The Bears' Last Dance With Mary Jane

By Todd Harrison  JUL 09, 2013 10:10 AM

Shorts cling to a technical level as earnings approach.


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

It's Turnaround Tuesday in the City of Critters as traders openly wonder which Tuesday will step up to claim it's fame; will it be the nonsensical notion that the second day of our five-session set tends to reverse the prevailing trend, if only for a day, or will we revisit that freaky streak when the Dow Jones Industrial Average (INDEXDJX:.DJI) finished higher twenty straight Tuesdays weeks?

2013 has been a streaky stretch on a few fronts -- my P&L included.  The venerable Jeff Saut of Raymond James was asked yesterday whether the DJIA  "buying stampede" that began with the back-to-back 90% Upside Volume Days on December 31, 2012 and January 2, 2013 ended when we saw the mirror image, 90% Downside Volume Days on June 19 and 20 of this year, along with the series of lower highs. Jeff's response follows (emphasis mine):

"The answer to that question remains a resounding NO since the Dow Jones Industrial Average has still not experienced four consecutive down sessions this year. Indeed, it has been the most remarkable upside skein I have seen in over 50 years of stock market observations with said stampede now at session 129!"

Jeff has targeted mid-July as a potential "timing point" for the first meaningful decline of the year to commence—July 11 and 12 as minor timing points and July 19 as a major timing point (I will note these time horizons were also flagged by Jeff Cooper, who has an uncanny knack for nailing such turns). 
Potential catalysts in Jeff's view include Chairman Bernanke's speech on July 17 in front of the House Financial Services Committee, and July 18 when Big Ben delivers his second day of testimony before the Senate Banking Committee, along with a Q&A.  And of course, between now and then, we’ll have a boatload of earnings to digest and outlooks to assimilate.

Time and price, price and time; while the spinning wheel continues to land on green—absent the stretch between May 22's outside day and June 24 reversal off the lows, or 7.5% from the high print (S&P (INDEXSP:.INX) 1687) to low print (S&P 1560)—most of the price action is during the overnight session, which is thinner (easier to move) than regular market hours.  I'm not the first person to make this observation—I believe Zero Hedge flagged this dynamic long ago—but it is curious, if nothing else.

I cleaned up our Danger Zone chart below as three of the four resistance zones—horizontal resistance at S&P 1600, the 50-day at S&P 1627, and the downtrend of "lower highs" at S&P 1630—have been violated, and past resistance morphs into future support. 

Does that "matter" given the context of extremely thin holiday volume?  Only if it fails, my friends.  Either way, the Mother Ship resistance is the underbelly of the broken uptrend in place since November 2012.  That is the bears' last dance with Mary Jane; one more time to kill their pain, at least on a technical basis.

One step at a time as we continue to find our way.
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Twitter: @todd_harrison

Position in SPY.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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