I Still Say We're At or Near a Top

Wow, two weeks without a post, after I said I'd try and post daily as we search for this important high. I just got super-busy with work. I'll keep trying, since I still believe I'm absolutely correct. And I think it's an important concept, which is that the markets move in the opposite direction of the money flow, both long and short term. I am attempting to show this with the use of two funds involving the Nasdaq 100 and two funds involving the S&P 500. The Nasdaq 100 funds I believe do an uncanny job of demonstrating the long-term concept. And the S&P 500, particularly the movements of what is apparently one person who I call the $200 million man, I believe do an uncanny job of demonstrating the short-term concept.

I'll leave out exactly which funds I'm looking at from this blog. But what they are is a Nasdaq 100 fund that moves twice whatever the Nasdaq 100 moves, in the same direction. And then there is a mirror fund that pays twice of the opposite of what the Nasdaq 100 moves. So if the Nasdaq 100 went up 1% today, this negative fund would be down 2%. And if the Nasdaq 100 went down 1% today, this negative fund would go up 2%. So these funds move a large amount many days. And what they do is they force your hand like nothing else in the market. You may believe you have your money in the correct direction, but when you lose 10% or more in a few days, you'll probably fold and take your losses, unless you're really sure of yourself.

But what I just happened to notice years ago, as far as the Nasdaq 100 funds, is that they would steadily rise to a certain number, which would come at or near an important market top, and then they turn around and steadily drop, with rallies along the way of course, down to a certain number, which comes at or near an important bottom. Those low numbers have been pretty consistently around even money, positive versus negative, or as much as one to two times as much money on the negative side. The high numbers have been rising now, especially through this past year. At the last two important highs, back in January and then in April of this year, the Nasdaq 100 numbers got up to around 4.1, meaning 4.1 times as much money on the positive side as on the negative side. This number only got up to around 2.6 at the all-time high in 2007. And now, over the past several weeks, it's climbed up to even higher numbers, with a high of 5.03 on November 5, which came in the same day as most of the market reached its most recent high and one day before the high so far in the Nasdaq.

Then we had a modest decline, where the Nasdaq 100 number actually got down to 2.75 this past Friday. Here are the numbers for the Nasdaq 100 for the month of November so far. Again, this is dividing the larger number, which is always the positive fund number in this case, by the smaller number, or the negative fund volume number.

11/1 - 3.86
11/2 - 4.40 (new all-time record)
11/3 - 4.56 (new all-time record)
11/4 - 4.84 (new all-time record)
11/5 - 5.03 (new all-time record)
11/8 - 4.76 (high in the Nasdaq 100)
11/9 - 4.57
11/10 - 4.87
11/11 - 4.38
11/12 - 4.58
11/15 - 4.45
11/16 - 3.79
11/17 - 3.66
11/18 - 3.34
11/19 - 2.75
11/22 - 3.22

So I'm going to give it a 60% chance that we have seen that final high I've been looking for around November 5, right as we were reaching an all-time high of people having money in the positive money fund relative to people who had money in the negative fund.

And I'll say a 40% chance that this rally of the past few days will keep going to a new high. But if it does, I'm almost positive that that will be the final high.

Then we have the short-term movements of the markets explained beautifully by the positive and negative funds relating to the S&P 500, particulary the movements of the $200 million man. Actually, he seems to be only throwing around about $100 million these days at most. But I will go back to Thursday, November 4, and show how the movements of this guy from positive to negative or out altogether lines up with the movements of the market, in the opposite direction.

11/4 - 79.21 positive/223.47 negative (and this fund goes up over 4% because the S&P 500 shot up over 2% on this day)

11/5 - 83.34/219.53 (he keeps his money on the negative side, and this fund goes up another 1%)

11/8 - 145.75/157.86 (ah, he switches to the positive side, and we have a modest down day, down a half a percent)

11/9 - 172.14/126.85 (looks like he adds to his positive position, or maybe it's just others moving from negative to positive, and we have a fairly large down day, down 1.8%)

11/10 - 82.35/132.85 (he gets out of his positive position, out of the market, and we have basically a flat day, up 0.2%)

11/11 - 166.42/127.61 (he gets back into his positive position, and we have another basically flat day, down 0.2% - I'm surprised it wasn't much worse)

11/12 - 169.70/128.65 (he keeps his positive position, and this time the market zaps him, down almost 3%)

11/15 - 83.89/144.07 (he gets out totally, and we have a flat day, down 0.2%, enticing him back in ...)

11/16 - 165.47/167.77 (he jumps back into the positive side and gets zapped again, down 3-1/2% this time)

11/17 - 103.27/174.57 (so he's back out, and I can tell you he's been out since, and we've been rallying ever since, this day basically flat)

11/18 - 74.71/177.20 (still out, maybe some flight from the positive fund from other people, and we had our giant up day of last Thursday up, this fund being up 3-1/2%, without our friend)

11/19 - 74.92/177.91 (still out, basically a flat day, up 0.2%)

11/22 - 78.52/172./44 (still out, down a teeny bit, 0.3%)

I am wondering about the fairly large negative presence that doesn't seem to change in quite a few weeks. And you'll note that the $200 million isn't throwing around nearly as much money as he was a while ago. So I'm wondering if perhaps he didn't lay down some money in like a semi-permanent negative position. I wonder if the market has to lower this negative number before it can really move down, which it would go by powering up and forcing the people with their money on the negative side to get out.

My position remains that we have seen or are at or very near an important high, possibly a very, very important high, especially when you look at how high the Nasdaq 100 number got earlier this month at a record-shattering 5.03.

Rob