iBC Machine Mid-Day Update — 6/17/2008by Danny on June 17th, 2008 at 3:51:06 pm |
The iBC Machine is NEUTRAL, and therefore the emphasis is on a margin of safety. There is very narrow leadership (breadth is poor), and on an overbought/oversold scale of 0-100, we are at a 55. The LT readings are still bullish, meaning you can give the rally a small benefit of the doubt, but it is decreasing by the day.
Think of it as a stop light. Green means there is momentum in the market. Go ahead and buy SQM up 10 points in a few days. Neutral is similar to a yellow light, except unlike in real life it doesn’t mean drive faster, but take care. Are stocks extended? Even the momo faves? Then take profits. Sell on up days, buy on down days. Red means cash and general shorts are best.
Friday did not see broad based buying that is indicative of another rally. Also, my intermediate indicator of momentum turned negative on 6/11. Another one of my favorite proprietary indicators, Stock Schweppes, signaled a market sell on 5/20.
Another interesting idea: If you were to add up The iBCM’s daily buy interest from 5/19 to today, and compare that to the daily sell interest from those same dates, the selling outweighs the buying by a factor of 10 percent.
Now, if you did that same analysis from April 4rd, the day I called the rally, to 5/18, the day before momentum died, you’d find that the buy interest outweighed sell interest by a factor of 45%
That’s more proof to me that the market is rolling over, or at the minimum isn’t as robust as it was.
These studies plus deteriorating machine fundamentals warrant caution, and as such I’d increase cash or short exposure. At the minimum, I’d take some winners off the table.
Good info, Danny. I was looking at just the past seven days (before today)in my scans and the selling interest from 6/6 to 6/11 was on average quite a bit higher than the buying interest of the past three days on average. (before today)
Interestingly enough, I am seeing a little more breakouts than breakdowns today - I assume those are mostly commodity stocks. I wish the bears could have done more today - I was hoping for more intense selling. If they don’t do so soon, I think they could lose their chance.
June 17th, 2008 at 4:51:13 pmnet net I had more buy interest today, however, 55 of my 104 buys were in the metals, energy, and shipping complex.
So focused sectors, not broad based, which has been the theme for a while.
Shipping trades utterly together, so if you got GNK bouncing, may as well add in a drys or an exm. And vice versa.
Monthly ratios weakened and that is the more relevant term of breadth. 35% is attributed to chemicals, energy and metals.
“I wish the bears could have done more today - I was hoping for more intense selling. If they don’t do so soon, I think they could lose their chance.”
I disagree only because from iBC machine view, we are tricking down. If we get selling to fast, we bounce. It’s much more fun (for me) if we just kinda roll over. There is nothing in the machine that I see that looks like it portends great positive movement. In other words, we could bounce, but to where? 12,700? That’s not much.
11,600 is the low, 12,800 is the high. We are exactly in between. Buying has slowed. Ratios have worsened.
Combined with my other analysis, it looks more like the precipice of the next move lower than the beginning of a move up. I think the bears are just beginning to pick up steam, not rolling over.
June 17th, 2008 at 5:09:24 pmHoly crap, I want to see what’s inside your machine!
(The ibcmachine of course. You perv.)
June 17th, 2008 at 5:13:53 pmReal soon that will be a reality. All of iBC tech resources (jeremy) are hard at work on such a feat.
In fact, just as a show of support to Jeremy, I request you give karma to Prospectus if you agree with his statement and are interested. Then J will know his hard work isn’t fo’ nuttin.
June 17th, 2008 at 5:18:12 pm“Combined with my other analysis, it looks more like the precipice of the next move lower than the beginning of a move up. I think the bears are just beginning to pick up steam, not rolling over.”
Good point - I just think there has been so much chop that if the bears don’t get this market rolling over soon, then stupid dip buyers are likely to come in and bounce us up again. It makes doing anything a lot harder.
I also am a little curious if options will affect things this week.
I agree that there is very little out there suggesting that a new rally is in the cards here. Hopefully today was a starting point for the bears and they can slowly build on it.
June 17th, 2008 at 5:30:00 pmThe wildcard in my mind (sounds like yours as well) is Opex.
My guess is that the MOS’ and others will benefit more than, say, financials.
“there has been so much chop that if the bears don’t get this market rolling over soon, then stupid dip buyers are likely to come in and bounce us up again”
If more intelligent analysis tells you otherwise, short into it. With stops and proper risk mgt. it doesn’t matter what happens to a degree. My guess, s&p has upside to 1375, downside to 1300. Thats 25 pts up, 50 down.
Currently, my portfolio is concentrated in the names that are working, save for gay-ass DGLY. Today, rather than sell my commodity plays I added to PCLN short, TSCM short, XLF puts, bank stocks short. That increased short exposure ought to make me money based on what I think will happen, without making me sell my winners.
As long as my winners aren’t stopped out, I let them run.
June 17th, 2008 at 5:39:37 pmStill hate ANF?
Then keep an eye on GES, too.
June 17th, 2008 at 6:30:33 pm_
I do hate ANF still. doomed.
June 17th, 2008 at 7:49:54 pm