Venda do Novo Banco pode representar 8% do M&A na banca europeia este ano

[Ochoa]

WEDNESDAY a.m.
August 27, 2003



The Fifth Time
by David Nichols

Looking at the 30 minute chart from this morning left me scratching my head, thinking "I've seen this chart before..."



How many times are we going to see this same pattern play out? I'm talking specifically about a tough, grinding, hard-fought move back to the top of the trading range, then a swift and violent sell-off. By my count, this is the fifth time we've seen this unfold, from almost the exact same price levels. Just for fun, let's look back at the 30 minute charts since the June 6th spike high, to see the uncanny similarities.


It's just plain weird to see this same thing over and over, and it really underscores what a confusing morass this market has become over the summer. Nobody has any conviction, because there isn't really any to be found -- either on the charts or trying to interpret the "macro" environment. Inflation, deflation, "reflation", growth, recession, earnings, unemployment, liquidity, debt, current account deficits, bonds...who knows? Nobody does. And that's how you get such a tight, repetitive summer trading range.

But what to make of these quick sell-offs, like this latest 30 point SPX drop off Intel's "surprise" positive announcement and gap to the upside? I believe it's a direct symptom of too much bullishness . Just as the bulls gun the accelerator to break out to the upside, they find the sentiment tank is empty, and the market starts quickly sliding back downhill. Enough energy then gets stored during the backslide to grind away at the summit again, but there is never enough fuel (negative sentiment) to get over the hump.

Because really, it's not the bulls job to break the market out to new highs. The bulls have already made their bets. You need bears to break the market out to the upside, in a furious rush of short-covering and put selling. There just aren't enough bears left at this point.

One of these days -- probably soon -- the market is going to start sliding back downhill and not be able to reverse course. This would happen on a solid move below SPX 976, that then carries on well below SPX 965, and it should be accompanied by some unexpectedly bad news, that gets interpreted as bad news. That will be the tip-off that the big sentiment shift back to rising bearishness is underway.

It's theoretically possible for the markets to crank uphill and break out to the upside -- anything is possible, after all -- but it's going to take a rising VIX and rising market to accomplish this. That's a difficult task. It didn't happen yesterday, as the VIX tumbled down quickly during the expected bounce. If the VIX had held up near the highs as the market rebounded, then the upside would have a much better chance. But the VIX dropped from 21.70 to 20.33 in the final 3 hours of yesterday's trading. That's a problem.

The market is likely setting up for a larger scale sell-off over the next few weeks, after this quick upside retracement runs out of steam.

Sentiment Dashboard
by Adam Oliensis



SENTIMENT TANK: Drained 1 point to 10% full of negative sentiment.

SHORT-TERM: Hourly gauge crossed into a "turning up" mode, trying to start an advance phase, though it's very early in that effort.

MID-TERM: Remained at 83/17, officially neutral, but the negative bias was removed. Could still roll over into a new decline phase, but now equally ripe to give a Continuation Buy signal as it starts up again. Still above the 75/25 box in which it has lived since June, which is confluent with the slightly positive Confidence reading of a bullish 2.

LONG-TERM: Regressed to 9% on the decline side. W/W still declining, but the week isn't finished yet. Backed up a point from yesterday morning's reading. Confidence is slight at a bearish 1.

BOTTOM LINE: Still oscillating in a pretty neutral area. On a short-term bullish note, yesterday saw the third consecutive day with the Put/Call Ratio at 0.90 or greater. The following chart illustrates the recent history of such readings. The blue arrowheads indicate the days on which that situation occurred.



While no secondary indicator is perfect, and this one did not work perfectly near the October '02 low, it has worked in all but that most virulent downtrend, and currently suggests short-term upside. One cautionary note: this last week of August may prove out to be a non-normal period, what with so much volume absent from the market, which COULD force this indicator into irrelevance. Nonetheless, key support levels held yesterday, and this chart suggests at least a bounce. I believe the bias into the weekend has a good chance of being positive. (Assuming the economic data continues to be positive.)


un saludo