Taking Stock - Week of 12/28/20

Monday, December 28, 2020

Green Arrow Up

DJi30 index at the close   —-   30,403.97   +204.10 (+0.68%)

The Index opened at 30283, the lo for the day, up 83 points, and immediately shot up another hundred.  By 10:00 it reached 30416, and 30526, a new intra-day hi at 10:30.  It slid to 30380 at 1:30, rose back up to 30450 and hovered there from 2:15 for about an hour before sliding into the close.

The Santa Clause Rally happens in the last week of the old year into the first two trading days of the new. That extends from today until a week from tomorrow, and got off to a strong start.  A gain of 0.68% is quite modest, but we got a new intra-day hi of 30256, and a new closing hi of 30404.  This is a clearly up day, with the hi and lo up by 316 and 184 points, respectively.  The span was 242.

Ignoring the aberrant low on 12/21, the rising wedge is getting narrower.  This can’t go on much longer, since the lines will cross in just a few days. 

Today was a rather tepid session on the NYSE, with volume at about 3/4 of the last 6 week’s average, and decline volume greater than advance volume.  The S&P500 and NASDAQ were also up today, but the Russell 2000, crude oil, silver and gold all slipped.

My way of measuring momentum looks at time spans from 5 to 34 days.  Today’s increase did next to nothing at the short end [which surprised me a little;] and the 34 day measure, which had been steadily rising to catch up, has now converged to head sideways with the five shorter ones.  They set up more or less this way - though far less neatly - a couple of times in late ’19 and early ’20 before the final convergence from Feb. 21 to 24.  After that came the crash. 

Can’t say with any certainty that history will repeat itself only a few months later, but it does seem likely that some sort of a down-turn will materialize in the reasonably near future.  Have I hedged that prediction enough?  There are few sure things in the real world.  So I’m very curious to see how this plays out.

% Changes -

DJI30  +0.68% 

SP500 +0.87%   

NASDAQ  +0.74%    

Russell 2000 -0.38%

DJI30 Closings -

12/28/18 - 23062 

01/02/20 - 28869

11/27/20 - 29910

12/28/20 - 30404

NYSE Internals -

A/D =  1658/1509 = 1.10

A/D Vol = 0.92

New Hi/Lo = 300/6 = 50

Tuesday, December 29, 2020

Taking Stock - Week of 12/21/20

Monday, December 21, 2020

Yellow Arrow Sideways

DJI30 Index at the close   —-   30,216.45   +37.40 (+0.12%)

Overnight, the DJI futures fell sharply between 4:00 and 6:00 a.m., bottoming near 29400, and were near 29680, off about 430 points at 9:00.  They rose about 90 points just before the opening bell.  The Index then opened at 30159. off 20 points, and immediately dropped to 29865, off 314.  It quickly recovered back to 30000, off 179, then dropped to the lo of 29755, off 424, before 10:30.  From there it was a slow steady climb to 29304, up 124 points and the day’s hi, at about 2:30.  After that, there was a slide to 30110 at 3:52, and then a 106 point rise into the close.

I didn’t expect a climb back into the green today, but that is where the Index ended up. The hi was 39 points under the all time intra-day hi set last Friday.  The close was 87 points under last Thursday’s all time closing hi, and two points under the close on 12/04.

Today’s span was 549 points, the largest since 803 on 11/09, the day the Index was up 834 points.  It was a strange day, with hi lower by 39 points, the 37 point gain at the close, and the lo off by 274.  The lo was the lowest since 11/30.

The Index, even with all the new highs, is really going nowhere. It seems that 30000 is a level this market just can’t get away from.  I ran a few numbers  for the action since 11/24 to check.  That was the day before Thanksgiving, and the first session to have intra-day and closing highs above 30000, at 30117 and 30046, respectively.

Total lo to hi span: 29463.94 to 30343.59; or 879.95 points.

Mean of the hi and lo = 29903.62

Average of all the daily highs and lows = 30015.36

Span as a % of all the highs and lows = 2.93%

So the range over this time is 30015.36 +/- 1.47%
The standard deviation for this data set is 215.

The 875.95 point range is 4.10 standard deviations.
The dataset is 29903 +/- 2.05 St Dev units.
There were no highs above this range, and only one lo below it.

Even with all the new intra-day and closing highs, this is a very well behaved data set.

All the indexes were close to neutral.  The other 3 were slightly negative.

Today’s lo fell outside the up slanting wedge, but in the end, nothing came of it.

% Changes -

DJI30  +0.12% 

SP500 -0.39%   

NASDAQ  -0.10%    

Russell 2000 -0.02%

DJI30 Closings -

12/21/18 - 22445

01/02/20 - 28869

11/18/20 - 29438

12/18/20 - 30216

NYSE Internals -

A/D = 1170/2016 = 0.58

A/D Vol = 0.49

New Hi/Lo =  177/6 = 29.5

Tuesday, December 22, 2020

Taking Stock - Week of December 14, 2020

Monday, December 14, 2020

Red Arrow Down

DJI30 Index at the close   —-   29,861.55   -184.82 (-0.62%)

The Index opened at 30124, up 78 points, and immediately shot up to 20240.  Then it climbed more slowly, hitting the hi of 30326, up 279, at 10:30, giving us a new all time intra-day hi - by 6 points.  [Yippee!] But by 11:30 it had dropped to 300100, and stayed below 30130 until dropping another 40 points by 12:30.  After that, it just kept tumbling, hitting 29960 at 2:30 and the low of 29849, 12 points below the close, in the last few minutes.  

The hi and lo were higher by 255 and 28 points, respectively.  But the Index tumbled almost continuously after the first hour. Maybe this illustrates the Smart Money Index that I mentioned last week - the idea being that emotional [dumb] money enters the market at the beginning of the day, and rational [smart] money trades at the end. The spread was 477 points, the largest since 498 on 11/18.

The big gains in November were concentrated in the first half of the month. Increases since, though real, have been rather tepid, and would have been far less impressive without the late October slump.  In fact, compared to the highs on 9/03 and 10/12, the recent gains, though real, are rather incremental.

All the indexes started hi this morning and slumped the rest of the day, though the NASDAQ and Russell stayed positive.

DJI30 momentum is still sideways, though at the micro level it’s been slipping for the last 3 sessions.  And today’s closing value is the lowest since 12/01.  The question always is - what will the follow-through be?  Today might have been a turning point leading into a slump.  The action for the rest of the week will either confirm or refute.  At least I hope so.

% Changes -

DJI30  -0.62% 

SP500 -0.44%   

NASDAQ  +0.50%    

Russell 2000 +0.11%

DJI30 Closings -

12/11/18 - 24101

01/02/20 - 28869

11/13/20 - 29480

12/10/20 - 29862

NYSE Internals -

A/D = 1218/1932 = 0.63

A/D Vol = 0.26

New Hi/Lo = 221/2 = 110.50

Tuesday December 15, 2020

Taking Stock - Week of December 7, 2020

Monday, December 7, 2020

Red Arrow Down

DJI30 Index at the close   —-   30,069.79   -148.47 (-0.49%)

The index opened at 30233, up 15 points, and a new intra-day hi.  It immediately started falling, and hit a local lo of 30036, off 182, after 10:00.  It recovered to about 30115 at noon, then resumed falling.  It hit the day’s lo of 29967, off 251, at 2:00.  From there, it zig-zagged into the close, gaining 100 points along the way.

This is an outside day by tiny margins.  The hi was higher by 15 points, and the lo was lower by 22.  The span was 266.

I guess this could be called a sideways day, since it’s only off a half percent; and if you chose to do that I wouldn’t argue.  But the Index slid most of the day, so I’ll stick with red. We’ll have to see what happens for the rest of the week.

Today’s close was the 2nd highest. [Friday’s was the highest at 30218; 11/24 is in 3rd place, at 30046.]  Momentum increased by the tiniest increment, but remains basically sideways, as it has been since 11/16.  

This day was uninformative.  It’s hard to say whether the Index is topping or biding time for another thrust up.  An impulsive move below 30000 would be required to support the bearish case.

% Changes -
DJI30 -0.49%
SP500 -0.19%
NASDAQ +0.45%
Russell 2000 -0.06%

DJI30 Closings -
12/07/18 - 24389
01/02/20 - 28869
11/06/20 - 28323
12/07/20 - 30070

NYSE Internals -
A/D = 1315/1823 = 0.72
A/D Vol = 0.61
New Hi/Lo = 286/2 = 143.0 

Tuesday, December 8, 2020

Taking Stock - Week of November 30, 2020

Monday, November 30, 2020

Red Arrow Down

DJI30 Index at the close   —-   29,638.64   -271.73 (-0.91%)

The Index opened at 29855, off 56 points, then dropped to 29630 in the first 6 minutes. After a bounce near 29700, it resumed falling, hitting a lo of 29476, off 435, at 10:45.  There was another bounce to 29600 before a drop to the day’s lo of 29464 after 11:30.  From there it was a jerky rise to the close, including a jump of 70 points in the last 2 minutes.

 

All the indexes were down today, with the Russell 2000 as the biggest loser. For what it’s worth, NYSE volume was the greatest since 9/18, and more than double what the average has been since.

This is a clearly down day, with the hi and lo off by 161 and 356 points, respectively. The span was 390.  Momentum is sideways,   Since 11/09 there have been 7 closings under 29500, so this is really going nowhere.  Today’s range is actually in the upper half of the trading range since that date, and the closing is 158 points above the the midpoint of that range.  It’s going to take a bigger fall than this to turn momentum downward.



I do expect that to happen, though, with an intermediate lo occurring around mid-December. This is speculative, of course.  Meanwhile, equities remain wildly over-valued by any historical or rational metric.  But the markets are fueled by emotion, not logic, so this can go on for a considerable time.



But the day of reckoning will come.  It always does.

% Changes -
DJI30 -0.91%
SP500 -0.46%
NASDAQ -0.06%
Russell 2000 -1.91%

DJI30 Closings -
11/30/18 - 25538
01/02/20 - 28869
10/30/20 - 26502
11/27/20 - 29639

NYSE Internals -
A/D = 958/2190 = 0.44
A/D Vol = 0.27
New Hi/Lo = 170/4 = 42.50

Tuesday, December 1, 2020

Taking Stock - Week of November 23, 2020

Monday, November 23, 2020

Green Arrow Up

DJI30 Index at the close   —-   29,591.79   +328.31 (+1.12)

The Index opened at 29333, up 69 points, and the lo for day; then rose to 29577 up 314. It dropped back to 29360 at 11:30, then rose slowly to 29540 at 2:30.  From there it thrust up to the day’s hi of 29668 at 3:08, 76 points above the close. 

This is a clearly up day, with the hi, lo and close up by 198, 102 and 328 points, respectively. The span was 335.  On Friday I said, “Resistance seems to be firming at 29500, and support somewhere above 29000."  This was half right.  Resistance, for now at least, is closer to 29700.

 Up 328 looks impressive, but the midpoint of the the last 2 weeks range is 29433, and today’s midpoint is at 29500, only 67 points higher.  So after a big surge up on 11/09, the Index has gone basically nowhere - or more precisely - down a little.  Short term momentum is now very slightly down; and over longer ranges, even beyond one month, appears to be topping.

For what it’s worth, Apple was down almost 3% today, closing at 113.85.   It was ridiculously overvalued when it peaked at 134.18 on 9/02.  For the last couple months it’s been trading mostly in the range of 110 to 120.  I believe it is still significantly overvalued.  I’ll get interested when it hits a low somewhere around 80.  Maybe in February.

% Changes -
DJI30 +1.12%
SP500 +0.56%
NASDAQ +0.22%
Russell 2000 +1.95%

DJI30 Closings -
11/19/18 - 25017
01/02/20 - 28869
10/23/20 - 28336
11/23/20 - 29592

NYSE Internals -
A/D = 2385/740 = 3.22
A/D Vol = 4.61
New Hi/Lo = 202/3 = 67.33

Tuesday, November 25, 2020

Taking Stock - Week of November 16, 2020

Monday, November 16, 2020

Green Arrow Up

DJI30 index at the close   —-   29,950.44   +470.63 (+1.60%)

The index opened at 29672, up 193 points, and quickly rose to about 29900.  After a brief draw back to 29730, it reached 29940 for about a half hour around 11:30.  It dropped to 29760 after 1:30 and stayed below 29860 until 3:30.  There was a rise of about 100 points in the last 4 minute of trading.

This gives us new all time highs, both intra-day and closing, only 14 points apart.  This was a clearly up day, with the hi, lo and close higher by 405, 468, and 470 points respectively - all this in the midst of a raging pandemic that will have unpredictable long-lasting effects.  Evidently this is due to the favorable vaccine news.  As if we didn’t already have a quarter of a million deaths, and more than another 1000 every day.  It will take months to get the vaccine approved and distributed among the population - if everyone hits all home runs.  Now we hear that people on their death beds in red parts of the country, are denying the virus, even as it takes their lives.  Such is the power of a monstrous predisent* and Fox news, who care nothing about the people of this country, spreading lies and killing people every single day.  And now I see that 40% of the population is planning on their normal Thanksgiving family get-togethers.  How many grandparent and grandchildren will we lose due to this carelessness and denial?  How many parents and front line workers?

These new vaccines need to be stored and transported at extremely low temperatures — minus 70 to 100 degrees.  Is your local CVS equipped with that kind of capability?  

Today’s action puts the Index only a fraction above where it was before the February crash, so maybe it wouldn’t be unreasonable - if the Index hadn’t been historically over valued back then, and we weren’t in the Covid world now.  The index has increased to a level more than 2 standard deviations above its 233 day EMA three times since early 2018.  Each time there was a draw back, of increasing severity.  It has just crossed above the 1 standard deviation line. On Feb 12 the Std Dev was only 1085.  Now, because of the steep decline and recovery, it’s 2379.  You can decide how over-extended this is.

The P/E ratio of the SP500 is now 36.55.  It’s been higher than that only twice — in 2001-2 and 2008-9.  Those were good times, weren’t they!   Going back to 1880, it had never gone above 25 and change until the late 90’s.  Even in this century, when it’s been above 20 most of the time, this is only the 3rd time.  Good luck going forward!



Yeah, I’m seriously in downer territory here.  But this is all so depressing. Yet stock Indexes reach new highs.  Yay, hooray!

% Changes -
DJI30 - 1.60%
SP500 + 1.16%
NASDAQ = + 0.80%
Russell 2000 +2.37%

DJI30 Closings -
11/09/18 - 25413
01/02/20 - 28869
10/16/20 - 28606
11/12/20 - 29950

NYSE Internals -
A/D = 2562/536 = 4.78

A/D Vol = 6.22

New Hi/Lo = 198/3 = 66.22

Tuesday, November 17, 2020

Taking Stock - Week of November 9, 2020

Disclaimer:  I am not a financial advisor, and do not give advice.  Make your own decisions.  Chose wisely.

Monday, November 9, 2020

Green Arrow UP a lot

DJI30 Index at the close   —-   29,157.97   +834.57 (+2.95%)

The Index opened at 29468, up an astounding 1145 points, or 4.04%, and quickly leaped further to 29934, an even more astounding 1610 points, or 5.69%, and a new all time intra-day hi.  It slid back to 29340 around 11:00, rose again to 29700 at 1:00 and hovered near there for an hour.  It slipped back to around 29500 at 3:30, then dropped hard in the last half hour, ending at 29158, about 27 points above the low.

This was a wild ride, and a huge gain, despite giving back about half of the morning’s advance in the afternoon. I certainly was not expecting this.  It’s a clearly up day, with the hi, lo and close massively higher by 1502, 941 and 835 points, respectively.   This gave us a new all time intra-day hi, but not a new hi at the close, which is about 40 points under the 9/03 hi.

I’ve been predicting a down-turn, and this is, obviously, not it.  Whether I’m wrong or not depends on what kind of follow-through happens in the next few days. Strangely, the NASDAQ’s participation in the morning’s surge was rather anemic.  It’s gain at the opening was 1.27%, which is respectable.  But it slid most of the day, and wound up 1.53% in the red.

Either this was the last gasp of irrational exuberance, or I’ll have to go back to the drawing board.  The big decline at the end of the day suggests that this might be a toss up.

% Changes - all the Indexes except the NASDAQ were up all day

DJI30 + 2.95% 

SP500 + 1.17&%   

NASDAQ - 1.53%    

Russell 2000 + 3.70%  [!]

DJI30 Closings -

11/09/18 - 25989

01/02/20 - 28869

10/09/20 - 28587

11/09/20 - 29158

NYSE Internals -

A/D = 2442/683 = 3.58

A/D Vol =  0.83 = 4.93

New Hi/Lo = 345/12 = 28.75

Tuesday, November 10, 2020

Taking Stock - Week of November 2, 2020

Disclaimer:  I am not a financial advisor nor stock market professional; nor am I in any way qualified to make recommendations.  I’m just an old man with curiosity, an attitude and an internet connection. I realized long ago that I see the world differently from most people, and l am looking at these things for my own amusement and amazement.  Maybe you will be amused, as well.

Monday November 2, 2020

Green Arrow Up

DJI30 Index at the close   —-   26,924.92   +423.32 (+1.60%

The index opened at 26691, up 190 points, and immediate shot up to 26851.  After a brief slide back to 26730, It hit the day’s hi of 27043, up 541 at about 10:20.  It dropped to 26830 before 11:30, rose to 26975 at 11:45, then slowly dropped to a minimum around 26700 around 2:00.  It rose again, topping at about 26960 at 3:30.  From there it was a drop to 26815, and a 110 point leap to the close in the last few minutes.



This is a clearly up day with the hi, lo, and close higher by 404, 548 and 423 points respectively.  The lo to hi spread was 352.  An increase of 423 points looks impressive - at first.  But in the context of a drop of almost 2300 points from the 10/23 hi it really isn’t. Further, the early day hi was up 542 points, but the next two local highs were lower.  This sequence looks to be counter-current, with the major thrust still down.

The rise today is no surprise.  Nothing moves in a straight line  I thought this might happen last Friday, and the 295 point surge in the last few minutes was the beginning of the rally that lasted into this morning.  The rest of today was lack-luster, but the counter-current move could continue into tomorrow, or even for several days.  There’s quite a bit of room for movement on the upside, without changing the basic bearish picture.

There might be robust resistance in the low 27000s.  And there looks to be a support range between 26000 and 26500.  This is a rather narrow range that will likely break soon, one way or the other.  My guess is that the wave down continues.

% Changes
DJI30 +1.6% Positive all day
SP500 +1.23% Positive all day
NASDAQ +0.42% Dipped into negative territory before rising into the close
Russell 2000 +1.96% Positive all day

DJI30 Closings -
11/02/18 - 25721
01/02/20 - 28869
10/02/20 - 27683
11/02/20 - 26925

NYSE Internals -
A/D = 2275/797 = 2.85
A/D Vol = 5.43
New Hi/Lo = 32/29 = 1.10

Tuesday, November 3, Election Day 2020

A different look at Apple [APPL]

I have two semi-contrary ideas.  The first is that the market, on average, over some long run time span, renders a realistic estimate of a stock's true value.  Of course, that estimate, though realistic, might not be accurate.  And, as Keynes said - in the long run, we’re all dead.  The second is that in real time the market varies wildly in the accuracy of its estimates.  The idea that ties these two concepts together is that the market makes its worst value estimates at tops and bottoms.  A corollary is that the panics which follow extreme under or over valuations tend to drive the estimated value to the other extreme.

My other, related, idea is that markets are fueled by emotion, or, in Elliott wave terms, social mood.  I’m not quite ready to buy into the entire social mood paradigm of human behavior, but I do think it’s useful to consider in the context of asset pricing.

As an example, let’s look at Apple Inc. [APPL]  Now, I think Apple is a great company.  My wife and I own and use several of their products every day.  I am using one to write this essay.  You may well be reading this on an Apple device.  And their stock performance, for the most part, has been stellar for a long string of years.  But I think the stock has recently soared to an unsustainable level.  And I base this not on any kind of fundamental analysis, but on the price action of the stock itself.  Let’s have a look at its chart [Graph 1.]

Graph 1 - APPL Closing Values, 1/04/10 through 10/30/20

The red line estimates a best fit exponential curve through daily closing data from 2010 to now.  However, since the big decline in the spring of this year the stock price has deviated dramatically from that curve, going up in almost a straight line.  Reminds me of Icarus.

Another way to think about this is that on February 12, Apple stock peaked at 81.80.  Then, after the end of the world in March and the excessively exuberant recovery, it peaked at 134.18 on September 1.  So, speculators [at this point we can hardly call them investors] decided that Apple was worth 64% more on the first day of September than it had been just 6 1/2 months earlier.  This, not to put too fine a point on it, is nuts!

Whatever the rational valuation price for Apple might be, even in the bizarro world of 2020, at least one of these numbers has to be wildly wrong.  The average over/under of daily prices, as compared to that best fit exponential trend line is +11.1%.  So the price growth over that entire period has been on average, a bit above exponential.  On Feb 12, it was over trend by 11.6%.  At the low on March 23, it was under trend by 29%.  But at the September 1 high, it was 68% over trend.  My guess is that this was too good to be true, and now the stock price is indeed falling.

Yet another way to look at this is the stock price relative to Its own moving average.  Since the stock has trended up over time, it runs above its moving average more often than not.  But not all the time, and not by the same amount. As graph 2 shows, the price [blue line] seems to be pretty tightly contained in a envelope bordered by two Standard Deviations above [red line] and one Standard Deviation below [green line] the 233 day exponential moving average [not shown.]

Graph 2 - APPL closings in an Envelope of +2 and -1 Std Dev.

Graph 3 shows the difference in standard deviations units between the daily closing price and its 233 day exponential moving average [EMA,] with the Standard deviation computed over that same 233 day period.  The mean value of that difference since the beginning of 2010 has been 0.92 standard deviations above the EMA.  This is indicated with a red line on the graph.  The orange line is the 89 day EMA of that difference.  It seems to track the values fairly well.  The graph shows that whenever the difference gets above 2 units, the price is in a danger zone, and will likely revert towards the mean.  At the extreme, on the two previous occasion when it got above 3 units, there was a sharp reversal to a price more than 2 units below the EMA.  Similarly, when the price drops more than 2 units below the EMA, there is a reversal toward 2 units above the EMA  If this pattern plays out again, it suggests a coming low somewhere near 80, per Graph 2, about where it was in February, and a potential buying opportunity at that time.

Graph 3 APPL Daily closings difference from 233 EMA, in Std Dev Units

A Final thought, and no disrespect to Benjamin Graham and David Dodd, nor to Warren Buffet.  There is an idea that you’re not buying a stock, you’re buying a company.  That's Buffet’s approach, it’s worked very well for him, and that’s what you’re attempting to do with fundamental analysis.  But unless you have deep pockets and a time horizon of several decades, this is probably not why you are in the market.  If there had been equities markets in 10th Century B.C.  Israel, the Book of Ecclesiastes would have had a verse saying that there is a time to buy and a time to sell.  The time to buy is when all the excess has been wrung out of the market for a particular stock or stocks in general.  My hope is that the ideas I’ve presented here may be helpful in identifying those times.

Note: Daily closing values from Yahoo Finance; calculations and graphs by me using the Open Office spreadsheet program.

Disclaimer:  I do not own Apple stock, though I may at some time in the future.  Except for a couple managed funds, I am out of equities markets for now. There will be a time to buy.

More disclaimer: I am not a financial advisor nor stock market professional; nor am I in any way qualified to make recommendations.  I’m just an old man with curiosity, an attitude and an internet connection. I realized long ago that I see the world differently from most people, and l am looking at these things for my own amusement and amazement.  Maybe you will be amused, as well.

Note 2: I almost managed to avoid saying that Apple's success stems from their core competence.  Now I leave you with these thoughts: invest wisely, speculate cautiously, avoid crowds, wear a mask and wash your hands.

Taking Stock - Week of October 26, 2020

 I've been posting the daily DJI30 updates from my FaceBook page at the end of the week for a few weeks now.  Starting today, I'll be putting them up each trading day [if I remember.]

I am neither a financial advisor, nor a stock analyst.  I'm an old man with an attitude, some curiosity and an internet connection.  Add NaCl to taste.

Monday, October 26, 2020

Bright Flashing Screaming Red Arrow Down

DJI30 index at the close   —-   27,685.38   -650.19 (-2.29%)

The Index opened at 28186, off 150 points, and that was only the beginning.  It immediately dropped to 28033, off 303.  Then the decline shifted from precipitous to a steep tumbling slide.  There was nothing resembling even a minor rebound until it hit the  low of 27317, off a cool 965 points at 1:30.  It rebounded almost 300 points to 27620, down a mere 716.  Support near 27530 was solid the rest of the day, and there was a rise of about 160 points in the last few minutes.

This is a clearly down day, and quite dramatically so. The hi, lo and close were off by 250, 780 and 650 points, respectively.  The index blasted through the 55 day EMA and round number resistance at 28000.  It slid through 27500, but didn’t maintain the lo. Last Thursday I mentioned support in the lo 27000’s, and that was in effect this afternoon. 

The day’s span was 816 points, the largest since 875 on 9/04. That was a Thursday, and I said this: ”On Wednesday it was up, up and away.  Now we have to wonder if this is the end, and where the bottom might be.”  It was the end, at least for that thrust.  And now I’m wondering again - or maybe still.

Pundits are blaming the double whammy of the CV-19 surge and lack of stimulus for today’s decline.  But these things are not shocks. They’ve been obvious for a least a couple weeks.  Ignore the pundits.  There is good news and bad news every day; and if the market reacts to them at all, it is in a way that is both trivial and ephemeral.

Anyone who reads these posts regularly [if such persons in fact exist - say hi in comments of you do] will not be surprised to find that I am not surprised by today’s plunge.  You know not the day nor the hour, but I was quite sure we were on the verge of some sort of a decline.  Upward momentum peaked in the first week of September, and momentum has been sideways since.

Sideways momentum also happened after the 6/08 high.  The ensuing lo was on 6/26, but momentum wasn’t clearly up again until the beginning of August.  After that was a very good month.  The August 3 close was 26664; the September 2 close was 29101.  That was a tidy gain of 2436 points [9.14%] for anyone who was able to capture it.

But for now, at least, the party is over.  I have no idea how long the decline will last nor how lo it will go.  Just a few months ago in March the Index bottomed at 18592.  The entire year of 2018 was a bust.  But memories are short, and irrational exuberance is greatest at the peak.  For asset appreciation, the time to buy is when gloom and doom are everywhere, and all the excesses have been wrung out of the market.  This is not that day.

There might be a partial recovery tomorrow, but I think that now there will be a downward thrust of some duration, and it’s going to be weeks to months before the Index exceeds 28500 again.

Closings -

10/26/18 - 24688

01/02/20 - 28869

09/25/20 - 27174

10/26/20 - 27685

NYSE internals -

A/D = 388/2697 = 0.14

A/D Vol = 0.10

New Hi/Lo = 14/45 0.31

Tuesday, October 27, 2020

Red Arrow Down

DJI30 Index at the Close   —-   27,463.19   -222.19 (-0.80%)

The Index opened at 27651, off 34 points.  It approached 27700 twice in the first 50 minutes, reaching a hi of 27008.  It reached a low of 27536 before 10:30, jumped up above 27625, then repeated that action two more time.  On the 4th try it hit a marginal new lo at 27462.  There was one more bounce to 27550 followed by the day’s lo of 27485 in the last few minutes, just 5 points below the close.  The span was 250 points, the lowest since 204 on 10/13.  The 10 day average is 385.

All this intra-day bouncing around is counter-current to the downward thrust.  I would not have been surprised by a positive outcome today, but all we got was a low 88 points above yesterday’s. Meanwhile, the hi was off 478 from yesterday’s, and only 22 above yesterday’s close. Momentum has clearly turned down.

The SP500 also zig-zagged today, centered around the null point and finished down 0.3%.  The RU2000 was down almost continuously from shortly after the opening, and finished down 0.9%.  But the NASDAQ was up all day and finished with a 0.64% gain. This is more market fragmentation.

Fasten your seat belt and put on your crash helmet.

Closings -

10/25/18 - 24985

01/01/20 - 28869

09/25/20 - 27174

10/27/20 - 27463

NYSE Internals -

A/D = 942/2086 = 0.45

A/D Vol = 0.34

new Hi/Lo = 31/34 = 0.912

Tuesday evening Update

I haven't been paying attention to the NASDAQ, but took a look at it this evening. I put an exponential best fit exponential curve through the data from the beginning of 2010 to now.

Mean reversion is real, but inexact. Typically the Index will run on one side of the best fit curve for a while, then cross and run on the other side. Occasionally, it will bounce off the curve and return to the same side.

So, despite mean reversion being real, for the Index to be at or near the curve is not typical, and overcorrection is the norm.

In the last two years the deviations have been extreme. At the 3/23/20 low, the Index had fallen about 22% under trend. At the 9/02/20 hi, the Index was above trend by about 18%. One could have gotten rich in about 6 months. Now it looks like the correction has already started. and momentum is downward. If the correction is as extreme as the current situation, the Index could go below 9000.

NASDAQ since 2010

NASDAQ in 2020

Wednesday, October 28, 2020

Flaming Red Arrow Down

DJI30 Index at the close   —-   26,519.95   -943.24 (-3.43%)

The Index opened at 27102, the day’s hi, off 361 points, and immediately plunged to 26880, off 583.  It hit a lo near 28600 before 11:00, bounced a bit, hit the low again at 11:30, and after rising to 26800 dropped to 26554 at 1:15.  At 3:30 it climbed slightly above 26750, then dropped a hard 210 points into the close, which landed only 23 points above the low.

This is the worst clearly down day in months, with the hi, lo and close off by the jaw dropping amounts of 606, 961 and 943, respectively.  In Elliott wave terms, it’s 3rd wave down territory, and I suspect it’s not over yet. 

I see this being blamed on the CV-19 surge, and no chance of stimulus in the near term.  As I’ve already stated, these things are very emphatically NOT new news.  Forget the news, forget the pundits, turn off TV - the market runs on emotion, and for now, it is negative.  The bottom is not yet in sight.

There could be round number support at 26500.  The Index spent most of the day bouncing up from 26600, plus or minus a few dozen points, before the plunge into the close. The 9/24 lo was 26537, just 17 points above today’s close; and there was a cluster of support around that level in July, before the August surge.

A counter-current move up tomorrow, even of several hundred points, would not surprise me, but it will be temporary, and  IMHO, the current move down is far from over.

Closings -

10/26/18 - 24668

01/02/20 - 28869

09/28/20 - 27584

10/28/20 - 26520

NYSE Internals -

A/D = 268/2834 = 0.09

A/D Vol = 0.09

New Hi/Lo = 14/98 = 0.14

Thursday, October 29, 2020

Green Arrow Up

DJI30 Index at the close   —-   26,659.11   +139.16 (+0.52%)

The Index opened at 26481, off 39 points; dropped to 26291, off 229; and rose to 26609, up 89, all in the first 33 minutes.  A hi of 26693, up 174 was reached at 10:40.  That value was exceeded after 1:30, on the way to the day’s hi of 26892, up 372, before 2:30.  From there, it was a slide of 233 points into the close.

The other Indexes were alsoup today, each by more than a percent, so the DJI is the laggard.

Despite the minor gain, the day’s hi and low were lower by 210 and 207 points, respectively.  The total span was 601 points, about the same as yesterday’s 605.  This is counter-current to the main thrust down.  So the downward thrust is not yet complete.  The 233 point slide at the end of the day reinforces this view.

Closings -

10/29/18 - 24443

01/02/20 - 28869

09/29/20 - 27453

10/29/20 - 26659

NYSE internals

A/D = 2016/1039 = 1.96

A/D Vol = 2.49

New Hi/Lo = 20/87 = 0.23

Friday, October 30, 2020

Red Arrow Down

DJI30 Index at the close   —-   26,501.60   -157.51 (-0.59%)

The Index opened at 26572, off 87 points, and immediately fell to 26529.  It reached 26429, off 230 before 10:00, and 26156, off 514 at 11:00. It bounced up to 26460.  The lo was challenged again after 2:30, but held.  From there trading had a slight upward slant, followed by a 295 point rise into the close in the last 20 minutes.

Despite the strong finish, this is clearly down day, with the hi, lo and close off by 253,147 and 158 points, respectively.  The Index seems to be drawn back to the 26500 level, which should now be resistance. It also seems that 26150 might be support, but that span is unrealistically thin. Meanwhile, the Index is in the range of values we saw from mid-June through mid-July.

Momentum is clearly down.  There is no reason to think the Index is near a bottom.

This wraps up the week and the month.

Monthly closing changes, Sept 30 to Oct 30.

DJI 30:  27782-26502 = -1280; -4.6%

NASDAQ: 11168-10912 = -256; -2.29%

S&P 500:  3363-3270 = -93; -2.77%

DJI30 Closings today -

10/30/2018 - 24875

01/02/2020 - 28869
09/30/2020 - 27782

10/30/2020 - 26502

NYSE Internals -

A/D = 1186/1862 = 0.64

A/D Vol = 0.75

New Hi/Lo = 19/64 = 0.297