August 9th, 2010

Waiting, Vacations or Just Plain Boring?

Art Cashin, head of floor operations for UBS, said this afternoon that coming to work today almost wasn’t worth the price of a subway token because trading had been so slow and boring. While some Talking Heads on CNBC said the reason was just that it was a lazy, August trading day when many are on vacation. Others said it was slow because many traders were sitting on the sidelines waiting to hear what sort of new stimulus the Fed might come up with in tomorrow’s meeting (and if they don’t, that will give the Bears an excuse to sell the market lower).

I’ll take a purely technical view and say that the market (that is, many of the market’s participants) are waiting to see whether all the others are able to push the Index above the 100-dma for the first time since it slammed through it from above in the beginning of May while a few others of a different persuasion are waiting for some safe distance beyond tomorrow’s full moon (according to the Lunar Cycle Theory, trading days in the waning phase, Full to New, are supposed to be more bullish than the other).

A move above that 100-dma would be significant for a number of reasons:

  • Index will be above all moving averages (50-, 100-, 200- and 300-dma) for the first time since the beginning of May
  • Index will have crossed above a neckline (somewhere in the 1120-1125 zone) of what we will later call an intermediate double-bottom
  • Since the decline from the April peak was so severe and so sudden, there’s relatively little resistance up to 1165 (+3.25%) and from there up to 1218, that April peak.
  • Interestingly enough, the distance from current levels to 1218 would be 9.5%, just about the same as the distance from the July low (1022) to the neckline.

Although I’m writing in mid-day, the market looks strong enough for me to say that the wait may be over and the market will successfully break above those double hurdles, the 100-dma and the neckline:

Readers to my Instant Alerts service (for more information, click here or the link to the right) already have seen that I’ve changed view of the market’s near-term direction. Rather than waiting for the correction that never came (11 months, with the market moving horizontally), I now see the odds of the market hitting 1165 greater than the odds that it will hit 1050 (the first step on the way to the missing correction’s ultimate goal of 950). I added 26 stocks to the model portfolio since July 22 and brought the percentage invested up from 35% to 55%. A cross above 1165 on increased volume and I’ll move to be fully-invested.

It could get very interesting as we approach the mid-term elections and after. Subscribe to Instant Alerts and you’ll see what moves I make shortly after I make them.

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  • Market Monk

    tomorrow is a full moon?

  • Joe

    Yes it is. I'll update the scorecard tomorrow for all those out there who howl at the moon.

  • Joe

    I stand corrected. Market Monk is correct. Tomorrow will be a New Moon so, according to the Lunar Cycle Theory, things won't be as good as it's been until after the next Full Moon on August 24.

  • Jesse

    you still think the game isn't rigged? look at fridays action and todays action and tell me it's not. wow, complete manipulation! I'm growing tired of playing in a rigged market….

  • Joe

    Rigged? Just because many players were on one side of the boat tipping it one way before the Fed announcement and quickly jumped to the other side and tipping it the other way?

    You say rigged but other than saying you got burned by trades you made on Friday and today and needing someone other than yourself to blame, can you be more specific about how it's rigged?