Ian Woodward's Investing Blog

The last ten days have been a nightmare even for the short term Type 1 & 2 Traders (Day Traders to a Week Traders) as they struggle through the whims and fancies of the Big Guns with the least bit of good or bad news to shake things up:

…And to prove it we only have to look at the “W” formations we have endured on the Market Indexes in the last ten days:

Those who have been with me forever know I trot out my favorite picture of the Ides of March and this is a wind up in two week’s time to Et Tu Brute!  This next chart gives you the timeline of what to expect in this Sequestration kerfuffle for the next 6 months:

Using the Russell 2000 (RUT) as an example of what has transpired these last eight days, it along with the Mid Cap S&P 400 were on fire and reached a peak of 932 on 2/19/2013, only to trot down to 895.84, about 3% down from its high in a matter of five days.  It has since bounced back in the last three days from the assurances of our good friend Uncle Ben who spoke to Congress with his usual confidence that the Fed is standing tall with its QE-3 assurances!!  The RUT has recovered half the loss from its recent high.

As we note, the Big Guns used “I” for Italy in the PIIGS as the excuse for a hard knee jerk, but Uncle Ben came to the rescue.  Needless-to-say, the VIX did its dance upwards and has not as yet fully recovered to its “quiet” state of below 14.00.  None-the-less the warning blast of nearly seven Buckets up in one day says it doesn’t take much to throw the markets into a tizzy:

Meanwhile, the leaders have been truly trounced, but there are signs that there is rotation into “old names”, some rising from the ashes such as JNJ, PFE, AVP, CAG, K, PG, BMY, IFF, CLX, and producing LLURs though with rotten ERG!  Defensive stuff.

This next chart tells the whole story as we see the extent of the oscillation as the S&P 1500 %B trotted up & down:

The Big Guns are reluctant to let the floodgates open full bore yet and through all of this turbulence we are back to Stalemate:

One of my newer faithful followers Fred Magner mentioned his strong belief in the High Jump function as have many people over the years.  The chart below is a sea of numbers and most just roll their eyes and move on.  However, if you take the time to study what I lay on a silver platter for you, you will begin to see the value of setting targets from Stakes in the Ground based on both High and Low Jump targets.  As long as the Rally was on, I focused your attention to the Higher and Highest Jump targets in the top half of the chart below.  Once the Market peaked on 2/19/2013, we see we were close to the Higher Jump targets and just 2.4% away on average.  We also note that the NDX and Nasdaq were the laggards, with the NYSE and S&P 400 leading the charge.

Since then, the only Market Index that has beaten that Rally High is the DJI as shown in cell I20 shown in green while the others are all lower than their recent high shown in Blue.  The recent dip of three days ago when we had that knee jerk on the Italy scare took all the Indexes down about -3% from the  recent highs, but they have all bouced back with the Bernanke reassurances to Congress to recover to within 1.3% of those Rally highs.  Note that the S&P 400 which was the best was hit the hardest and is lagging the rest:

It’s all about Fear and Greed and how your stomach can adjust to such oscillations, and these views make that come alive for you.

Best Regards,

Ian.

The Stock Market is totally “News Driven” and we have another week if not more of this to tolerate.  We got the Bounce Play on Friday which was satisfactory but not startling, so the Slide and Bounce Yo-Yo continues:

Having taken you Tip-Toeing Through the Tulips these past several weeks, the Ball Game is simple and can be summarized now in one slide.  We got the Bounce Play so it now continues or we slip-slide away.  So, I won’t prolong the agony:

The Bounce Play had better continue early this week or we head back down for a bigger correction.  Good luck for this coming week.

Best Regards,

Ian.

We had a follow through day to the downside, and the odds favor “The Real Thing” over a “Knee Jerk” as I suggested as the alternatives in last night’s Blog Note.  I will treat this as an update to yesterday, so I will show you the charts with very little verbiage:

Ten Days Gains were lost in just two days on most Market Indexes:

There is an inviting Gap between 3021 and 3076 that is below here and needs to be filled on the Nasdaq:

The Russell 2000 (RUT) took a big hit these last two days with 7 Buckets down:

…While the VIX is inching up as you would expect.  It needs to get above the 200-dma at 17 to cause fireworks:

Since the two big days at the turn of the Year we have been waiting for the Big Guns to produce heavy selling and now we see it:

The Leaders are getting Trounced:

7.2 Buckets in two days is hard to recover from, but don’t count out a Bounce Play.  The quality of that Bounce will tell us a lot:

As we would expect, there is a big shift to the downside on the % of Stocks in the Lower Buckets:

The majority of the evidence points to the downside, but sometimes the Market will fool you.  Stay alert, and Keep your Powder Dry.

Best regards,

Ian.

After a strong move yesterday which took the Market Indexes into New Highs, would you believe that wonder lasted just one day as we had a Five Bucket Down day on average for the Market Indexes?  The $64 question is whether it is a knee jerk or the real thing by way of the much anticipated correction?  The Bad news was there was consternation in the FED Minutes on their Monetary Policy:

If I may say so, it seems that the Market is on the Three Road Scenario I had postulated…the first one was a complete surprise with the Miracle Bounce Up, and now we see if this 5 Bucket Down Day produces a Knee Jerk Fakey or we head on down for a Correction of the Rally which has gone all of four months, and certainly with the big breakout right out of the barrel at News Year’s time.

You will recall that we had the first shot across the bow on 02/04/13, and two weeks later we had the big Knee Jerk down:

We have followed the Russell 2000 (RUT) as it has been one of the leaders, but today we got the dreaded hit of 5 Buckets Down:

The VIX had a Field Day today shooting up 8 Buckets after being dormant and now we wait to see if it spikes up further or falls back:

The Leaders took a big hit today with A+B losing over 300 stocks from that group and the lot continues down:

I have updated this next chart to show the High Road Bounce Play is behind us and we are now on the way down between ending  with a Knee Jerk which could turn out to be a Fakey or it is the real thing in a further correction which has long been expected:

…And here is the twin picture which shows the deterioration today in the %B and the percentages in the Buckets:

I feel the next two days are critical, so watch carefully and make your call of Bull or Bear depending on how they play out.  If there is no let up tomorrow to the downside with heavy volume then it would seem the call is to the downside, but understand that the Game Playing has begun and you call it as you see it.

Best regards,

Ian

I have been very busy this past week, but felt I must raise a Flag after all the Blog Notes that got us to this point. We are at a critical juncture and this is probably the start of a Climax Run:

You folks know the go to charts at a time like this.  So, let’s not waste any time and you judge for yourself:

Notice that when %B hits the top bucket, i.e., >1.0, it doesn’t stay up there for more than a few days.  The next chart shows we have had a long run above 0.5 for nearly a month, and that the Index is now Overbought:

Do Not anticipate the potential correction, but time is running out after today’s strong move up.

Best Regards,

Ian