this market is headed lower

Discussion in 'Trading' started by empee, Jan 30, 2009.

  1. empee


    big day will be monday in confirming but look at anything UPS, FDX, CAT, CSCO, MGM, UPS, MSFT etc (some have already started lower on heavy volume). and of course TXT

    Of course, lets see what weekend news brings.

  2. S2007S


    How this market is trading at 8000 is beyond me, with the negative news flow for the last 2 years about housing, banks and everything else in between I have no idea how these markets are holding where they are today. Monday will be an interesting day, if it opens lower and stays down through the closing many would be buyers are going to stay far, far away and wait for the break to new lows before putting any kind of new money to work in this market.
  3. My indicators confirm the markets are leaning negative. Support for the S & P 500 at the 800 level will be key. If it holds we can expect a nice bounce up.
  4. You make it seem like we're only 10% off the highs.

    The indexes are down 45%+ in 15 months. How much lower do you think we should be right now?
  5. empee


    We can head a lot lower. There's an article somewhere (I lost the link, if someone can post it) pointing out that even if all the financials go to zero the Dow will be only go down 300 pts. However, XOM is now 5% of SPY. In short, the financials are now underweight in the dow since its price weighted; they've done the damage their going to do, for the next leg down to happen, other parts have to take a beating; and looking at those industrial names it looks like it (CAT, etc)

    The reason its going lower is that its not just the XLF now, the actual industrials are now rolling over. Thats why DOW is so weak relative to other indicies.

    So in short, the majority of losses to this point were financial related, now the rest of the market ex financials need to breakdown to go lower.

    On the up side, oil will be cheaper and thus gas :)

    Of course there are no guarantees. Its just very ominious, Of course, we could have a huge reversal day and everything closes up big from its breakdown point and this could be all wrong. However, we should have bounced by now. Ideally, Monday is a big volume day to get clarity.
  6. S2007S


    EMPEE here you go......

    Its in this article what you are looking for...
    Will Financials Push The Market Over The Edge?
    Thursday January 29, 12:39 pm ET
    By Simon Maierhofer

    Poker players and anyone who's ever been in a position where negotiation skills are required can appreciate the value of a good bluff. Dishing out a successful bluff or calling a bluff is much more fun than falling for a bluff, especially since falling for a bluff could be quite costly.

    The stock market has been bluffing investors for decades. The market's indiscernible jolts have been particularly pronounced and painful in recent months.

    Novice investors might take solace in the fact that mutual fund managers (supposedly the 'pros') have had a heck of a time trying to call the market's bluffs. In fact, in October 2007, at the all-time high, fund managers expected the rally to continue indefinitely. With a record low allocation of only 3.5% in cash, fund managers were invested to the max right before the market topped and crashed nearly 50%.

    To a smaller extent, at the beginning of 2009, investors were extremely bullish yet again. In fact, investor optimism (CBOE Put/Call ratio, moving average) rivaled the optimism seen at the stock market's all time high. The optimism combined with other factors caused us to issue a sell recommendation on January 6th with the Dow at 9,070 (alert sent to ETF Profit Strategy subscribers). The Dow has dropped 800 points since.

    Financials were the worst performing sector in 2008 and year-to date. Financials have been falling harder and faster than the major indexes. Have financials fallen because of the market or was the market's fall induced by financials?

    There are a number of ETFs tracking the financial sector. Here are the main ones:

    Financial Select Sector SPDRs (NYSEArca: XLF - News)

    iShares Dow Jones US Financial Sector (NYSEArca: IYF - News)

    Vanguard Financials (NYSEArca: VFH - News)

    PowerShares Dynamic Financials (NYSEArca: PFI - News)

    PowerShares FTSE RAFI Financial Sector (Nasdaq: PRFF - News)

    First Trust Financials AlphaDEX (NYSEArca: FXO - News)

    Rydex Equal Weighted Financials (NYSEArca: RYF - News)

    Unlike the above pure-bred financial ETFs, major benchmarks like the Dow Jones (AMEX: DIA - News), S&P 500 (AMEX: SPY - News) and Russell 1000 (NYSEArca: IWB - News) have only limited exposure to the financial sector. Before the bubble burst, financials made up over 20% of the S&P 500. Today financials account for less than 11% of the S&P 500.

    The strangle hold of financial stocks on broader benchmarks continues to weaken as the financial sector loses value. This is particularly true for the Dow Jones. As a price-weighted index, movements of higher priced stocks affect the Dow Jones the most and vice versa.

    At $90 a share, IBM carriers 30 times more weight than General Motors at $3 a share. Four of the 30 Dow components already trade below $10 a share, two of which are financials: Bank of America (NYSE: BAC - News) and Citigroup (NYSE: C - News). The remaining two financial stocks are JP Morgan (NYSE: JPM - News) and American Express (NYSE: AXP - News).

    No doubt, financials were the mill stone that dragged the stock markets to new lows. After a year of persistent losses however, financials relinquished their command over the major indexes. According to Ronnie Moas with Standpoint Research, if all the financial stocks in the Dow (JPM, BAC, C and AXP) drop to zero, the Dow Jones would only drop 300-350 points from current levels.

    On the other hand, if Exxon Mobil went to zero, that stock alone (at $76) would send the Dow Jones down 600 points.

    Industrials (19%), consumer staples (17%), technology (15%) and energy (15%) currently dominate the major benchmarks. As we've seen in recent months, individual sectors are not de-coupled from one another. In fact, the tentacles of financials control the welfare of many other sectors via its lending power (or lack thereof). As we are painfully aware, when funding dries up, so does economic activity.

    We have successfully used the financial sector as a precursor of future events to come. Via our ETF Profit Strategy Newsletter we alerted subscribers on November 14th of the following: 'The Financial Select Sector SPDRs actually closed beneath its October 27th low. This should serve as a nice foundation for the next push down. Once the Dow breaks beneath 7,500, it is time to lighten up on short ETFs' like the ProShares UltraShort Financial (NYSEArca: SKF - News) and ProShares Short Financial (NYSEArca: SEF - News).

    Once again, the financial sector has broken beneath its previous low. We've alerted our subscribers since the middle of November that the broad indexes will break below their respective November 21st lows once the Dow's rally past 9,000 is complete. The spear heading approach of the financial sector is yet another piece of the puzzle that confirms our outlook.

    A test of the November lows will likely be followed by a forceful break of the November lows. The stock market will continue to bluff investors. The best reply to a bluff is a winning hand. The ETF Profit Strategy Newsletter has consistently recommended the right ETFs at the right time. It's time to call the market's bluffs.
  7. The only thing left keeping Dow up is oil. Anyway; surprising strong gasoline demand in this week's oil report.

    It is timely call for all "freedom" fighters to break up oil pipelines and pirates to hijack oiltankers.:eek: :D Hopefully in this weekend. LOL
  8. If anyone's interested, the price of all the Dow stocks added together as of the close today is 1004.53, so divide a component's stock price by that number and you can see what percentage of the Dow that stock currently is.

    XOM is about 7.6%
  9. Well, I must admit my call for the next week is bullish. The reason is that XLF needed this leg down to fill the gap from wednesday morning. The gap is filled and then a bounce right from it into the close on a high volume. At the same time SPY and DIA bounced back from levels lower that that gap, which tells me that financials outperformed DOW and S&P (They fell much less)

    My post might look messy but the main idea is that we go higher from here...
  10. einar79


    #10     Jan 30, 2009