I believe it was pure algo) but stay with the data and dump the preconceptions (and EWT--Satan I will strike at your heart)...

Notice we haven't got much more room to run to the upside in BSS (from a historical standpoint we're approaching the max value level). Chimera also is running up hard and approaching its historical max. If we project out a bit, and if we run up tomorrow, we are liable to encounter the 1100ish region soon, which is the bottom end region of the Volker gap.

If that happens, we might roll over if the tank is near empty. Might be a good place to cross over to the darkside in a large way.

Tomorrow let's 1) see if the shorts cover some more, and 2) see how the Volker testimony goes and how the market reacts.

Let me show you another significant factor that is sitting at around 1096ish.

hmmmmm......

Now, one final word. Keep dry powder ready for THURSDAY in case we have a BUILD in the employment numbers.

Gonna be a chess game this week boys and girls....

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Guess What Showed Up at the Close? 01/29/10

2010-01-30T10:12:00.003-05:00

Parabolic SAR

We'll see Monday.
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Done or More to Go? 01/21/10 - UPDATED

2010-01-21T20:08:00.010-05:00

External events are tough on indicators, much like sticking your finger in a fan. There is an initial reaction and then a counter reaction--the initial reaction is somewhat predictable; subsequent reactions are more difficult to predict (don't stand around someone when they do this).

Let's look at some of the indicators to see if there is any agreement.

First, Buy-Sell strength (BSS):

BSS indicates that we are nearly done. Done (1.0)

UPDATE 01/22/10:

Rounding Over

Next, VWAP delta:

Historically, we had a relatively big pullback here, essentially exceeding previous reversion moves. We may be done if the dip buyers come in. If not, and if there is a mass freak-out, we have much more to go. Dip buyers were going wild today, essentially altering the TRIN index to a value lower than last week.

VWAP Delta: Probably Done (0.5)

UPDATE 01/22/10:

They freaked out - VWAP delta SEm (so far) is the largest deviation in at least 200 days. We've got almost 3.0 here, which is statistically a real improbable event.

--> We are so extended here that I do NOT want to discount the possibility of a fairly rapid snapback.

Next, the Normalized Awesome Oscillator:

The values here are very close to the pulbacks going back to early December. Again, if the freak-out level remains low tomorrow, and dip buyers step in, were done.

UPDATE 01/22/10

Awesome Oscillator: Probably Done (0.5)

They freaked out some more and drove AO past the December levels to the maximum low near 10/26/09.

Let me now show the McO:

I've shoved this in here to demonstrate that my hybrid indicators have a partial relationship with the more well-known indicators. There is a reason for this...

Anyway, notice that the McO indicates that we're not quite done yet, especially if things get a bit out of hand within the levels of the red rectangle. Normally, though, we would have a bit to go.

McO: Not Done Yet (-1.0)

UPDATE 01/22/09

Probably done -- past oversold area and near historical lows.

Finally, let's look at cummulative TICK institutional buys and sells:

The institutional selling was pretty strong today (it's been worse), and the extent of selling exceed levels going back to mid November. I tend to think that institutions are preemptive in everything they do, thus, I suspect that they're done given no other external event. If they do freak-out overnight, then we could get another round of extensive selling to reach the end-of-October levels. Also, the selling tapered off to the close, and there also was institutional buying around the 15:00 time frame, which is normal. (tweeted)

So, on this one: Probably Done (0.5)

UPDATE 01/22/10:

They took it down to the October/November levels. They can do more, though--look at the buys in early September.

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Total score: 1.5 in favor of Done
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We're also nearly on the lower margin of the Bollinger Band 20,2 -- Lots of points in the past.

If you think I will trade on this bullshit like a system trader you're absolutely crazy. When I see premarket and the open, and listen to potential alarms going off during the session, then I might trade one way or the other (maybe both).

So, dudes, be ready both ways.

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Big-Ass Sector View (select sectors) 01/17/10

2010-01-17T11:55:00.001-05:00

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More Data--Tuesday Will Be Important 01/17/10

2010-01-17T07:59:00.007-05:00

TRIN was summarized in the last post; essentially declining volume has been increasing. Let's look at some of the historical patterns, and where we are, with regard to some of the hybrid indicators.

First, TICK institutional activity. Again, this is a running sum of institutional [buys-sells] on a daily basis. In a way we are looking at their holdings.

You can see what appears to be "scalp mode" in effect since November '09. More recently, big commitments or big liquidiations haven't been made. As of Friday, they ended at approximately net zero on their activity, so, Tuesday will be important in terms of where they are going. If they sell hard, that would be a break of their trend activity. If they buy, well, they are starting their initial positions for the next scalp.

Next, VWAP delta...

Very orderly activity overall. If you are the least bit late on your timing to short, you can't. Can you see the optimal places to establish a short position? That's right--when VWAP delta peaks and flattens or rolls over.

The last cycle, approximately the last four days has been something of a break in trend. Notice that we normally have had small pullbacks (where VWAP(0) crosses below VWAP(5)), then approximately 5 day runs where price is increasing. This last cycle was a fake out to the extent that we had a pullback immediately following a VWAP cross upward. It may be OpEx or the earnings, but something changed a bit.

This sort of pattern has happened before, but we want to watch what happens Tuesday, as well as the magnitude of a pullback, if we get one. Again, recently we have not pulled back more than where we left off Tuesday.

Remember that the dependent measure on VWAP delta is SEm, so we are looking at a potential break in the variance of MEAN REVERSION.

Now, to the BSS/Chimera system (total market readings) which has been working fairly well recently.

One problem that I see here is that the peak low of the Sell Strengh has dipped a bit below the recent historical lows. Again, we are looking at variance in BSS, so, there has a been a bit more "abnormal" strength on selling into Friday's close.

In summary, Tuesday I'll be sitting back and watching a lot. If they come out of the gates hard, that will be our clue. If not, we'll have to see. The hard buy route will be the easiest to interpret. Anything else will be tough.

Remember, ES is open half day Monday.....

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TRIN - Declining Volume is Ramping Up 01/16/10

2010-01-16T10:16:00.004-05:00

I rarely talk about the TRIN index because it has a number of major problems, particularly relating to its feed. I sorta treat the TRIN like the Dow (bailout) index--I look at it but don't really pay attention to it. The TRIN's feed also is manipulated every now and then on the short term time frames (notice the spikes at the open and mid-day) to spoof participants that use it to trade short term trends.

Nearly everyone talks about volume everyday in an absolute perspective. "The volume is below the last week; the volume is this and the volume is that..." The TRIN takes volume into consideration in a relative way. It essentially normalizes volume in the following way.

[(Advancing issues/declining issues) / (advancing volume/declining volume)]

If the TRIN is used as it is supposed to be used, ala Richard Arms the originator (aka the "Arms Indicator"), you use it over time periods around 10 days. Arms used a 10 day moving average to indicate overbought and oversold conditions.

There's one specific thing that has caught my eye on this relative time frame. I saw this a lot last year, and it generally tended to give us a bit of advance warning on changes in trend.

Here is the TRIN since 12/28.

What we have above are Bollinger Bands with a 6 day time frame (red) and 2 SD boundaries, a normal time-series forecast over 6 days (blue), and a buy/sell "standoff" horizontal line at 1.0 (green).

Notice the trend that is present. A TRIN above 1 indicates that the volume in declining stocks is outpacing the volume in advancing stocks Peak TRIN is clearly increasing (yellow). The lows of the TRIN cycles also seem to be increasing. The time series forecast also looks like it is pointing directionally upward.

The TRIN observations are generally consistent with some of my other hybrid indicators, and I might append those other observations later this weekend.

This is one pattern I'll be watching very closely during the day Tuesday. The tone of the market may be changing toward a correction, which is definitely due.

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Wages Back to the Levels of the Last Recession 01/13/10

2010-01-13T20:40:00.004-05:00

December '09 monthly Fed Depositary Receipts were released today, so, the updated charts on withholding are shown below.

M/M:

And, the 2 month average Ms/Ms:

It is apparently getting better, however, we are still at the 2002-2003 levels. The phat chats that run the show may have liked the data after about 14:00--maybe there is a recovery (uncovery) going on.

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LT Indicator Updates 01/12/10

2010-01-12T20:53:00.007-05:00

Golly, we get a ~1% "pullback" and everyone goes apeshit with the prognostications of doom and gloom. Not surprising given this long-only manipulated beast. It's been about a month since some of the LT indicators were posted, so, here are some charts.

Not much going on here in terms of trending. slight fluctuations but still running in the positive area.

Next...VWAP delta

Put me to fucking sleep...Seriously, reset the smoke detectors going off on every blog.

Notice the shallow cyclic patterns since 11/20/09. This means no persistent trend, and this also means the EB VWAP(5) system essentially has a flat equity curve since then. So, it's playing their gap game overnight and swing trading with long rentals. Notice also that the H to L cycles have been so shallow and rapid that it's almost impossible to short this index/sector shit. Hmmmm...maybe someone wants it that way. Anyway, a zillion posts have been made on the ES manipulations and the fact that the overnight action in ES drives this rapid cyclic stuff, so, 'nuff said.

Next, fib fans...

Nothing to see here; move along. Everything is on track and following the fans well. For some reason COMP has more potential for downside, however, it also is closest to the 20. There is another significant issue shown on the COMP chart--COMP progress was rejected at the 2007 fib downtrend level. So, COMP will need some extra gas to get over that hump. Maybe some earnings data at the end of the week.

Now, if the fan lines and/or the 20 is violated by the indices the story changes significantly. That, friends, is what I'm watching tomorrow.

Be ready both ways...
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When the Buys Stop Do They Sell Into Strength? 01/04/10

2010-01-04T21:44:00.005-05:00

Or do we blast off? If they do get serious on a daily basis it could get crazy. On the other hand, they just might sit tight (long) and let the pikers continue to run this beast up.

Cumulative TICK delta.

1Q earnings next week; we'll see how the week ends...
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(Some) SPDR Sector Updates 12/29/09

2009-12-29T20:19:00.003-05:00

Here's some sector views and how they have been performing. Recall that I don't move the fib fans once they are established (way back) -- price moves in relation to the fans.

Again, there have been fewer posts recently because there is not much happening in the market other than low volume megadroid activity characteristic of the holidays. So, like a lot of other bloggers, I'm pretty much watching the nonsense rather than going balls out. The technicals point to a roll over, but who knows with this manipulated beast.

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Some Sector Fib Fans 12/16/09

2009-12-16T21:40:00.012-05:00

Yawn...I'm definitely in the camp of bloggers that can't find a damn thing to say about this megadroid-driven tape. We can, however, look at the price action in several sectors to see what's going on.

Sideways action; backing away from the 03/09 uptrend fib fan level.

Very slowly progressing; lack of mojo.

Also progressing slowly to uptrend line. Constrained by Bollingers approaching 07/09 uptrend fan level.

Nice recent run up from the 20 to Bollinger which must expand to permit a test of the 07/09 uptrend level.

Easter story; running up to the 07/09 uptrend levels from the '07 downtrend path--a test is likely tomorrow.

Materials also will likely test levels tomorrow.

Financials appear completely doomed unless they can progress upward from the '07 downtrend levels.

After a mammoth run recently the utilities are taking a break within the fib fan no-man's land. This is free air, but reversals can occur in here. Still looks fine right now in terms of an intact uptrend.

Oh well, on to the next daily sector rotation.
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Fed Witholding Deposits Improved Slightly; Still Sucks 12/10/09

2009-12-10T21:19:00.004-05:00

The Federal Depository Receipts for November were released today, and payroll withholding tax deposits improved slightly on both the 1 month and 2 month analyses. However, we are still a long, long way from improving significantly, and the trendline is still not inflecting upward.

Notice that in the 2001-2002 downturn, the peak loss in receipts lasted approximately 5 months before we had an improvement. In the 2008 downturn we have had a more consistent downtrend in lost wages, and it has persisted must longer than in 2001.

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Recently, They've Sold in This Range - 12/01/09

2009-12-01T22:27:00.005-05:00

(1) The carry trade.
(2) Global financial issues with a potential to spread.
(3) Iran

These are powerful factors operating to make technical analyses tenuous at best.

Let's look at two observations, though.

First, cumulated institutional buys and sells, as judged by TICK measurements.

Notice that recently they've sold at the point in which cum buy-sell delta reaches around 100-130.

Another observation is the AO oscillator. There has been a transient inflection in the AO downtrend observed recently; the magnitude of which has progressively decreased since August (but it is nonetheless present).

Tomorrow should tell. If we power past 1114, then we will probably establish a new leg/uptrend. Friday will be a better tell if we can hold any levels present on Thursday.
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Turkey Ambush - Ha - 11/26/09

2009-11-26T08:30:00.002-05:00

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Fib Fan Projections; Selected Sector ETFs 11/22/09

2009-11-22T21:11:00.007-05:00

XLF: 50% LT downtrend retracement is acting as resistance. Price movement to 15 range breaks resistance. Price movement below 14.50 targets intermediate and short term levels near 13.59-13.75.

NOTE: AO Oscillator below

XME: Intersections between 78.6% LT downtrend, 38.2% IT uptrend, and 50% ST uptrend are acting as resistance. Price movement below 48.50 is consistent with continuation of LT resistance levels. Price movement to 49, 50 and above would be consistent with uptrend.

XOP: Price has moved significantly below 78.6% LT downtrend fan, as well as 50% ST uptrend support. Price action below 38.75 would be consistent with a movement to 61.8% levels at IT and ST uptrend. Price action above 39.35 would target the 78.6% LT downtrend. Price action above 40 would imply a breakthrough of the 78.6% LT downtrend line.

SMH: Does not have an obvious ST uptrend. The 61.8% LT downtrend fan has acted as resistance twice since 10/13, and the 38.2% IT uptrend fan has acted as support twice during that period. Price movement above 26.35 implies a break of the LT downtrend resistance.

XLK: Also does not have an obvious ST uptrend. 23.6% IT uptrend line has acted as consistent resistance, while the 38.2% has acted as support. Price failed to reach the 23.6% uptrend line on the last cycle. Price that exceeds the convergence area between LT downtrend level and IT uptrend level will be needed to continue an uptrend. 21 is the downside projection under a uptrend failure.

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Indicator Madness; Meet Chance the Dollar Fairy--11/21/09

2009-11-21T17:01:00.013-05:00

First, the POS carry trade:

Might be in for a bit more dollar up/equity down. The dollar also could consolidate simialar to the 8/17-8/31 region. Based on the daily bars, it looks more like the upside in progress.

SPY:

I'm not seeing the odds in favor of sustained upside move yet, but predictions these days based on technicals are simply pissing in the wind. Maybe a few days, but not yet. Institutions have not yet begun to buy, they are sitting "net sellers" with regard to their buys and sells for the last 2 months, and I'll need to see some commitment on their part before I jump onboard some select longs. Commitment does not mean the bot/algo pump and dump schemes we saw several times last week. We'll need to see a trend day with the institutions coming on board throughout the session--Early buys and late sells (pump n dump) do not cut it.

IWM:

IWM looks like it is completely fucked on any additional downside move. Of course, the FX-equity fairy (named Chance; see below) may visit us early Monday morning and fix things right up.

Chance, the FX-equity dollar fairy. Chance is shown here with his butt crack exposed for a good reason--He taunts you as you buy PG, KO, and other defensive POS's for the fucking dividend because your long and short trades suck.

Take your Chance with these and others...

XLF:

XME:

XOP:

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Something is Here...11/19/09

2009-11-19T20:08:00.005-05:00

Potential for more downside. Of course, everything depends on the dollar and the bots.

Normalized Awesome Oscillator:

ZZTop:

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We're Close to Something... 11/16/09

2009-11-16T21:07:00.007-05:00

We had some nice FX/carry trade action today in the equity markets. I have some concerns about the upside potential here, but it all depends on the direction of the dollar. If the dollar completely dives through support levels here then the technicals will be out the window and just buy all kinds of shit. If the dollar bounces here, then down we go.

1) Bollinger Bands

How will it behave at the envelope?

2) VIX

This compression shit is just plain weird.

TwitPic'ed Friday but posting today.

3) BSS is negative

4) ZZ Top is close to max for the cycle.

Have at least two plans ready.

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An Introduction to ZZ Top 11/15/09

2009-11-15T13:48:00.006-05:00

Two words -- mean reversion. Four more words -- most indicators are worthless. Yes, they are worthless because they deal with events and numerous variable interactions in the past. Stupid is is stupid does (Gump) -- backtesting; by its very nature it deals with the past. And finally, things change. Yep, things change regardless of what you might think.

Now, let's talk about a flat line. Compute any moving average of length t, and you'll get the same value at period n, n+1, n+2. (every value of a flat line). Now, let's make the line increase linearly -- for every subsequent period (n) add x to the value at n, n+1, n+2 etc. For a moving average, at n+1 you will get a change in the value for period t. This will continue as the line now moves up and down--the mean of period t will change.

You can compute z-scores on the relative change in values as the line moves from zero slope to increasing or decreasing slopes. A single z-score can be evaluated by the use of one moving average of length t, but you can employ a wide range of simple moving averages to compute another "grand" z-score for value changes across a large number of simple moving averages with different periods t. This is because you never know the mean which is the center of reversion, and again, THINGS CHANGE.

When you do this you have the ZZ Top. ZZ Top computes a grand z-score based on moving averages ranging from 3-50 days. I encourage readers to do the gedankenexperiment with a line changing slope and many different moving average lengths tracking the value changes.

Enough of the explanation. Below are data from SPY.

This is what ZZ Top looks like since 2003. A polynomial regression is shown to describe the large scale trend. Notice that we entered a bull market in March of 2003 and the values of ZZ Top generally remained above 0 until 10/2007, at that point ZZ Top values dip below 0, establishing a bear market. Then in March of 2009 ZZ Top values elevate again above 0, establishing a new bull trend.

Here is the current year.

Notice the elevation of z-values on 03/11/09 from predominantly negative values (pre 03/11) to predominantly positive values (post 03/11). Notice also that we have generally been running above zero since March, and this action increases price. Notice also that since the period that started 07/13/09 the maximal values have been decreasing (lower highs) to present, and that the minima (lows) also may have decreased since 07/13. Finally, we are currently in a down cycle of z-scores.

Any relationship of ZZ Top to the TICK institutional data that I routinely report? You bet. Let's look at 2 month's worth of data.

I'll let the interested reader look at (and think about) the data in the above chart and its implications, but, for now, think about selling and buying done the right way. Buy at the bottom, and sell at the top; right? Notice that we are in a down cycle in ZZ Top, yet we have not crossed zero. Would you expect institutional selling to pick up when ZZ Top crosses zero?

I'll be posting these analyses from time to time as price action dictates.

Carry on...smoke em if you got em.
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2003 is Off the Table 11/14/09

2009-11-14T13:53:00.006-05:00

We've been analyzing the similarity between the beginning of the 2003 "bull market" uptrend and this year's uptrend, which started in March. See previous posts, but one earmark of the initial 2003 uptrend was a divergence in price movement between IWM (small caps), the Q's (tech large) and SPY (large caps). In our last post there appeared to be a similar divergence between IWM and SPY. In this post, that divergence is pretty much shot, thus, we feel the current uptrend is probably not going to resemble 2003-2004 in any appreciable way. Economic factors are clearly different between 2003 and 2009 and it appears that the market at least partially recognizes that.

Let's review the preliminary observations on divergences in 2003.

Now, let's look at this years price normalized to the first of the year.

Finally, the divergences. This time we normalize for the lows of each year where the "uptrend" was supposed to start (the pivot).

Houston we have a problem...The divergence looked good during the summer, but it has pretty much fallen apart. So, no cigar. This will indeed be a "different" recovery and "bull market", as compared to 2003.

Unlike the market, Catherine Zeta-Jones is looking deliciously similar in photos from 2003 and 2009.

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Ya Call This is a Rally? 11/13/09

2009-11-13T22:08:00.006-05:00

I heard a lot of "rally" words today. A rally this ain't...see me when we cross zero.

Earlier today I tweeted that IWM and XLF (among others) are under a short signal [VWAP(0) below VWAP(5)]. Let's agree to talk rally when that condition reverses.

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Screaming Recovery 11/13/09

2009-11-13T06:19:00.003-05:00

Screaming recovery as Matt T. would say. (I'm not the only one who watches this stuff -- market should rise big time)
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Pegged It...11/12/09

2009-11-12T21:54:00.005-05:00

Yep....

More to come...? Probably...Look at the dollar and BSS below. Right now, everything is related to the dollar's variance, so, follow the dollar.

How much?

Watch RUT -- It's VWAP(0) was closest to VWAP(5) today.
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You Might Think About Getting Your Affairs In Order 11/11/09

2009-11-11T20:45:00.002-05:00

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To be Forever Known as The Piker Rally of November '09

2009-11-09T20:30:00.010-05:00

If you listened to CNBS(leeze) anytime during the session today you were told that institutions jumped in with a huge show of faith and bidded up equities. The FM "traders" also recited the same old lie about fund managers chasing equities in a run for the end of the year. Well, for you, the tooth fairy exists and will no doubt visit your house tonight with a shiny new silver dollar that continues to depreciate together with the now-defunct UUP.

The little fellas sure had fun today while the big fellas sat back and smiled. Here are the institutional data. Breadth or no breadth, notice how the buying and selling has been decreasing for institutions. They are just sitting back.

Here are the piker data. Notice how the pikers have been going hog-wild with the equities. In actuality, since this is a low volume carry trade effect, most of the data are probably footprints of HFTs and buyers outside the US. Nice pattern of increased buying and decreased selling, though.

Ok, so what about week over week? Decreased buying and selling in institutions.

Nice increase in buying and sellers in pikers.

How is the institutional buy delta in terms of z-scores? Well, down (meaning less than normal).

Meanwhile, the pikers are probably selling small children to buy into the casino action.

One has to wonder why the institutions are sitting back at this point. If CNBS is correct, and we'll be at 1150-1200 by year end, why wouldn't the institutions be selling large children, office furniture/supplies in order to get into this juicy short term action?

Just a thought...Maybe they are just waiting for pikers to exhaust themselves before harvesting the crop. After all, why bid the market up when the pikers can do it for you (you know, trading expenses, settlement, and all that accounting stuff).
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Propping it Up 11/05/09

2009-11-05T22:36:00.005-05:00

Lot of buys to keep it essentially flat.
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Two Perfectly Timed and Executed Pump and Dumps 11/04/09

2009-11-04T20:46:00.002-05:00

If you can't follow this, switch on CNBC -- Pisanni said "We faded a bit into the close."

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SPY VWAP delta & BSS; UUP BSS - 11/03/09

2009-11-03T22:32:00.008-05:00

We are nearing a situation where VWAP(5) could cross above VWAP(0), essentially creating a long signal for the EB system. SPY is shown below, but the Qs and IWM look essentially the same.

SPY

BSS for SPY is consistent with this possibility:

The UUP, our proxy for the dollar is showing a BSS value and pattern which is consistent with a decline in price. The dollar carry trade has been significantly affecting equity prices for over a week. Also, the UUP is caught between the 40 and 50 day MAs; a failure of the 40 day may lead to a decrease in price.

Red vertical lines indicate areas in which UUP trended down, black lines indicate UUP uptrend. A decreasing dollar would most likely correspond to an increase in equity price. Many variables affect the dollar, thus, BSS can only show a trend based on previous factors.

Stay ready.

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Data Madness 11/02/09

2009-11-02T20:15:00.004-05:00

Let's start with the TICK temporal data today:

Looks pretty bad no? Actually, selling was equal to last Friday. There was also more buying.

Now, let's look at TICK buy-sell delta:

Because we had more buying today than the previous two sessions, it may be the case that buy pressure is increasing--at least for SnP.

Next, the VWAP deltas:

SPY

Max down appears to have occurred and the rate of the downtrend may be decreasing (as judged by VWAPs). When we look at the downtrend channel (trendlines) for SPY it doesn't appear that way, however, VWAPs move within the channels and, specifically, you need to look at the position of VWAP(5).

SPY's BSS looks like this:

We're almost crossing the zero line and going positive.

In terms of VWAP delta, the other indices look pretty similar,so, not wasting space here.

In terms of their associated BSS they do not.

Here's the Q's:

The Q's have a bit to go in order to get the point of SPY. Same with IWM:

Buy pressure in RUT is flat and not increasing that much.

SPY appears to be able to start an uptrend soon, but RUT and COMP are lagging behind. We'll see how this pans out in the next few days.
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Tomorrow Definitely Will Be Interesting 11/01/09

2009-11-01T20:08:00.006-05:00

Institutional TICK data from EOD Friday 10/30/09:

Increased selling over Thursday, not over Wed. Selling pretty high for the week.

Same conclusion on TICK delta -- monster selling? You bet; seems to be decreasing, though.

TICK delta z-score--not massive at all compared to some previous spikes down.

Week over week. General pattern of selling this week; again may be decreasing.

We'll see what comes of all this. VWAP delta is directing the index trades right now, since individual high momo stocks are completely whacked.

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Whales Like This Level 10/29/09

2009-10-29T19:29:00.005-04:00

We got our bounce suggested last night by the VWAP delta data, and it appears the whales like these price levels, at least on SPX. Notice the buying on 10/6 and today. Institutional buys (TICK) were a bit slow to get started today (when I did a prelim at noonish) but they continued consistently during the day. The summed absolute institutional buy TICK ended up relatively strong, so, they appear to like this level. Piker activity also was strong (as judged by the z-score) which allowed us to retrace fairly well. In actuality, pikers pulled their weight to a larger extent in this market today. Bear trap or not, GS manipulation or not, the fact is that institutions were buying today.

SPX

Numbers at dates represent daily sum of TICK institutional buys.

Alright, let's start working on some plans for tomorrow. Look at SPY.

First, notice that we closed at the fib fan support line--good. Second, notice that at the OPEN TOMORROW VWAP(0) may cross above VWAP(5). VWAP(5) will be lower than it is today, and VWAP(0) follows the open. So, everything depends on the Globex tonight, but in many cases the VWAP cross DOES happen at the open. In the case of a lower open, the cross may not occur at the open.

So, if you've been following previous posts you know what to do with the shorts and longs.

A LOT of dudes are predicting a downer open tomorrow, so, keep that in mind. A LOT of those same dudes started to short yesterday or sold their longs. So, no prognostications here--I'll wait for the open and follow the various plans.

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Bouncable Region 10/28/09

2009-10-28T21:14:00.006-04:00

VWAP delta SPY, IWM, Q's

VIX

We're there...

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Big Fellas Game Right Now 10/28/09

2009-10-28T20:23:00.011-04:00

Full series of TICK data:

Institutional Cum TICK

Notice that today was primarily an institutional game. They apparently decided to cash out to a pretty high degree. Notice that the piker sell levels are not to outrageous, whereas the big fellas put the pedal to the metal.

Now, for the week over week data:

Again, sort of a ho-hum week for the pikers so far; buy levels have definitely dropped a lot but sell levels have not increased that impressively. Institutions, though got really serious about the selling this week. One of the reasons for this is probably that the price levels dropped near the 10/5 period where they really bought the dip. I tweeted about this today. This is one of the big advantages of the TICK analyses because you can literally mark where their buys occurred.

Let's look at the buy-sell delta data:

Yep; they're selling all right.

We're due for a bounce (see the prior post and the one that is gonna be next), and (a) I sure as shit am not going to stop out my shorts here (see the VWAP stuff perviously posted), and (b) I'm not getting in the way of the whales here. My strategy is to wait until I have a pod sighting then I'll feed on what they're swallowing. I could care less whether I miss the first move upward here because these institutional moves can be massive, as you saw today.

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VWAP Delta IYT, IWM, Q's 10/28/09

2009-10-28T08:27:00.004-04:00

Data as of close YESTERDAY 10/27/09

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TICK Temporal Pattern 10/23/09

2009-10-26T06:37:00.003-04:00

Where the hell is the EOW TICK stuff? Well, I didn't post Friday's intraday observations because there is a chunk of data missing from the stored TICK stream--I don't know why it's missing because two machines show the same thing. The missing data from 13:15 to about 14:50 is not included in the chart below (blue ellipse).

However, I'm posting it today because there was some fairly persistent institutional selling moving into the market Friday. It may or may not continue today.

You might compare the intraday selling pattern to last week's daily data posted here.
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VWAP Delta Moving South; BSS minimal 10/25/09

2009-10-25T20:11:00.008-04:00

With the exception of the Qs, VWAP delta is in a short condition for SPY and IWM -- VWAP delta may be moving lower based on the historical patterns.

Buy strength also is minimal.

We'll see how the coming week works out.
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Weekly TICK/VWAP Delta Summary 10/18/09

2009-10-18T17:43:00.006-04:00

Summary of institutional buy/sells by day for the past week; buying increased Friday.

Summary of weekly TICK delta and TICK delta z-scores.

Low buying early in week; increased buying at end of week. An up cycle in buying may continue Monday; recently we've had 2-3 days of increased buying.

And, VWAP delta

Running positive above the secondary (lt grn), but could make a move toward zero (falling price).

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What's Joe Up To? 10/18/09

2009-10-18T11:32:00.005-04:00

Time to peek at the equity mutual fund inflow/outflow data. Buy and Hold appears to be truly dead.

Has Joe set up his e-trade account?
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Employment No Better 10/17/09

2009-10-17T17:57:00.004-04:00

Matt T. initially started posting these data but has discontinued. Below are the Federal Depository Receipt data for withholding taxes. The Feds, for some reason, took a long time to release these data this month, and they were released late yesterday. You can probably see why.

Bottom line--there are a lot of people unemployed out there and it's not getting any better. BLS can skew all the data they want, but the bottom line is that we are down big on withholding taxes flowing into the treasury.

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Equity Pullback of Some Sort is Coming 10/11/09

2009-10-11T14:13:00.014-04:00

But, I didn't say when did I?

Given that were are at a somewhat "historical" point in price levels, as compared to the last year's important support and resistance, we may have an epic rally attempt Monday to break through current resistance levels and start a new leg upward in the indices.

Frankly, being a realist on the bearish/fundamental side I would love to see that.

However, under "normal" circumstances (meaning everything prior to now shown by the data below) we should have a pullback at some point in the very near future. Here is the summary of VWAP delta and BSS data:

We have reached VWAP delta and BSS max up in SPY and both measurements are rolling over.

Same for the Qs.

Same for RUT.

...Same for just about any equity sector you analyze.

Notice one thing about the VWAP delta data. Recall that the dependent measure in VWAP delta is SEm. Also remember that VWAP delta is a measure of pure mean reversion. Make note of the fact that we are getting progressively smaller swing highs, and there is some evidence in terms of the trendlines that we may begin getting larger swing lows.

Now, let's look at the long bonds via the ETF TLT.

Bonds are in a perfect snap-back position in terms of VWAP delta; perhaps a few more days, but they will snap back. Notice that when they snap in an extended negative position, they really snap.

And, lastly, thank goodness gold is dead again. I absolutely HATE gold. I guess I would feel better about gold if I hadn't been burned so many times by the fucking miners. And don't reiterate that bullshit inflation justification that the bugs spit out every time gold rallies and someone challenges their sanity. Dude, we're headed for DEFLATION, not inflation. I'd rather trade biotechs all fucking month than buy into gold for a day--and you know that kinda shit is bad...

Back to the story...

What I mean here by the "gold is dead" statement is that, objectively, gold's VWAP delta has peaked and it is returning to its historically-muddled churning activity between zero and 1 SEm.

Do you think the goldbug-speculators are going to hang around in GLD when they realize the short term run may have subsided? Hell, even Howard said he was selling last Thursday or Friday...

Finally, let's introduce USO to the picture, another bullshit falling dollar-quasi-pension fund-bubble mechanism:

Waffling around zero to 0.5 SEm--nothing juicy about that action. See any crude demand pick up lately or in the near future?

Ok, let's summarize.

1) VWAP delta and BSS is rolling over. We can hang out and flat line under 1070, but the longer we do that (about 3-4 days) VWAP delta moves to zero. Usually, if it goes that direction we have a period of selling to drop VWAP delta under zero. The question is how much under?

We could have a rally that pushes VWAP delta higher, because it will be noticed that the VWAP delta max value on this current cycle is depressed relative to other occurrences in past months. We would need some real gas to do that, and it would push us over the current resistance levels.

2) Bonds are in a prime position to snap back. This is a threat to equities right now.

3) Gold ended up sucking at the EOW. This is neutral because it could work on the bond side or equity side.

3a) (Insert your own oil commentary in here if you want to).

4) From my previous post on TICK data, its evident that institutions had recent buys in equities about 5 days ago--they are sitting at the recent swing low. A 2-3% pullback would not hurt them appreciably. Beyond that--watch out.

Things to think about prior to the open tomorrow.

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Market Status; TICK observations 10/10/09

2009-10-10T18:31:00.015-04:00

Let's look at the end of week TICK data. Oct 8 data are missing due to a computer problem, but you'll see that it's not really that problematic in terms of analysis. There are some interesting patterns developing...

First, the cum TICK data from institutional levels.

The early part of the week saw a nice surge in buying, and both buying and selling tapered off throughout the entire week. It's interesting to note that we saw a surge in buying approximately one month ago. Poly fits should that were are approximately peak low for both buying and selling, so, something should happen soon to shift the direction of trends. Compare the current buy/sell levels to Sept-21.

The piker buys an sells show a somewhat different pattern.

Piker buys also increased at the beginning of the week, and this buying tended to stay elevated throughout the week or decreased only slightly. However, selling levels have progressively increased throughout the week. This sort of increased selling on the daily does not necessarily tell us much--sometimes sequential daily increases in piker selling can precede an uptrend in the index, whereas it also can precede a downtrend. Pikers simply move quickly in the market. It is important only to note that there is a divergence in institutional and piker selling.

What scares you more--huge red candles that slice through 2-3 moving averages or little bitty candles that simply make the intraday plot colorful? That's what I thought...

On to TICK delta (daily buys-sells), which presents a more consistent picture across institutions and pikers.

Essentially, buy strength was up early in the week, and has decreased toward the end of the week. Also, historically, when we get to these delta levels (near zero) there is typically at least one down day that follows.

Institutional week over week also shows some divergences.

Notice that both buys and sells week over week have decreased in institutions, whereas buys are increasing in pikers (and perhaps sells also). One gets the impression from these patterns that the institutions became established long in positions early in the week and are basically holding. Pikers, on the other hand, seem to have played "catch up" in long positions toward the end of the week.

This is the intraday buying/selling that occurred Monday (10/05/09)

and has occurred to a lesser extent thru Friday (10/09/09)

Late day buys dominated from Wed to Fri of this week. So, at least when we look at the institutional buying and selling patterns it appears as though they are loading up. There may be some catalyst that pops up for a sell on Monday, but at this point it looks as though the institutions are staged long in expectation of a continuing uptrend.

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Status of the Indices-VWAP(5) 10/04/09

2009-10-04T16:19:00.008-04:00

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When Do Institutions Buy and Sell? 10/03/09

2009-10-03T17:13:00.005-04:00

We're accustomed to hearing and using two old sayings; the first is amateur hour and it refers to that seemingly random buying and selling activity that occurs during the first hour after the open. The second is the pros buy at the close, and this saying refers to the presumed practice of institutions buying at the close. I've seen many, many studies address this question indirectly over the years, pointing, in general . to optimal trading times of 11:00am EDT and 2:00pm EDT (14:00), but let's look at some fine-grained data and drill down a bit on this.

If we look at TICK data streams it tells us the magnitude of upticks or downticks. Recall that I classify specific levels of TICK data as piker (between 0 and approximately 500; positive or negative) or institutional (between 500 and greater than 1000; positive or negative). In general, what I've done below is form the TICK data bins as they come in (there is no fixed time interval that it is streamed), and collect the time of institutional buy or sell pulses. This was done for two weeks of data. Next, a running cumulative sum was performed over about 4 minutes of data. Finally, a 25 period moving average was plotted over the running cummulative 4 minuet bins. Don't ask for more computational details, because you'll hear polite silence. You should get the general point of what's going on.

Now, let's focus on the resulting charts and the outcomes of the data operations.

First, let's test the null hypothesis--if institutions merely bought and sold at any old time during the day, perhaps when the doughnuts, cold cuts, chips and beer ran out, we would expect to see a fairly uniform and flat distribution of buys and sells across the session (remember this is two weeks of data). That doesn't happen at all... Null rejected.

Moving on, if you look at the buys, you see that the buy frequency/pulses tend to increase throughout the day. Conversely, sell frequency/pulses tend to decrease throughout the day.

At the open all hell tends to break loose, as we all know--both buying and selling occurs. Then things stabilize around 10:00am (actually with this data, 10:10am). After 10:00am there is increased buying and decreased selling during the session as it progresses to 3 o'clock. At 15:00 there begins some fairly choreographed sequences of (1) sells, (2) buys, (3) sells, then (4) sells. Note that the pros do NOT normally buy at the close--basically, they are either locked in with buys or they are moderately selling. If you want to see what the bots/quants are doing with their tit-for-tat warfare, look no further than the 15:00-15:30 time period (although there are some other prime-time battles described below).

In terms of day trading/swing trading I've marked some interesting buy/sell periods that occurred during the last two weeks. It's important to remember that these data have been obtained during a topping phase in the index price action, and there are some historical differences when a firm trend is established.

A) 10:10 - 10:30; marks a low point in selling and a spike in buying
B) 11:52-12:02; A fairly dangerous head-fake period. Note rapid sells then buys.
C) 12:43-13:01; One of the lowest sell points of the day; opportunistic pattern of buys.
D) 14:13-14:52; Again, very low selling and sustained/consistent buying (if it is occurring).
E) 15:10-15:26; Buys after a period of selling. Rapid pulsed selling occurs between D and E.

Enjoy...

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2003 Yet? No, But Getting There 10/03/09

2009-10-03T13:30:00.007-04:00

It's been about a month since we looked at the tech/small cap/large cap divergences. Recall that one earmark of the 2003 bottom was the beginning of a tech/small cap/large cap divergence, specifically, between the Q's/IWM and SPY. We've been following this possibility by looking at price action in 2003 and 2009. Here is the reference chart that is included in all of the related 2003 posts.

The Q's continue to hammer upward, together with IWM and SPY, and we are starting to see a potential divergence beginning between SPY and IWM. Notice the low-point trendlines for the ETFs since the March low. It seems as though the trendlines for IWM and Q's are running fairly parrallel, yet the slopes of the Q's/IWM trendlines are beginning to look higher than that of SPY.

If we look at the normalized price action relative to the normalized low of 2003 and 2009 (see previous posts) we see that there is a slight upward divergence between IWM and SPY. Again, in the third chart, no divergence would be indicated by price action moving around the zero line.

Although there does appear to be a continuing divergence between IWM and SPY, the rate of change (slope) is markedly different from 2003. Thus, in the absence of a housing/home equity-ATM bubble, the appetite for increased risk/growth still seems present, but price action is subdued. Maybe folks realize that the P/E isn't going to be increasing as fast in the small caps for a year or two, or whenever the small caps are able to employ workers and sell some stuff to consumers.

Look at that polynomial fit for 2009 on the 3rd chart. I've added the poly regression this time because we are starting to get enough data points for trend analysis. What concerns me at this point is the downward projection that this shown for the remainder of the year. One possibility is that we begin a new leg upward (Monday, hopefully), and the regression line will then be able to inflect upward. The other possibility, which is more substantiated from a macro/fundamental level, is that we begin a side-ways or downward movement in price action. This second possibility would probably occur with a "W" type of "recovery" in equity prices. Given the economic data, and the reaction by the market this week to just the tip of the iceberg of bad reports to come, I would definitely keep the sideways/downward possibility in the back of your mind.

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Day by Day 10/01/09

2009-10-01T21:56:00.006-04:00

BLS employment is center stage for tomorrow, and Asia is basically trashed tonight. Reports from Asia today were absolutely miserable in the areas of retail and auto sales. Commodity stocks (e.g., RTP) also were being spanked hard as I started writing, although the Aussies closed slightly up. Goldman again felt the need to revise their employment estimates downward a day before the BLS report, which is probably telling. We'll see whether GS is using a new psychological (sentiment) approach while, perhaps, they have become net short. All in all, this week's data, in combination with the EOM/EOQ, has sent bow-shot to the amnesic CNBS-esk bulls.

The TICK delta data have gotten worse for the bull's cause.

Essentially, it's best at this point to run day-by-day, and intraday, until some buy-siders show up. The 50 day for Spoose is about 9 points lower, given the fact that we've blown the 20 day. The ascending wedge for Spoose is blown, so we are now under the control of the market makers.

Continue to watch the dollar and it's relationship with the air above the 20 day.

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Chill Dudes-It's Either Going Up or Down 09/29/09

2009-09-29T20:00:00.010-04:00

Nearly every one I talked (or listened) to today expressed some form of frustration and extreme uncertainty in the market. Same story on the web blog stuff I read. Basically, to sum it up--they are totally freaked to the max. Now, mind you, the dudes I run into (or actually walk past their offices on the way to the head) are not the dim-wit-Kudlow CNBC types. These dudes are natural-born killers right out of Reservoir Dogs. I'm not even close to the perimeter of their sphere, but my point is that it's sorta odd to overhear these dudes doing Denninger-esk macro/fundamental shit when they are normally pulling off trades. In their universe it's normal to pull off upper six figure trades out of their retail cash accounts over the course of 15 minutes. None of us are professional traders; merely gamers.

I'm not sure what's going on, maybe another leg down in my testosterone levels or increased plasma binding of my lovastatin, but I'm feeling pretty invincible right now, similar to Curt Russel in Big Trouble in Little China after all the good guys drink the dry-ice-fuming-herbal-potion. There have been some good trades in the last 2 weeks, and that's all needs to be said for fear of offending the market Gods.

Screens for victims are initially pulled off using price and volume momentum criteria. The real-time and historical TICK distribution data continue to provide information regarding the atmosphere (intraday and daily). The victims are then drilled down with VWAP(5) and VWAP delta, and finally BSS and the fast RSI, but everything depends on the atmosphere. It works until it doesn't.

Enough of this bullshit. Let's look at the daily TICK distributions.

Yesterday we had a surge in institutional buying that was predicted by Friday's up-sloping buy fit. Today there was an increase in selling, but there also was a matched buy that has kept the buy fit elevated. The easiest (and most probable) explanation I have for this pattern is the EOM.

Generally speaking, the pikers have a short fuse in terms of selling--they follow the intraday theme as much as possible and move quickly. Today, we saw increased selling by the pikers, but that was matched to some extent by an equivalent amount of buying. So, it was a draw today with the pikers. This should explain your watchlist today--probably about half green and half red, with the greens up pretty good EOD.

Notice that the Delta color bars have been changed to Putrid Pink because some ass-wipe bitches didn't like the motif. Anyway, in terms of the buy-sell delta there is still an up-slope present for institutions, even though they took some profits today.

Notice the Mexican stand-off in the pikers today.

What is happening, in terms of historical activity, is that institutional (and piker) buying week-over-week is decreasing, and selling is increasing. This means that relative to LAST WEEK institutions are buying less and liquidating a bit more. Again, this could be EOM. This buying and selling is at a low level for institutions--Look at what they can do if that want to-- Sept. 1st. There was a suggestion that Sept 1 was a forced sell by a specific fund.

Did you read my weekend post on the OUTFLOW from equity mutual funds? Guess what this recent week-over-week pattern also could reflect? Are we going to have a forced sell off similar to last year? Probably not.

Same general week-over-week pattern in the pikers--relative to last week a bit more selling and less buying.

All in all, we are at the EOM and there appears to be more of a consolidation pattern happening here than anything else. That, embedded upon the fact that we are having some shitty news and mutual fund outflows at least partially explains the frustrating price action in some stocks/sectors.

This doesn't mean that we can't sell off in an instant, but I wouldn't bank on it. Carefully select the individual stocks and play them untill they don't work--remember the concept of a sell stop? Stop complaining and make some fucking money.
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Friday's EOD TICK Data 09/27/09

2009-09-27T22:55:00.008-04:00

Cum TICK for institutional buys and sells:

Polynomial order now set at (5) for increased n in dataset.

Cum TICK for piker buys and sells:

Polynomial order (5).

Let's look at the daily institutional buy-sell differences (delta) for the datasets.

Piker:

SPC daily 08/23/09 present:

We are essentially at a neutral point on the TICK Buy-sell delta as of Friday's close. This is pretty much in agreement with VWAP(5) delta and BSS. Fav setups from your watchlists might be dusted off if we can hold positive during the first hour tomorrow. On the other hand, if there is a directional bias lower I would carefully watch the institutional negative ticks (<-700) from the open and evaluate early short positions from those clues.

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Joe is Starting to Play it Safe 09/26/09

2009-09-26T13:53:00.006-04:00

The last time we checked Joe Sixpack was gambling in the foreign equity markets at the expense of domestic equities. He has continued to play the foreign risk asset, but his bets have pretty much flattened out or decreased for the last 4 weeks. Domestic equity funds are essentially getting trashed on a wholesale level.

The more revealing picture comes from a look at both mutual equity and bond activity.

As is evident, a total of $9.47 billion dollars have been drawn down from domestic equity funds in the last month, whereas $2.27 billion and gone into foreign equity funds. There also has been massive inflows into both taxable and non-taxable bond mutuals funds--approximately $51.9 billion dollars for the month. Money market funds still are sitting at about $3.5 trillion, and during the past week total money market mutual fund assets increased by $198 million.

So, the first take-away message is one that CNBS reported a few days last week. The "side-line money" is not moving. Second, as of 9/16 (which was reported 9/23) money is moving out of domestic equity into the "safety" of bond mutual funds at an average rate of about $1.9 billion per week.

Kudlow will have to show me how these data are in any way positive for the domestic stock market.
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Show and Tell Night 09/23/09

2009-09-23T22:15:00.010-04:00

VWAP delta (SPY) is progressing downward

BSS (SPX) was abnormally blown out by the 14:40 sell-off.

Daily institutional TICK shows increased selling. This primarily happened after 14:40.

Daily piker TICK shows increased selling; decreased buying.

Week over week institutional TICK (Monday vs last Monday, Tuesday vs last Tuesday, etc.) shows decreased buying. (green is buy; red is sell)

Week over week piker TICK; increased selling decreased buying.

Bots placed the VIX at the sweetspot for either a rally or a continuation of a selloff (this was the afternoon tweet).

ES green at the time of this post (naturally...ES is now prohibited from conforming over night)

I take this to be a "New Normal" buy signal for tomorrow morning.

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Day by Day, Dudes 09/21/09

2009-09-21T22:25:00.006-04:00

Well, we did not start a move upward today. So, Friday's BSS pattern was accurate in guiding us about the trend lower.

VWAP delta continued its path down toward the (reversion) mean in most indices, and SPY actually closed below 0, which is an initial short signal.

SPY

A profitable short usually occurs when the VWAP delta crosses below the -1SEM boundary (red), but recently you need to catch this intraday rather than at the close to maximize the return.

In terms of TICK activity...

increased selling and decreased buying, as compared to Friday. If you look at the poly fits above, and how buy and sell trends are crossing, it basically provides the basis for the confusion everyone expressed today about the equivocal tape. Joe Terranova of CNBS was visibly shaken (freaked out) to the point of recommending a cash position (surprised he wasn't dip buying gold or oil here given his past Zoloft-like euphoria).

Watch the VWAP delta and TICK data. With all the auctions and macro crap happening this week, it's pretty much a toss up until 9:30-11:00 each day. But, when VWAP delta cycles upward one must be ready to jump in.
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Movement Upward Next Week? 09/19/09

2009-09-19T12:52:00.006-04:00

Let's look at some cum TICK data to see what's been going on with the big fellas and little fellas.

Institutional buying fell off toward the end of the week, with a bit of selling on Thursday. Pikers generally showed crazed buying this last week, although they did have a slight increase in selling Thursday and Friday.

BSS for SPX, which calculates buy/sell strength based on price action alone, has been progressively decreasing after peaking approximately 8 days ago. This data is for SPX because I do not use TICKQ for COMP. You can generally look at the similarity between the BSS function and the polynomial fits to both the institutional and picker TICK data. Notice that the BSS down cycle has yet to complete--it is getting close, perhaps 1/2 way to peak down.

The VIX oscillator has begun cycling UP. Given the market/option sentiment (read: insane) I don't put much emphasis in the VIX oscillator as a predictor of anything now, but the data are the data and it might start working someday.

Monday might provide some initial upward action in the broader indices, especially since the semiconductor sector has started to move up (modestly), but I think we'll have to work smart to bank coin until BSS and institutional TICK gets going. Retail and banks still suck, materials to some extent also, and the fast action continues to be way off in the boondocks with the unknown and uncrowded stocks. I'll continue to play those until the above upward movements begin.

Remember, it's September and we are nearing October.

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Brain Dead System Trading 09/16/09

2009-09-16T21:09:00.004-04:00

During the course of the week I've developed a new trading system with a very efficient equity curves. No backtesting, no nothing--it's no longer necessary.

Buy Rules:

Monday -- any stock symbol beginning with A-E
Tuesday -- "" F-J
Wednesday -- "" K-O
Thursday -- "" P-T
Friday -- "" U-Z

Forget money management because it's not necessary. Just remember your 3 day settlement period.

Sell Rules:

Sell whatever you bought at the close

Stock will trend between 2-9% each day, sometimes upwards of 30%.
---------------------
Go get drunk
Next day do the same thing

________________________________

In all seriousness, we all scalped today's tape in epic proportions--Hell, a gerbil could have done it. I would say that 90% of the stocks that I looked at for a swing trade before the close were way outside the 20,2 Bollinger level--I mean the entire candle body--in some instances for 2-3 days. Now, the market can act irrational for a long time and show directional trending, but there is one thing that rarely happens--persistent price action far outside the Bollinger.

I've heard some discussions of exhaustion today, and I think it is near, but, I never build short positions. So, we'll see what happens tomorrow. I suppose one could screen for those 1-2 stocks that haven't been overbought yet, but I'm not sure any exist.
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VWAP Delta 09/10/09

2009-09-10T08:51:00.001-04:00

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CRON Job - Time to Ramp 09/09/09

2009-09-09T05:53:00.001-04:00

Haven't had a CRON job for a while, so here it is. Maybe there is some news, but who cares?

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VWAP Delta Stock Screen (Partial) 09/06/09

2009-09-06T14:04:00.003-04:00

Some previous stocks (EB system) and their status.

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VWAP Delta Upcycle Beginning 09/06/09

2009-09-06T12:54:00.006-04:00

Check previous posts to become familiarized with the VWAP delta used in the EB system. As of the close on 09/04/09 we are within a delta upcycle in the major indices. UWM is lagging slightly on the excursion past +1SEm.

SSO

QLD

UWM

Note that we are approaching the 3rd day up in indices, and that once VWAP delta reaches the normal "max up", there is reversion.

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2003 and Now...Not Yet...09/06/09

2009-09-06T11:25:00.005-04:00

It's been about 20 days since the 2003 SPY/IWM divergence pattern has been analysed. So, here we go...

Above is the updated normalized price for SPY, IWM, and QQQQ to date.

And the second chart above is the normalized SPY/IWM divergence to date. Notice that it isn't happening. Or, if it is happening, the slope of the divergence is turning out to be much lower, significantly lower. We won't be able to get a clear picture of this possibility with a trend analysis for about 30-40 days.

The previous post on the SPY/IWM divergence pattern is here.
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Mutual Fund Inflow/Outflow 09/05/09

2009-09-05T20:38:00.001-04:00

Joe's still doing his thing ex-US.

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Lebowski Media 09/05/09

2009-09-05T18:04:00.000-04:00

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House of Mirrors; (1) E-Ticket 09/03/09

2009-09-03T22:16:00.009-04:00

Here was my tweet this A.M.

"everything I've looked at so far looks like digested dog food -- not going to work that hard to lose money."

If you don't believe today's session was complete shit, and you happened to scalp a few good trades, congratulations are in order--luck is on your side. But the closing stats paint a still-lousy picture (look at %symbols above previous highs).

1) The volume was absolutely pathetic, horrid, ridiculous, etc. We are at the low end of a 20 day downtrend in the index ETFs.

2) The market was gunned shamelessly from 15:30 to the close. This will be demonstrated below.

3) Prior to the "gun" sell signals dominated the landscape. At the close some important technicals look beautiful, picture-perfect--There was a perfect RSI(2) buy signal generated on all indices, as well as confirming support with BSS and the VIX oscillator. Gunning, however, cannot manipulate the EB VWAP(5) system (unless it happens for 3 or so sessions), which is still locked into a solid max low short signal.

Let's look at the binned TICK data

First, institutional TICK levels for the entire session--

Looks great--Institutional buyers appear to be stepping up to the plate and the sellers seem to be backing off. Very nice crossover in the polys.

Now, the pikers, whole session--

Same basic conclusion for the whole session data. Piker buys increasing; piker sells decreasing; nice crossover in trend lines.

Now, let's take out the last 30 mins of the session for the institutional TICKs--

Hmmm...pretty quiet session up to 15:30. Institutional buys were actually lower than yesterday and sells were also quite low.

Now, the pikers to 15:30...

Hmmmm #2...Most of the piker buys and sells were done before 15:30 because there is very little difference between the two piker charts. Curiously, the pikers really didn't seem to chase the increasing institutional activity that occurred in the last 30 minutes of the session--that's not normal--pikers love to chase, if even to sell in AH.

Color me (and the current ES) unconvinced. I'll become objective at the open tomorrow, but right now I'm skeptical of a sustained move tomorrow.
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Nothing Much Has Changed 09/02/09

2009-09-02T22:03:00.003-04:00

We didn't go much lower today, and that has set up a NR sequence on all indices. Rather than post a bunch of charts I'll summarize the major observations.

1) We are still at max low on the VWAP delta metric. SnP started to move a little beyond the normal (recent) max low (and it is causing me some concern), but COMP and RUT are right there. There is no inflection upward in the max low VWAP delta reading--that means we could conceivably go lower, but it is not likely.

2) The BSS indicator also has reached max low and is rounding upward. This suggests that buyers will (have) come in. This relates, in part, to what is described below in the piker TICK buy distribution.

3) The VIX oscillator has reached max low and has stabilized. It is not inflecting upward (an upward reading on the VIX osc coincides with increased buying).

4) In terms of TICK bin distributions, the institutions backed off today and there was a lower and similar number of institutional buy and sell blocks. Readings were relatively low. So, essentially, they sat out the dance today.

5) The picker TICK distributions were completely different. There was an increase in BOTH buying and selling in pikers. The poly trend line for this group is above the previous two days and increasing in slope. In a way, it was as if the pikers had a somewhat delayed reaction to yesterday and/or they had some unfinished business. They did, however, step up to dip-buy.

So, with all of this "balanced" buying and selling we ended up with a NR day.

This "equilibrium" condition suggests to me that any news event, or even an indication of institutional buying or selling (with large spikes in 1 minute bars, for instance), could trigger a very large reaction in terms of price. Thus, we are at the "hair trigger" point.

The VIX is still way above the +2.2SD region, but it is moving lower--I tweeted today that it began moving lower as soon as there was evidence of institutional buyers in the action. In conditions such as these, a trigger event can oftentimes cause a huge "snap" reaction in the VIX that will propel price very rapidly. Since the VIX is already maxed to the upside, I thought of a possibility where it would rapidly spike lower and that would be consistent with buying. Retail reports tomorrow, and it is difficult to imagine any decent numbers coming out of them (since YoY back to school was -1%), but who knows. It also is possible that the ES gets gunned in the morning, and that would likely do it.

CNBSleeze continuously talked about the jobs report "fear" in the market today, and it's hard for me to imagine that a low reading is not already priced in (as they say). Why in hell would we expect to see a dramatic reduction in numbers?

There are so many previously-performing stocks that are below yesterdays highs, and basically flatlined, that I see no need to rush into anything here. Again, I am continuing to monitor my watchlists for early momentum and recover of prior damage. This pullback has not been large in an absolute percent, but it has caused widespread tops and flatlining in almost every stock that I look at. So, momentum eventually has to be re-built.

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Be Ready Tomorrow 09/01/09

2009-09-01T20:51:00.004-04:00

Both VWAP delta and BSS are showing the same thing on all indices. VWAP delta is shown below because it is easy to understand (read: price). The charts below show both 200 and 75 day VWAP deltas for SSO--Bottom line; we are nearing max down. Notice that max down has been at a consistent level since March 9th (as has been max up).

A break of max down lower implies a change of game plan, similar to pre-March 9th.

The VIX has showed a geometric expansion this week, which indicates higher implied volatility. As with yesterday's action, the VIX attempted to move lower intraday only to be rejected outside the 2.2 SD region (not a good place to be). The proprietary VIX oscillator is NOT showing a stabilization that would imply a reversal of direction tomorrow--a reversal would be consistent with increased buying. However, it is important to note that the VIX has had relatively little predictive power for the past 30 days.

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Guess Who Went Into Cash Today? 09/01/09

2009-09-01T19:32:00.006-04:00

Did you see this coming (cf. last night's post)? I didn't actually expect this, but...

TICK data (red is selling; green is buying; Excel has deleted the labels for some reason)

The big fellas are going to cash, and it may continue. The little fella sellers are still taking profits and the little fella dip-buyers are standing down.

I wouldn't do anything at this point except study your watchlists. Potential support may be close. Institutions will tip their hands on this action and we want to follow their wake.

320 SMA

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Waiting for Tomorrows News? 08/31/09

2009-08-31T19:57:00.006-04:00

Let's look at today's TICK data combined with last week's data:

Big Fellas:

Little Fellas:

The big fellas sat this one out today; no dip buying. The little guys had a significant increase in selling (in fact, they were the source of selling early on), while the little dude buyers dip-bought modestly. Brett mentioned today that the big fellas might be waiting for some economic news tomorrow, and that may be the case.

Early in the session today I noted (tweeted) that SPX needed to capture 1020 on the fib fan to avoid a multi-day short signal. This relates to VWAP delta--the region below 1020 is greater than 1 SEm VWAP(0)/VWAP(5) convergence. There was a market manipulation toward the close that pumped SPX prior to a dump after hours, but beyond that we did not convincingly capture the fib fan region (by exceeding it) during the regular trading session. Notice the location of the fans in relation to the 2/4 day EMAs.

I also tweeted today that the VIX Bollinger bands have opened up because of the very large spike at the open (and it was a whopper, holy cow...). This means that the range of implied volatility should be increasing for a while. We'll have to see how this pans out. During the final regular session the VIX challenged the +1SD region but could not break lower into "clear air". So, we are not set up in an optimal way for increasing price action according to the VIX (there is still some "fear" in there).

As usual, the ES is flat-lined before 12 midnight, let's see if the vampires and other foreign dip-shits start rockin' in the wee hours.

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Previous Victim Screen 08/30/09

2009-08-30T16:11:00.001-04:00

Previous victims that might be ready this week. Then again, maybe not.

ATLS
ATN
BID
MEE
ROC
SNX
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EB VWAP(5) Compatibility Screen as of Close 08/28/09

2009-08-30T11:00:00.002-04:00

ESC - delta cycle up.
LZ - delta cycle up in a longer term delta downtrend (30 days) (buyers losing interest).
LCAPA - delta minimum that may bounce nicely. Longer term (20 days) delta max trend upward (increasing buyer interest). No bounce and possible consolidation or downtrend in price.
MW - delta cycle up (1-3 days, possible).
POOL - delta cycle up (1-3 days, possible).
MTN - delta maxed out, price may decrease for 1-4 days.
TKR - - delta cycle up (1-3 days, possible).

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Saturday Night Playlist 08/29/09

2009-08-29T19:56:00.001-04:00

Full Playlist (some videos prevent embedding)

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Fat Man & Little Boy - TICK data 08/29/09

2009-08-29T13:45:00.006-04:00

More observations on the buyers and sellers and what they have been doing this week. In this post TICK data are presented. TICK data contain information on upticks and downticks in the market. When institutions trade there is a large TICK number per lot, between +/- 700 and 1000 (and sometimes greater). When pikers trade much smaller numbers are obtained, usually between +/- 0 and 200. These data are collected during the trading session at approximately 20 sec intervals. Admittedly, this is only transparent activity in the market--it can't see dark pool activity and other obscured stuff concocted by the big fellas.

You can do a lot of analyses in real time on TICK data, and the real time data feed/analysis can help a great deal to identify very short term changes in price momentum for daytrading, but for now let's look at some weekly summary data.

In the above chart we have institutional TICK data ((+/-) 700 and greater). Institutional sells peaked on Monday and have been decreasing all week. Following the Monday afternoon sell-off, institutions showed large relative buying on Tuesday (dip). This activity has dropped off considerably to the end of the week, with institutional buyers/sellers basically taking a 3 day weekend.

Notice something interesting. Thursday morning gave rise to a sell-off of sorts and there was virtually no participation in this activity on the part of institutions. The institutions may have increased their dip-buying a bit on Thursday, if anything (see below).

The chart above shows piker activity. The same general pattern of decreased buying and selling is observed throughout the week. The pikers, however, on Thursday were delighted to contribute to the uptick/bounce in the market, probably by doing a bit of dip-buying or increased allocation to some sectors. (look at the absolute difference between positive/negative categories at each day). Speaking of that...

Remember the activity in the completely BOGUS/BULLSHIT/WORTHLESS AIG (and the other four-shit financial stocks)? That happened on Thursday and Friday, and the pikers were right on hand to scalp (maybe) some trades--maybe a bit of instutional/MM as well.

In all likelihood, without the four-shit financial activity, we may have sold off on Friday. Look at the increase in selling that occurred in institutions Friday.

Ok, now let's consider VWAP delta, BSS, and TICK data for the week. There has been a downward bias all week in mean reversion, buy variance momentum (BSS), and TICK-positive activity (see the previous two posts today). Monday (Sunday night) may be a prime day for some fancy ES/cash manipulations to pump us up, or it might be time to start initial short positions.

Let's watch for Gaps Without Cause (GWC) early Monday morning in ES.
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Buy Sell Strength 08/29/09

2009-08-29T11:35:00.008-04:00

In the theme of where are we at and where are we going, let's look at buy/sell strength (BSS). Briefly, to review, BSS is a measure of price variance in buying and selling--here, when the term variance is used, it means just that--statistical variance. BSS analyzes exemplars within an index to determine variance patterns of the index.

$SPX

The threshold for buying and selling signals relate to variance levels around zero; as BSS increases positively, increasing price occurs (think of the bid and offer here). The opposite occurs with negative trends in BSS and negative price movement. Black and red signal lines are shown with a threshold around a projected value of -2 BSS.

$COMP

$RUT

The previous post showed VWAP delta, and that data indicates we were at a short-term juncture where price may increase or decrease next week (Monday). Current BSS tends to tilt the odds towards the downside (as do RSI(2) signals that are used together with BSS in this trading system).

Notice that with BSS there is not a historical tendency for variance to rapidly "bounce" (as can occur with VWAP). There tends to be specific momentum that continues for 2 or more days once the values cross particular levels, such as zero. This probably relates to buyers (and sellers) that chase moves in particular directions once the initial moves have started.

As with everything, these measurements can't accommodate unexpected positve or negative news, or blatant market manipulations that occur. However, all historical patterns do reflect significant news events and ongoing and relentless market manipulations. So, again, we'll see. Again, the philosophy of staying in cash as much as possible, without renting stocks overnight, works out well in uncertain times. The objective is to define specific edges when they become visible.
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VWAP Delta 08/29/09

2009-08-29T09:35:00.005-04:00

If it felt like you were fighting the tape this week, and the market was going nowhere, that's exactly what was happening. Let's look at the VWAP delta (VWAP(0)-VWAP(5)) for some of the levered ETFs that the EB trading system uses as victims.

SSO

The big spike we had seven days ago (focus in the red box) caused a fairly large rise in price across all classes/sectors, and essentially peaked the VWAP(0) / VWAP(5) delta. At that point, in terms of mean reversion, the short term index action was done until price backed off a bit. Now, think about many of your "good stocks" that have been trending up in the last few weeks--they couldn't make newer highs, and/or they could not exceed there previous 1-2 highs. They also found lower price support when you were looking for a decent pullback. Also, fast RSI systems (e.g., RSI(2)) have been completely useless this week for most symbols. That's because of the strong mean reversion that's exerting its effects at this top level of action (within the "1000/2000" area). Buyers are rotating so rapidly that there is no upward price action.

QLD

Notice the larger relative move in the Q's based on the Dell/Intel news.

UWM

Now, the good and maybe the bad. Notice that the VWAP delta is back to near zero, and there appears to be an inflection upward either toward or near the +1SEm band. This could mean that we may enter an up phase in price action next week. On the other hand, a VWAP delta movement/trend below zero could take place (see the historical 145 day region) giving rise to a larger sell off that may be shortable (because would would probably break some important support levels). So, Monday's action might be important in terms of providing some clues to the directionality. Historically, the VWAP delta doesn't tend to stay around zero very long, so, we will watch this.
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Hairy Top 08/26/09

2009-08-26T08:32:00.001-04:00

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Conforming and Non-Conforming Observations 08/24/09

2009-08-24T22:05:00.004-04:00

Reversion occurred (began), as expected, in price today. Aside from closing out some (non EB system) longs, no buys were taken at the open for EB. Notice that the "pullbacks" that occur at this phase in the reversion cycle progress toward the positive SEm boundaries for a few days. However, there is usually not a "shortable" advantage until the VWAP(0)/VWAP(5) difference swings below -1SEm. This is because we can sometimes get a bounce as the VWAP delta approaches the +1.96 or +1 SEm regions (greens).

There were several interesting observations regarding buying patterns in TICK data today, but those charts will have to wait until tomorrow--completely swamped with EOD data right now. So, be mindful of which way price may move tomorrow.

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Joe Continues to Top-Tick Emerging Markets 08/23/09

2009-08-23T12:30:00.008-04:00

When we last left off two weeks ago, Joe was piling into foreign equity mutual funds. He's still doing that and apparently top-ticking as well.

Equity funds had estimated inflows of $2.79 billion for the week of 8/12, compared to estimated inflows of $5.43 billion in the previous week. Domestic equity funds had estimated inflows of $318 million, while estimated inflows to foreign equity funds were $2.48 billion. That's a ratio of about 7.8 to 1 in favor of foreign equity mutuals.

Hybrid funds, which can invest in stocks and fixed income securities, had estimated inflows of $945 million for the week (08/12).

Bond funds had estimated inflows of $11.84 billion, compared to estimated inflows of $11.74 billion during the previous week. Taxable bond funds saw estimated inflows of $9.86 billion, while municipal bond funds had estimated inflows of $1.98 billion.

Congratulations are in order: Within the last two weeks Joe has pushed the deposits in foreign equity mutual funds to net positive for the year. Domestic equity inflows have basically remained flat, and there is a way to go before that reaches net positive.

So, does Joe know something we don't about foreign markets, or is he top-ticking (listening to the less-than-cortically-endowed investment advisers)?

It is true that emerging markets have performed very well since March 9th--major out-performance relative to SPY. The chart above shows the relative (normalized) performance of some emerging market ETFs relative to SPY. When viewed from March 9th, and IF Joe bought into this 50% rally at that point in time, emerging markets did do very well.

However, Joe did not enter the market on March 9th. If you look at the first chart, Joe (like most everyone else) waited about 8 weeks to re-enter the market--Joe's foreign market investments really didn't pick up until July 1st. That's when the foreign/domestic rate of investment started to diverge. Now, let's look at emerging market performance since July 1.

SPY is sorta in the middle of things, as compared to all emerging markets analyzed. Brazil and Germany are actually doing the best, while China (FXI) and Taiwan (EWT) are under-performing. So, depending on where Joe has banked his coin, he may be under or overperforming. But, knowing how run-of-the-mill fund advisors work, I'm betting on Joe's venture into Asia.

We'll see what Joe does if Asia continues to fall off. Since the above mutual fund data are running a week behind, Joe may have started moving into US equities. That may explain some of the institutional buying that we've seen in the TICK numbers this week. On the other hand, Joe is not (usually) very nimble...nor is CNBSleeze.

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Reversion Patterns in the EB VWAP(5) System 08/22/09

2009-08-22T17:45:00.005-04:00

The EB VWAP(5) system can be termed a pure mean reversion (MR) trading system. It establishes uptrend signals when VWAP at time (0) is greater than the historical price of VWAP(5 days). Conversely, a downtrend is defined, signal-wise, as VWAP(0) moving below VWAP(5). This is about as MR as it gets...

Let's take a look at the recent history of MR in the EB.

The chart above shows reversion in SSO, our trading proxy for SPY and the SnP500. What is shown is:

Blue line with symbols - VWAP(0) - VWAP (5)
Dark Green line -- 1 Standard Error of the Mean (SEm) unit of the last 5 days.
Light Green line -- 1.96 SEm
Red Line -- (-1 SEm unit)
Yellow Symbols -- price exceeding 1 SEm

Notice the cyclic pattern of reversion over the last 75 days. This cyclic pattern is characteristic and continues back in time, but the 125 - 200 day chart is shown to minimize clutter (200 is the most recent day). We have recently been in a slow and gradual downtrend while near the 1000 level on the SnP, and we entered an uptrend within the last 2-3 days--the price action rapidly accelerated above 1 SEm. There is another important aspect of the chart from a historical standpoint--there are peak highs and lows on the VWAP difference (reversion) over time. We are nearing what would "normally" be a peak region with the recent surge in the SnP.

The equity curve of the system shows the largest daily gains when the VWAP difference is greater than 1.0 SEm. As the difference becomes larger, historically, there is a greater gain per trading day. Conversely, as the difference approaches 0, the chances increase for a loss in the daily trade. This is one factor that allows scaling into the trade, or forming a statistical money management scheme with the EB VWAP(5).

If you have not taken a look at Matt's most recent post on entering the "Box of Bulls", visit his web site and read the fib analysis of where we are at and where we might be going.

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Another CRON Job 08/21/09

2009-08-21T06:47:00.005-04:00

Also, check Frank's post in relation to the current activity in ES.

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EB VWAP(5) Compatibility Screen as of 08/19/09

2009-08-19T21:04:00.002-04:00

Symbols compatible with EB VWAP(5) showing moderately increasing strength as of close 08/19/09.

AGL ATN BBT CMTL NCIT OGE TRA XEC
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Weekly CRON jobs 08/19/09

2009-08-19T06:59:00.002-04:00

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EB VWAP(5) Compatibility Screen as of 08/17/09

2009-08-18T07:32:00.000-04:00

Notice insurance, medical, pharma popping up with the demise of ObamaCare options.

-Symbols in an UP equity cycle with increasing buy strength:

CVH HUM IMA NSR PRX SGP SNX WMGI WYE

-Symbols in a QUESTIONABLE or NEUTRAL equity cycle with equivocal buy/sell strength (because of the 08/17/09 sell-off)

CHSI CPO MED

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Conforming and Non-Conforming Observations 08/17/09

2009-08-17T22:48:00.008-04:00

How many times have you heard "tomorrow's a critical day"? Probably about as many times as you've heard "the stock is trading way under its current valuation".

Anyway, tomorrow is a fairly important day. In all actuality, I'm loving the pullback because we might be out of this limbo-hell of 5 point trading ranges in the ETFs and/or flat basing patterns in individual symbols you want to rip. With regard to today's trading, there are a couple of observations to be made.

(1) ES was trading up last time I checked (about an hour ago)
(2) There was a LOT of activity in AH cash (for a Monday), and a lot of large buy bars.
(3) The gap down (breakaway) at the open was very orderly in terms of fib fan adjustments.

Let's look at the price levels today in SPX, COMP, and RUT.

SPX

Two-day retracement to 78.6%.

COMP

Same retracement level early on, but notice there is movement below the fib level. This is cause for concern.

RUT

Conforming to 78.6%.

If we break the current levels, there is the 975 basing level next, and below that a lower potential for a 100% retracement to 7/21 and 947.

I want to specifically watch COMP (Q's) premarket and at the open if we don't gap down--COMP appears closest to the edge at this point.

The BSS indicate is "max down" today, meaning that any further selling will invalidate a normal predicted pattern of buying activity.

Frank at TradingTheOdds tweeted earlier regarding the potential for a continuation down at the open, with increasing buying towards the close or sometime during the day.

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Lebowski Media 08/16/09

2009-08-16T20:30:00.001-04:00

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EB VWAP(5) Compatibility Screen as of 08/14/09

2009-08-16T19:36:00.003-04:00

Some symbols compatable with the EB VWAP(5) system over a 200 day / 5 day period as of the close 08/14/09.

-Symbols appearing to be in an UP equity cycle with increasing buy strength

SGY ATLS SOA ROC MEE RRD FTI WCG ROVI ANAT CI OMTR LIFE DIOD KCI HPQ OKE VAR RAI HCP COF

-Symbols appearing to be in a DOWN or NEUTRAL equity cycle with decresing buy strength

BKD CMI KBR MWV PL SLG SM TRMB TTWO VNT ZUMZ

-Symbols appearing to be in a QUESTIONABLE or NEUTRAL equity cycle with equivocal buy/sell strength

ANR BEZ BID BRC DRC GLBC TEL

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Anyone Out There Watching the 320 SMA?

2009-08-16T18:29:00.005-04:00

Summer doldrums, low volume, poor fundamentals, boring earnings, Obamanomics, yada, yada, yada, or maybe something else?

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TICK Histos Mid-Day and EOD 08/14/09

2009-08-14T16:42:00.005-04:00

TICK bin distribution histo at approximately 14:00.

Distribution EOD. Notice the development of 0-700 range TICK values toward EOD when buying/price increased.

Notice also that we had some institutional buys toward the end of day, and institutional sells did not increase.

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Indicator Update 08/14/09

2009-08-14T07:39:00.004-04:00

TradingTheOdds is a must-read daily blog. Unlike the pompus self-proclaimed gurus at MarketSci and elsewhere, Frank does a fantastic job and observing daily patterns and trends and then tests these so-called set-ups agains historical probabilities. MarketSci and others generally claim to have the keys of paradise, however, they also generally fail to reveal the critical details of their system(s) to readers so that they can validate their claims--at critical junctures data of MarketSci and the like becomes "proprietary"; I love it. This is just the opposite of what "science" really is--you present the critical data for others to validate.

Anyway, to make a long story short Frank's prediction for today is basically negative. You can read todays post to see. It looks like price action is predicted to oscillate all over the place, but basically close down.

I thought I'd post an update to my indicators to compare the action today.

The VIX oscillator is in a weak positive uptrend. Notice that there has been weird action in the VIX lately as we approached 1000 on the SnP--That is, the normal high/low cycles have not been occurring.

The Buy Sell Strength (BSS) is having some problems; it has been attenuated or blunted in its normal oscillations, but it also is in a weak positive trend above zero; likewise with Chimera, and we have 1 or so days left on the fast RSI before it maxes out at 100.

In the past, under these conditions, market prices tend to increase. We'll see how the next few days fit in.
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Where's the Institutional Involvement? 08/12/09

2009-08-12T22:37:00.009-04:00

Let's look at the sell-off Tuesday and the buy-in today.

Cumulative TICK 08/11/09. Red and Green represent the slope of 10 bin TICK regression lines, spanning approximately 200 seconds.

Frequency Histogram of TICK bin values for Tuesday.

Now, today's cum TICK. Arrow marks FOMC statement.

And today's frequency histogram.

Generally speaking, institutional involvement shows up in TICK readings in the +/- 1000 readings and greater. As illustrated, the readings are clustered around the "piker" level.

One wonders what's going to happen when the Big Dawgs get involved again (if ever).

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Why All Workers Deserve ObamaCare 08/11/09

2009-08-11T16:29:00.002-04:00

Regardless of how stupid and irresponsible they are...

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Yep, That's What Happened 08/10/09

2009-08-10T20:57:00.003-04:00

I realize that we should all buy random symbols tomorrow at the open because of the Dow Theory signals, but...

Recall from last night:

(1) Several indices/sectors are borderline with regard to VWAP(0)/VWAP(5)-any sort of negative price action may flip the signals back to Thursday's trading levels.

(2) The employment report presents a largely bogus picture (what's new?), and this will probably be realized during the weekend by low-level fund managers having a "moment of clarity" while sipping their Italian Swiss. I'm not sure how they will react to what they chased on Friday...Be ready. Read more, and more.

Both were realized today. The following happened:

(A) The VIX oscillator, which was in a very weak ascending positive phase at the end of last week, is now rolling back over (gently) to the negative direction. Not good. The VIX oscillator never has started what I would term a "new" (real) buy cycle, probably because of the psychological numbers 1000 and 2000 ( The last "normal" buy cycle started between July 13th thru July 17th). The reason I say that the VIX has been stalled by the 1000 and 2000 levels this is that the small- and mid-caps have been partying very hard in the absence of those psychological constraints.

(B) The Buy Sell Strength (BSS) oscillator, which is was in a negative phase Thursday was spiked upward in the positive direction by the employment data rally. This had the effect of dragging the Chimera positive on SPX. Chimera never went positive on COMP or RUT. A buy signal also was generated on the fast RSI(2) indicator for SPX, COMP & RUT. All of these effects were reversed today by the mid-morning bleed off, which effectively puts us back to Thursday's levels in the index ETFs. Some sector ETFs are still in bad shape, or worse, than Thursday. I believe it was one of the lowest volume days in a long time.

(C) Some additional ETFs are in short signal mode with the EB. Another drawback of the employment spike is that it will raise VWAP(5) closer to VWAP(0) tomorrow at the open. The slopes of many more ETF 5-day equity lines have flattened or gone negative today, as compared to last night. This historically occurs prior to a pullback (like those that occurred recently in May and June).

Now, mix all of the above with the FOMC meeting, and you have what portends to be a real five-star session coming up tomorrow.

Finally, there was some absolutely schizophrenic buying right after the close and in AH with SPY (I'm talking big block sizes, clustered). ES has been flat-lined all night, DX is down, and CL is up.

Take the nearest coin you have and toss it regarding tomorrow.

I may post something premarket if it looks important. Stay alert.

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EB System-Weekend Update 08/09/09

2009-08-09T15:10:00.006-04:00

There was topping price action early this week and a lot of volatility. Basically, profits were accumulated during the first of the week and thereafter short signals were generated in days leading to the employment report that caused some EOW losses. This had (has) a flattening effect on the 5 day profit factors from last week. Friday's gap has "pushed" (artificially) the long signals on index ETFs, and some sector ETFs, thus some caution is warranted for the beginning of next week.

(1) Several indices/sectors are borderline with regard to VWAP(0)/VWAP(5)-any sort of negative price action may flip the signals back to Thursday's trading levels.

(2) The employment report presents a largely bogus picture (what's new?), and this will probably be realized during the weekend by low-level fund managers having a "moment of clarity" while sipping their Italian Swiss. I'm not sure how they will react to what they chased on Friday...Be ready. Read more, and more.

(3) A Quant mind fuck induced the rally Friday. Prior to the fuckery, price action (SPY below) could not hold above VWAP(0)--absolutely pathetic buying--Price was making lower highs and lower lows rapidly moving toward pivot. Things changed quickly between 10:26-10:28...notice the directional tails (shadows) RIGHT AT VWAP(0). At that time I tweeted that the buying was not organic, but, what the hell I scalped UYG all day long courtesy of GS/JPM/UBS. (dear Lord, was that price action beautiful most of the morning--pure VWAP reversion)

(4) Gaps following employment reports usually fade quickly, within a day.

(5) Long auctions are coming this week -- there are growing controversies over last week's 5 and 7 year auctions, and the implications of the buy-backs from the primary dealers. There will be massive attention devoted to these auctions.

So, go slow on Monday morning. You'll need to judge/determine the momo in the specific ETF because I'm expecting some really weird action.

Reminder

5-Day profit factor is the slope of the regression line for profits during the last 5 trading days. Red/Green directional changes from last week. (s) represents SHORT signal as close Friday.

200 day gain is %Gain from trading system LONG signals.

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Trading with Cum TICK 08/09/09

2009-08-09T08:34:00.003-04:00

The chart below illustrates relations between cumulative adjusted ^TICK and SPY on 08/07/09.

Do you see any clues to the directional changes offered by cum ^TICK?

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