Rendimento das famílias trava a fundo no início do ano

[Pata-Hari]

BOTTOM LINE: Everything points to a market that is flirting with breaking up and out. If the flirtation does not bear fruit then the backlash (downside) risks being a violent, shoot-em-up affair.



THURSDAY a.m.
August 21, 2003




What a Difference a Year Can Make
by David Nichols

I'm out in California working this week with Mohan of 21st Century Futures -- a genuine "Market Wizard" for sure -- and we were joking during another low-range, go-nowhere day how last summer lots of junior fund managers must have been fired after having to call the boss back to the office from vacation.

Last year was the craziest summer on record, with the S&P 500 dropping a quick 330 points in late May, June and July, and then re-capturing almost 200 of those points in a lightning rebound in August.



This year it looks like the surviving junior fund managers are dead-set on keeping the market neutral until the Top Dogs get back to work.

It's almost hard to believe now -- with the market so flat-lined -- that most of the current rally path that we've seen since the March 2003 low was traversed in only 22 trading days last year, in late July and August. That's right, the SPX went from a low of 775 to a high of 965 in only 22 sessions. Now we've traveled that same distance, plus about 35 points, but it's taken months and months of grinding to get to this particular spot.

This is all part of the illusion of the markets. How people feel about stocks is not just influenced by price -- it's also influenced strongly by context, and by the elapsed time of a move. A longer market move, even if most of it is sideways, tends to reinforce ideas in people's minds.

The following is a 60 minute chart of the S&P 500 since the beginning of June. I think the one word that best describes this chart is "noisy".



While the market has been gyrating around in this range, the VIX has managed to break down to new lows, showing people are growing more comfortable with the market as this range extends in time. That's not such a desirable thing. You want to see people grow more uncomfortable with a trading range, with a consensus forming that the market will drop like a stone out of the range. There's just no evidence of that happening; indeed, the VXN (the Volatility Index on the Nasdaq 100) is at all-time lows.

With the VIX under 20, the upside fire-power has dwindled down to nothing. I can't recall, off the top of my head, when a VIX under 19 wasn't a perfect signal to go short in the current modern market environment, so maybe we'll see that elusive 18 VIX soon.

We should also keep in mind that the end of August has marked important market turning points over the last 5 years. For all its seeming innocuous and noisy behavior at the moment, the market can turn on a dime at this time of year.

Sentiment Dashboard
by Adam Oliensis





SENTIMENT TANK: Filled by 0.7 points to 0.7% full of negative sentiment. While it did peel off of 0, it did so about as minimally as possible.

SHORT-TERM: Gauge remains in a neutral posture with a bullish bias.

MID-TERM: Progressed 7 points to 76% on the advance side with a confidence level of 2 (out of 7). The gauge pipped above the recent 25-75 range. That 1% violation is so close to the cusp that we have to suspend judgment for a day on whether momentum has broken up out of its recent range, especially in light of the low level of negative sentiment in the tank.

LONG-TERM: Unchanged at 93/7 with an unchanged confidence reading of a bullish 2. That slightly bullish confidence number has tugged the needle ever so slightly (fractionally) to the advance side of the gauge. But given that the weekly readings aren't confirmed until the Friday close, and given the "fractionalness" of the "plusness" of the reading, it's still officially "neutral." (This is officially a warning that the gauge is ripe to turn positive.)

BOTTOM LINE: Everything points to a market that is flirting with breaking up and out. If the flirtation does not bear fruit then the backlash (downside) risks being a violent, shoot-em-up affair.