Wednesday June 9 : Inside the Turn : Dog Chasing Car syndrome

 “There must be some way out of here”
Said the joker to the thief
“There’s too much confusion
I can’t get no relief”

Is it possible to put two up days together. Maybe. At the close Tuesday the money flows dropped and that led to a lower futures opening. That was immediately bought up to the old high with money flows restored.

Looking for short term trend lines there is one at the bottom, and one later which is less impactful, but does have the benefit of trailing the lower trend line and raising the possibility of a “range” in todays action. Now the range doesn’t mean much, what matters is how the day resolved itself relative to that range, do we break out, fall into the range, or drop below?? The counter rally out of the range was done on A/D money flows, which is largely irrelevant to the intraday operation. So let’s watch this and see what happens, we should be at a turning point here. I have an idea what I expect in the daily chart money flows, and hopefully it will all coalesce.

Are the money flows driving this, no not really. If money flows aren’t driving the selling, they aren’t likely driving the buying either. In Dog Chasing Car Syndrome the dog usually gets tired and quits. Price exits out the side, and the market takes some time and regroups.

New trend lines are identified, or perhaps some action in the money flows which is more positive. They bought it with relish at 407.73 which was the third test of the 407 line. I don’t think there will be a fourth rejection of that level. Prices need to keep fighting in order to stay above that support. Netflix is up 1% and the FANG stocks is where this market lost it’s MOJO, so this is perhaps something different. Capitulation??

Lately this is what happens when volume gets this low. You should note that the biggest bars on this chart are buying days. And the buy days on the right side of the chart seem to outnumber those on the left. Although the most recent bar of note is a selling day and the market has basically gone sideways since then.

The strong hands in this market have not capitulated which implies they are good with the stock they have. That raises the question where is the buying going to come from. Low volume markets are often very volatile, as fewer and fewer participants are negotiating price. Then there is the influence of the futures players, (often those who hold the stock and have no desire to sell the underlying) The thinking goes this is where the Fed goes to spike the punch, it takes very little to push the futures market one way or the other.

So far this selloff has been the leaders in the index. The NYFANG is down hard against the SPY. but lately the ratio has pulled back. This has taken some of the pressure off, but it hasn’t lifted the SPY index and so far the buying in FANG isn’t as robust as it was in the March rally either. I doubt that it will be, although the buyers may sort through the wreckage. I like Netflix, and eschew Amazon, now that the split is complete, the consumer can only lose spending power from here, he or she is already loaded, or maxed out at they say. Inventory sales may help that out, I doubt it. Margins are thin and you can dump this stuff in the river before you are willing to sell below cost.

The real issue is what are the sellers thinking? Do I want to sell the rally? I could possibly get a few points doing that, over a period of months, then I have shaved my holdings down, and the inflation picture clears, the economy gets the go ahead and its time to buy. Damn…. The need to sell in the front of a real bear market drop seems less compelling under the circumstance, and so this is how slow, grinding bear markets get started. Yet it’s very likely that the money is going to keep their own version of the FED PUT in place, buying the dips. They need to protect their bottom line.

If you are a Wall St. trader you might as well be thinking about the Hamptons now. If you are a scalper you want to grab obvious pivot points like the down open on support June 7th. So you get a couple trades a month. The ALGOs work for you. That is probably how this thing will play out for a while.

As we get closer to the fall and the election season heats up. Nobody in Corporate America wants to see Roe V Wade overturned. States rights is a franchise issue. Sorry we can’t work in your neighborhood. Most urban blacks lack the same quality food stores the rest of us take for granted. Same issue, and Corp Am doesn’t like racism either. They want to sell to everybody.

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