Ian Woodward's Investing Blog

Archive for November, 2010

Santa Rally, Grinch & Moose Droppings

Sunday, November 28th, 2010

The Stock Market had a great day before Thanksgiving, but then the expected follow through fizzled badly on the day after, so we are still stuck in no man’s land with a slight bias in favor of the Bears.  The Grinch hit hard on Friday and hammered the OEX, the S&P 100, as I will show you later.

We have tracked this strong rally ever since the Hindenburg Omen scare back in mid and late August, and now that all of the kerfuffle is behind us I showed you three possible scanarios last week.  We sit 50 trading days up from the low with a couple of weeks “Pause to Refresh”:

When we had that extraordinary jump in %B >1.0 for the S&P 1500 where we clocked up 1.25 with 570 stocks, I suggested that we had within 12 Days to see a turn down and I am glad to say that yardstick seems to work quite well:

Grandma’s Pies are sitting at almost equilibrium and we really need a strong push this coming week to drive the market into a strong rally.  The Bulls are hoping that the Black Friday results for Retail Shopping will give the market the thrust it needs, but the dark clouds from the North and South Korea skirmish is hanging over the market’s head:

…And the Inverse ETFs also show that the Bears have the upper hand at the moment:

The S&P 100 (OEX) was hammered last week and is the weakest of all the Major Market Indexes except for the Dow Industrials as you will see below:

Here is the overall performance for the ten Market Indexes shown and one can immediately see that the Small Caps led the way:

So there you have it.  We should soon see if we have a Santa Rally or continue down before we have a move to the upside.

Best Regards, Ian.

Stock Market Scenarios for Thanksgiving & Santa

Sunday, November 21st, 2010

It is our tradition to Wish You and Yours a Happy Thanksgiving from the HGS Investor’s Team, and we hope you have a joyous time with your family and friends around you this coming week.


This next chart reminds you that we are at a Stalemate with a slight positive bias in favor of the Bulls:

I have taken a shot at three possible outcomes for the High, Middle and Low Road Scenarios and we shall see which one the Market actually takes next week and a few weeks after, going into the Santa Claus Rally.  I remind you that on past occasions Santa has suffered from Moose Droppings, so don’t count your chickens before they are hatched:

The High Road Scenario:  Having had a couple of shakey weeks, the Bulls come roaring back and drives for a strong rally right into the end of the year using this time last year as a Template!

The Middle Road Scenario:  This suggests that we have a good week next week, but the Bears take another pot shot at driving the market down into early December, before the Market picks up again going into the New Year:

The Low Road Scenario:  The Grinch visits us early and not only spoils the traditional rise during Thanksgiving week, but also dampens most of the Santa Claus Rally, before giving some relief going into the New Year:

…And here is a reminder from an old chart I have that suggests that both Thanksgiving and New Year’s are the strongest weeks of the holidays as shown below:

Let’s keep our finger’s crossed and hope we can go out the year with a renewal of this long rally which we have enjoyed for the past twelve weeks. 

Best Regards, Ian.

Bulls and Bears at Crossroads

Thursday, November 18th, 2010

Given today’s statistics, you may be able to ride this Market both ways.  We are at a stalemate, but the Bulls can thank the four leaf clover gift from GM’s IPO and the Bailout of Ireland.  So we are back to Snakes and Ladders:


The strong Bounce today gave the Bulls some breathing room with many Market Indexes showing Kahunas to the upside, which translated says that they had a 1-Day Change in %B of >=0.24.  It now puts the S&P 1500 in the balance at a %B of 0.52:


The  S&P 1500 %B stocks above 0.5 was as low as 33.9% yesterday and potentially heading down to below 20%, but snapped back to 52.2%:


…And here’s the picture that shows both sides of the coin.  We are stuck in Limbo, but the Bulls are grateful to have that going into tomorrow:


As you would expect Grandma’s Pies offer a balanced taste between Sweet and Tart, but markedly improved from yesterday:


Likewise, the Inverted ETFs which were going full bore yesterday are now back to just holding the upper hand:


Tomorrow we have Options Expiration, so expect Volatility.  The action tomorrow will be key to whether this Rally can recover or flop.

Best Regards, Ian.

The Bears are Riled & Nipping at the Bull’s Heels!

Tuesday, November 16th, 2010

It has been a long time coming, but the Bears lowered the boom today. I’m glad I gave you plenty of warning, and now we shall see how quickly the Bulls can recover.  Those who follow the “Bucket Brigade” will understand the numbers in the Cartoon below, especially the 13.8% of stocks in the S&P 1500 sitting below the Lower Bollinger Band %B <0.  It also goes without saying that we had a Phoenix today, so the Bears have control after a long dry spell:


We have had a twelve week Rally, but the Market was broken today:


Now the question is how much further does it go down before the Bulls come roaring back:


…And here is its twin chart which shows how drooped the %B is below 0.5:


This last one should seal the picture for you as it shows the deterioration in one day!  


   Don’t forget that this is Options Expiration Week, so keep your Powder Dry.

Best Regards, Ian.

Bulls are at High Noon Next Week!

Saturday, November 13th, 2010

We have eked out an Eleven Week Rally and the Market is looking a trifle tired at this stage.  Last week was a rotten week for the Bulls, giving up all its cushion from the stellar bounce back to Uncharted Waters as I wrote in a previous blog note.  The time has arrived for the Bulls to fight back or collapse into a long awaited correction by the Bears.  Blame this week on a Stronger Dollar, the Irish kerfuffle over its Economic outlook and the hiccup on POMO delivery on Friday:


The Bottom Line is that the Bulls are Weak and the Bears are gaining the upper hand, while Grandma’s Pies have got more than a trifle moldy.  65:35 is the last call before we see danger and we are already at 57:43, so next week will be interesting.  The Inverse ETFs Portfolio I featured a few notes back is showing signs that they are stirring, but next week is do or die for them as well:

Although all Market Indexes have risen in unison, the true leaders for the rally have come from the Nasdaq 100 (NDX)…the Technology Big Caps.  Here is a snapshot of what has transpired with that Index inside one day, thanks to my good friend Chris White and his EdgeRater tool, which gives the picture in a wink!

The Market has given up its cushion, and we are at the Breakpoint:

We have had an Eleven Week run for this rally, and we are again suffering from Droopy Drawers…it would seem that three strikes and you are out from the picture below.  So we shall see if the Bears can gain the upper hand after patiently waiting all this time.  Frankly a little correction would be good before we trot into the Santa Claus Rally which usually starts around Thanksgiving:

So what caused the sudden deterioration this past week?  Blame it on a Stronger Dollar, the problems with the Irish Economy and a momentary glitch in POMO land:

So what are the High Road, Low Road and Middle Road Scenarios:

High Road:  An immediate strong bounce that sweetens the Pies again to >70:30.  This will be the true test as to whether the Bulls can regain control and win the fight at the High Chaparral at High Noon on Monday!

Low Road:  The Bears follow through on the gains of this past week and we head down for a minor correction of <8% from the high.  We will worry about anything more until after we reach that crucial point.  Remember that there is a 75% chance of a recovery on the S&P 500 for <8% corrections.  After that watch out below.

Middle Road:  We trot down a couple of points more and then the Bulls rally back enough to hold the fort until the following week when they should start to gain steam once more for Thanksgiving and the anticipated Santa Claus Rally.

Best Regards, Ian.

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