The bulls were very stubborn today and were determined to push the Dow to a new all-time high. That feat was accomplished on an intraday basis but the index closed below the old high once again. Still, I didn’t really like the action today. The A/D line on the Nasdaq was slightly negative at about 7:8 and the NYSE’s was barely positive at 17:16. Another negative was pointed out to me in an email I which I received at 4:04 today:
What’s your take on this record setting dow day as the ratio of up volume to down volume at each exchange was so poor? nyse: 7:9, naz: 8:10, amex: 1:3. Appears the headlines wont be telling the whole story.
My response was that, like I’ve been saying the past couple of days, the small and mid-caps aren’t participating in the fun. I have no idea why the whole world is so fascinated with 30 stocks (the Dow) when there are thousands of others that tell you the real story of what’s going on in the markets. Oh well, I guess that’s why I’m not on CNBC — I don’t believe the hype.
I guess I should feel lucky to have escaped with a nice little gain today from nothing but shorts. DGX turned out to be my big winner for the day, although it should have been much bigger. As you can see on the daily chart, it had a nice gap to fill right a the psychologically important $50 mark.
Even though I knew (I thought I knew) that it was headed for $50, the market action persuaded me to exit earlier than I had originally planned. I entered at 10:41, right after it broke under $54. The entry was a little early because it was still above the low of the previous candle. But I took it because I really like to short under whole numbers, which are typically resistance. So I thought I’d roll the dice on the entry and get a tighter stop and thus be able to short more shares. I covered half just after noon at $52.40 as the indices started to follow through on their earlier strength. I planned on holding the rest until the close with a loose trailing stop but I got antsy and covered the rest at $51.71 at 2:10, just minutes before it tanked and hit $49.90.
On the bright side, I also covered my other three shorts (CNO, SEPR and ENDP), which weren’t working, just after noon and that saved me some money because all three would have hit their initial stops. So I ended up making 2.78R (2.09%) on the day thanks to the 3.78R (2.84%) gain in DGX.
I took advantage if the clues from $TICK in deciding to bail on the shorts at noon. It kept spiking over 1,000 and that convinced me to bail, despite some other bearish signs I saw, like my moving averages and the A/D line.
Anyway, enough of that intraday minutia, here are charts of the Nasdaq, S&P 500 and Dow. As much as I want to be a short term bear this week, the indices appear to have completed normal retracements and seem ready to push higher. Of course, we could just chop around until Friday’s jobs report. Time will tell…
No changes…
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Lat | Up | Lat |
| Intermediate | Up | Up | Up |
| Short-term | Up | Down(-) | Down(-) |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
Strange, wondering when you captured those charts? I checked those same ones about 1hr after market close, and just did once again. They all showed a surge in volume today.
I’ve found that stockcharts.com is probably one of the most reliable data sources available. BTW, I just use the free charts, while you may be a subscriber. Anyway, free ones can’t be better/more accurate than subscribed ones, can they?
Hi Mike, Dave!
StockCharts, or the corresponding data provider, apparently needs some time to gather the volume data for the SPX and sometimes the INDU. You have to give them an hour or so. Nasdaq volume is always correct.
Olaf
I would add that energy and commodity stocks have been leaders in this bull market and now they clearly are not. That has to be contributing to the negative technical internal readings as these stocks continue to get clobbered.
“So I ended up making 2.78R (2.09%) on the day thanks to the 3.78R (2.84%) gain in DGX.”
Can you explaning the 2.78R and 3.78R for me please. Is that your risk reward you made? Thanks.
-B
The New Market Reality…
Heard over the water cooler…
“Hey Steve… tough day in the markets huh….. yeah – some really bad economic news came out…. so the Dow was only up 29 points today – bummer!.” “Hey – don’t worry Bob… I watch a TV channel called C..N..B..C… and these guys say now’s the time to get in before its too late…. yeah – I’m thinkin’ of maxin’ the line-of-credit on the house to buy whats called Dow Stocks… yeah – everybody’s gettin’ in”
“Yeah Steve… but I sure hope this Dow has better days than only going up 29 points…. my financial guy at Edward Jones told me the Dow should NEVER have a down day ever again…. and ya know what buddy?… so far he’s right”… “man – oh – man… I can smell the cash already!!!!” “Bob…. check this out….. “BOOOOOOOYA”…… heard it on a show…. that channel is so cooooool.”
Hi Mike -
Nice site you got here. I don’t like the action either – all the whoo whoo about the Dow, but I sat down and looked at the components today and this is what I found out:
- Not a single stock in the index made a new high
- Of the 30 stocks, 20 made their all-time high in 2000 or prior
- 21 are still down 20% or more from their all time high
- Adjusted for inflation, the Dow is only at 9,995 in 2000 dollars (Using Fed inflation calculator)
While the new high may not be representative of the whole market, I think these internals are. This market is skating on thin ice, an the only thing between it and a big drop are the mid-term elections.
Full story here:
The Dow’s Phony New High
Cheers,
Michael
Brad,
Yeah, R is a reward:risk multiple. See my recent article about R-Multiples.