Posts Tagged 'Reversal'

Unhealthy Reversal

The U.S. Government auctioned off $11 billion of 30-year treasuries today.  The auction was received well as there were plenty of buyers causing interest rates to fall (bond prices to rise).  I can’t remember the last time interest rates fell in a meaningful way.  It’s been a straight move up in the last few months (see TBT).  After the auction was announced, the stock market shot up.  This is because there had been increasing concern that the U.S. would have trouble finding lenders.

I wrote a piece a few days ago about how Chariman Ben Bernanke may really be happy with long-term rates going up.  In just a few months, ten-year treasuries have risen from 2%-4%. Apparently, rates have risen enough to entice new buyers to treasuries causing Ben Bernanke to say “sheww”.  

Everything was humming along until the last hour of trading.  Profit taking came, volume picked up, and down we went.  It wasn’t a complete collapse but it certainly got the bulls’ attention.  Many of the strongest areas still finished near their highs of the day.  But, there are many comments floating around how the rally is deteriorating, the volume’s weak, breadth is awful, and the Nasdaq is rolling over.  We need to be prepared if selling does accelerate and pick up.  So far, it hasn’t.  In fact, the S&P went to a new higher level at the beginning of the month and has been trading in a new range since then.  If we break above yesterday’s high and hold (unlike today), we’ll be in another new range.  I think ultimately we’ll break out and S&P 1000 is in the cards.

As the rally has matured, I’ve been spreading out my holdings to include more financials, more materials, and more technology.  I’d suggest the same to you in a methodical manner.  I haven’t been selling much lately except I did take profits on Baidu (BIDU) on Monday after more than a $100 profit per share in just a few months. What a run.  I was feeling a little greedy and starting to brag.

Today’s reversal isn’t that uncommon.  What is a little uncommon is the fact that we had a strong stock market for all but an hour and yet the internals stunk for the entire day when it was all said and done.  It was a pretty lousy day when you really dissect the market.  Bad days will come during a rally.  What we need to change our mind is some persistency.  The only thing that’s been persistent lately has been the buying.  As always, don’t let your guard down.

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Big Reversal & Apple

I thought we were close to a trading bottom yesterday and today we got that big intraday reversal.  Just after lunch, the markets all turned around and after being down most of the day pretty hard.  They began to rally and the Dow was up about 75 points before pulling back.  Now, we didn’t get so oversold that I covered all of my short positions, but I did cover some of them when the late day rally faded to lock in some really nice gains from just last week when I put more short on.  

I don’t think we’re oversold quite enough for a real long sustainable rally.  So, it’s possible we get just a couple of days of up and then the pullback continues.  But, we were oversold enough to cover some shorts.  After all, we had fallen 6 days in a row, and about 11%.  This would have been the 7th down day in a row.  You don’t typically see that. As with any rally, we have to monitor the quality of it.  I’m not holding my breath.  If we’re range bound, the Dow bottomed roughly right where it should have and perhaps it makes a run up to the 9000 level once again.  You do have to love an intraday reversal though.  Those are the best kind, especially when the volume picks up as the market is running up like it did today.

Apple

I never got a chance to buy more Apple today as rational investors came in this morning and pushed the price back up after that ridiculous 10% sell off after the bell last night when Steve Jobs announced his leave of absence.  After my radio show this morning when I mentioned it would be a buy if it opened 10% lower, it was upgraded by some firm. What influence I have (yeah, right).  But seriously, I think Apple at these levels is very attractive not only for a trade but for an investment.  Earnings are due out later this month and we’ll see if they can surprise us all.  If the stock falls because of temporary weak Christmas sales, I’d buy it on that dip as well.


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November 2017
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