Losing GOOG & MSFT here as leaders. Should Cisco sell off after earnings... I don't know... it could be katie bar the door. General feeling from the bears is they have now thrown in the towel.. we must be more vigilant than ever!
Stocks: Overdue for a Correction? February 05, 2007 The S&P 500 rose 1.01% in January, making it the eighth straight monthly increase for the index, a rare feat indeed. During the last eight months, the S&P 500 has advanced 13.24%, which is actually not that spectacular when we look at the best 8-month price rate-of-changes over history. There were many periods where the index rose over 15% in an 8-month period. However, it is rare to get this many months in a row of positive returns without a loss. That the arc of the rise is very gradual is both good and bad. It indicates that we are not in any sort of "mania" but it also indicates churning and the distribution we started this thread off highlighting. Going all the way back to 1970, the S&P 500 has only risen at least eight straight months on four other occasions. During one of those streaks, the index rose for nine straight months. This occurred from August 1982 until April 1983. The three other periods where the "500" rose eight consecutive months were from April 1980 until November 1980, December 1994 until July 1995, and November 1995 until June 1996. Interestingly, three of these streaks (including the present one) started just as the 4-year year cycle low was put in. The key to all this is that the return for the market following these streaks has not been great. We will note that there are not enough observations to make this statistically significant and it is certainly possible, but not probable, that the current streak extends to nine months. However, the streak in 1980 was followed by two negative monthly returns of -3.39% and -4.57%. *Also, remember that monthly returns can mask a lot of the volatility that can occur on an intra-month basis. For instance, a monthly loss of 3.5% may have looked like a 7% loss during the month. While many of the indexes highlighted above have moved to new highs (recovery or all-time), the Nasdaq remains stuck in a base. What's interesting is that while the index has basically moved sideways since mid-November, there was a heavy rush of volume that traded on the index in January but was unable to push the Nasdaq either up or down. This is not good. FUN FACT*>January, 2007, was the eighth heaviest traded month in Nasdaq history! Trading volume during the twenty days in January averaged 2.34 billion shares. January's volume was the heaviest since March and May 2006, right before and during the latest correction on the Nasdaq. The index peaked in April, a little before most of the other indexes topped out. It would seem we are less than a month away from the same fate. This surge in volume has pushed the 3-week Nasdaq/NYSE volume ratio to its highest level since January, 2004. The three-week average of this volume ratio is up to 153%, indicating a surge of volume into the Nasdaq relative to the NYSE. The indicator is very close to the peak in 2004, which was 158%. The January, 2004, peak is still the highest going all the back to the Internet bubble and implosion years of 1999 through 2001. This is a worrisome trend as it indicates a rapid increase in riskier financial assets with higher beta stocks more prevalent on the Nasdaq than on the NYSE. And then there's the problem of these risky stocks have not gone anywhere- weak hands shall surely dump them quick. I think it is disappointing that with all this volume being traded on the Nasdaq, that the index is not racing higher. It signifies a period of market churning, often seen at intermediate-term peaks. Churning is basically the inability of a stock or index to go higher during periods of heavy volume. What is happening is during certain high volume days, up volume on the Nasdaq is being equalized by down volume on the index. **Institutions, we think, are lightening up their positions during this period of high market activity. By doing this now, they are basically feeding the market stock at high prices without knocking the index down. As private investors we should begin doing this as well. We ran a screen to highlight days where volume on the Nasdaq was above its 50-day moving average of 1.9 billion shares and then looked for instances where advancing volume and declining volume were less than 15% apart. We found that there were four instances over the last 13 days that met our criteria and that may have been evidence of churning. For instance, on (1)February 1, total volume was 2.1 billion with up volume and down volume only 7% apart. The other three days were (2)Jan. 16, (3)23, and (4)26. These were all days of higher than average volume and the difference between up and down volume was 12% or less. While churning can occur at anytime, it is more prevalent after an extended move higher. Crude oil prices surged another $3.60 per barrel or 6.5% last week and now are up an incredible 17% since Jan. 18 or just 12 trade days ago- the day stonedinvestor sold his oil plays. There was very little chart resistance between $50 and $56.50, however, prices have now moved into a zone of potential supply or resistance that runs from $56.50 up to $64. In addition, trendline resistance off the peaks in August and December sits up near $60. While prices could continue a bit higher in the near term, I still expect to see some basing action and some type of reversal formation. Despite the big gains so far, crude oil is still in a downtrend as it has not broken out of the pattern of lower highs and lower lows. Take That!
EqtTrdr now I know you know distribution and panic selling are two different animals. One happens at tops and one happens at mid free fall and at bottoms. Today was a neg vibe for me. We'll see.
Eqt> Yesterday the McClellan Oscillator was a plus 101, after Tuesdays plus 102. The one digit difference in McClellan lore is called a "minor change" read and suggests a big move over the next few days. The "how big" number is around 2%, and usually in the direction of the recent move in the index - that's up in this case. How about a quick 2% run up and we all get off together? > stoney