The Rogue Investor » smart money

Holiday Trading: Stocks Drift Higher

Alex — Sun, 27 Dec 2009 19:05:16 +0000

Merry Christmas & Happy New Year!

As expected, volume decreased over the last 4 sessions with most investors on vacation. We can see on most of the major indexes that the Smart Money made their final trades for the year on the 18th as the volume was enormous.

Over this light trading, the markets drifted higher and even broke out of the top of the trading channel. Most surprising for me is that the Nasdaq moved an astounding 3.35% higher. Also, the Russell 2000 advanced 3.85%.

While we can’t immediately dismiss this move, I don’t buy it until we get a full day of full volume trading. If the market continues its rally after the professionals return, who knows how high we will go.

I do think that we are in or near a hazardous situation in the markets. It seems like the market has gone up just enough in this latest rally that investors who have missed out on the gains so far are jumping in taking new long positions. This could be the perfect time for the Smart Money to dump their shares to these investors.

In this situation, these personal investors would be described as “weak holders” in VSA. This means that they are on the wrong side of the market and could easily be under pressure if the market changes trend.

If this is the situation, we could find the perfect storm of professionals and personal investors dumping their shares causing a rapid decline in the markets.

Overall, we will have to watch Monday’s session to get a better idea of the health of the market.

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Smart Money Active on Friday Before Holidays

Alex — Fri, 18 Dec 2009 22:40:21 +0000

Just as it looked as though the Smart Money wouldn’t show their faces before the holidays, Friday’s volume soared signaling a large batch of orders taking place.

From the initial analysis, the S&P 500, Nasdaq, and Russell 2000 all had bullish price action, closing near or at the highs for the day, and the Dow 30 and NYSE showed signs of supply, closing off highs, which could ultimately be bearish.

Squeezing this for even more analysis, we can see that the broader indexes showed bullish action. To me, this would suggest that overall,Friday was a bullish session because more total stocks were sampled to have better return on the elevated volume.

For a much more complete view of how this day will affect future market movement, we will have to wait until Monday’s session. If the indexes move higher with strength, we will know that today had to be buying and can expect higher prices until further Smart Money orders take place. If prices are unable to close on highs and show weakness, we can conclude that there was selling amongst Friday’s trades and can anticipate lower prices to come.

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Flat Week Provides Little Direction for S&P 500

Alex — Mon, 14 Dec 2009 05:47:33 +0000

As time continues to fly by, now almost halfway through December, the markets have shown us little as to where they want to go.

One thing that sticks out to me is that in the last 24 days, we’ve only seen the market close on/near the high for 7 days. With a stat like that, it is easy to understand why the markets haven’t pushed higher into fresh, new ground.

The bulls gets some kudos here also. Of those same 24 days, only 1 has closed on/near the low.

Either way you look at it, we still end up in the same situation: narrow trading channel and very little direction in the markets.

If the market continues to rally and approaches the top of the trend channel, keep an eye on volume. If volume picks up and prices are unable to close on/near the high for the day, it is a good bet that our sideways trend will continue.

This would show that there is still supply in the market and that until the supply is removed, the market cannot rally higher.

Here is a look at the 2 recent days where the Smart Money was most active:

While both of these major days of activity both closed up, only one of them was a sign of strength. As you can see, I have marked them appropriately.

The first marked day is strength because of the close. The market finished on the high of the day and is right at the bottom of the trend channel. On the other hand, the weakness is seen on the second day because the market closed in the middle of a rather wide range at the top of the channel.

Overall, all we have at the end of the day is a flat market. All we can do is wait and watch for a new direction.

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November Wrap-up: Quick Start, Flat Finish

Alex — Sun, 06 Dec 2009 00:45:13 +0000

And just like that November is gone. If you get my newsletter, you know that this month has been far from my favorite.

After starting off on fire and rallying 6%, the markets have cooled off majorly, drifting sideways for a loss of 0.3%. What’s different about this consolidation is that it has lasted two weeks. That’s eight more days than the average sideways top of the last four pullbacks.

Based on the frequency of pullbacks and the volume during, I really have to think that the Smart Money has been dumping their shares as they fuel the rally with fabricated data.

Here’s a chart that shows how much the short-trend has flattened out:

The trend change isn’t a terrible thing. Until prices puncture through the bottom of the up-trend, the rally will technically be alive.

Because this new flat trend has lasted so long, it becomes a point of concern for bulls and a source of hope for bears. We can’t make any assumptions based off the action, but this is a very difficult market to trade in the short-term.

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Markets Gap Higher but Close Off Highs

Alex — Tue, 24 Nov 2009 03:18:53 +0000

After a lackluster end to last week, the markets jumped right back with the S&P 500 closing up 1.36%.

The number by itself is pretty impressive but the price action says different. All the major indexes closed pretty well off highs signifying supply in the market.

When we add volume to the mix, the day’s significance drops. Volume was close to the low for the last two months.

If things stay consistent, it wouldn’t surprise me to see the markets drift back to the previous highs and then fall off on increased volume.