Saturday Review

What led to Friday’s plunge? Was it overdone? Why might it be duplicated Monday, and to what degree? What is the alternative, and what signs will tell us which scenario is playing out?  These and other questions are answered in this weekend’s Saturday Review, along with many great questions posed by attendees. And as usual, my answers are designed to include useful examples of how my methodology helps the market speak honestly to you.

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The following stock requests were reviewed in this order:
FB, AMZN, NFLX, GOOGL, GDXJ, WYNN, RARE, BAC, WDC, MU, VRX, CMG, TWLO.

09/10/2016 09:27:58 David B: Good Morning
09/10/2016 09:28:01 G: good morning
09/10/2016 09:28:07 Mark Glezer: gm
09/10/2016 09:31:33 ljr mobile: gm
09/10/2016 09:40:40 Mark Glezer: is there a potential for a 200 pts day Mon/Tue?
09/10/2016 09:46:30 Mark Glezer: when NDX printed new highs on Mon, CNBC reported that FANG stocks are breaking higher, do u think is being trumped by the mkt downturn?
09/10/2016 09:54:17 Mark Glezer: does Fri action suggest that a downturn, even if interjected with a bounce will likely develop very fast?
09/10/2016 09:57:43 David B: options expiration could be influential or to early in the week for it to be a factor?
09/10/2016 10:01:53 Bill G: Would a test of lower prior highs over next couple of days become a bottom and still allow for new highs?
09/10/2016 10:03:59 Mark Glezer: Carter Worth from Oppenheimer said that
09/10/2016 10:06:39 Mark Glezer: if we rally from a gap up above 2138, would u short when we get to higher prior lows?
09/10/2016 10:10:01 David B: could a lot of the selling be discounting what the market thinks the FED is going to do and if they raise then we may rally?. or is this too far out to be looking at this?
09/10/2016 10:10:29 Mark Glezer: that’s me asking, not Carter hahah
09/10/2016 10:10:41 ljr mobile: do u think this is a short term or long term trend change? weeks/months dare I say years?
09/10/2016 10:12:52 Mark Glezer: if they don;t raise we plunge, maybe after a knee-jerk reaction?
09/10/2016 10:14:12 Mark Glezer: lol
09/10/2016 10:16:57 David B: is this wasn’t a friday what we saw could we talking about a multi session decline or friday or is this not a factor here?
09/10/2016 10:21:16 Mark Glezer: Mon gap down might just invert if we don’t gap under lower prior highs?
09/10/2016 10:21:16 David B: there was talk in the market about bollinger bands being very narrow and a sharp move was going too happen. was there anything in your work was indicating this was going to happen?
09/10/2016 10:22:09 Mark Glezer: what would be the best bottoming action Mon ?
09/10/2016 10:23:21 ljr mobile: the brexit lows look a lot like that “throat” pattern last August that we hit limit down
09/10/2016 10:27:33 ljr mobile: we tested prev years low
09/10/2016 10:30:48 ljr mobile: stocks: $wynn, $rare, $cmg, twlo
09/10/2016 10:31:08 ljr mobile: no positions in any
09/10/2016 10:38:01 ljr mobile: not sure
09/10/2016 10:38:13 ljr mobile: just relative strength
09/10/2016 10:38:18 Mark Glezer: BAC
09/10/2016 10:38:32 David B: WDC,MU
09/10/2016 10:39:15 Mark Glezer: VRX – still going to zero, maybe with mkt’s help?
09/10/2016 10:47:51 Mark Glezer: can BAC exceed 17.07 target or it’s highly unlikely provided it even gets there?
09/10/2016 10:51:44 Mark Glezer: thx much
09/10/2016 10:53:52 Mark Glezer: Bill Ackman has 10% or so
09/10/2016 10:58:09 ljr mobile: thx great review today.
09/10/2016 10:58:22 Mark Glezer: thx much

Last Monday’s new high seems so far, having printed a week ago. But it’s actually very close, perhaps a strong morning away. That feature speaks as much to the ongoing rally’s strength, as to its likely near-term resolution. Interpreting the variety of patterns and behaviors is this weekend’s initial focus.

Meanwhile, we’re in the middle of a bullish WedEX, and Friday was right in-line. How that should impact Monday morning, and why, is discussed in detail. So is the comparison among the three major market indexes as a way to gauge the stability or fragility of big money sentiment. The Labor Day holiday weekend’s proximity and its effect on price action is also discussed.

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The following stock requests were reviewed in this order:
VRX, CS, MU, BABA, MS, BAC, C, GDXJ

08/20/2016 09:31:29 Mark Glezer: gm
08/20/2016 09:31:31 G: audio good
08/20/2016 09:57:31 Bill G: What is the expectation following an active vs a passive bullish Wedex?
08/20/2016 10:04:54 Mark Glezer: downturn should be obvious by Tue afternoon if it happens next week?
08/20/2016 10:04:58 Bill G: thanks
08/20/2016 10:07:30 c: wedex- love it
08/20/2016 10:13:38 Mark Glezer: VRX, CS, MS, BAC, C
08/20/2016 10:14:15 David B: MU,BABA
08/20/2016 10:17:13 Mark Glezer: can still short for a long term?
08/20/2016 10:34:02 Mark Glezer: do u still see BAC getting to 17?
08/20/2016 10:34:51 Mark Glezer: thx much
08/20/2016 10:36:51 Mark Glezer: does your expectation of a move higher in a few financials plays into a liklihood of a extention higher in ES albeit temporary?
08/20/2016 10:37:17 Mark Glezer: play
08/20/2016 10:40:12 Mark Glezer: thx
08/20/2016 10:40:23 David B: thanks
08/20/2016 10:40:25 c: TKS

This week’s bigger picture discussion finds the market at the same level as last week. That lack of improvement is, in itself, a predictive condition. We review why, and how that may play out initially and eventually. Several great questions were posed by attendees, and several stocks were reviewed. (Also, to test a voice-to-text program, a rough transcript is below.)

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The following stock requests were reviewed in this order:
NDA, TXN, BAC, C, AMGN, BIIB

Below attendee comments is a rough transcript of the bigger picture review.

08/13/2016 09:31:31 David B: Good Morning
08/13/2016 09:32:04 Mark Glezer: gm
08/13/2016 09:44:28 David B: maybe we will see a turn in the market on what big money is thinking early in the week with options expiration this week?
08/13/2016 09:54:53 sm: A close at what price level above would have you start to consider that price is no longer within the orbit of the range of the topping pattern?
08/13/2016 09:55:02 David B: has this rally been since the brexit vote been more a lack of sellers versus accumulation of strong hands. I mean similiar like you may get on a trading day before a holiday when you see a big move.
08/13/2016 09:59:23 David B: yes it seems like we can’t get a durable downleg because of a new global trend extreme or a new trend high on a friday. does this tell us the participants that are in the market.
08/13/2016 10:01:19 David B: when they don’t confirm the next day is that confirmation also?
08/13/2016 10:02:10 David B: like on a friday and then we get a negative close on a monday
08/13/2016 10:04:45 David B: when you see different makets all strong like bonds,stocks,commodities does this tell us something?
08/13/2016 10:04:51 David B: markets
08/13/2016 10:04:52 Mark Glezer: any likely setups for Mon?
08/13/2016 10:05:24 David B: because there is n correlation?
08/13/2016 10:05:32 David B: no
08/13/2016 10:05:39 David B: n=no
08/13/2016 10:08:54 Mark Glezer: extending down sharply would be one-two day affair?
08/13/2016 10:09:33 Mark Glezer: can we get to 2140 on this reaction?
08/13/2016 10:11:16 Mark Glezer: would u fade a retest of the prior highs Mon morning then?
08/13/2016 10:13:55 Mark Glezer: from a flat open
08/13/2016 10:14:24 Mark Glezer: k
08/13/2016 10:15:02 David B: NVDA,TXN
08/13/2016 10:15:09 Mark Glezer: BAC, C
08/13/2016 10:21:25 David B: NVDA and TXN are these patterns that usually go higher?
08/13/2016 10:24:42 David B: AMGN,BIIB
08/13/2016 10:37:51 David B: thanks

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Good morning and welcome to Saturday review

I’m trying to do a automated voice to text transcript to make it easier to wade through the 45- 30 minutes or however long it is of a presentation about the market. Today it might not even be that long because what we are looking at is similar so similar to what we were looking at last week. So similar that one big difference or additional information is just that we’ve been here for so long so where were we last week when we were talking there was a break out to a fresh Friday, a new high close — new trend high close on a Friday. And a new trend high close on a Friday means that there’s going to be at least one more higher trend close.

In fact there was not immediately and also not cleanly Wednesday or Tuesday’s close which was effectively higher still within the range but a new trend High close the actual close was that actually a tick lower but because that section containing that overlapping high close itself had produced a new trend high it could suffice as fulfilling that outstanding requirement. So for what it’s worth we went to on Thursday to produce actual new trend high close, so that requirement is off the table. Where we left it last weekend — last Friday’s new trend high close was also the first close beyond multi-session highs and begin by giving up. There were some features to it we discussed that made it a little less likely to be confirmed by a second consecutive higher close, not the least of which was that it was a Friday and that’s among the least likely breakouts. Also to be breaking out from a such a long ongoing range. So in fact, it wasn’t confirmed despite probing higher, despite having the means, did not close higher and confirm Friday’s breakout close. And that just helps to confirm instead that buyers are waning, that the upside momentum is not a sell signal, but it is basically in lieu of downside momentum.

And that’s how the week progressed. We did have some unfinished business above. We created unfinished business above in the process of fulfilling other unfinished business above, which is how a rally keeps itself alive. And it did keep itself alive, most recently with the upside target of 2185.50 that was met at least to within 2 or 3 ticks — actually, to within 1 tick at the high. In fact, it was met in the process of ranging sideways Thursday afternoon, and it’s reaction fell back into that afternoon range, that last congestion it was trying to break out from. So, back into that range but at least it fell back into that range and that wasn’t a sell signal.

None of this is a cell signal. Not by satisfying target above, but by reversing back under a prior low — which the market has yet to do. Still Friday, without Thursday afternoon having gained traction, that is just ranging sideways, needed to gap up Friday in order to preserve the rally. And it did not gap up, so there’s another means available for a reversal — down, rather than the means being available to the buyer is now the means are becoming available to sellers. Where the means to extend higher are rejected we suspect that the rally’s momentum is waning. Where the means to reverse down are rejected we also start suspecting that similarly selling pressure is waning.

Well, selling pressure isn’t very old here. It was just Friday, so one day of rejecting an opportunity after satisfying upside objective the day before, having closed deeply enough back into the rain to start suggesting momentum reversing down, not gapping up to reject it — actually, gapping down and extending down and spending the entire session in negative territory — still, it’s just one day for sellers did not reject that, and they certainly weren’t projected with a higher close, but it was starting. A couple or three more sessions like that where price basically drifts.

There’s a gap back down to Wednesday’s close. If price direction turns down and fills the gap back to Wednesday’s close, without closing under Wednesday’s close, although price direction would be down, that action of absorbing and that gap still holding that test instead of breaking it, that would undermine sellers. So pressure wouldn’t necessarily be waning but it would be getting expended without gaining any traction for the effort. Which can be just as undermining and therefore in this case just as bullish.

So, in order to actually take all of these ongoing observations and conclude that a top has formed — let alone that momentum or the trend is reversing down — we need an actual close under an actual low. Whether it’s a prior low close like the close back to Wednesday’s gap, whether it’s Wednesday’s low, the interim low between these two intraday highs, whatever it is (in that latter case (2167.50), whatever it is, that is what would signal the trend reversing down. Until then, the same force, the same factor and I almost say the same sponsorship — not that it’s an entity, not that it’s even an affiliated group of conspirators, unwitting co-conspirators with the same sentiment just having the same affect and same influence and that is without that reversal to close under prior lows. If price is not going to remain static which it did for quite a while, then it is vulnerable. Wven while it is static, vulnerable to at least probing higher highs and then extending higher.

So let’s look at the three major indexes and compare them to see if there’s any signs that they maybe ready to turn the corner. Last week we actually saw speculative activity coming back. Let’s take the ES first which is a control group. 500 stocks comprising the S&P 500 broad cross-section of economy, relative liquidity, analyst coverage, revenue flow somewhat predictable, and visibility of earnings. And last week we have a new high and a higher high prior to that, compared to the prior week basically centered around it, dipping back into or under lower price, at least down to lower prior highs. Just as much of a range up here as a range down there.

See how that compares just on that basis alone to the Dow. Much more conservative. In other words, even greater predictability, visibility of earnings, because there’s even wider analyst coverage. Greater liquidity because these are among the most highly capitalized stocks, only 30 of them, but still major industry players so let’s see. Here is that consolidation at the low and if the Dow were trading similar or at a similar level relative to S&P is, then last week’s high prior to Friday would have held as the week’s highs. Instead, we’ve actually got a more complete expression of any accumulation that might have developed the prior week, at the prior week’s lows. And how productive was that, because last week’s rally, first of all, the beginning of the week tried to extend Fridays break higher, which vs. S&P 500 that broke out above all prior highs, the Dow did not. So there was, of course, some tag along, because no two indexes are going to diverge from each other. And in this case, the Dow did come along. It just couldn’t get out to a new high. Not even until Friday — and Friday could not maintain a closing high despite having the means, despite having probed higher, it still failed to close above its prior high from four weeks earlier. So, a lot of movement into the safer areas, rotation into the safer areas, not quite making higher not quite breaking out.

NDX didn’t do anything that substantial.  High on Friday was above prior highs. That’s of course relative to an uptrend as opposed to yesterday that had been ranging sideways. Actually more so, it had been ranging sideways, then down, which had been down trending. But that speculative fervor that this chart represents, the NDX which is a hundred stocks, newer companies just by virtue of their being more technologically exposed, less predictability of earnings and revenue stream. Where bigger money goes when it is feeling comfortable with the market’s prospects. And yet  since last Friday’s Breakout also just raining sideways the Dow has had the better performance of the week once again coming down to Friday, Friday on and NDX doesn’t even register a new high, where the Dow at least part of it (or, compared to this leg) does nothing.

So, if we’re going to see a downturn in the market it’s likely to start being obvious Monday, because everything that I just described really is only observed on a one-day basis. So none of that is binding — like any of it ever can be anyway — but any of these observations regarding the comparisons among the three indexes is going to be compelling for a bigger move when it’s observed over two consecutive sessions. There are plenty of instances where these situations like the one I just described can be observed on one day, and then the market resumes the prevailing trending actions, and behaviors among the three indexes. So in order for this relative divergence, budding relative divergence to have any impact on price action, on trending, it still needs a second consecutive session of deterioration. That would be Monday, and that would mean if this is going to take hold, then it’s going to be observed relatively quickly. There is no other unfinished business above. There are signs that sellers are trying to take hold. And if there’s any reason why they didn’t already do it Friday, it’s because it was Friday. That’s always the most difficult day for any kind of predictive price action.

Alright question — “maybe we will see you turn in the market on what big money is thinking early in the week with option expiration this week.” That’s a great question because I want to be clear the expiration, the WedEx, Wednesday expiration signal, while it is definitely a reflection of big money — what we’ll call big money, lumping a lot of different players in — we can lump in institutional players that use the options market to lay off risk, and we can use the otherwise unaffiliated conspirators of retirees who use the options market to generate extra income (maybe I should say excess). There is definitely big money involved. But as far as what it’s thinking, that may be the least thinking money of them all, or even if it’s otherwise thoughtful monies, it may be there at least thoughtful of all. And that’s because the only consideration is which way they’re leaning going forward, or what kind of exposure they need to clean up.

Their opinion’s going to be expressed in there to some degree, but even better than opinion — even more reliable than opinion — is the mechanical feature of what they are forced to do in order to maintain some sort of an investment number that the original position was designed to achieve. So, as far as this week, it was big money is thinking in their opinion of things. I’m not looking for that, but definitely this being a expiration Wednesday’s close, as an opportunity as always to be compared to a prior couple of sessions, to the context that we discuss all the time — which are always available, but more importantly what’s not always available which is available now is the proximity to prior highs. If the market were just trending relentlessly into WedEx, Wednesday expiration, then we wouldn’t really have a great comparison to make. That’s the best part of all the comparisons is to gauge the current price versus the prior range. And being beyond the prior range doesn’t offer as much predictability as does recently breaking beyond or at least testing the prior range.

Next question — “what close at what price level above would have me start to consider the price is no longer within the orbit of the range of the top?” Another good question, because there is still room to extend. And. again, without actually signaling momentum reversing down, the trend is reversing down, closing under prior highs — which is now suddenly a lot easier than it was this Friday than it was last Friday, because this Friday comes off of a new intraday high that tested the week’s prior intraday high. And their interim low, their interim low pullback is so much closer relatively speaking. It’s really not even 15 points away, whereas last Friday the last relative high, and then the interval between them was 35 points lower. And also facing a strong headwind if it wanted to work its way back there. So, even though we’re that much closer to, or that much easier to reverse down, if we go another day or two without reversing down, then the question becomes “what is preventing it?” And something more substantial will be preventing it. If that’s the case, and this range — we have talked about this range — just as much as it has projected to a number of the levels that we’ve hit in testing higher highs, it still has projections that would just be extensions of that range up to the 2250 area +/-. So, without actually reversing down, without actually getting sponsorship that is motivated to push price down — dumping a lot of shares… (Appaloosa, for instance, hit the tape yesterday that they’re out of a number of high-profile stocks)… Actually pushing price down, as opposed to just really needing a pullback because the sponsorship to the rally is taking a break, going to buy it a little cheaper. Until we get that, with this being the range and this being the low of the several weeks of consolidation, if one of its projections doesn’t upon being that and then produced some sort of a reversal pattern price, can just drift to the next high, and higher.

Alright question — “has this rally been since the Brexit vote or has it really been more a lack of sellers versus accumulation of strong hands similar like you make it on a trading day before a holiday when you see a big move?” So, what’s behind this? Because this is the Brexit reaction. So, I suppose another way to phrase the question — “is this because buyers have been accumulating, or is this just a rubber band effect?” Is that basically the question? It seems like we can’t get it because those are features to a trend that is entrenched. Little tactics like that — that sometimes require a lot of effort, like a new trend high close on a Friday, that sometimes require nominal effort, like Sunday night Globex trend extreme, as has been the case the last two Sundays — different tactics like that, that a rally or a trend in any case can apply to entrench itself, to entrench its direction, and to allow for a reaction refueling itself, counter-trend action that traps the counter-trend sponsorship so that it gets squeezed to fuel the trend’s resumption. Those kind of tactics reflect stronger or weaker hands and they definitely reflect stronger hands when they’re on Fridays, and they reflect an interesting follow-through when they happen on Sunday nights because that of course is not with US cash market trading. So I’ve always interpreted it as being a broader appreciation of the trend and therefore even more defense of it. If it starts reacting, being in the opposite direction, it’s not so much at some point a matter of what those tactics are that are being employed to maintain the trend, but how quickly they are neutralized. So, at one point it is those tactics, and then down the road it is the absence of those tactics, that define the difference between a healthy trend and one that is losing sponsorship. And along the way there are different shades of it, and the shade that are reviewing now is that those anchors are being neutralized that much faster, so that last Sunday that this week’s this prior Sunday the prior prior Sunday that Sunday night Globex trend extreme that required an intraday high remains outstanding. About a month ago another one at 2168 remains outstanding versus intraday retest for quite a while this past week Sunday nights new Globex trend extreme was neutralized pretty quickly. So, at some point that just starts to reflect rather than strong hands getting over extended and letting the retail market catch up with them, you’re basically trading among themselves.

“So when they don’t confirm the next day is that confirmation?” No. There is a pattern, a sequence that we discussed from time to time mostly in the currencies where there’s a breakout, no confirmation the next day and that doesn’t preclude there being a breakout the next day, because that breakout today and then on confirmation or a multi-session range so that third session breaks out in which case the fourth session is very predictable. When that happens, when it has that setup so not confirming a break out is not in itself predictive of anything the third day of that sequences? On a Friday then we get a negative close on a Monday now so that just won’t be productive it’ll be a missed opportunity and sometimes that can a attribute itself to a bullish or bearish thing, but it’s never going to be predictive in itself.

Another question — “when I see different markets all strong like Bond stock commodities does this tell us something?” It probably does, kind of like running a blue light special, trying to get a lot of attention, trying to reassure its sponsorship by being as profitable along the way as possible and ultimately becoming too aggressive to attract new sponsorship and sharply changing prices so Sunday or Monday work to start dropping quickly any kind of aggressive truck brake member that guy back to the prior week back to the prior to Thursday the for the employment situation report reaction, that would actually have a much better chance of holding. There’s a number of levels on the bottom we have to look at would pick up Monday or Friday sellers left off Friday sewing and inside day really getting nowhere for its effort which on any other day would be looking at bullishly they almost look at it it is Monday off as much pretty much in the same thing the same characteristic would have a much better chance of gaining traction so early weakness Monday if its aggressive could follow through but and depending how deep but initially given the opportunity how did suspect that if we do get one or two days of downtrending that it’s because new, new direction has been established and that new direction that would be done so what I say to retest of the prior has Monday morning I’d like to see that I’d like to see how that’s being done because buyers did not gain traction Friday afternoon and the only way to resume the rally and immediately is to gap up above that prior session’s high. So would I fade a gap up above the prior high now? Maybe ultimately later in the morning after it had extended, but it would be likely to extend until any kind of a test of the prior high is rejected or some setup indicates that it’s projecting to a level that would reject that. I can anticipate being a seller. Also too many other variables we certainly don’t want to be stepping into a flat market or what is going to be a flat market so I really don’t want to do anything open wide open is not that enticing opening flat after having probe higher or lower overnight that would be compelling.

[Note: Correcting the initial output took about an hour, so I’ll be trying a different speech-to-text software next week]