Market Tells Evening Edition (January 2nd, 2008)
By
Rennie on Wednesday, January 2nd, 2008 at 11:30 pm
Perhaps it was just a case of institutional investors extending their
vacations, but overall institutional participation was surprisingly muted
Wednesday. Both gauges of NYSE TICK action that we track settled in positive
territory, reflecting an absence of heavy sellers. TICKscore settled at +6,
cumulative Adjusted TICK +226. Wednesday marked only the fourth time in the
five-year history we have of Adjusted TICK data in which the indicator has
closed in positive territory on two consecutive down days. In the prior three
cases, the S&P rallied sharply over the next couple of sessions.
New 52-week lows came in at only 190 vs. 262 on Monday despite the S&P trading
well below Monday’s lows. That creates the potential for a positive divergence
as it indicates a relatively small number of stocks were driving the market
lower Wednesday.
While the lack of heavy sellers on such a solid down day (SPX -1.4%) could be
a short-term positive, we should keep in mind that the cumulative TICKscore
has clearly violated both its December and late-November lows, signaling
persistent institutional selling. Until this indicator begins making higher
highs, the market will have a tough time putting in more than a short-term
bottom.
Interesting to note that the signal board is drying up fast as we enter the
new year. This is particularly evident when only setups that have triggered in
the last twelve months are considered (see board). The relative absence of
fresh bullish signals isn’t a positive sign longer-term.
The Last Hour indicator fell into new multi-year lows over the Christmas
break, continuing the unprecedented three-year slide for this smart money
indicator. Given its consistently reliable performance over the last forty
years (see long-term chart), there’s little reason to doubt it’s once again
functioning as a lead indicator. Declines of this magnitude have only been
seen in 2000 and 1987, and declines lasting 2+ years have only been seen in
the 1971-72 and 1975-76 periods. All cases ultimately led to a significant
decline in equity prices over the longer-term. This is the only time we’ve
seen such a massive decline in the Last Hour spread out over a three-year
period. If history is any guide, it’s when this long-term decline finally ends
and the retracement begins that the market is most vulnerable. And this will
remain the case until the Last Hour’s entire move down has been reversed, a
process that’s likely to take years.
Market Tells Evening Edition (January 2nd, 2008)
By Rennie on Wednesday, January 2nd, 2008 at 11:30 pmPerhaps it was just a case of institutional investors extending their
vacations, but overall institutional participation was surprisingly muted
Wednesday. Both gauges of NYSE TICK action that we track settled in positive
territory, reflecting an absence of heavy sellers. TICKscore settled at +6,
cumulative Adjusted TICK +226. Wednesday marked only the fourth time in the
five-year history we have of Adjusted TICK data in which the indicator has
closed in positive territory on two consecutive down days. In the prior three
cases, the S&P rallied sharply over the next couple of sessions.
New 52-week lows came in at only 190 vs. 262 on Monday despite the S&P trading
well below Monday’s lows. That creates the potential for a positive divergence
as it indicates a relatively small number of stocks were driving the market
lower Wednesday.
While the lack of heavy sellers on such a solid down day (SPX -1.4%) could be
a short-term positive, we should keep in mind that the cumulative TICKscore
has clearly violated both its December and late-November lows, signaling
persistent institutional selling. Until this indicator begins making higher
highs, the market will have a tough time putting in more than a short-term
bottom.
Interesting to note that the signal board is drying up fast as we enter the
new year. This is particularly evident when only setups that have triggered in
the last twelve months are considered (see board). The relative absence of
fresh bullish signals isn’t a positive sign longer-term.
The Last Hour indicator fell into new multi-year lows over the Christmas
break, continuing the unprecedented three-year slide for this smart money
indicator. Given its consistently reliable performance over the last forty
years (see long-term chart), there’s little reason to doubt it’s once again
functioning as a lead indicator. Declines of this magnitude have only been
seen in 2000 and 1987, and declines lasting 2+ years have only been seen in
the 1971-72 and 1975-76 periods. All cases ultimately led to a significant
decline in equity prices over the longer-term. This is the only time we’ve
seen such a massive decline in the Last Hour spread out over a three-year
period. If history is any guide, it’s when this long-term decline finally ends
and the retracement begins that the market is most vulnerable. And this will
remain the case until the Last Hour’s entire move down has been reversed, a
process that’s likely to take years.