Tuesday, January 24, 2012

Technical Turn Tuesday

We have that nagging gut feeling again. Ok, the data continues its trend of "better than expected" surprises with the Euro PMIs but there are factors appearing that leave our post of yesterday of a generalist "it drifts higher" ramble in need of a tweak. Our concerns aren't linked to news flow or the usual developments in Greece, Iran or whatever bad twist the blogosphere has dug up about imminent disaster (we see Barclays has started looking at Skyscraper building as the next portent of doom, especially for China), but the butterflies we feel in the stomach are as follows:

1) The last few days have seen a rush of more spivvy "get me in" euphoria. Nice start to our bigger-bullish view, but nothing goes in a straight line and this phase may be over.

2) The technicals. Soothsayer signals (see glossary) abound with turn signals in the Dow, EuroStoxx and various European index components (DAX, MIB, CAC) and noticeably in a raft of AUD crosses with their normal equity correlations. The shape of most risk asset climbs have been getting thinner in sharp wedge like manners. Dojis spotted?

3) Recent highs in many equity indices means stops have been driven. Leading back to point 1).

4) It's Tuesday. We like Tuesdays for turns. As the run has been up then the turn should be down.

5) Momentum change leads to model driven accounts changing direction and we still think that January has seen the models dominate market moves more than usual as "real" players have mostly sat on their hands and core beliefs unless been forced otherwise. Spivs excepted.

Now the above are hardly Macro and it's not easy when the Heart says buy yet the Gut says sell, but the above are worrying enough to make us want to get out of shorter term longs and take a breather. So despite us remaining general bulls we are going to tune positions and prepare for a shorter term down swing to allow us to re-accumulate longs before (we hope) resuming the grind higher.

19 comments:

Saul Bollox said...

Dojis? Turnaround Tuesday?

You been slumming it over on our technical blog again, guv'nor?

Anonymous said...

I found that a lot of people are waiting for a pullback to jump in, which means that there might not be a pullback here.

abee crombie said...

Europe looked like it wanted a pull back, but crazy spoos wont have it

BTFD is back ..arg

Anonymous said...

If enough people look to sell when DeMark says sell when does DeMark become a contrary indicator?

Steve said...

With you on that. EC QE will probably limit the downside. I looked at the past three years or so and 2/3 of the time we get a reversal following equity option expiration (last Friday). It didn't work during the US QE2 so it will be interesting to see what will happen now, with Draghi at the wheel. Jury is still out.

Amplitudeinthehouse said...

Life's that tough over there amongst the ski bunnies you only have time for a quick glance at the charts hey?

Leftback said...

It will take at least a couple of JBTFD events that get sold lower before the recent arrivals are chased out.

Treasuries and FX risk proxies (AUD) are probably a good indicator of where we are, and they are not crumbling yet. Volume is piss weak, a lot of money is still on the fence.

Right now the true believers still think that Super Marios and China are going to save us, and those revenue misses by US companies are just bad luck.

Polemic said...

Saul .. nahh geez been playing "pick up sticks" on me own ones.

Anon and Abee. "Patience young grasshoppers" - or .. otherwise .. yeah buy back on new high breaks.

Anon re demark. I have a strong belief that all technicals are to a great extent self fulling. The more fashionable they are (or rather the more money that is placed on the back of them) the better they will work. Pick any strange voodoo, it just happens demark is the new black. As for contrary indicator in the case you suggest .. Once they have all sold and it doesn't go down. Markets are all about determining what the fashions are. And they change. I even remember fondly days when the US trade figs were the most important figure in the world. Ahh nostalgia .

Amplitude - Basically Yes. Actually last thing we want to get bogged down in this blog is in reams of charts and lines as think enough others do that and you just open yourself up to arguments in technique. People get very protective over their own churches of belief. Suffice it to say it also takes ages. Above comments were personal feelings as I said .. Gut feeling and more than long lists of rsis macd's stochs, lines, fibs, ganns, bollingers, parabolas red 13s and green 9s etc ,..

abee crombie said...

technicals are like the jokers on fast money. they are good at telling you what the market DID, not what it is going to do

Thats why I like soothsayers like TMM lol..

the more I learn about the markets the more I realize even the smart HF ppl I used to think had superior knowledge/resources/info dont have much of a better idea than average most of the time (am I wrong), they just manage risk better and hopefully capitalize when they do have an insight.

Right now looks like one has great conviction, hence the grind up

Thanks polemic, I still manage a 'virtual' book anyways so its easy to be patient!

abee crombie said...

Right now looks like no one (oops) has great conviction, hence the grind up

Leftback said...

when you don't know what to do, don't do nuffink.
innit?

Leftback said...

I guess the art of it is to have most at risk when one is most confident of the outcome, and the least when one is clueless.

In other words sit tight, play small ball, until the two or three big obvious opportunities of the year come along, and then go BOLIVIAN.

Polemic said...

LB - WELL PUT

Amplitudeinthehouse said...

I'll bet Yennish v Bolivian anyday :)

Nemo Incognito said...

MXNJPY - whose stops are getting run today? Not mine.

Price action is pretty wacky - sadly feel like CTAs are running over a few of my shorts and hedges. To say that sentiment indicators, technicals, etc etc on AUD look toppy would be an understatement. Don't think China has the stones to bail out all the commodity markets people are hoping it does.

Anonymous said...

Nemo, agreed on the AUD but, in the absence of any conviction anywhere, the grind upwards seems the likely trajectory. The next couple of days would appear to be critical. I've got a smallish short. Using the current grind up in the ASX200 to lighten some problem longs.

Nic said...

So Apple smashed it, and all the stock traders I see on twitter are raging stock bulls.
When markets stop going up on good news ...

Polemic said...

Nic . agree. See latest post top para.

Leftback said...

AUDUSD and EURUSD seem to be confirming a turn. DXY and 30y undecided but today is Wizard Day, FOMC has a lot to do with that.

VIX making higher lows, but protection still cheap. For those who like to short the weakest of the herd, GDX and EEM are lagging.