SHORTS SQUEEZED BEFORE LONG WEEKEND / DAVE´S DAILY

Shorts Squeezed Before Long Weekend

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It doesn’t take much to stampede the herd when markets are oversold and plenty of nervous money is still dominant.

Crude oil, which had been an anvil around stocks neck for some time, gained sharply once again on rumors from the UAE OPEC could meet to coordinate production cuts. But, should that happen, cheating would begin almost immediately.

Nevertheless, crude oil had been extremely oversold, so the herd was easy to spook.

Bulls had it in mind to close index green on the week but only Transports were able to comply. So the volatility continues.

Getting more mojo for bulls was JPM’s Jaime Dimon who bought $26 million of the company’s battered stock. I think he can handle it even if the timing proves to be off.

All the previous recent gainers (Treasury Bonds, Gold, and so forth were weak.

Beaten down and/or most shorted were squeezed higher. Overall, what can happen over the long Holiday weekend, is something to be feared and positions must be squared-up.

In other news, economic data reported Friday wasn’t very supportive of a rally. Retail Sales were flat 0.2% vs 0.2% expected & prior 0.2%. The data was better given seasonal adjustments which is manipulative which doesn’t seem supportive. Import Prices were down -.0.1% and Export Prices fell to -.0.8%; Business Inventories flat at 0.1% vs 0.1% expected & prior 0.1%; and, important Consumer Sentiment fell to 90.7 vs 92.5 expected & prior 92.

Market sectors moving higher included: Almost everything.

Market sectors moving lower included: Volatility (VIX), Gold (GLD), Bonds (TLT), Investment Grade Corporate Bonds (LQD), Euro (FXE), Japanese Yen (FXY).

Below is the heat map from Finviz reflecting those ETF market sectors moving higher (green) and falling (red).

Dependent on the day (green) may mean leveraged inverse or leveraged short (red).



Volume Friday even on the ramp higher was light comparatively. Breadth per the WSJ was quite positive.

Charts of the Day

Major U.S. Markets (7)
$NYMO (1)
$NYSI (1)
$VIX (1)

• SPY 5 MINUTE

  
  
  
  

• SPX DAILY

  
  
  
  

• SPX WEEKLY

  
  
  
  

• INDU DAILY

  
  
  
  

• INDU WEEKLY

  
  
  
  

• RUT WEEKLY

  
  
  
  

• NDX WEEKLY

  
  
  
  

• NYMO DAILY

  
  
  The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.
  
  

• NYSI DAILY

  
  
  The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.
  
  

• VIX WEEKLY

  
  
  The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation has changed due to a variety of new factors including HFTs, new VIX linked ETPs and a multitude of new products to leverage trading and change or obscure prior VIX relevance.
  
  
  
  

This commentary is short due to outside activities preventing my doing anything more.

The volatility remains and you’ll note the VIX, despite the gains Friday, didn’t move much. That said, every dog has its day.

Let’s see what happens.