Bernie Schaeffer's Market Commentaries

Schaeffer's Short Takes: The S&P 500 Index, Then and Now

Tue, 07 Oct 2008 13:03:00 GMT

Comparing now versus 2002 for the S&P 500 Index (SPX) on a 160-month moving average basis doesn't look so very encouraging, though monthly closes are most important.Note from chart below that the 160-month trendline was never violated intra-month in 2002.If you view this as an indication that the market is technically weaker now than it was in 2002, then the potentially bullish implications of greater fear levels and more compelling valuations must be further discounted...(Read More)

Schaeffer's Short Takes: Hedge Funds' Favorite and Least-Favorite Stocks

Mon, 06 Oct 2008 16:50:00 GMT

I pulled some sentiment data on the sectors that appear to be "favored" and "not favored" by hedge funds, based on anecdotal evidence as well as on the recent Goldman Sachs list.The stocks in these 2 groups seem to share common characteristics across the broad spectrum of our indicators.Favored:Weak price action - with just a couple of exceptions60-day Relative Strength (RS) less than 100%all Schaeffer's put/call open interest ratios (SOIR) are less than 1.00a tendency to low SOIR % ranks - many in single-digitslow short-interest ratios (SIR) - only 1 of the 20 stocks with a SIR greater than 2.00high analyst rankings - with just a couple of exceptions, "buys" exceed "holds + sells" mostly by a wide marginstrong Zacks rank - with only 2 exceptions, all Zacks ranks are 3, 2 or 1high International Securities Exchange (ISEE)/Chicago Board Options Exchange (CBOE) buy-to-open (BTO) call vs...(Read More)

October Option Advisor Commentary

Tue, 30 Sep 2008 13:03:00 GMT

Due to extraordinary market conditions, we are giving all readers immediate access to the most recent Option Advisor commentary.The following is a reprint of the market commentary from the October edition of the Option Advisor, published on September 25...(Read More)

Schaeffer's Short Takes: The S&P 500 Index Tests Critical Technical Support

Tue, 30 Sep 2008 12:18:00 GMT

The December S&P 500 Index futures contract (SP/Z8) is currently trading at the 1,146 level after a few failures to take out the 1,150 level...(Read More)

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Fri, 10 Oct 2008 22:05:00 GMT

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Schaeffer's Short Takes: A Look at the UltraShort Financials ProShares Chart Dynamics

Fri, 12 Sep 2008 15:57:00 GMT

Because of the leveraged nature of the UltraShort Financials ProShares (SKF: sentiment, chart, options) , it has different chart dynamics than Select Sector SPDR Fund (XLF: sentiment, chart, Read More)

September Option Advisor Commentary

Wed, 03 Sep 2008 12:00:00 GMT

The following is a reprint of the market commentary from the September edition of the Option Advisor, published on August 21...(Read More)

Schaeffer's Short Takes: The S&P 500 Index and the Media's 'Bear Market' Crescendo

Mon, 25 Aug 2008 15:29:00 GMT

The headlines came pretty fast and heavy in early July, when the S&P 500 Index (SPX) penetrated the 1,252.12 level, which constituted a 20% decline off the 10/9/07 peak of 1,565.15...(Read More)

Schaeffer's Short Takes: The U.S. Dollar Index Struggles with Its 80-Week Trendline

Mon, 18 Aug 2008 15:35:00 GMT

It's a little difficult to follow on the first chart, but ever since the dollar broke below its 80-week trendline the second quarter of 2006 it has not been retaken.The declining 80-week moving average is currently at 77.64; the U.S. Dollar Index (DX/Y) closed on Friday at 77.12.The second chart shows that increases in 10-week historical volatility (HV) to 10% and above have generally been associated with rallies in the dollar and have generally occurred near dollar peaks...(Read More)

Schaeffer's Short Takes: What Does the 'Bear Market' Tell Us About Volatility?

Wed, 30 Jul 2008 17:05:00 GMT

I wonder if this year's "bear market" qualifies as "different" from those occurring over the past decade or two - in terms of the divergences in price action by sector - and whether this argues for a lower peak CBOE Volatility Index (VIX) than we had otherwise seen.I'd argue that the weak price action (and the consequent fear) has been very concentrated in the financial sector, with other sectors (commodities) concurrently performing quite well.I think it is a tenet of portfolio analysis that the more "diversified" the portfolio, the less volatility it will incur, and in this sense the "portfolio" of the S&P 500 Index (SPX) during the past 9 months was more diversified than it had previously been - hence less volatile...(Read More)

Schaeffer's Short Takes: Coal vs. Financials, a Relative-Strength Comparison

Mon, 28 Jul 2008 18:18:00 GMT

This is a daily relative-strength chart comparing the Market Vectors Coal ETF (KOL: sentiment, chart, options) and the Select Sector SPDR Financial Fund (XLF: sentiment, chart, Read More)

July Option Advisor Commentary

Wed, 09 Jul 2008 12:29:00 GMT

The following is a reprint of the market commentary from the July edition of the Option Advisor, published on June 20...(Read More)

Schaeffer's Short Takes: An Orders-of-Magnitude Leap in SPY Volume?

Mon, 30 Jun 2008 12:52:00 GMT

2007 marked an orders-of-magnitude leap in S&P Depository Receipts (SPY) volume.The peak of 6.24 billion in August 2007 was triple the peak in June 2006.2008 peaks have been 6.11 billion in January and 5.47 billion in March.June volume is currently at 5.15 billion, which means we'd need about 320 million today to match March - not likely unless we have a major down day...(Read More)

Schaeffer's Short Take: The Fed and Financials

Tue, 24 Jun 2008 18:42:00 GMT

Recall back in July/August when the Fed was stubbornly refusing to cut rates and the markets essentially forced huge rate cuts out of their cold, dead hands.I think we could potentially be setting up for something similar now - the markets pound the financials into oblivion unless the Fed reverses its recent tough talk.The Select Sector SPDR Financial Fund (XLF) so far in June below...(Read More)

Schaeffer's Short Takes: The Fed, Gold, and Crude Oil

Mon, 16 Jun 2008 15:25:00 GMT

Crude oil prices (CL/) were flat for a year until the Fed began to cut rates aggressively in the summer of 2007...(Read More)

Schaeffer's Short Takes: A Common Pattern for the CBOE Market Volatility Index

Mon, 16 Jun 2008 14:06:00 GMT

On Friday, the S&P 500 Index (SPX) held at the 1,350 level and its 160-week moving average.The CBOE Volatility Index (VIX) was down 9.04% on Friday and closed back below its 40-week moving average...(Read More)

Schaeffer's Short Takes: The Volatility of the VIX

Wed, 04 Jun 2008 18:28:00 GMT

While the actual CBOE Market Volatility Index (VIX) peaks have moderated over the course of this decade, the volatility of the VIX has actually accelerated in recent years; perhaps due in some manner to the introduction of the VIX options but in any event very interesting.The chart below graphs the 10-day volatility of the VIX in blue at the bottom of the chart.Below are some of the major VIX volatility peaks:The current VIX volatility level of 96% is still quite high by the standards of earlier in the decade.From the standpoint of the VIX options, which presumably are priced off these historical volatilities (HV), one could conclude that these options have been historically expensive over the past couple of years, which could indicate something of a bubble in the "protection trade"...(Read More)

Schaeffer's Short Takes: When Do Markets Bottom?

Mon, 02 Jun 2008 17:44:00 GMT

This past week, I had the opportunity to sit down with Paul Kangas on PBS's Nightly Business Report...(Read More)

Schaeffer's Short Takes: A Look at the 5-Year Treasury Note and the Market's Direction

Wed, 28 May 2008 12:49:00 GMT

This is a long-term daily chart of CBOE Interest Rate for the 5-Year Treasury Note (FVX) that goes back to 1999.I think it's pretty fair to say that sustained periods of weakness in the FVX chart (declining 5-year rates) have coincided with periods of weakness in the stock market.FVX has rallied from its March 2008 bottom, but its very recent failure at the 195-unit and the upper 80-day Bollinger Bands (BB) calls into question the sustainability of the recovery...(Read More)

Schaeffer's Short Takes: Videos on Sentiment, Hedge Funds, Commodities, and the VIX

Tue, 27 May 2008 18:57:00 GMT

While at the Las Vegas Money Show earlier this month, I sat down with Nancy Zambell at the MoneyShow.com Video Network...(Read More)

Schaeffer's Short Takes: The S&P 500 Index Battles Its 80-Week Moving Average

Tue, 20 May 2008 13:45:00 GMT

Ahead of yesterday's open, the S&P 500 Index (SPX) was at 1,425.35; its 40-week moving average was at 1,425; and its 80-week moving average was at 1,440.4.The 80-week trendline held as support on numerous occasions in '04, '05, '06 and '07; it was finally broken early in '08.The 40-week moving average is widely watched, but I'd consider a takeout of the 80-week to be more significant.I'd also note that it is encouraging that the 160-week trendline was retaken in April, as this level was never retaken on a weekly closing basis after it was broken in February 2001...(Read More)

Schaeffer's Short Takes: Are Breakouts an Indication of a Reversal?

Thu, 15 May 2008 19:45:00 GMT

This 30-minute chart of AK Steel (AKS: sentiment, chart, options) serves as a good illustration of how breakouts - which at one time fed on themselves due to attracting new buyers and the capitulation of short sellers - have become more of an indication of reversal or mean reversion.Note the first "breakout" above %2470 about 6 trading days ago, which was greeted with an immediate smackdown...(Read More)

Schaeffer's Short Takes: How the Economy is Different from the Stock Market

Mon, 12 May 2008 13:44:00 GMT

I think the action in the AMEX Retail HOLDRS Trust (RTH) is a perfect illustration of how "the economy" can be much different from "the stock market."The RTH has been flat for 5 years (most of which would be considered a period of strong consumer spending and a "good economy")...(Read More)

Schaeffer's Short Takes: Technical Turmoil Hinders the S&P 500 Index

Thu, 08 May 2008 18:18:00 GMT

Strong Wal-Mart Stores (WMT) sales figures this morning are a bit of a counterweight to the weakening economy case...(Read More)

May Option Advisor Commentary

Wed, 07 May 2008 12:16:00 GMT

The following is a reprint of the market commentary from the May edition of the Option Advisor, published on April 17...(Read More)

Overheard on the Trading Floor: Debit Spreads Ahead of Earnings?

Fri, 04 Apr 2008 17:13:00 GMT

Below is an email exchange that occurred earlier today between trader John Stewart, Todd Salamone, and myself...(Read More)