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Wednesday, January 23, 2008


... here's that probe

the s&p opened down again this morning at 1285, accompanied by another huge fall in the treasury yield -- the ten-year yield now under 3.30%! on december 26, the yield was about 4.28%, meaning that over 19 days it has fallen 23%.

i have data for the ten-year back to 1962, and this is the fastest such fall in the data. that is not to say that this is the worst, however -- comparable points include the spectacular 29-day collapse in march and april of 1980, where the yield over 29 days fell 24%. in the aftermath, the s&p rose from around 100 to 142 in november.

the nasdaq 100 opened as low as 1725 on the heels of apple and ebay news, undercutting yesterday's low slightly. 36% of the 100 notched a new yearly low yesterday -- a reading on par with the very worst days of the 2000-2003 collapse, with the 1998 long-term capital crisis, with the 1996 "irrational exuberance" downdraft. there is a pretty important level around 1711, and after that potentially an air pocket to 1485 (gulp).

sentiment measures are getting very bullish now as well, with small traders very bearish. the financials are also seeing some buying -- the banking index is up 5% at 10:45 -- stemming the downside leadership of the sector. indeed, real estate, transports and consumer services have also been improving in terms of relative strength in the aftermath of january 9 -- this was also a notable precursor to the reversal off the august lows.

another observation -- both yesterday and today saw massive drawdowns interday (that is, overnight in the futures market, from the close to the open). yesterday's intraday trade (that is, during regular market hours, from the open to the close) was quite positive. this is something i've studied a bit with respect to the nasdaq 100 -- when interday trade becomes significantly negative over some span of time while intraday is improving, it often spells out at least a local low. the rationale is that the premarket futures can be used to push stocks lower with relatively little money, washing out weaker hands and allowing stronger hands (presumably the same folks selling the premarket down) to accumulate. the timing, however, is imprecise.

studying the 21-day average of both intraday and interday points as a percentage of the 21-day moving average of the NDX itself, we're getting exactly that condition -- index value gained/lost intraday (during trading) has been improving since january 8, while index value gained/lost interday (overnight) is spiking lower.


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