Tucker Report

Almost everything got hammered today. The chart to the left shows the roller coaster ride over the last few days. The big fannie/freddy inspired rally on Monday went right up to the slower moving average line (dark blue), then fell apart, then by the close rallied almost all the way back up. Today the market opened right about where it left off and continued down to take out all the gains from Monday, and then to close well into the range from last Friday, making a new low for this move. It did look like a rally was in the works after the close on Friday with a slight divergence from the oversold area. Prices on the S&P did go right to the newly downtrending moving average, almost to the tick. Actually prices gapped up on the open due to the news, but all the bullets were exhausted and that was the extent of the rally. The yellow line in the sub-graph is the same double stochastic as the black line, but drawn on weekly data. It indicates there could be more to go on the downside. The only positive I can see at the moment is the advance/decline ratio is rather flat and not making a new low. In the past it was heading lower and lower on all the rally attempts. It isn’t much to go on as far as anticipating a rally.

Stock indexes attempted to rebound from what was becoming an oversold condition. The Nasdaq 100, shown here with the QQQQ etf, tried to reject the spike low from July 15th. The open of the day session was right on that low and price tried to move lower. After spending some time in that new low area, prices started to reject the new low and a move began to retrace back into the lows of yesterday. Prices weren’t able to close into the candle from yesterday, but at least there was a tail left with at least a temporary rejection of the lows.

The S&P 500 chart, shows to the right using the SPT etf, has so far not been able to take out the July 15th low, but it did test the July 28th low in a similar fashion. The open of the day session was right on that low, prices tested lower, and then rejected those lows to close higher for the day, and slightly into the range left on the bar on Thursday. The S&P situation looks a bit more hopeful than that of the Nasdaq. The higher close creates a bullish hook, and the momentum indicator is now just at the oversold line and setting up for a possible divergence.
After such a large downtrend in the stock indexes is would be reasonable to expect some sort of bounce here. Sentiment has gotten very negative and conditions seem ripe for a counter-trend move. But usually downmoves of this extent don’t create V shaped bottoms and new uptrends. I would think that if an upmove should occur it would create a good potential short if prices can get back up into the moving average area. In the case of the Nasdaq 100, that area is quite a ways overhead. If a recovery rally should occur, it would be important to watch volume to see if it dries up on the rise. Volume did increase on this drop, but still not near the levels of the drop in the June/July period.
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 Stocks were lower today on bearish economic news and technical support areas breaking down. The rising dollar and continuation of the drop in many commodities wasn’t enough to lend any support to the stock indexes. The Nasdaq actually closed at a lower low than the low on the spike down on July 15th, although today prices didn’t take out the July 15th low, yet. The S&P is still a ways away from the July 15th low, but is trying to hold the July 28th retest of that low. It was surprising to me to see this continuation as I got used to the markets swinging for one or two days in one direction with large range bars, and then abrupt reversals with the markets swinging back the other way. These markets have been quite insidious lately. It is difficult to trust any attempt at a trend starting. Conditions look to be lower, but some short term indicators are touching the bottom, but they can stay oversold for a long time. The above chart is the Dow World Stock index. I drew a yellow line near the July 15th low, that shows a few attempts in the last couple of weeks at holding that support. This index broke the support with enthusiasm today (the tiny bar on the right is the after hours session as I write this).

Stocks ended the day with the S&P and Dow little changed while the Nasdaq continued down. The chart above shows the Nasdaq etf in the upper graph, and the S&P etf in the lower graph, along with the mesa adaptive moving average on each. I had been somewhat more favorable toward the Nasdaq over the last couple of month, and more negative toward the S&P. You can see that the July low in the S&P made a lower low, while the Nasdaq held that point at a high low. Therefore it seemed that the price structure was somewhat better on the Nasdaq. Then the small rally near the right side of the chart had a bit more enthusiasm that on the S&P. However in the last few days the Nasdaq has been falling faster, leading the way down, and is getting a bit closer to the July low that is the S&P. The Nasdaq is still holding up better relative to the S&P going back several months. All this time the advance/decline ratio has been in the basement, but has at least stopped going down for now in both markets. It seems the feel of these markets are more bearish than bullish, but I took the bear out of the box and replaced it with a roller coaster, as that more accurately reflects my mood at the moment. I wish I could be more definite and say something more specific, but the markets aren’t giving clear indications to me at the moment. The drop in commodities has been the most obvious and clear of the signals, which I’ve talked much about in these posts. If commodities can continue down in the longer run that should obviously help stocks eventually. Hopefully my indicators will clear up. Meanwhile I’ll just be patient and stay out of trouble.

Stock indexes gapped up on plunging crude oil and relief that the hurricane did not cause as much damage as feared. However, shortly after the open the indexes failed to push higher. All buying power seemed to exhaust quickly. The Nasdaq started to reverse into the red first, followed by the S&P. The stayed in the green for much of the session, but finally succumbed. I look at the S&P etf chart to the left shows how difficult this market has been to trade on a short term basis. The swings are fast and turn the other way quickly. The longer term trend has a slightly up bias, but trying to stay on board what looks like an uptrend can be frustrating. Strong sectors today included autos and homebuilders. Commodities got clobbered today on the advancing dollar, in addition to the oil drop. Currency trends can last a long time. The drop in the dollar lasted for years and overshot on the downside. I would expect the new uptrend will go on for a long time and overshoot on the upside. Most analysts seem to think the dollar rally is just a bounce in a longer term downtrend. They may be correct, but I can’t look that far into the future. I can only see what is in front of me, and for now the trend is up.

The chart above is the same S&P etf, but with hourly bars instead of daily. The cycles are a bit more even when viewed intra-day rather than on a daily basis. The double stochastic in the lower sub-graph does a good job overall of tracking the cycles up and down, although this indicator can be misleading when the market decides to start a directional trend.

The October crude oil chart to the right shows the size of the drop. Since this is chart includes overnight data, much of the drop today started last night, which is why there are two large down candles. (The little bar on the right is the evening session as I write this.) The trend has been clearly down as indicated by the blue moving average lines. The darker blue line offered excellent resistance, and the double stochastic offered excellent entry points when it turned down from the overbought zone.

I did change the “Market Mood” graphic. I had the July 4th bear, but thought the roller coaster was more appropriate.