Post by brosin on Aug 12, 2010 0:08:09 GMT -5
Caldaro: Today's decline again began overnight in the foreign markets. For the second day in a row the US market gapped down at the open. Yesterday the market recovered some after the FOMC statement. Today the market declined sharply early and then drifted lower for the rest of the day. There was not enough buying power, at any point during the day, to rally the SPX even five points. Key support remains within the OEW 1090 pivot range. The next support after that is not until the 1058 pivot. With the current wave structure: Intermediate waves 1-2 and Minor waves 1-2, a decline to the OEW 1058 pivot would put this entire uptrend bullish count in question. Since the market has risen in two five wave structures from the SPX 1011 low. An alternate count to be considered, if a breakdown to the 1058 pivot occurs, is the secondary August count we have been noting in the weekend updates. This secondary count suggests that this uptrend could be a B wave rally, and part of a larger Primary wave II correction. The weakening economic numbers appear to support this secondary scenario. Tomorrow may prove to be a pivotal day.
Cobra: The bottom line, the short-term trend is down and I hold partial short position overnight. I expect at least 2 legs down. We’re now in the very 1st leg, which I don’t think will last long. I’ll present evidences in tonight’s report. As for tomorrow, because today is Major Distribution Day (NYSE Down Volume : NYSE Up Volume >= 9), so 67% chances, it’ll be a green day.
Bespoke:
-Nasdaq Breaks 50 and 200 Day Averages in One Day: It's generally considered a negative technical signal when an equity index breaks below one of its major moving average lines. With that in mind, the fact that the Nasdaq broke down below both its 50 and 200-day moving average today has bullish technicians feeling pretty glum. Falling below both the 50 and 200-day moving average on the same day is certainly not a common occurrence. Since 1971, there have only been five other days where this occurred for the Nasdaq. Following those periods, the Nasdaq has averaged a gain of 0.36% over the next week and a decline of 1.2% over the next month, and in each case the Nasdaq was positive three out of five times.
-High Yielders Going Ex-Dividend: Dividend-paying stocks have caught the eyes of investors recently. For those interested, below is a list of the S&P 500 companies with yields of 3% or more that are going ex-dividend between now and the end of September. Remember, to receive the dividend, you have to own the stock by the close of trading on the day before the ex date. You can even sell the stock on the ex date and get the dividend as long as you own it at the close the day before.
-In the table to the right we highlight each decline of 2% or more in the S&P 500 since the March 2009 low. Today's decline is the 25th day since then where the S&P 500 has lost more than 2%, and it is on pace to be the worst day since July 16th. The average return on the day after these big down days has been a gain of 0.14% with positive returns 62.5% of the time. Over the next week, the S&P 500 has risen 75% of the time for an average gain of 1.81%. Additionally, in each of the five occurrences since the flash crash on May 6th, the S&P 500 has been up over the next week every time.
-S&P 500 Performance After 2% Declines Taking a longer term view, we also looked at the S&P 500's performance following 2%+ declines since the year 2000. Here the results are still positive, but certainly more modest. In the 99 occurrences where the S&P 500 has been down between 2% and 3%, the S&P 500 has averaged a gain of 0.1% the following day and 0.5% the following week. When the index is down more than 3% (57 occurrences), it has averaged a gain of 0.4% the next day and 1.1% over the next week.
Ritholtz:
An interesting statement from former Dallas Fed President and a look at the Fed's (in)action of the past year
Media Appearance: The Kudlow Report (8/11/10)
"Back on the Kudlow Report at 7:00 pm this evening to discuss the Fed, today’s big market drop, and maybe even some housing.
Here is food for thought regarding the Fed action, via (former) Dallas Fed Prez Bob McTeer:
The FOMC’s decision to limit the shrinkage of its balance sheet is modest indeed since allowing any shrinkage is, in effect, a tightening of monetary policy. They didn’t adopt easy money; just less tight money.
People argue that other things are more important in getting the economy moving again: removing the threat of major tax increases; removing the threat of major regulatory burdens, etc. Okay, but fixing those things are not an alternative to monetary measures. They are a complement. Do both. It really doesn’t matter which would be the stronger medicine.
It is important to remember that the Fed did not ease monetary policy yesterday. It acted to limit the tightening that would automatically have taken place with the run-off of mortgage backed securities. It may not be enough. We need gradual growth in the balance sheet to support gradual growth in the money supply. (emphasis added by Ritholtz)
As always, it should be fun."
&
Road to Nowhere?
While it’s interesting to see how the Fed statement changes from one meeting to the next, it’s also instructive to see how it changes over time. That said, let’s look at almost one year’s worth of commentary on the housing market and see how far we’ve come:
Sept. 23, 2009 (link is to all statements and minutes):
Conditions in financial markets have improved further, and activity in the housing sector has increased.
Nov. 4, 2009:
Activity in the housing sector has increased over recent months.
Dec. 16, 2009:
The housing sector has shown some signs of improvement over recent months.
Mar. 16, 2010
However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.
April 28, 2010
Housing starts have edged up but remain at a depressed level.
June 23, 2010
Housing starts remain at a depressed level.
Aug. 10, 2010
Housing starts remain at a depressed level.
When something is “depressed” long enough, is it fair to say it’s a “depression”?
And my post would not be complete without a few words about Mr. Hoenig’s dissent (making five in a row). Today’s Yesterday’s release says:
Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected.
“As projected?” As projected by whom? Back in April, the Fed upgraded — yes, upgraded — its central tendency for 2010 GDP from its January forecasts. January’s forecasts had been for 2010 to fall in a range of 2.8 to 3.5, and that was raised in April to a range of 3.2 to 3.7. We’ve now got Q2 coming in at 2.4 (with a downward revision likely) and no one looking for anything better for the balance of the year. So what, exactly, is he talking about?
Cobra: The bottom line, the short-term trend is down and I hold partial short position overnight. I expect at least 2 legs down. We’re now in the very 1st leg, which I don’t think will last long. I’ll present evidences in tonight’s report. As for tomorrow, because today is Major Distribution Day (NYSE Down Volume : NYSE Up Volume >= 9), so 67% chances, it’ll be a green day.
Bespoke:
-Nasdaq Breaks 50 and 200 Day Averages in One Day: It's generally considered a negative technical signal when an equity index breaks below one of its major moving average lines. With that in mind, the fact that the Nasdaq broke down below both its 50 and 200-day moving average today has bullish technicians feeling pretty glum. Falling below both the 50 and 200-day moving average on the same day is certainly not a common occurrence. Since 1971, there have only been five other days where this occurred for the Nasdaq. Following those periods, the Nasdaq has averaged a gain of 0.36% over the next week and a decline of 1.2% over the next month, and in each case the Nasdaq was positive three out of five times.
-High Yielders Going Ex-Dividend: Dividend-paying stocks have caught the eyes of investors recently. For those interested, below is a list of the S&P 500 companies with yields of 3% or more that are going ex-dividend between now and the end of September. Remember, to receive the dividend, you have to own the stock by the close of trading on the day before the ex date. You can even sell the stock on the ex date and get the dividend as long as you own it at the close the day before.
-In the table to the right we highlight each decline of 2% or more in the S&P 500 since the March 2009 low. Today's decline is the 25th day since then where the S&P 500 has lost more than 2%, and it is on pace to be the worst day since July 16th. The average return on the day after these big down days has been a gain of 0.14% with positive returns 62.5% of the time. Over the next week, the S&P 500 has risen 75% of the time for an average gain of 1.81%. Additionally, in each of the five occurrences since the flash crash on May 6th, the S&P 500 has been up over the next week every time.
-S&P 500 Performance After 2% Declines Taking a longer term view, we also looked at the S&P 500's performance following 2%+ declines since the year 2000. Here the results are still positive, but certainly more modest. In the 99 occurrences where the S&P 500 has been down between 2% and 3%, the S&P 500 has averaged a gain of 0.1% the following day and 0.5% the following week. When the index is down more than 3% (57 occurrences), it has averaged a gain of 0.4% the next day and 1.1% over the next week.
Ritholtz:
An interesting statement from former Dallas Fed President and a look at the Fed's (in)action of the past year
Media Appearance: The Kudlow Report (8/11/10)
"Back on the Kudlow Report at 7:00 pm this evening to discuss the Fed, today’s big market drop, and maybe even some housing.
Here is food for thought regarding the Fed action, via (former) Dallas Fed Prez Bob McTeer:
The FOMC’s decision to limit the shrinkage of its balance sheet is modest indeed since allowing any shrinkage is, in effect, a tightening of monetary policy. They didn’t adopt easy money; just less tight money.
People argue that other things are more important in getting the economy moving again: removing the threat of major tax increases; removing the threat of major regulatory burdens, etc. Okay, but fixing those things are not an alternative to monetary measures. They are a complement. Do both. It really doesn’t matter which would be the stronger medicine.
It is important to remember that the Fed did not ease monetary policy yesterday. It acted to limit the tightening that would automatically have taken place with the run-off of mortgage backed securities. It may not be enough. We need gradual growth in the balance sheet to support gradual growth in the money supply. (emphasis added by Ritholtz)
As always, it should be fun."
&
Road to Nowhere?
While it’s interesting to see how the Fed statement changes from one meeting to the next, it’s also instructive to see how it changes over time. That said, let’s look at almost one year’s worth of commentary on the housing market and see how far we’ve come:
Sept. 23, 2009 (link is to all statements and minutes):
Conditions in financial markets have improved further, and activity in the housing sector has increased.
Nov. 4, 2009:
Activity in the housing sector has increased over recent months.
Dec. 16, 2009:
The housing sector has shown some signs of improvement over recent months.
Mar. 16, 2010
However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.
April 28, 2010
Housing starts have edged up but remain at a depressed level.
June 23, 2010
Housing starts remain at a depressed level.
Aug. 10, 2010
Housing starts remain at a depressed level.
When something is “depressed” long enough, is it fair to say it’s a “depression”?
And my post would not be complete without a few words about Mr. Hoenig’s dissent (making five in a row). Today’s Yesterday’s release says:
Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected.
“As projected?” As projected by whom? Back in April, the Fed upgraded — yes, upgraded — its central tendency for 2010 GDP from its January forecasts. January’s forecasts had been for 2010 to fall in a range of 2.8 to 3.5, and that was raised in April to a range of 3.2 to 3.7. We’ve now got Q2 coming in at 2.4 (with a downward revision likely) and no one looking for anything better for the balance of the year. So what, exactly, is he talking about?