santa claus rally - What We're Reading - StockBuz2024-03-29T15:48:02Zhttp://stockbuz.ning.com/articles/feed/tag/santa+claus+rallyBreakouts vs. Breakdownshttp://stockbuz.ning.com/articles/breakouts-vs-breakdowns2014-12-21T16:47:49.000Z2014-12-21T16:47:49.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291048?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291048?profile=RESIZE_320x320" width="300"></a>According to <a href="http://btigresearch.com" target="_blank">BTIG Research</a>, there remains cause to be concerned after the stock market's bounce last week.</p>
<blockquote>
<p>For the first time since the October low, breakdowns have outnumbered breakouts. This is a byproduct of the 5% pullback in the SPX over the past two weeks, which naturally saw some stocks break support levels. We are inclined to worry about breakdowns when they are abundant (at least 10% of the SPX, more than this time around) and recurrent (outnumbering breakouts for at least 2-3 weeks).</p>
<p>This last occurred in October, when the market suffered deterioration in breadth that was significant enough to suggest a structural shift may be underway. For this reason, we would be inclined to use strength to sell stocks that previously broke down or stocks that have exhibited weak relative strength.</p>
</blockquote>
<p>Looking closer at a few of the internals: A 5-year weekly chart of T2107, or stocks which are above their 200d SMA, has made a lower high and appear to be rolling over again - almost as if it tested overhead resistance and failed before even reaching the overbought territory (if technical analysis were to actually work on such a study). </p>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291086?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1291086?profile=RESIZE_320x320" width="300"></a>Breadth however has turned back up on a <a href="https://dwq4do82y8xi7.cloudfront.net/x/hmglw5Nu/" target="_blank">daily chart</a> and the Dow Jones Industrials (right) bounced off of it's 38.2% fibonacci level (a good sign the high will be challenged ahead) so it would seem that Santa Claus is indeed on his way.</p>
<p>Clearly the next two weeks (Christmas/New Years) will be important and volume is will be low as fund Managers are on vacation. Do we break higher on low holiday volume, hold in a range or (heaven forbid) do we drift lower? Will Europe/Asia be buying overnight or no? The historic bias on low volume is definitely to the upside and algos will be set to auto pilot so barring any shocking geopolitical news, we should be just fine..</p>
<p>What traders and firms such as BTIG will do now is short names which have made lower highs on any move higher in strength. Generally at overhead 50d moving average, 200d moving average or past support, now turned resistance. I would imagine this will be the case, <em>especially </em>in oil & gas (or related) names.</p>
<p>I have been recommending that any long positions initiated, doing so with Calls rather than common shares in order to lessen any losses given the age of this five (almost six) year bull run. The Santa Claus rally may have begun, but that doesn't mean <em>some</em> names won't fail at a higher level. Best of luck-</p>
<p>Per BTIG:</p>
<p>Breakouts: BK, CVS, ETR, OMC, SPLS, WAG, WDC<br> Breakdowns: CAT, CCI, CNP, COF, CTXS, CVX, DOV, DTV, ECL, EXPD, FLR, GCI, GOOG, GOOGL, HOG, IBM, JEC, JOY, KO, MCD, MET, MLM, NFLX*, NUE, OKE, OXY, PBI, PM, PSX, QEP, RRC, T, VZ, WIN, WMB</p>
<p>*Full disclosure I do have some short positions however not in any of the names mentioned in this article with the exception of NFLX as <a href="http://stockbuz.net/articles/roasted-nflx" target="_self">recommended here</a>.</p></div>What About The Santa Claus Rally? S&P500 Top Deja Vuhttp://stockbuz.ning.com/articles/what-about-the-santa-claus-rally-s-p500-top-deja-vu2014-12-15T21:00:51.000Z2014-12-15T21:00:51.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>According to <a href="http://www.cityindex.co.uk/market-analysis/market-news/35785172014/dangerous-signal-in-the-sp-500-other-equity-indices/?cid=0000215115" target="_blank">Ashraf Laidi:</a>  The following sobering analysis on the <a href="http://www.cityindex.co.uk/range-of-markets/indices/">S&P500</a> reinforces our expectations that recent record highs in US equity indices will not be revisited before at least six weeks.</p>
<p>A decline of at least 10% is expected to follow.</p>
<p>-        Last week’s 3.6% decline in the S&P500 single-handedly erased all of the prior seven weeks’ consecutive gains.<a target="_blank" href="http://wordpress.cityindex.co.uk/market-analysis/files/2014/12/SPX-Oct-207-vs-Now-Dec-15.jpg"><img class="align-right" src="http://wordpress.cityindex.co.uk/market-analysis/files/2014/12/SPX-Oct-207-vs-Now-Dec-15-530x179.jpg?width=530" width="530" /></a></p>
<p>The <span style="color: #ff0000;"><span style="color: #ff00ff;"><strong>last time the S&P500 erased at least three weeks’ of consecutive gains was the week after the October 2007 record</strong></span>.</span> Stocks fell more than 50% thereafter and took six years to regain that high.</p>
<p>-        And for an unprecedented finding, last week’s S&P5 500 decline took place after SEVEN weekly consecutive gains, which had NEVER been seen before in the index.</p>
<p>Seven consecutive weekly gains have occurred in the past (Aug-Jul 1989, Aug-Sep 1993, Apr-May 1997, Feb-Mar 1998, Dec 2003-Jan 2004, Apr-May 2007, Mar-Apr 2009, Dec 2010-Jan 2011, Jan-Feb 2013), but never in any of those cases has the streak-breaking week fallen by more than 2.0%.</p>
<p><span style="color: #ff00ff;"><strong>The fact that the magnitude of last week’s declines was nearly 4.0%, following as many as seven rising weeks, shows an unprecedented departure in sentiment from greed to fear.</strong></span></p>
<p>Kos here.  I've been saying that yes, oil's plunge <a href="http://stockbuz.net/articles/will-oils-fall-hurt-the-rally" target="_self">would affect our rally</a> although <span style="text-decoration: line-through;">CNBS</span> CNBC was telling us no,  For those who like to point fingers at reasons "why", take your pick:</p>
<ul>
<li>Year-end tax selling</li>
<li>Even JNK, a proxy for risk, is seeing heavy selling.</li>
<li>Strong dollar in a weak economy</li>
<li>Maybe this is the market........without the benefit QE.</li>
<li>Who wants to "buy" at these high levels, not me.</li>
<li>There's an over supply in crude oil and price is finally reverting to reflect that</li>
<li>It's not an oil correction, it's a bear market in commodities; period and oil finally joined the club.</li>
<li>Oil and gas names have begun to postpone projects (see massive drop in permits in Oct/Nov. to the right) and ALL of their suppliers will feel the pinch as a result which <em>widens</em> the number of stocks which are weak.</li>
<li>Sure the average American will have more $ in their pocket to spent at Christmas but that's a drop in the bucket compared to the cut in spending in the oil arena as they tighten their belts with low oil.</li>
<li>Risk of defaults from heavily-indebted oil names.  Just ask regional name $CFR</li>
<li>When the VIX for crude oil $CVX is closing on the highs, oil's drop isn't over.  Watch for a capitulation move.</li>
<li>Saudi Arabia announced they will not cut supply even if crude oil is at $40.<a target="_blank" href="http://watchdog.wpengine.netdna-cdn.com/wp-content/blogs.dir/1/files/2014/12/drilling-approvals-dropping-chart-from-seeking-alpha-website.jpg"><img class="align-right" src="http://watchdog.wpengine.netdna-cdn.com/wp-content/blogs.dir/1/files/2014/12/drilling-approvals-dropping-chart-from-seeking-alpha-website.jpg?width=438" height="129" width="280" /></a></li>
<li>They would cut production if someone else does and if Putin were to cut, what would that do to his economy?  Russia's obviously not easily bullied.</li>
<li><a href="http://www.bloomberg.com/news/2014-12-15/ruble-weakens-to-record-before-russia-auction-to-ease-squeeze.html" target="_blank">Russia's central bank</a> announced a rate hike which has sent the Ruble to lows not seen since 1998.  Can you say recession in Russian?  This of course has traders pressuring the central bank to intervene.</li>
<li>Don't expect demand to increase any time soon with much of the globe in recession or with weak economies.   This of course, barring any disruption in supply.</li>
<li>And just how many cars can people buy when they're taking jobs at minimum wage?</li>
<li>The Fed may raise rates mid-2015 however watch the 10 year ($TNX).  It will rise long before the Fed lifts a finger.</li>
<li>All commodity currencies are struggling.</li>
<li>China's economy is slower than we hoped for with still high property prices.</li>
</ul>
<p><a target="_blank" href="http://www.bespokeinvest.com/storage/sectorweights1212.png?__SQUARESPACE_CACHEVERSION=1418402340937"><img class="align-left" src="http://www.bespokeinvest.com/storage/sectorweights1212.png?__SQUARESPACE_CACHEVERSION=1418402340937&width=300" width="300" /></a>So what sector could "step up to the plate" and help lead the market higher..........when we're already stretched in valuation? </p>
<p>I think financials will have their worries.  That's 16% of the S&P500 weighting - not going to rally.  Knock off Industrials thanks to crude. -10% and materials?  Another -3%.  How about Consumer Discretionary?  Poor $F was downgraded today by Deutsche Bank stating that with lower gas prices, consumers may be less apt to shell out cash for a new, more efficient auto, and well all know how TSLA has been falling.  Count them out.  Can technology, staples and healthcare give us a Santa Claus rally alone?  Hopefully there will be no downside surprise with the recent good retail sales numbers.</p>
<p>As volume dries up near the holidays, there tends to be no heavy selling but I'm not placing any bets on anything related to energy.  We shall have to see but it won't be easy.</p>
<p>There's enormous pressure on Russia at this juncture and the other slippery slope is for the Fed........how to raise rates in 2015 after halting quantitative easing and not encourage deflation from persisting. </p>
<p><em>Edited 4:35pm to update Sector Weightings graph.</em></p>
</div>Bullish on Small Capshttp://stockbuz.ning.com/articles/bullish-on-small-caps2014-12-08T02:13:01.000Z2014-12-08T02:13:01.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1291011?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1291011?profile=RESIZE_480x480" width="375"></a>In early October, I pointed out that the Russell 2000 (IWM or $RUT) could be forming a bullish butterfly pattern, having found buyers off of the 20month SMA. (<a href="http://stockbuz.net/articles/small-cap-bullish-butterfly?" target="_self">See here</a>) </p>
<p>Well so far so good and I'm calling it's recent consolidation a bull "flag" due to no significant breakdown in the other three indexes, nor semiconductors.</p>
<p>Friday we saw banks and broker/dealers make a nice reversal higher after comments were made, that while the ECB is not easing "now", they will be preparing a QE plan for their January meeting. The U.S. 10 year popped and the banks/brokers followed in suit.</p>
<p>Small caps also typically outperform large caps going into the end of the year. While the stronger US dollar may weigh on them longer term, I still believe Santa will not leave them off his "nice list" this holiday season.</p>
<p>While much of the equity market is extended, banks still have room to run and I feel small caps will rip to the upside and I hope to see them lead. My next $RUT target $1300. Stop below the 200d. </p>
<p>Conversely if you can grab VIX below $11, it is almost too tempting to pass up. It's extremely cheap protection............just food for thought.</p>
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