Schaeffer's Trading Floor Blog
Stocks quoted in this article:

Dave says - "Last night i thought, this might be the biggest (trading) opportunity of the year. How? The market would head lower at the open, break support, and then rally. Reason?: as Bernie notes, some buyers have a real interest in keeping this market going, (could it be Greenspan, Bush and the Social Sec reform lobby, ergo the Plunge Protection Police?) and so has the market been a great disrespecter of technical levels, (for whatever reason). The Bulls have done okay luring the Bears into their trap. Yes I was ready to back up the truck, go long at the bottom, bet it all on Red, (no Black). So what we have is the opposite of what I imagined. (The esoteric buying interest would surely hold back the bid at the open, let the market fall, and then jump in. This is somewhat more Bearish don't you think?)"

My response - Dave brings up a number of thought provoking points. The first thing that jumps out is the topic that "the market been a great disrespecter of technical levels" - which I refer to as noise. In addition to what Bernie has pointed out (make sure you check out yesterday's column - What the Future Has in Store and the link at the bottom of that article) you have a few thousand hedge funds (and their heavy leverage) all trying to outthink each other. I think this has increased the whipsaw action and helped to drive up the frustration we have discussed.

The second point that jumps out is the comments at the end about the weak open after the weak close. It sounds like the described scenario would be one of capitulation were all the weak hands are shaken out. Those who were trading back in mid-to-late-1997 know of which I speak and probably remember the chart below...


Created with SuperCharts by Omega Research

The market has been moving higher for the early part of 1997 but had become range bound by the summer. In late October the selling picked up and on the 27th the old style circuit breakers were tripped and the market was halted for a short time. The action was opened back up and the second layer of breakers were hit and the market was closed for the day. The opening on the 28th was brutal as sell orders crowded the open.

As you can see, the VXO (which was the VIX at the time) "gapped" higher and spiked past 50. I remember watching the open as stocks seemed to be melting. And even though the market had been in an extended bull market for some time, I don't recall anyone saying it was the time to buy. It was all about selling...Which of course was the bottom...

While I can't do it justice, that is what capitulation "feels" like....

And as I said this morning - flipping on the television and hearing that it isn't that bad doesn't seem to be the hallmark of capitulation...

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Stocks quoted in this article:

As usual, this table lists stocks that have at least 10 percent of their float sold short and then shows the top ten based on the previous day's gain. The last field shows how the stock is performing in today's session. This can be a useful tool for finding situations where stocks with heavy short interest have begun to move. All returns are shown in percentages.

Note - more information on short interest can be found by clicking here.

Company Yesterday's
Gain
Percent of Float
Sold Short
Yesterday's
Close
Today's
Return
Align Technology, Inc. (ALGN) 20.3 38.8 8.36 -3.08
Champion Enterprises, Inc. (CHB) 13.3 12.2 9.52 5.88
ADTRAN, Inc. (ADTN) 5.6 10.8 21.40 -2.52
Ariba, Inc. (ARBA) 5.3 10.3 7.40 7.26
NitroMed, Inc. (NTMD) 5.0 26.6 16.49 0.36
Inter Parfums, Inc. (IPAR) 3.7 13.9 15.14 0.00
AMR Corporation (AMR) 3.4 29.5 10.51 1.33
AMN Healthcare Services Inc (AHS) 3.2 17.8 15.12 0.99
palmOne, Inc. (PLMO) 3.2 35.2 23.31 0.60
WebEx Communications, Inc. (WEBX) 3.0 16.8 20.85 4.07

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Readers Respond - De-Caf...

by 4/21/2005 10:16 AM
Stocks quoted in this article:

In response to my morning tirade...Chris says - "I think the bulls need to consider de-caf! Watch the charts as the caffeine wears off over the first couple hours of the morning."

My response - I think that this morning's action will be important to watch. The bulls have been struggling lately (do I have a knack for understatement or what?) and now have the opportunity to turn the momentum. They failed to rally the market when the SPX was first "oversold" and sitting near support at 1160'ish so a failure here would be another blow to what has to be weakening psychology...


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Buy!

by 4/21/2005 10:02 AM
Stocks quoted in this article:

We are half an hour into the already strong session as NYSE net ticks spike higher...After sitting on their hands for the last week, we get a chance to see how much "oomph" the bulls have. The recent high on the SPX is near 1155 and seems to be the most likely resistance level...

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At the Open - Part II

by 4/21/2005 9:58 AM
Stocks quoted in this article:

Stocks have had a chance to settle into a groove so here is an update to the chart we looked at below...

For the most part the picture remains relatively unchanged from what we saw at the open...the broad market indices are strong while internet stocks lead the pack...bonds are lower as is oil...gold is flat...the biggest change is the pickup in the XOI/XNG...


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