A Big Intraday Reversal Sends Stocks Well Off Their Lows Of The Session; The VIX Hits A 21-Year High
October 11, 2008
Wow. That perfectly explains the action the past week in the stock market. There is no doubt that the past week was the weakest week any of us have seen in our lifetimes. That can best be seen in the SP 500 which fell 18.2% this week easily beating its old record in the week of the crash in 1987 when it lost 12.2%. So as can be seen this was easily one of the worst weeks any of us have ever seen.
The worst index this week of major importance was the NYSE which lost a whopping 19.5% in one week! That is by far the worst drop, as the Nasdaq only fell 15.3%. These kind of huge drops did nothing to convince anyone that the bailout bill was a good idea and proof of that fear was easily registered in the VIX.
The VIX hit a shocking 76.94 intraday on Friday. That was the highest level since 10/20/1987 when the VIX hit 172. This extremely high level on the VIX is something most of us have never seen as most of us were not investing full-time or doing this for income back in 1987. This extremely high level has a lot of people believing that Friday must have been the volume. Especially since volume came in the heaviest ever on the Nasdaq expanding by 41% from Thursday’s levels. Volume expanded around 50% on the NYSE. Even though my charting service Telechart does not show record volume, IBD shows that volume on the NYSE was a new high for at least 2008.
While the extremely big volume, along with the very bullish reversal from the Nassy being down 6% to closing up .3%, was very bullish on a day that saw some extreme fear intraday, there was still a slight problem. The fear that showed up in the VIX just has not showed up in the put/call ratio. The shocking and almost unbelievable fact is that the put/call ratio actually fell on Friday to 1.16 from 1.20 on Thursday. This is still off the recent highs of 1.3 which is still below the 1.5-1.6 put/call ratio that showed up in March when BSC was the first of the bad eggs to knock the financials lower. I don’t know how this is happening, with all the fear being driven up by the news media, but it is happening.
Despite this bad news, the other good news that is showing market participants are getting too bearish is the investors intelligence survey which shows bears hitting a five-year high of 53% and bulls hitting a five-year low of 25.3%. With professionals this bearish, it is a good sign that most of those that are going to sell have sold. This very weak reading can get weaker so don’t think just because these are five year highs and lows that this means this is a bottom. The put/call and lack of a follow-through day should keep anyone from declaring the worst over yet.
Even if it is not over, we are so oversold that I think with the comeback intraday today, along with some other data, show that a bounce must be expected sometime soon.
Two things that clearly show me that we are extended to the downside and poised for at least a bounce soon is that out of 7050 stocks in my Telechart system ONLY 261 are above the 50 day moving average. That is a number I do not believe I have ever seen in my Telechart above the 50 DMA scan. It is shockingly low. But what makes it worse is that the majority of the stocks in an uptrend and above the 50 DMA are all ETFs. Most of the regular stocks are in downtrends.
The last thing that really shows an extended market to the downside is the new 52-week highs to new 52-week lows. Leaving out the AMEX, there were 3 new 52-week highs to an outrageous 3,398 new 52-week lows. A number so high that I believe I have never seen that before. I do not keep data on 52-week highs and lows going back to when I started in 1996 but I am sure I have never seen that many stocks making new lows at once. Adding to this, the AMEX had 45 new 52-week highs (all ETFs) and 649 new 52-week lows. If your keeping track that is 48 new 52-week highs to 4,047 new 52-week lows! Stunning!
I believe that we could see a bounce however I don’t know how anyone with a sane mind would play this, minus looking to short a low volume rally. There are zero good looking charts out there setting up in my CANSLIM scans or in my “perfect setup” scans. This lack of quality stocks setting up, along with poor leadership, shows that it is going to be a rough move higher if we do move up off the lows here. However, nobody said that this all can not be part of a long bottoming process. We have been in a bear market for almost a full 12 months now. This is not something new. A lot of people act like we just started moving lower and nothing could be further from the truth.
If this is not part of a bottoming process we will know soon enough. We will not see any new stocks setup in nice patterns, IPOs will not come to the market, low volume will be on the indexes, and the rally will, obviously, fail and we will hit new lows on higher volume. That would be the worst scenario, in my opinion, because the government has their hands in the market.
I am not sure if we are about ready to enter a new world of Socialism but I am praying that my worst fears do not come true. If they do, I believe that the USA can still produce some exciting innovative companies. I like to believe that we have not dumbed-down our culture enough that the entrepreneurial spirit is dead. I like to believe it is alive and well and still kicking and even if we have to go through four years of Socialism we will come out ahead because we are hard working Americans. God help us all, if I am wrong.
For now, it would be smart to take profits in any shorts that you have a 20% or higher return on your investment. We have come down a lot the past couple of months and the past week was one of the worst drops ever. To not cover SOME (not all) of your shorts into this environment would be foolish. If you are not going to take any profits, don’t come crying to me if you get a big fat short-squeeze that takes you out of your position. There is a difference between being smart and being greedy. In bull markets you can get the big 1,000% gain. In bear markets, you must take profits along the way from 20% to 99%, depending on the chart pattern and price descent.
I hope everyone has a nice weekend. Relax, enjoy your company with family and loved ones. The truth is that is the most important thing in our lives. Not money, but family. As long as you cut your losses, which I have ALWAYS preached, you can always wait for the proper bull market to make a LOT of money. There is always a bull market from a bear market. This too shall pass. Aloha!!
Here is part one of the video market wrap. Part two and three for members only. Gold and Platinum subscribers can watch the full size version in the forums:
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Hi,
I’m one of your silver subscribers. (Bob’s Maelstrom just one of my anonymous email accounts.
But yeah, the above analysis was posted on the 11th October, it’s the 13th now, the evening of the 13th. Big day in the markets. I’d like to see an analysis please, even if it appears in the Silver longs subscribers area and not publicly.
October 13, 2008
Joshua,
Regarding your market analysis video, mentioned in your Silver New Shorts section October 13, 2008: “For silver subscribers it will be available before the opening bell”
Why???????????
From your own posted description of silver membership:
“The Silver Package includes the daily market commentary and detailed analysis on all longs and shorts Joshua Hayes will be taking the next market open!”
Okay so that’s 1) “daily market commenary” AND 2) “detailed analysis on all longs abd shorts JH will be taking THE NEXT DAY”
Let me see if I understand this, you’re gonna give a market commentary of the day you have ready now, but you’re gonna to give it to me before the bell on the next market day??? That’s more like historical market commentary.
I would like to recieve the service I am paying for per what you advertized it to be please, including the “daily market commentary”
Bob,
Commentary is free, everyone gets it and has been that way for awhile. On top of that, commentary has been available before EVERY market open since we began the service. Joshua is in Hawaii, 6 hours behind EST. How is the commentary historical when its provided prior to the open? It prepares you for the day.
Seems like you are eager to buy stocks here…why? The largest % gains happen in Bear Markets please go study 1/2/01 - 4/1/01 and you’ll see on 1/3/01 the market rose 14.17% only to roll over 30% to the downside. Have you been reading the commentary, watching the free video? I think Josh has made it clear what kind of market this is.
The service is not going to change, it is provided for everyone prior to the market open. It has been even prior to Big Wave Trading when we were with Investors Paradise.
It has always been ready for the next day markets. It is always done before the open. What are you talking about? I am NEVER changing anything. If you don’t like tough.
I think my returns SPEAK FOR THEMSELVES!!!!
It is time to GROW UP!!!! Why dont you study my returns a bit more.
You are a day late dude!!!! WAKE UP!!!!!!! NOthing has changed for over a year so your comments are pointless. NOTHING IS EVER LATE. EVER!!!!! EVERYTHING IS ALWAYS POSTED BEFORE THE OPENING BELL. IT IS ALWAYS DONE BEFORE 6am. WHAT ABOUT THIS DO YOU NOT UNDERSTAND???????????
WAKE UP!!!!!! This is the problem with newbies to the market. They have no clue.
Wow Bob. You should just cancel. You obviously have not studied my Past Big Winners. NOTHING IS EVER LATE so your whole comment is COMPLETELY POINTLESS. Just cancel. I don’t want a–holes like you here. EVERYTHING IS ALWAYS POSTED BEFORE 6am. You post one more mean or completely asinine comment, I will cancel your subscription for you. Jerk. How about all those 50% plus returns in the bear market I have gotten for you???? What about all my 200%, 500%, 1000%, and 2000% winners????? What a freaking joke.
RIGHT NOW, THERE IS NOTHING TO DO!!!! GET THAT THROUGH YOUR HEAD!!!! ONLY IDIOTS ARE TRADING THIS MARKET HARD!!! Unbelievable. Why don’t you wake up earlier and get the info that I give.
I have ALWAYS been a before the market open service. Unless you are Gold or Platinum, you are NOT GOING TO GET ME RIGHT AFTER THE BELL OBVIOUSLY!!!! DUH!!!! If you are platinum you get me ALL DAY, if you are silver….YOU DONT!!!
What is there not to get? Like I said one more jerkoffish comment from you Bob, you can forget about having ANY OF MY FUTURE BIG WINNERS. And trust me there will be a LOT.
how can ANYONE be upset with this service. I saved EVERYONE from destruction of this bear market.
My best account is up 20%, we have a subscriber up 42%, and my worst account is down 7%….all during a market that fell 40% plus.
Some people are SO UNGRATEFUL. You are one of them Bob.
Very disappointing.
How many times did I say Cash IS KING!!!!??????
100 times before the crash?
or 1000??
How many idiots at realmoney.com or CNBC told you this? None??
well RevShark maybe…but since 2005 his returns have been weak.
btw, everyone, I am canceling Bob’s subscription. Before attacking me over something you are obviously IGNORANT about, you might want to ask nicely how we play here.
I already have too many subscribers. When the next bull market starts and we are getting 300% returns there, 500% returns here, and 2000% returns in the best, you will be losing money following all the other morons that work on wall street (trust me they are like you, Bob).
My returns can’t be beat.
That is why I worked as a guest contributor on Realmoney.com and write for multiple websites now. IGNORANCE will get you NOWHERE in life. Bob you are out!! I decided I am NOT going to put up with this when I am up 20% in my biggest account for 2008 and my worst account is only down 7% compared to the 40% loss in the market. Bob you just lost the best service that will make many VERY RICH in the next uptrend/bull market.
Hope you are proud of yourself. Don’t attack me, without knowing what you are talking about. It is an automatic BOOT!
Just to remind everyone:
I have been doing this since 1996.
I have been doing this FULL TIME without another full-time job since 1999 (that includes 00-02, 08)
I have been asked to work for EVERY big financial website–Minyanville, Realmoney, SeekingAlpha
I was asked to partner with RevShark. I declined because his returns were WORSE than mine.
I have been doing this on my blog since 2005 and my records are available there at http://www.bigwavetrading.com
NOBODY and I MEAN NOBODY!!! on the internet can get the returns I get in a bull market. Why? Because I have studied my history and I know and fully understand the CANSLIM system
If you like only working 1-3 hours a day, the rest of your life, you are in the right place
However, I will not put up with crap from anyone! My returns this bear market, via my shorts have proved that I am a master of bull and bear markets. I don’t need to prove ANYTHING to anyone anymore. I have my past big winners for my longs going back to 1999. I don’t have any shorts posted but top returns should be posted so people like Bob can’t get nuts and ignorant
Think before you speak or risk losing your subscription. I have too many subscribers and I am afraid too many will piggy back me into illiquid longs (I don’t short illiquid stocks) so there is no reason that I should deal with people that are clueless about the topic they are angry about. ie…Bob. This guy is just terrible. How can you say that I don’t post things on time, when I have NEVER!!!!! been late. I have never missed updating my longs or shorts before the opening bell…EVER!!!!
Where were you when we went long AFSI, APPY, or TESO last year, where were you in 2005 when ERS made 550% and GIGM made 250% in less than six months, where were you this year when I went short AAPL RIMM MOS POT?
How many big winners will I have to get before idiots like Bob stop the BS? Probably never enough.
God bless you all that are respectful and polite. And DOUBLE God bless you all that are not. Very sad.
Bottom line: even if you were 5 days late, with my longs/shorts, if there is a low volume rally/pullback after the breakout or bounce, you still have TONS of time to get long/short.
However, if you miss something and it breaksout and runs…BIG DEAL!!!! There will be more!!!! I am never short of long candidates in a PROPER bull market (WHICH WE ARE NOT IN) and also if I decided not to update the market commentary for 3 months…I can do that. THIS IS FREE!!!!!!!!!!!!!
I never have problem with professionals or people that already know CANSLIM. It is always with the uninformed. ALWAYS!!!! If you come here and you do NOT know what CANSLIM is…you probably should know what that is before subscribing.
Nobody that daytrades stocks can beat a CANSLIM investor over a 3, 5, and 10 year time frame.
Daytrading in the futures market…now that is a different story. But when it comes to stocks, even if you were 3 days late my analysis deals with big trends. Not minor ones…which newbies focuses on. I have learned either UNSUCCESSFUL investors or NEW daytraders don’t seem to understand that the best and biggest gains TAKE TIME TO come through. You cant daytrade and beat the market. Less than 1% that try to daytrade succeed, so why go with those odds.
What was my other job besides investing in stocks from 2001-2004? Poker. Anybody that doesn’t know the rules to poker will lose to me. Just like in investing. I know how to make money in poker and I know how to make money in the market. If you think one is different than the other, you are VERY WRONG.
This is my final comment on my skill that so few seem to understand. I guess that is why everybody, where I live, has NO CLUE what “shorting” is. They have NEVER heard of it and even if I tell them what it is they look like I just gave them the most complicated calculus problem to solve. If you don’t know what shorting is, you are probably not ready for this site. If you see those huge returns on my homepage and in my past big winners and still complain like Bob…you get canned!