Slope Of Hope with Tim Knight

Survivorship Bias (by Consistently Incredulous)

I tripped across a Standard & Poors announcement last week that CBOE Holdings (CBOE) will replace Temple-Inland (formerly TIN) in the S&P MidCap 400 index as International Paper (IP) (S&P 500) completed its acquisition of Temple-Inland on February 13th.  This reminded me of a good Seeking Alpha post I read last year about Survivorship Bias in Index Performance.

I highly recommend the full post; but in a nutshell, survivorship bias in the indices:

“Specifically, in the process of rebalancing (selecting and or deselecting stocks) the indices it is the tendency for failed companies to be excluded from indices because they 1. No longer exist, 2. Their market capitalization has fallen or 3. Their industry is in decline (which likely caused the first two reasons); this is considered Type 1, survivor bias. Inherent in this type of bias is the error you make in just counting the survivors.”

Pushmi-Pullyu

Well, the market presents a mixed bag - - some major indexes look bullish (which explains why I finally relented by actually BUYING some stocks, which is probably a huge short signal in itself) and others look bearish. Let's take a look at them, in bullish/bearish order:

The NASDAQ Composite pushed above its long-term resistance line late last week, and it's been inching higher ever since. This chart is bullish, period.

The Dow Jones Industrial Average (the Dow 30) likewise beat its "bin Laden high" from last May 2nd.

The Apple-powered NASDAQ 100 has been on a huge tear since Thanksgiving, and, as with the broader Composite, is straight-up bullish.

The strongest argument for the bearish case (which could be badly damaged by a single "good" headline at any moment) is the EUR/USD.

It turn, the $HUI Gold Bugs Index is poised for a beautiful fall (provided it stays under that centerline).

The Russell 2000 is right up against resistance, and this is a point where it could easily slip back to the high 700s.

The Broker/Dealer Index, $XBD, may have double-topped.

Lastly, the NYSE Summation is a screaming sell right now. Look how it's configured compared to Spring 2010, shown on the left, just before its big tumble.

So your guess is as good as mine at this point. At this moment, I'm 50% in cash, and of the 50% in equity positions, 25% is long and 75% is short. It's pretty much all about the Euro at this point, folks. We are all FOREX traders.

Geomagnetism Rules

A correlation between stock market performance and geomagnetism is captured in a paper here by Krivelyova and Robotti. That aside, it is a rarely used discipline in trading, and if you search Marketwatch, Bloomberg and CNBC for its reference, you will come away empty handed. My latest findings are about to demonstrate its importance.

Here is daily geomagnetism versus the S&P500 stock index since the cyclical bull market begain in March 2009. The red-yellow spikes down are high geomagnetic disturbances, and the two periods in which they are strongest correspond to correction periods in the stock market. In between and either side, stocks advance during periods of relatively benign geomagnetism.

Overbought Condition? (by eMiniSchool)

David Einhorn Captures Europe Beautifully

Important Timing Update (by eMiniSchool.com)

Remember the .35% Support? (by eMiniSchool.com)

 

Confluence of Positive Technical Factors (by Mike Paulenoff)

Our cycle work in the S&P 500 indicates that we are near the timeframe for the establishment of a small cycle low due on November 30 (+/- 2 days). A small cycle is 20-25 days, and lies within the larger, overriding cycle of 70-75 days. Accordingly, we find that the S&P 500 on Monday and last Friday hit a corrective low at 1158.67/66, and since then has pivoted to the upside into Tuesday's high at 1203.67 (so far).

Dow Support Levels/ Scalping (by eMiniSchool.com)

Over the last few months we have been talking about the .35% symmetry support. As the market was falling in August it seemed impossible for the support to hold but it did and from the support we have rallied 1500 DOW points.

It seems like we would have to pullback from where we are now but if we look at the 30 Minute chart you can see the .35% has held again at the 11,600 level. As long as we stay above the 11,600 this market does have a shot at making a new high above the 12,900 high. As of right now the bigger trend and 30 minute trend is stll up. 

It seems like we should pullback but if we can follow through today to the upside we could get a short squeeze from the overbought daily levels as the weekly and monthly chart kicks in. The next two days are going to be very important. Right now the daily NQ candle looks like a DOJI but we still have a few more hours left in todays session.

This is our last bigger picture update from yesterday  http://wwweminischool.wordpress.com/2011/11/08/what-if/

** If you are intrested in day trading www.ScalpingTheMarkets.com is having a free Webinar this Thursday. To join just go to the site and register as a free member and register for the Webinar.

 

Market Update Video (by eMiniSchool.com)