Song Remains the Same

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  • on July 18th, 2011

Thankfully, I’ve yet to find a redeeming data point that could pull me into expecting an end to the selling.  I’ve finally come to terms with trusting my evidence over my gut, as the evidence I use is simply a collection of all the “gut” calls that have(and have not) worked out over the years.  I do believe that by the end of the week we will have clarity on the issues dictating the market’s flow.  The evidence shown here WILL NOT predict that outcome, but will reveal the shift if it is significant.  I’m fine accepting Keynes’ “Better to be roughly right than precisely wrong” over worrying about being “A day late and a dollar short”…March 10, 2009 felt late to a bottom picker but it’s safe to say there was still money to be made.  Today’s rough look at the evidence looks as follows, I took it near the 3PM highs:

Some buyable candidates have fallen off my list because of pending earnings…implied volatility is one of the factors I use when calculating reward:risk, and this number gets blown higher ahead of EPS so I choose to set those stocks aside from my analysis.  That leaves great performers like $AAPL, $IBM, $BIDU, $ALXN, & $VMW temporarily off my list but if they perform then surely they’ll qualify again.  That doesn’t affect the ratio, because poor performers(particularly financials) like $GS, $BLK, & $MS are also temporarily excluded.  The point is, despite isolated strength in a few leaders, the broader picture continues to deteriorate and I now show just 42 buyables against  79 shortables.

It feels like we’re just piling onto recent losses, but the reality is that today is the first day we’ve fully separated from that 1317-ish area that was touched EVERY day last week in $SPX.  It’s possible today could be an island day countering that 7/7 day overhead, but that’s not the way I’m playing it…those are quite rare and so far this doesn’t feel like it.  I’ve always loved the ISEE ratio as a sentiment ratio, and it printed an awfully low reading on Friday, but until we get some evidence of stocks making some lows I’m sticking to defense.  Only a heavy flush or a move back into last week’s range(w/appropriate stock leadership) will prompt me back to offense.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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