Tuesday, October 23, 2012

T 3 Update..10.23.12

This is the view as of Monday's close.  Today's early action is bearish and getting more so in early going and bottom fishing is not recommended.  From a technical standpoint the NYSE adance/declime line is currently flat at .14 (1.00 is a neutral market...equal sellers and buyers) and reversals from sell offs of this magnitude typically require bearish readings of < .10 before true recovery rallies occur.  These selling capitulations only happen on about 1% of trading days but they can get truly ugly as a bottom is fathomed.

Just as an aside,,,,based on my 25 years + sitting in front of the screens I'd say without reservation that the NYSE advance/decline line (typical symbol $NYAD) is the most reliable indicator of market momentum you can monitor and I always have a real time chart of it active....why? because it's one of the few technical market metrics that high frequency traders and order masking algorithms can't distort (at least not too much).
OK...back to T3..

On Saturday I noted my skepticism about the top 3 picks for this week and, as a result, I'm still holding the 10.12.12 lineup, (TLT, XLU, AGG) supported by the Long TLT/XLF pair trade we've profiled over the past week. Nothing says you've got to follow the signals and cash is always an option in my mind, which we will see the results of with tomorrow's update of the fixed allocation TAQK and LM models.

Apple was the catalyst for QQQ's + momentum yesterday...all eyes are on their earnings report on the 25th and the sentiment is distinctly bullish.  That being said, if we do run up against prolonged selling in the major markets Apple is going to have a tough road not to follow the herd downward.

As a final dismal observation, note the real time TrendX chart of the SPY in the right panel.  It's there for a reason.  SPY is now sitting at TrendX support and a break below this level will not bode well for equities and the safety of cash will become much more attractive unless you want to play the short side.