Spying on SPY

OK, I’m sitting here watching CNBC “Fast Money” and on comes a trader talking about the “Capone Index” and shows a chart of restaurant and gambling spending dropping as it has done before prior downturns in the market. Yeah, folks “tighten the belt” with the booze and meals out and gambling before they forego the house payment, new tires, or clothes. It’s an “early indicator”… and it’s saying folks are shutting the wallet.

So I decide to do two things.

1) Get my Linux based automated stock screener box (and part time GIStemp) box running again. In some “room moves” it had been taken down, then the network ‘issues’ hit. So it’s “been a while”) running again.

It’s now running and doing it’s “update tickers thing”… about 100 down, 4000 to go…

2) Do an in depth look at volume in SPY (a useful trade indicator. I’d rather use total NYSE volume, but Bigcharts doesn’t give me a graph of that and I’ve not had time to look elsewhere.)

This posting is #2. (No potty jokes! ;-)

First off, remember that I’ve already made a “call” in the very long term chart section of the last WSW posting that we’re headed for a toppy section.

https://chiefio.wordpress.com/2011/03/21/wsw-sunday-20-march-2011/

First my comments on the NYSE, then the SPY.

Incipient “Red On Top” for DMI and Slow Stochastic clearly saying “be out right now” with it headed down. When it turns up again from near the bottom, then the market will be good for a few weeks again. MACD looks like a ‘crossover to red on top’ SOON, and prices are way far from the center of the SMA stack. I smell a ‘correction’ in progress. Not waiting for “sell in May and go away”…

Spiders (S&P 500) looks very similar. Again, the indicators are “be out”.
[…]
We’ve got a market set for a tumble longer term, and we’ve got really bad news flow. Not feeling the love from the long side… Short Stocks / Long Francs&Wip look best to me for a while.

Well, FXE, the Euro, has outperformed the FXF Swiss Francs. All those Arab Dictators sucking out their cash from Swiss bank accounts?

But what about a faster and closer look at spy. What does it say?

SPYing on SPY

Two charts, both with a bunch of ‘indicators’. First up, “the usual” with RSI, MACD, and DMI / ADX.

SPY vs FXE FXF with RSI, MACD, and DMI

SPY vs FXE FXF with RSI, MACD, and DMI

So, what do we see here?

This one also has “Price Channel” on it. (You can click the chart to get a larger one). OK, so we’ve got the generally rising price trend broken at about Feb 18. Then we have a ‘wobbling sideways’ but never reaching that upper “price channel’ level again. FXE, the Euro in dollars, that is the blue line, continues to climb as the dollar continues to drop. FXF the Swiss Franc has not broken its long term trend, but is ‘wobbled down’ at the moment to the lower edge of its channel. Now would likely be a good time to move dollars to Francs. It’s possible it’s a start of a new downtrend in the Franc, but the ‘best bet’ is just a dip in the ongoing trend.

But back at SPY… It’s not keeping up. In dollars, Francs, or Euro. It’s got “failure to advance” written all over it.

Look at the three SMA lines. The Simple Moving Averages are converging. They do that during “buy the dip” moments, too, so it could just be a ‘dip’ and time to buy based on this indicator alone. But it can also be the start of a ‘topping weave’ where the three lines weave together before separation into an upside down stack in a falling market. At a minimum it means “be very cautious now, the trend is no longer your friend”. But we must look elsewhere for further guidance.

RSI has come off of a “50-80-50-80” rising trend pattern where “buy the dips” is the norm; and it’s now split each side of 50. At a minimum, we’re in a sideways market (but you can tell that from looking at the sideways prices too). It’s not yet “near or at 20” so the downturn is likely not over yet (but we could wobble sideways for a while too… if, for example, the Libya and Afghan wars suddenly ended, news flow would shift the dynamic). But right now it’s saying “no joy in Mudville”. You’ve got all the risk, but gain is taking a break.

MACD is at the end of a long “be out” “red on top” phase and is calling a technical ‘trade in’ with “blue on top”, but it is below the zero line, so it is a ‘counter trend rally’ in a falling trend, per MACD. Which means exit if your price gets back up to the SMA stack. (If it’s a new rally, you can buy back in on the other side, you are managing the risk of a drop, not being greedy for the rise…) And the price is right on that SMA stack…

DMI? Still “Red on Top” be out. DMI is a bit dour and slow, so could be just slowing down your otherwise beautifully timed “buy the dip”… but he also brings sensible caution to the punch bowl… Notice he was “Blue on top” for the whole run up, only shifting to “red on top” at the roll over. Do not lightly dismiss his council… and right now that advice is “time to be sipping wine at a French Cafe in Euros”.

ADX is about 25, which nominally says to use MACD over Slow Stochastic (slower vs faster trade indicator) but also says this trend is of “modest” strength. And at the moment the trend is somewhat down. Finally, look at the “price bars”. Notice that 2 days ago we have one that looks like a cross or star? VERY narrow range. Ten to Eleven trade days ago, they were very wide ranging bars. That’s fairly typical. Volatility is greater to the downside than to the upside. But the degree of volatility on the down days ‘near the top’ in the last couple of weeks is a worry. That’s a classic “topping behaviour” in my opinion. Someone is shorting heavily on those down days and triggering stop loss orders. (IMHO).

So we’ve pulled away from the bottom price channel, but have not been able to revisit the top on. Not good.

Next up is SPY but this time with Volume, Slow Stochastic, and Williams %R indicators.

SPY with Volume, Slow Stochastic, and Williams %R indicators

SPY with Volume, Slow Stochastic, and Williams %R indicators

Well start with the other tickers first. TBT is the “bond short” and it’s moving with stocks right now. Stocks and bonds often move in opposition, so a ‘bond short’ ought to move in opposition short term. XAU is a combined gold and silver index. It is showing twin peaks of topping action with “failure to advance” at the moment. The “drop” in the middle of the peaks is a bit on the strong side. Be very wary of the metals markets right now, and gold miners in particular. Money leaving stocks is not going into gold, but looks like it may be headed to bonds.

Both Williams %R with the zero crossing and Slow Stochastic have been giving good ‘trade signals’ at this time. The trend breakdown makes MACD work less well (until a strong downtrend develops) and during the “confused times” Slow Stochastic and Williams %R can work a bit better for faster trades.

Slow Stochastic is “at a high”. If you look back to early February you can see that it can “hold a high” for “a while” during a trending market. But we’ve broken the trend. In this kind of ‘sideways roller’ with ADX ‘near 20 or below’ it is more likely that a Slow Stochastic at a high over 80 means trade out. At a bare minimum, put stop loss orders in place or buy puts.

Williams %R is rather similar to MACD in behaviour. It can ‘twitch’ just a bit faster sometimes, and hold you in a bit longer at others. You don’t really need both of them, but I use them both anyway. It is saying “trade in” and you can see that it called the trade in earlier than did MACD. On the 21st rather than the 24th. But he, too, is saying “be ready to exit the trade”. Not do the exit, just prepare for it. When Williams %R drops through zero, that’s the formal exit call, just as Slow Stochastic headed “mouth down” with “red on top” is a trade exit. So not quite there yet, but…

On the price chart you will find two thin red lines that are Bollinger Bands. They show the movement in std deviations of recent movement. We’ve stopped tracking the upper Bollinger Band and started tracking the bottom one. Yes, a recent ‘pull off’ but it’s not getting back to the top one. Just a “pop” before ??? the drop? Notice the two lines got close to each other at that last top? Losing momentum at the top. They’ve now widened a bit as we gain momentum in the drops. The direction of the band has also shifted from upward to sideways. Not good…

OK, last indicator. Volume.

Look at how it’s been higher on down days than on up days. The red bars are higher than the black bars.

As we’ve approached this ‘local top’ the volume is just drying up. At the last bottom, it was way high during the drop. Folks want to sell more than they want to buy. Current volume is well below that sideways moving average of volume line. Not good. Very much not good.

OK, put it all together and what do you get?

Folks pulling in spending. Market nervous about lack of jobs growth. A “questionable war” or three… Japan being rocky and with “spillover” globally on dependent manufactures. A long market run, with a context of “late in the game far from the 5 yr weekly moving averages”. Recent advance broken, and volume showing lack of buying interest with “someone” providing volume to the downside (most likely professional shorts ‘beating the bushes’.

To me it says “correction” and we’re going down for a while pretty soon. Maybe not tomorrow, but soon.

Mutual Fund and payroll auto investing plans buy stocks the first couple of days of the month. I’d expect we’ll see a couple of up days on that demand, with hedge funds selling out their long positions into that demand, then the shorts to come in about April 4 or 5 (Monday or Tuesday).

So I’m not putting any money into this market at this point. I just don’t like what I see. I’m in a spread of other currencies along with some WIP and TIP and waiting for a ‘shorting opportunity’. But mostly just waiting.

Live Versions of the above charts:

SPY with RSI MACD and DMI

SPY with RSI MACD and DMI

SPY vs XAU and TBT with Volume, Slow Stochastic, and Williams %R

SPY vs XAU and TBT with Volume, Slow Stochastic, and Williams %R

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money and tagged , , . Bookmark the permalink.

13 Responses to Spying on SPY

  1. R. de Haan says:

    I think you’re spot on with your analysis and your conclusions.

    There was some bad news about Quantas today and as we continue to throw big bucks at the Russians, Venezuela and the Arabs we can kiss economic recovery goodbye.
    http://www.ft.com/cms/s/0/7fa28b96-5a2f-11e0-86d3-00144feab49a.html#axzz1I2QaABBW

    With green dumb ass ideologues in Government pushing their completely absurd agenda of Global Government and energy poor economies = poverty, we are in deep trouble.
    http://notrickszone.com/2011/03/29/another-german-will-soon-unveil-a-master-plan-for-a-transformation-of-society/
    The Fukushima nuclear crises has completely eradicated the political basis of Merkel and pushed the country into the hands of the Greens.

    So we currently have the first, the third and the fourth biggest economies of the world under a severe assault from environmentalist hubris resulting in a close down of perfectly well functioning nuclear plants and declaring war on coal and oil at the same time.

    I think the time has come to pack my bags and move to a place where sanity overrules hysteria before it’s too late.

  2. wolfwalker says:

    I don’t know a damn thing about the stock market except that I don’t trust it … but I do recall that in late 2008, during the market’s big plunge, Ambrose Evans-Pritchard wrote a column pointing out that the Baltic Dry Index, which tracks the price of bulk cargo space, was nosediving and had lost something like eighty percent of its value in a few months. He suggested quite strongly that this was a symptom of a big downturn in the near future, because a falling BDI means factories are cutting production, which means they expect lower sales in the near future. He was, as we now know, quite right.

    Well, the BDI is nose-diving again. It peaked last June at above 4000, bottomed last month at around 1000, and has struggled back up to about 1600 now.

    If it means the same thing this time as it did last time, well…

  3. P.G. Sharrow says:

    I have a local forward indicator. My wife and her son have a Dayspa. She does facials and skin improvement, he does hair color and cuts. When things slow her bookings slow first and when things get very bad his bookings slow. During the last few months things have improved to merely slow. As lots of competitors have gone out of business, and the well to do have gotten used to lower cash flow. Now the dead cat is heading back down.

    My experience is in farming. It looks like a very good time to get into farming or at least into good farm land and businesses that “farm” the farmers. Machinery, fertilizer and services. When farmers make money they up grade and and expand. pg

  4. P.G. Sharrow says:

    @R. de Haan, There is no place to run to, You must “stand and deliver”do your part in the correction. Only 2 more years and things will be set on a better path. You just need to stand your ground and say HELL NO to those that would push things over the cliff. Have faith my friend. pg

  5. Verity Jones says:

    @P.G.Sharrow, let’s hope the farmers do continue to win out. Elevated CO2 – good / colder weather – not so good.

    Farmers taking advantage of Britain’s warming climes to grow Mediterranean crops like olives and apricots. http://www.countryfile.com/feature/country-matters/british-olive Government advice? – Pah!. And of course I don’t need to mention to readers here the recent Mexican freeze

  6. E.M.Smith says:

    @R. de Haan:

    FWIW, one of my ‘basic suspicions” is that the bulk of the money “moving markets around” is from OPEC. They have about a $Trillion to shove at markets THIS YEAR. They simply can’t spend it all, even if they try.

    OPEC exports: $847 Billion per

    http://www.eia.doe.gov/cabs/OPEC_Revenues/Factsheet.html

    BEFORE the price run up to $100+/bbl.

    So where does it go? As the percapita figures show, they could give it all to their people to spend. But they don’t. They do invest some of it in things like oil refineries, ports, etc. But the lions share goes off to banks in other countries in case something like his happening now were to happen… And those banks put it where?

    Treasury bonds of the world. Stock markets of the world. Gold. Silver. Private ownership of land and companies.

    http://www.ehow.com/about_6325340_global-market-capitalization-stock-markets.html

    puts the global capitalization of stock markets at

    According to the World Federation of Exchanges, the total global market capitalization in January 2010 was $46.634 trillion. The WFE consists of 54 stock markets that make up the regulated stock markets of the world. Regional breakdowns show the Americas’ market capitalization at $18.985 trillion, the Asia and Pacific region with a market cap of $14.099 trillion and Europe, the Middle East and Africa finished January 2010 with $13.549 trillion of stock market value.

    $46 Trillion. So, 46 years of this to “owning the whole world” of all stocks of all countries. Better be putting some into land and bonds…

    We’ve been at this since at least 1970. Note on that DOE chart that 1980 was $600 B in “real 2005 $”, though it dropped to “only” $200 B in the middle years…

    So we’re into it about 40 or 50 years, and they ought to own about 1/2 the total global stock market if they invested only in it… So I’m pretty sure they put some in bonds instead…

    Oh, and Saudi has about 50 more years to run at the present rate of oil production; give or take a lie or three.

    So when a “whale” is moving some money out of the US Stock Market and into, oh, Euro denominated bonds via a Cayman bank; don’t think Bill Gates or Opra, think National Trust of Dubai….

    And when the USA puts a freeze on “Kadaffi US Assets” and the Arabs know from “last time” that all dollar denominated transactions must “clear” though the US Central banking system, thus be tracked, and they know that Switzerland is now a tamed lap dog for the USA Govt… they now move their money to “other places and other currencies”.

    And what do we see happening? Oh, other places and other currencies rising vs US Dollar and the Swiss Franc not participating to the same degree as the the Stock Market rolls down…

    So my personal “Whale Watching” includes that idea as a ‘probable’ any time the USA is pissing in the beer of some Muslim or Arab country or dictator… or there is “significant unrest” in an OPEC country.

    Proof? Nope, not a shred. Just reasoned examination of the people involved and what they are likely to do…

    So, for example, how much of that “Chinese holdings of US Treasuries” are actually held by a Chinese company that is owned by a Cayman holding company that is owned by a Master Limited Partnership in The Cook Islands that has units held by an OPEC “player”? So as China takes US dollars and wants to “launder them” into assets, the portion that WOULD go to a Saudi or Kuwati oil company can have the “investment portion” hidden in “Chinese investments”… That way, when some foolish US President “freezes OPEC assets” (as has been done before… and cost us dearly for about a decade) they will still have lots of assets to play with…

    Repeat the model with every oil importing country in the world…

    How much of Exxon or Total is owned by an OPEC player? Good luck trying to figure that out…

    That the Euro is rising instead of the Swiss Franc is a smoking gun to me. Obama just had the Swiss freeze Kadaffi’s cash a while back… Then the Yen and Euro run UP despite the damage done to Japan and that it will be years before all the bills come due? And folks think it’s because all the tsunami bills need paying?

    I think it’s something else. But “we’ll see”.

    Love the links, BTW…

    Per moving: I understand there are some nice places in Latin America where you can buy land cheaply and there is enough sun to power the whole place just from the trees and shrubs that need cutting each year… and with “4 season” farming…

    @Wolfwalker:

    2 things go into the Baltic Dry Index. Number of shipping tons capacity and demand against it. Short term it’s a trade indicator, long term it’s a ship build/scrap indicator…

    With that said: Yeah, dropping. More importantly, it’s dropping because Chinese ship loadings are down…

    I suspect “double dip” is going to be “rocky road” ;-)

    @P.G. Sharrow:

    I’m just waiting for the spring when New York Traders minds turn to thoughts of farms and grains… and all the damn snow has melted ;-)

    @Verity:

    A common ornamental olive sold in the nursery here is “Russian Olive” … It’s, ah, “cold tolerant”.. (but not edible really)

    http://en.wikipedia.org/wiki/Russian_olive

    So there are “cold tolerance” genes in the olive clans..

    http://www.novavine.com/olives/varieties/mission.asp

    The mission olive, as the link states, is “cold tolerant”. They used to farm them where I grew up. It sometimes snows there and the lowest I personally remember was 19 F (but I think it sometimes gets colder). I’ve seen them further north..

    Notice that on slide 25 here:

    Click to access 17346.pdf

    you can choose the flavor character of the Mission olive oil by when you pick, the others less so… Also on page 26 is a nice picture of an olive orchard in snow. On the “cold hardiness” page ;-)

    http://www.oregonolivetrees.com/index_files/Lucca.htm

    Shows someone starting an olive farm in Oregon. They showcase a cold tolerant variety.

    Texans:

    http://aggie-horticulture.tamu.edu/extension/fruit/olive/olive.html

    Claim it grows down to 17 F, suvives to 12 F with damage, and freeze kills to the ground in 10 F. They ought to know…

    The page also covers the “vernalization” requirement for fruit set. The olive needs a ‘cycling’ from cool to warm to cool to warm to set fruit in

    Climate is the most important limiting factor in the distribution of the olive in Texas and elsewhere. Temperature controls growth, reproduction, and survival of the olive. Growth begins after mean temperatures warm to 70 degrees F in the spring and continues until temperatures drop below this point in the fall. Unlike the fruit trees that we are familiar with, such as the peach, the olive does not set fruiting buds in the fall. Instead, the olive will only set flower buds after being exposed to cool night and warm day temperatures during the winter. This unique warm day/cool night vernalization is essential for fruit bud development.

    But it can’t be that “warm” if they are doing it in a Texas Winter and in Oregon!

    Though these folks:

    http://www.olive-bar.com/site/1263206/page/612827

    claim it isn’t actually ‘vernalization’ but stone fruit style ‘chilling’ that’s required:

    Chilling requirement varies among cultivars; those grown in California have relatively high requirements (1000 hr). Cultivars grown in northern Africa fruit well with only a few hundred hours of chilling. Some texts erroneously refer to the chilling requirement as “vernalization”, since flowers develop during or following (as opposed to before) the cold period. However, floral induction is known to occur in November prior to flowering, so olives are chilled, not vernalized. Cold hardiness may approach 5-15°F in midwinter when fully acclimated, but foliage and fruit are damaged by frost during active growth.

    The bigger issue that they see is damp rotting:

    Olives are supremely adapted to Mediterranean climates, and cannot tolerate high humidity due to disease and physiological disorders. Fluctuations in humidity and temperature 1-3 months following fruit set cause a condition known as aseptic apical decay on fruits. Part of the fruit surface turns black, and the fruit usually abscises; even in Mediterranean climates, losses may reach 30%.

    So you need a fairly stable summer…

    To me it looks like the “cold tolerance” isn’t the issue so much as the need for a damp tolerant variety. Unless you regularly get below 15 F or -10 C.

    http://www.netafim.com/crop/olive

    say humidity over 80% at flowering and you lose crop

    Areas receiving a mean annual rainfall of 400 to 700 mm are most suitable for olive growing. Supplemental irrigation during summer increase fruit yields by 30 to 50 %. A long, sunny, warm summer results in a high oil content of the fruit. Olives perform well with humidity varying between 40 – 65 %. High humidity, above 80%, at flowering causes flower drop and infestation of sooty mould. Olive is a long-day plant and benefits from prolonged sunlight (2400 to 2700 sunshine hours annually) and warm environment. Important varieties include Arbequina, Barnea, Koroneiki, Manzanillo, Kalamata and Arbosana.

    But the folks in Texas they just don’t take “can’t” for an answer (‘side, ya’ll done sayed it wrong… it’s KAINT, dang it all… 8-)

    http://www.texasoliveoilcouncil.org/

    The Texas Olive Oil Council, founded in 1994 as a non-profit organization, set a goal to successfully cultivate olives in Texas. The experts said that it couldn’t be done, but members of the Texas Olive Oil Council are proving them wrong. Our mission is to gather and disseminate the most current and pertinent information for growing olives and making olive oil in Texas. We also develop and promote standards for the production and labeling of Texas olive oil and to protect, inform, and engender the trust and loyalty of the consumer.

    http://www.texasoliveoilcouncil.org/info/info_thermal_adaptability_olive_pg1.htm

    Has a nice map of where you can grow olives in Texas along with more about olives and weather than you would ever want to read in tiny little type…

    Did I mention I really like olives? ;-)

  7. Tony Hansen says:

    R. de Haan,
    ‘…I think the time has come to pack my bags and move to a place where sanity overrules hysteria before it’s too late’.

    Do you mean you’ve found one?

  8. Jason Calley says:

    Here is an olive that may be a bit more damp tolerant:
    http://www.chestnuthilltreefarm.com/Exotic-and-Tropical-Fruit-Arbequina-Olive-53339.Item.html
    I bought two of them last fall and they are in flower right now here in north Florida. I’ll let you know if I get any olives!

  9. David says:

    So???, a double dip, looking more probable.
    Is QE3 far behind?
    If QE3 happens, who will buy the dollar debt?

    On a personal note I wish to get to a position where I do not have to be concerned about such things. Perhaps I will grow some golden manderin tangerines, must have something to barter.

  10. Malaga View says:

    @ E.M. Smith
    I suspect “double dip” is going to be “rocky road”
    That’s my guess…

    they ought to own about 1/2 the total global stock market
    If the other 1/2 owned by the pension funds???
    Then nobody directly owns anything anymore…
    Then nobody gets hurts when it goes “bang”…
    Then nobody losses when it gets nationalised…

    Dangerous place when nobody has anything to lose!

  11. Malaga View says:

    And I don’t think precious metals will help… they are a great way to suck in hot cash from the system.

    If the market delivers tungsten to the ETFs then that leaves plenty of room in Fort Knox for nationalised gold coins… rinse and repeat.

  12. R. de Haan says:

    P.G. Sharrow
    @R. de Haan, There is no place to run to, You must “stand and deliver”do your part in the correction. Only 2 more years and things will be set on a better path. You just need to stand your ground and say HELL NO to those that would push things over the cliff. Have faith my friend. pg

    Thanks for the encouraging words but I have arrived at a point of no return.

    We have no control over budgets and no control over the decisions of the European Commission.

    If Europe continues it’s current path I don’t want to be a part of it.

    http://motls.blogspot.com/2011/03/shimon-peres-visits-lhc.html

  13. P.G. Sharrow says:

    @R. de Haan; Question, how large a army does the EU have? pg

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