The GMI and GMI-R remain at zero. There were 3 new highs and 671 new lows in my universe of 4,000 stocks on Wednesday. The indexes I follow remain in solid down-trends and I made a little money in my IRA as my put options increased in value…..
I have been going to trader meet-up groups the past three years and had noticed that attendance was sometimes a good contrary indicator at market tops and bottoms. When few people attend the meeting it often signifies disgust with the market and a possible bottom. Last night we had the largest attendance ever, an ominous sign to me. When I mentioned this to the group they all laughed, which I interpreted to mean that they did not think the market was in for a further decline. Many of the new attendees were noticing the volatility of the market and wanted to find ways to profit from it. Could it be that as long as we have lots of people looking for opportunities, this market will not bottom? Capitulation (and bottoms) usually occurs when people want no part of the market. Moreover, when I look at this monthly chart of the QQQQ, I see a market that may be closer to the beginning of a decline than to the end.
Note that the shorter term moving average (dotted line) has just crossed below the longer moving average (red line). In contrast, the 2000-2002 market spent two years with this short moving average declining below the longer average. Maybe we should get ready for a long decline and stop trying to find a bottom. What do you think?
For Nazz I think you are right. Looking at the components in Nazz 100, the big ones such as AAPL, INTC, MSFT, GOOG, AMZN all may have some more downside for three reasons: First, they have high p/sales ratios and this may have to come down a little bit (the P/E ratios are fairly low, but the decreasing E may be increasing the P/E ratio without further price erosion). Second, they are highly liquid stocks and funds/individuals who are deleveraging are more likely to be selling these than selling their less liquid holdings. Third, they generally pay little or no dividends so it is hard to hold them through downturns as they generate very little income for a long term investor willing to stick it out for a few years, but who needs some income from their assets.
As far your observation about lots of traders still attending your group meeting, you may be right that interest is still high. Most of the buy-and-hold investors around me have not sold anything so far. Some are still looking to buy what they consider bargains. Anyone who has been in the stock market since 1982 (and that is probably a big part of the investor base) has learned that selling after a 40% selloff is a loser’s game. Each time since 1982 they sold into a panic, it didn’t take more than a few days/weeks for them to feel like idiots as markets went on to rally to new highs. So most folks have decided to stick it out this time. Are they right? I wish I knew!
Those traders who have survived the market so far certainly have plenty of temptations thanks to the wild volatility. I think most traders are not able to capitalize on the volatility (unless they are short or got extremely lucky with their trades), but it is very hard to give up on the idea that you could make a quick buck in this volatile market. A lucky trader could make a month’s gains in a day with this volatility. That may be what is helping them stay in the game. I suspect by the time this is all over, only a small percentage of full time traders will be left standing. Most full time traders will quit the market in disgust and go back to their original day job. This is not meant to be a criticism of trading as a full time profession — just an observation that Mr. Market has a way of frustrating max number of people. Traders in stock market are essentially intermediaries who are providing liquidity to transactions between long term investors. When the long term investors are less inclined to participate, it reduces the need for intermediaries who make a living assuming risk and providing liquidity.
QQQQ’s current all time low for month ( if close is no higher than current price at 1500 hr Thurs )
SPX – Ditto
XMI – ditto
NYSE – ditto
EFA – ditto
EEM – ditto
who needs more evidence ?
I believe Roubini – and commentor above , real panic has not yet set in , but will
I wouldn’t trade this market , or be long with a 100 foot pole .
Bill