It will return on Monday 21 May BMO.

Originally Posted by Conrad on Monday 07 May, 2012

I am carrying my bearish stance from last week into this week and looking to possibly cover my shorts towards the end of the week, just in case. Without much in terms of market moving data this week, I can’t see much reason for the bulls to want to regain the initiative – apart from foolishly buying dips again – especially when the prevailing hawkish news is confirming what we call knew a month ago.

I suspect Friday’s sentiment may carry into Monday for another DFDM (these DFDMs have been very frequent lately) and should set the tone for the rest of the week.

Direction for the week Monday 07 May, 2012 to Friday 11 May; down

Two straight weeks down and it comes as no surprise. But it still pales to the first two weeks of April. Both oil and gold finished at 2012 lows, with crude futures (CLM2 -1.56%) losing 95 cents, or 1%, to end at $96.13 a barrel and gold futures (GCM2 -0.98%) down $11.50, or 0.7%, to end at $1,584 an ounce, their lowest this year.

MARKET REVIEW – FRIDAY 11 MAY, 2012

Originally Posted by Conrad on Friday 11 May, 2012

The Friday before Mothers Day (Sun 13 May) has been up on the DOW 11 of the last 17 and the Day after Mother Day has seen DOW up 14 of the last 17 while Monday of May Expiration week has been up on the DOW 20 of the last 24.

I am going to pretend I didn’t write that. Given the internals and all the current affairs, I cannot be bullish.

Direction for Friday 11 May, 2012; Down

That early morning “rally” was again nothing more than short-covering that turned into some serious buying on low volumes followed by more short covering. The afternoon’s 100 points sell-off was proof of the persistent underlying bearishness that still haunts the market.

TECHNICALS & INTERNALS

Originally Posted by Conrad on Friday 11 May, 2012

NASDAQ wears a Deaisen (Meeting Lines) pattern that strongly implies more downside on Friday for the tech-heavy index. Support at 2,900 is going to be critical. DOW and SPX have Inverted Hammers implying a consolidation in the making. DOW broke its six day losing streak but closed 27 points above its 100DSMA and just above its nine-month channel support.

On weekly candles, DOW is wearing a Three Inside Down which strongly implies more downside in the coming week. On monthly candles, DOW is forming an Evening Star. DOW closed below its 20week average is now on cue for a consecutive DFDM. 12,800 continues to support the DOW but a break below is imminent.

No, that is not a Bullish Deaisen (Meeting Lines) pattern because the tech heavy index closed to the downside. That is more like an Inverted Hammer implying a consolidation in the coming week. On weekly candles, NASDAQ wears a Doji after a Short Dusk Line suggesting a pause or stall in the downside proceedings.

SPX has closed below its 20week average while stubbornly staying above its 100DSMA. Daily candles are implying downside on Monday.

Originally Posted by Conrad on Friday 11 May, 2012

Advancers outpaced Decliners by an average 1.55 to 1 on higher average volumes (+8.82%) on Thursday (avg +0.12%).

The VIX closed lower at 18.83 -1.25 (-6.23%) and the internals imply that it was a bullish day. If it was, why did DOW lose 86 points between 1:30pm and 3:45pm? The answer is that the bullish numbers were set at the open afterwhich, the bearish numbers played catch-up. The trading session belonged to the bears again. I smell pre-market manipulation.

Decliners outpaced Advancers by an average 1.48 to 1 on lower volumes (-0.72%) on Friday (avg -0.20%).

$DVOL outpaced $UVOL by almost 2 to 1 while New Lows marginally outpaced New Highs by 1.18 to 1. This was a case of short covering at the open with some insignificant buying that gave way to serious selling pressure for the rest of the afternoon. The bulls are still not there and the bears have a very firm grip on this market, setting up bull traps almost everyday of the week.

The VIX closed higher again, just shy of 20 points at 19.89 +1.06 (+5.63%).

Originally Posted by Conrad on Friday 11 May, 2012

A slight steepening amongst the longer maturities – something we haven’t seen is a very long time. I wonder if it really means anything or if this is a knee jerk by jerks. Follow through on this steepening will be crucial on Friday if this is not a dead cat bounce.

The 10-yr yield ended the week at 1.841%, and saw its lowest weekly close since late-September. The flight into the complex marked the eighth consecutive week of lower yields, and has yields across most of the curve nearing record lows. Flattening of the yield curve saw the 2-10-yr spread narrow to 159 bps.

Treasury Yields AMC on Friday 11 May, 2012:

• 2 Year Note 0.27% unch
• 5 Year Note 0.75% -0.04
• 10 Year Note 1.84% -0.05
• 30 Year Bond 3.02% -0.05

2/30 Spread : 2750bps ( -5 ) … 2/10 Spread : 157bps ( -5 )

Certain parts of the curve are not lower than 2011′s low and this does not bode well for the risk market. The 30 year yield is now only 2bps away from being twice under-par.

PREVIEW FOR THE WEEK

MONDAY 14 TO FRIDAY 18 MAY, 2012

There is no data on Monday.

Data flow for the week begins on Tuesday and is heavy as retail sales, retail sales ex-auto, CPI, Core CPI, Empire Manufacturing (8:30), net long-term TIC flows (9:00), business inventories, and the NAHB Housing Market Index (10) are all released.

Data remains heavy on Wednesday as the weekly MBA Mortgage Index (7), housing starts and building permits (8:30), industrial production and capacity utilization (9:15), and the FOMC Minutes (14) cross the wires.

Thursdays data includes initial and continuing claims (8:30), as well as the Philly Fed, and leading indicators (10).

There is no data on Friday.

Earnings Highlights
Monday: CTFO, IOC, KIOR, RVSN, SDRL, SLW, A, AL, ASEI, DVOX, GRPN, OPNT, PLAB, SUMR, YOKU, and ZGNX.
Tuesday: ACXM, ACAT, AMAP, CEL, DKS, ENG, HD, SKS, SORL, SNSS, TJX, VAL, VIT, YTEC, TEU, BORN, JCP, MBND, PAAS, RAH, SINA, THQI, and VELT.
Wednesday: ANF, ABMD, ALVR, BRC, CHS, CTRN, DE, EXP, SPLS, TGT, VVTV, VNET, EGHT, ANW, CPWM, CTRP, DHT, GTAT, HOTT, JACK, LTD, NTES, RRGB, SSW, and SPTN.
Thursday: AAP, BONT, BKE, CATO, PLCE, CSC, DANG, DLTR, GME, GSOL, NM, PERY, PCP, PBH, QSII, ROST, SHLD, SSI, SMRT, TK, TNK, TSEM,WMT, ARO, AMAT, ARUN, ADSK, BRCD, COSI, GPS, INTU, MRVL, NWY, PSUN, CRM, SCVL, SVM, SMT, VSAT, and ZUMZ.
Friday: ANN, BWS, CMRG, DCI, FL, HIBB, and KIRK.

Economic Events
Monday:
None Scheduled
Tuesday:
08:30 am Retail Sales
08:30 am Retail Sales ex-auto
08:30 am CPI
08:30 am Core CPI
08:30 am Empire Manufacturing
09:00 am Net Long-Term TIC Flows
10:00 am Business Inventories
10:00 am NAHB Housing Market Index
Wednesday:
07:00 am MBA Mortgage Index
08:30 am Housing Starts
08:30 am Building Permits
09:15 am Industrial Production
09:15 am Capacity Utilization
10:30 am Crude Inventories
14:00 pm FOMC Minutes
Thursday:
08:30 am Initial Claims
08:30 am Continuing Claims
10:00 am Philadelphia Fed
10:00 am Leading Indicators
10:30 am Natural Gas Inventories
Friday:
None Scheduled

Conferences and Shareholder/Analyst Meetings of Interest
Monday:
- The 11th Annual JMP Securities Research Conference
~~ Scheduled to appear : ASGN, FCH, SPRD, ARCC, CDXS, PMC, CHE, DEPO, DLLR, PMT, MXL, MERU, QSII, KBW, WBSN, VVUS, CLNY, VVUS, AEZS, MSCC, UPI, NTSP, AGNC, MXWL, TSRX, FTNT, EXAS, IVR, MOVE, SNH, SGMO, GDOT, ECPG, SAAS, AVNR, SBRA, BIOC, ALGN, GMT, SQI, ZIOP, CBG, PDLI, KFN, MFA, PODD, SPSC, SREV, MMS, ACCL, TWO, GHDX, ARI, ZLCS, ZLCS, BCRX, BIRT, KERX, EPIQ, HPP, VLTR, DX, HTGC, ANH, CWH, ACAS, CALD, WD, SONS, OREX, MGI, SPRT, DMD, ONE, TSPT, MU, PROJ, KEYN, REX, CY, CA:AXY, CSU, CALX, MHLD, AFSI, MITL, TBBK, SLAB, DTSI, MSCI, PEIX, SLXP, ICGE, PMFG, EIG, ELLI, BLDP, IMMR, BSFT, ACPW
- CLSA China Forum
~~ Scheduled to appear: CHDX, GA, BIDU
- Gulf South Bank Conference
~~ Scheduled to appear: SCBT, HBHC, RNST, ECBE, HBOS, OZRK, HOMB, CCBG, FMFC, SFNC, FBMS
Tuesday:
- JP Morgan Global Technology, Media and Telecom Conference
~~ Scheduled to appear: SSNC, ASML, EPAY, HPY, LGF, NTLS, IMI, NICE, SANM, LOGI, APKT, ANSS, CTSH, LEAP, CSCO, BRCM, WNS, AMD, TTMI, PRO, ARB, TRIP, CY, LRCX, MTSI, NLSN, JBL, TXN, AWAY, AZPN, MCO, PCLN, LOGM, SWKS, RLOC, EMC, NCMI, VRSN, MGI, GLW, CNK, LSI, RGC, IRBT, SYMC, ORBK, SIX, VZ, EFX, MSFT, CA, MA, UNTD, FCS, ZNGA, LYV, MITL, GRMN, CDNS, DIOD, QLGC, SYNA, VSH, WBSN, CKEC, PRSS, CREE, ALTR, TNAV, IMAX, EQIX, FTR, MELI, CSGS, WXS, CCOI, GWRE, IDCC, ENTR, QCOM, LXK, TYPE, VELT, FSL, V
- JP Morgan Homebuilding and Building Products Conference
~~ Scheduled to appear: RYL, USG, MTH, WHR, BZH, WXS
- Bank of America Merrill Lynch Health Care Conference
~~ Scheduled to appear: TCM, SLW, AEM, ABX, GG, HUM, CCJ
Wednesday:
- Pennsylvania Homecare Association Conference
~~ Scheduled to appear: ADAT
- Saint Louis Fed President James Bullard to speak at 12:30
- FOMC Minutes at 14:00
Thursday:
B- ank of America Merrill Lynch Global Transportation Conference
~~ Scheduled to appear: ECHO, JBHT, WERN, LCC, ALK, KEX, UNP, ALGT, GBX, GMT, KSU, NSC, INT
- Facebook (FB) IPO Will Be Priced
- Longbow Research Consumer Investor Conference
~~ Scheduled to appear: SIX, WHR, POOL
Friday:
- Facebook (FB) to begin trading
- G-8 Meeting
- Wipro Limited (WIT) Analyst Day

SUMMARY

Originally Posted by Conrad on Friday 11 May, 2012

No way that was an up day. Especially when bullish portfolios didn’t recover and bearish one were more profitable. I reckon this was a case of massive short covering at the open together with some system purchasing followed by some concerted effort to cut losses then a rash of selling. If you doubt that analysis, then ask yourself why there were no leading or positive sectors on Thursday when the Up Volumes were averagely outpacing the Down Volumes by 1.6 to 1 only to have the Down Volumes catch up significantly in the second half of the session. This was definitely not a day of bulls. It was a day that skeletons fell out of the closet – and this could open a floodgate for more to come.

What an interesting week. The bears have ruled the market for two weeks now and the naysayers are still holding on to their belief that the Sell-In-May will not work this year. In two weeks, the DOW has wiped out March and April’s gains and half of February’s gains. And there are still 14 trading sessions remaining.

The Day after Mother Day has seen DOW up 14 of the last 17 while Monday of May Expiration week has been up on the DOW 20 of the last 24. May Expiration Friday is bearish with DOW going down 13 of the last 22.

With no data schedule on Monday, I’ll be watching if we get a consecutive DFDM on DOW on Monday. This should bring in the rest of the bears and bring the market down for the rest of the week in a big way.

2012 Daily Directional Accuracy: 55/80 (68.75%)

2012 Weekly Directional Accuracy Year-To-Date: 12/19 (63.16%)

Pattern Trader Grads (WAT), click here to read the full detailed report.

Originally Posted by Conrad on Thursday 10 May, 2012

After the close, earnings continue to beat but majority of the beats are underwhelming and the stocks are being punished in after-hours trading. So while the statistics of beats continue to mount, the number of negative reactions are mounting even higher. CSCO shares traded lower following downside guidance on its conference call by over -8% in the after hours session. This will surely be a drag on all three benchmarks on Thursday. Co’s peer Juniper Networks (JNPR) is also showing weakness, trading lower by 2.7% in after hours.

Following last week’s horrible NFP shocker, Thursday’s Claims are going to be a key mover. At 2pm, the Treasury Budget could also be a game changer so expect a volatile and bumpy ride with some surprises and shocks. I remain bearish although I have lightened by positions with some profit taking.

Direction for Thursday 10 May, 2012; Down

No way that was an up day. Especially when bullish portfolios didn’t recover and bearish one were more profitable. I reckon this was a case of massive short covering at the open together with some system purchasing followed by some concerted effort to cut losses then a rash of selling. If you doubt that analysis, then ask yourself why there were no leading or positive sectors on Thursday when the Up Volumes were averagely outpacing the Down Volumes by 1.6 to 1 only to have the Down Volumes catch up significantly in the second half of the session. This was definitely not a day of bulls. It was a day that skeletons fell out of the closet – and this could open a floodgate for more to come.

TECHNICALS & INTERNALS

Originally Posted by Conrad on Thursday 10 May, 2012

Six straight sessions down on the DOW. You have to go all the way back to end July 2011 to find the last time the DOW went more than six straight sessions down. Dow now sits below its 12,950 support. For the second time in as many days, NASDAQ bounced off its 100DSMA and is stuck under its critical 2,950. Technicals now are not a priority. The only thing working now are the moving averages, as is the case every time the market tanks.

NASDAQ wears a Deaisen (Meeting Lines) pattern that strongly implies more downside on Friday for the tech-heavy index. Support at 2,900 is going to be critical. DOW and SPX have Inverted Hammers implying a consolidation in the making. DOW broke its six day losing streak but closed 27 points above its 100DSMA and just above its nine-month channel support.

Originally Posted by Conrad on Thursday 10 May, 2012

Decliners outpaced Advancers by an average 2.01 to 1 on higher average volumes (+17.74%) on Wednesday (avg -0.60%).

No doubt about the bearishness in this session. Volumes increased (again) in support of this bear run. The bulls, as expected, stayed on the side while the bears took the market down significantly, brought the market up again with some short covering and then took it down again at the end. The VIX closed above 20 points for the first time in a month as more investors took up protection rather than run to fixed income.

Advancers outpaced Decliners by an average 1.55 to 1 on higher average volumes (+8.82%) on Thursday (avg +0.12%).

The VIX closed lower at 18.83 -1.25 (-6.23%) and the internals imply that it was a bullish day. If it was, why did DOW lose 86 points between 1:30pm and 3:45pm? The answer is that the bullish numbers were set at the open afterwhich, the bearish numbers played catch-up. The trading session belonged to the bears again. I smell pre-market manipulation.

Originally Posted by Conrad on Thursday 10 May, 2012

Status quo … bond traders are in doubt again which is not good news for the risk markets. The money stays firmly locked in fixed income which only lends weight to any risk rally being nothing more than short covering. Beware of dead cats.

Selling swung the yield curve steeper as the 2-10-yr spread widened to 163 basis points.

Treasury Yields AMC on Thursday 10 May, 2012:

• 2 Year Note 0.27% unch
• 5 Year Note 0.79% +0.02
• 10 Year Note 1.89% +0.02
• 30 Year Bond 3.07% +0.04

2/30 Spread : 280bps ( +4 ) … 2/10 Spread : 162bps ( +2 )

A slight steepening amongst the longer maturities – something we haven’t seen is a very long time. I wonder if it really means anything or if this is a knee jerk by jerks. Follow through on this steepening will be crucial on Friday if this is not a dead cat bounce.

SUMMARY

Originally Posted by Conrad on Thursday 10 May, 2012

Well, I can’t say that (Wednesday’s drop) wasn’t expected. Once again the bears ruled and the bulls stayed away. Some short covering through the mid-day gave way to more weakness going into the close. There was no chance of a bull rally happening at all during the session. This was a broad based sell-off day.

Fridays data is the most anticipated of the week as PPI, Core PPI (8:30), and Michigan Sentiment (9:55) cross the wires.

The Friday before Mothers Day (Sun 13 May) has been up on the DOW 11 of the last 17 and the Day after Mother Day has seen DOW up 14 of the last 17 while Monday of May Expiration week has been up on the DOW 20 of the last 24.

I am going to pretend I didn’t write that. Given the internals and all the current affairs, I cannot be bullish.

Direction for Friday 11 May, 2012; Down

2012 Daily Directional Accuracy: 54/79 (68.35%)

Pattern Trader Grads (WAT), click here to read the full detailed report.

Originally Posted by Conrad on Wednesday 09 May, 2012

This market needs to get down a lot more before I can seriously consider buying anything up. I am looking for follow-through down to 12,700 on the high and 12,500 by end May. If we get that, we can expect 12,300 by June. Then I will feel vindicated and satisfied that the market is sufficiently sold down.

If the first half of earning season was good, the second half is looking pathetic. Things on the earnings front are souring pretty badly and pretty quickly. After the close, a whole bunch of lower guidance and misses were issued which sent the futures back down again by as much as another -0.15% This market is going to need a huge dose of good news to get it out of this funk and I mean seriously and factually great news.

I am expecting a bit of a bounce today. But I am not expecting a full blown rally as the bears take a breather and the bulls lick their wounds. But given the state of current political affairs and earnings, I don’t expect much in terms of gains.

Direction for Wednesday 09 May, 2012; Down

Well, I can’t say that wasn’t expected. Once again the bears ruled and the bulls stayed away. Some short covering through the mid-day gave way to more weakness going into the close. There was no chance of a bull rally happening at all during the session. This was a broad based sell-off day.

TECHNICALS & INTERNALS

Originally Posted by Conrad on Wednesday 09 May, 2012

Forget the technicals for now. All we need to know is that DOW is below 13,000 and NASDAQ is below 2,950. The benchmarks all bounced on their 100DSMA yesterday which triggered the “rally” in the last two hours. That’s all it is – system traders triggering buys while shorties covered on the 100DSMA retracement.

Six straight sessions down on the DOW. You have to go all the way back to end July 2011 to find the last time the DOW went more than six straight sessions down. Dow now sits below its 12,950 support. For the second time in as many days, NASDAQ bounced off its 100DSMA and is stuck under its critical 2,950. Technicals now are not a priority. The only thing working now are the moving averages, as is the case every time the market tanks.

Originally Posted by Conrad on Wednesday 09 May, 2012

Decliners outpaced Advancers by an average 1.33 to 1 on significantly higher average volumes (+20.91%) on Tuesday (avg -0.47%).

New Lows now totally dominate both the NYSE and NASDAQ. $DVOL had been outpacing $UVOL by more than 8 to 1 up until 2pm when the “buyers” started coming in. The session ended with $DVOL only managing 2.72 to 1. The VIX was shy of an intraday high of 21 points and fell off a cliff from 2pm onward to close at 19.05 +0.11 (+0.58%). The increase in volumes were not relative to the 1% rally between 2pm and the close. In fact, the TRIN fell by 40%, the down volumes continued its steady increased by 92% while up volumes spiked by 325% in those last two hours suggesting that the massive number of buyers were shorties covering their positions.

Decliners outpaced Advancers by an average 2.01 to 1 on higher average volumes (+17.74%) on Wednesday (avg -0.60%).

No doubt about the bearishness in this session. Volumes increased (again) in support of this bear run. The bulls, as expected, stayed on the side while the bears took the market down significantly, brought the market up again with some short covering and then took it down again at the end. The VIX closed above 20 points for the first time in a month as more investors took up protection rather than run to fixed income.

Originally Posted by Conrad on Wednesday 09 May, 2012

The curve fell flatter with the 5yr yield falling below last year’s low of 0.79. The belly of the curve (5 and 10 yr yields) remain twice under-par while the flanks 2 and 30 yr) stay one-under.

A slightly flatter yield curve saw the 2-10-yr spread narrow to 157.5 bps.

Treasury Yields AMC on Wednesday 09 May, 2012:

• 2 Year Note 0.27% unch
• 5 Year Note 0.77% unch
• 10 Year Note 1.87% -0.01
• 30 Year Bond 3.03% unch

2/30 Spread : 276bps ( unch ) … 2/10 Spread : 160bps ( -1 )

Status quo … bond traders are in doubt again which is not good news for the risk markets. The money stays firmly locked in fixed income which only lends weight to any risk rally being nothing more than short covering. Beware of dead cats.

SUMMARY

Originally Posted by Conrad on Wednesday 09 May, 2012

The curve fell flatter with the 5yr yield falling below last year’s low of 0.79. The belly of the curve (5 and 10 yr yields) remain twice under-par while the flanks 2 and 30 yr) stay one-under.

Data picks back up on Thursday as initial and continuing claims, the trade balance, import/export prices (8:30), and the Treasury Budget(14) are released. Treasury will hold a $16 bln 30-yr bond auction. Minnys Kocherlakota will speak on his home turf at the Economic Club (TBD), and Chairman Bernanke will give a keynote address in Chicago on bank capital (21:30).

After the close, earnings continue to beat but majority of the beats are underwhelming and the stocks are being punished in after-hours trading. So while the statistics of beats continue to mount, the number of negative reactions are mounting even higher. CSCO shares traded lower following downside guidance on its conference call by over -8% in the after hours session. This will surely be a drag on all three benchmarks on Thursday. Co’s peer Juniper Networks (JNPR) is also showing weakness, trading lower by 2.7% in after hours.

Following last week’s horrible NFP shocker, Thursday’s Claims are going to be a key mover. At 2pm, the Treasury Budget could also be a game changer so expect a volatile and bumpy ride with some surprises and shocks. I remain bearish although I have lightened by positions with some profit taking.

Direction for Thursday 10 May, 2012; Down

2012 Daily Directional Accuracy: 53/78 (67.95%)

Pattern Trader Grads (WAT), click here to read the full detailed report.

Originally Posted by Conrad on Tuesday 08 May, 2012

With no economic news to gie the market direction, earnings results should lead the way. And if Monday’s AMC earnings are a guide, we’re gong down again. Not unless the likes of PCX, TAP, RAIL, PDC, FOSL and a bunch of other lightweight companies can get a rally going. Europe will continue to be the watch-word and things are not looking good there. I reckon we’ll get another consolidation with a small possibility of a sell-down in the afternoon.

Direction for Tuesday 08 May, 2012; Down

There was no reason other than short covering for that “rally” toward the end. Oh, that and some more dip buying. While I was trading at around 3pm, someone messaged me on Facebook that buy signals were being given by a couple of gurus on non-defensive equity positions and U.S.-base denominated forex pairs. Not a bad idea given that the market was rallying back on nothing.

Leadership was amongst the four fear sectors; Health Care +0.2%, Utilities +0.2%, Consumer Staples -0.1%, Telecom -0.2%.

TECHNICALS & INTERNALS

Originally Posted by Conrad on Tuesday 08 May, 2012

This DFDMs on DOW are tightening. DOW paused to the downside and could complete a Stalled Pattern on a Fifth Candle on Tuesday. S&P finished with a Doji implying an end to this downtrend with either a consolidation or a reversal to follow. NASDAQ closed above its critical 2,950 support and DOW above 13,000 to keep their heads above water for now.

Forget the technicals for now. All we need to know is that DOW is below 13,000 and NASDAQ is below 2,950. The benchmarks all bounced on their 100DSMA yesterday which triggered the “rally” in the last two hours. That’s all it is – system traders triggering buys while shorties covered on the 100DSMA retracement.

Originally Posted by Conrad on Tuesday 08 May, 2012

Advancers outpaced Decliners by an average 1.19 to 1 on lower average volumes (-5.39%) on Monday (avg -0.05%).

Although the VIX closed lower, it did a +0.50 point U-turn in the afternoon. Up and Down volume were rather evenly match with the $DVOL outpacing $UVOL in the first half of the session then $UVOL overtook $DVOL by mid-day and by the close, $UVOL lost some steam but still managed to pip $DVOL by 1.12 to 1. Volumes were weak, as any Monday volumes usually are but the number of Decliners continue to be strong and New Lows are dominating the New Highs across the broader market. The bears still have a hold of this market.

Decliners outpaced Advancers by an average 1.33 to 1 on significantly higher average volumes (+20.91%) on Tuesday (avg -0.47%).

New Lows now totally dominate both the NYSE and NASDAQ. $DVOL had been outpacing $UVOL by more than 8 to 1 up until 2pm when the “buyers” started coming in. The session ended with $DVOL only managing 2.72 to 1. The VIX was shy of an intraday high of 21 points and fell off a cliff from 2pm onward to close at 19.05 +0.11 (+0.58%).

The increase in volumes were not relative to the 1% rally between 2pm and the close. In fact, the TRIN fell by 40%, the down volumes continued its steady increased by 92% while up volumes spiked by 325% in those last two hours suggesting that the massive number of buyers were shorties covering their positions.

Originally Posted by Conrad on Tuesday 08 May, 2012

In a confusing session, the belly of the curve rose a tiny tad as if investors were unwilling to move their monies from the safety of fixed income.

A flatter yield curve saw the 2-10-yr spread narrow to 158 bps where it is testing important support going back to September.

Treasury Yields AMC on Tuesday 08 May, 2012:

• 2 Year Note 0.27% unch
• 5 Year Note 0.77% -0.02
• 10 Year Note 1.88% -0.04
• 30 Year Bond 3.03% -0.04

2/30 Spread : 276bps ( -4 ) … 2/10 Spread : 161bps ( -4 )

The curve fell flatter with the 5yr yield falling below last year’s low of 0.79. The belly of the curve (5 and 10 yr yields) remain twice under-par while the flanks 2 and 30 yr) stay one-under.

SUMMARY

A month and a half ago … DOW was just above 13,200 …

Originally Posted by Conrad on Tuesday 20 March, 2012

I can’t see the market holding up these highs for long without another correction soon. I am praying that the market comes to its senses and allow for a correction before we get into April. Without it, I dread to think what the May sell-off might look like.

Two weeks later, … DOW was just below 13,300 …

Originally Posted by Conrad on Monday 02 April, 2012

I have resigned myself to the possibility that the market will get more overbought from here into May. God help us if and when we correct in May because we are now past the point of no return.

A month later, … DOW was just above 13,000 …

Originally Posted by Conrad on Tuesday 08 May, 2012

… it (Monday) clearly wasn’t a victory for the bulls either. This market is still being hyped up by the press and its the believing few who are giving this market its last leg up. We call these few “Dip Buyers”.

I don’t feel vindicated … yet. This market needs to get down a lot more before I can seriously consider buying anything up. I am looking for follow-through down to 12,700 on the high and 12,500 by end May. If we get that, we can expect 12,300 by June. Then I will feel vindicated and satisfied that the market is sufficiently sold down.

If the first half of earning season was good, the second half is looking pathetic.

Originally Posted by Conrad on Saturday 28 April, 2012

Earnings season is halfway done but as good as the blowout earnings have been, we still have half the season left. 70% of the companies that have announced so far have beaten their estimates. All that can change in the coming weeks thus I am not going to take any chances till I get a clearer picture. Till then, I remain bearish and hedged.

Wednesday will see the weekly MBA Mortgage Index (7), and wholesale inventories (10). Treasury will auction $24 bln 10-yr notes.

We still have the rest of this week and the whole of next week left to go. Things on the earnings front are souring pretty badly and pretty quickly. After the close, a whole bunch of lower guidance and misses were issued which sent the futures back down again by as much as another -0.15% This market is going to need a huge dose of good news to get it out of this funk and I mean seriously and factually great news.

I am expecting a bit of a bounce today. But I am not expecting a full blown rally as the bears take a breather and the bulls lick their wounds. But given the state of current political affairs and earnings, I don’t expect much in terms of gains.

Direction for Wednesday 09 May, 2012; Down

2012 Daily Directional Accuracy: 52/77 (67.53%)

Pattern Trader Grads (WAT), click here to read the full detailed report.

Originally Posted by Conrad on Monday 07 May, 2012

I am carrying my bearish stance from last week into this week and looking to possibly cover my shorts towards the end of the week, just in case. Without much in terms of market moving data this week, I can’t see much reason for the bulls to want to regain the initiative – apart from foolishly buying dips again – especially when the prevailing hawkish news is confirming what we call knew a month ago.

I suspect Friday’s sentiment may carry into Monday for another DFDM (these DFDMs have been very frequent lately) and should set the tone for the rest of the week.

Direction for Monday 07 May, 2012; Down

Not quite the wash out I wanted but it clearly wasn’t a victory for the bulls either. This market is still being hyped up by the press and its the believing few who are giving this market its last leg up. We call these few “Dip Buyers”. Leadership was mixed and confused except for Financials who were clearly the strength of the market today. The rest of the broader market was everywhere else but up.

TECHNICALS & INTERNALS

Originally Posted by Conrad on Saturday 05 May, 2012

The DOW avoided the psychological 13,000 by 22 points but still closed below is 20DSMA and 50DSMA. Although its only a week old, DOW’s monthly candles shows May as an Eighth Candles Reversal into an Evening Star.

NASDAQ wears a Short Dusk Line on weekly candles. It broke below 3,000 and closed well below its 20 and 50 DSMAs which crossed over on Thursday. All signs point to more downside on Monday and in the coming week.

S&P also closed below its 20 and 50 DSMAs with both MAs having crossed over on Wednesday. On weekly candles, S&P is on a Short Dusk Line implying more downside next week. This has been S&P’s worst week since November last year.

These DFDMs on DOW are tightening. DOW paused to the downside and could complete a Stalled Pattern on a Fifth Candle on Tuesday. S&P finished with a Doji implying an end to this downtrend with either a consolidation or a reversal to follow. NASDAQ closed above its critical 2,950 support and DOW above 13,000 to keep their heads above water for now.

Originally Posted by Conrad on Saturday 05 May, 2012

Decliners outpaced Advancers by an average 3.51 to 1 on higher volumes (+9.07%) on Friday (avg -1.71%).

New Lows on the broader market outperformed the New Highs while $DVOL hammered $UVOL by 6.1 to 1. There was little doubt as to who ruled the session as the TRIN got its highest close since 10 April. Did someone say that we wouldn’t sell off in May this year? … The VIX closed much higher, at 19.16 +1.60 (+9.11%), its highest close in three weeks. Technically, VIX has confirmed a higher low. A break above 20.50 next week will confirm the uptrend and a return to fear.

Advancers outpaced Decliners by an average 1.19 to 1 on lower average volumes (-5.39%) on Monday (avg -0.05%).

Although the VIX closed lower, it did a +0.50 point U-turn in the afternoon. Up and Down volume were rather evenly match with the $DVOL outpacing $UVOL in the first half of the session then $UVOL overtook $DVOL by mid-day and by the close, $UVOL lost some steam but still managed to pip $DVOL by 1.12 to 1. Volumes were weak, as any Monday volumes usually are but the number of Decliners continue to be strong and New Lows are dominating the New Highs across the broader market. The bears still have a hold of this market.

Originally Posted by Conrad on Saturday 05 May, 2012

The 5 year yield has fallen below last year’s low. The week’s confusion became clarity on Friday as investors ran for cover in the safety of fixed income. With the yield curve almost entirely back to last year’s low, you have to wonder why the risk market got up to such lofty heights this year. Talk about crystal clear divergence. If my yield curve analysis is close, the risk market should drop to last year’s lows in the coming months.

A slightly steeper yield curve saw the 2-10-yr spread widen to 162.5 bps.

Treasury Yields AMC on Monday 07 May, 2012:

• 2 Year Note 0.27% unch
• 5 Year Note 0.79% +0.01
• 10 Year Note 1.92% +0.01
• 30 Year Bond 3.07% unch

2/30 Spread : 280bps ( unch ) … 2/10 Spread : 165bps (+1 )

In a confusing session, the belly of the curve rose a tiny tad as if investors were unwilling to move their monies from the safety of fixed income.

SUMMARY

Originally Posted by Conrad on Saturday 05 May, 2012

Oil dropped below $100 at the open to as low as $97.83 for the first time since February, all three benchmarks dropped below their 50 and 20 DSMAs … This has been the worst week this year with the S&P losing more than 2.4%. NASDAQ also had its worst day of the year.

There is no data on Tuesday. Treasury will auction $32 bln 3-yr notes.

With no economic news to gie the market direction, earnings results should lead the way. And if Monday’s AMC earnings are a guide, we’re going down again. Not unless the likes of PCX, TAP, RAIL, PDC, FOSL and a bunch of other lightweight companies can get a rally going. Europe will continue to be the watch-word and things are not looking good there. I reckon we’ll get another consolidation with a small possibility of a sell-down in the afternoon.

Direction for Tuesday 08 May, 2012; Down

2012 Daily Directional Accuracy: 51/76 (67.10%)

Pattern Trader Grads (WAT), click here to read the full detailed report.

It is that time of year that the market reliably makes corrections.

May is infamous for having the nastiest correction of any month in the calendar year. Its reputation goes as far as to send the whole year into negative in spite of a four-month bull run from January to April.

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INFLATION OR STIMULATION?

Someone asked me why thoughtless lavish spending encourages inflation when it helps to stimulate the economy …

In one small example, buying an apartment you can’t afford then defaulting on the downpayment means that your thoughtless spending just helped to raise the price of properties unrealistically and returning the apartment doesn’t bring the price down. Instead, the developer can now sell that same apartment for a second time but at a higher premium. Your reckless greed just contributed to inflating property prices for the next buyer who really needs a home but cannot afford it now.

I don’t call that stimulating the economy. I call it selfish idiocy and poor financial management at other people’s expense.

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Just How Do Singaporeans Live?

The cost of a one bedroom apartment in Tg Katong/Paya Lebar is now S$900,000.

The cost of any small car in Singapore now comes at a minimum of $100,000. (That’s not even considering the $90K COE for a 2L car.)

You need to be a millionaire to afford a tiny house and a small car in  Singapore today … or be seriously in debt to own these things.

To read the full article, go here.

DEFENSIVE TRADING – EPILOGUE

Trading and driving are alike in so many ways. And the way you drive betrays they way you will be trading. Rules of the road are set up for safety reason just as we set up rules for ourselves when we trade. These rules keep us on the safe side of danger and lower our risk to ensure we reach our objectives without getting hurt. In a worse case scenario, we might encounter a few scrapes or bumps by we still get to our objective without killing ourselves. In life as in trading …

Break the rules and you’ll be punished

Make a mistake and it will be costly

Take a risk and the consequences can be tragic

Read the full detailed article here.