ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Monday, July 07, 2008

 

continuing market weakness


good stuff today. first dr. steenbarger, who posted a quadrumvirate on markets over the weekend -- on sentiment, on materials, on technicals not once but twice. his conclusion, broadly -- as oversold as equity markets appear to be, weakness still was building through the end of last week and expanding into previously strong sectors. and it was doing so not in a crisis pattern but in classic bear market fashion -- a slow, grinding decline without appreciable panic and capitulation.

his comments on materials may be especially relevant to holders of DUG, though too late for KOL. demand destruction is on the warpath, and dr. steenbarger rightly (i think) notes that this means worries about inflation are misplaced. throw in mounting evidence for a global shipping slowdown -- reports from UPS, fedex and CMA CGM all add up.

the sentiment picture reminds me rather of january 9. the market then looked deeply oversold and set to rally -- but instead broke and cascaded into january 22/23. i turned bullish too early then.

UPDATE: this weakness-on-top-of-weakness has drawn the attention of rob hanna at quantitative edges as well in two posts -- here illustrating that persistent recent declines really have little parallel since the decade-plus of systemic deleveraging that was at its most powerful in the 1970s; here showing that such persistent selling is (on limited precedent) extremely bearish looking out as far as 20 weeks.

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