5% Correction Sell Signal Triggered... Just Like In January 2011

Tyler Durden's picture


We previously explained the obvious similarities (with stocks, bonds, and leveraged positions) with the current period in the market and the end of 2010 and start of 2011 period. Much is once again being made of the 'flows' as $18.8bn (the 3rd largest on record - since 1992) pushed into equities. Retail also bought long-only equities for the fourth straight week ($2.7bn), and $12.2bn was added via ETFs, but the significance of the flows has triggered a "sell" signal for the traders at BofAML. The last time such a sell-signal was triggered was, ironically, late January 2011 - which was followed by an 8% correction. Their Global Flow Trading Rule (based on flows breaking 0.5% of AUM) on average has led to a 5% correction in global stocks over the subsequent 4-5 weeks. Different, this time?


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Fri, 02/01/2013 - 19:21 | 3207794 devo
devo's picture

No. Selling. Ever.

Until there is.

Fri, 02/01/2013 - 19:28 | 3207807 HelluvaEngineer
HelluvaEngineer's picture

You may not be aware of this, but the global economy has recovered.  The teevee told me so.

Fri, 02/01/2013 - 20:06 | 3207872 The Shootist
The Shootist's picture

The tree of liberty is always infringed upon. Until it's watered.

Fri, 02/01/2013 - 20:33 | 3207898 Enslavethechild...
EnslavethechildrenforBen's picture

Homeland Security says a fully automatic rifle is no match for a pair of scissors.

Fri, 02/01/2013 - 20:44 | 3207921 Pure Evil
Pure Evil's picture

Are they making semi-automatic scissors now?

Fri, 02/01/2013 - 22:57 | 3208368 flacon
flacon's picture

Tyler, if one looks at late January 2011, the major indicies continued up for quite a bit before coming down to just below late January 2011. .... So if one was to go short here they might get their faces ripped off if they are not careful. 

Dow Jones from stockcharts:



S&P from stockcharts:



The Oscilators are reading "Extreme overbought" territory and RIS is running way too rich. I have lost some money over the past two weeks trying to catch a top. I will let this one run until it's obviously a top. 

Sat, 02/02/2013 - 14:36 | 3209271 Frozen IcQb
Frozen IcQb's picture

I'd buy more of them there mutuals fund things but my 401K will only buy 200.5 worth of stuff.

Sat, 02/02/2013 - 10:58 | 3208976 BlueCheeseBandit
BlueCheeseBandit's picture

They're right, if u can chuck the scissors into the guy's forehead Jack Burton-style.

Sat, 02/02/2013 - 15:09 | 3209336 collon88
collon88's picture

A pair always beats one of a kind.

Fri, 02/01/2013 - 19:31 | 3207812 kaiserhoff
kaiserhoff's picture

They are all isolated, insane, lone gunmen..., until they're not.

Fri, 02/01/2013 - 21:33 | 3208094 CPL
CPL's picture

platoon, regiment, contingent then zerg hoard.

Fri, 02/01/2013 - 21:43 | 3208141 bobthehorse
bobthehorse's picture

I've got your correction.

I've got it hanging between my legs.



Sat, 02/02/2013 - 12:20 | 3209074 Lendo
Lendo's picture

Why do you keep spamming your blog?

Fri, 02/01/2013 - 22:34 | 3208318 venturen
venturen's picture

There is only up now...we are going to be trillionaires! 

Fri, 02/01/2013 - 19:24 | 3207800 Lost Wages
Lost Wages's picture

The only thing that bugs me about this article is the graph only starts in 2007.

Fri, 02/01/2013 - 19:26 | 3207805 HelluvaEngineer
HelluvaEngineer's picture

5%?  Christ!  I'll be under my bed, clutching my scissors per the DHS video.

Fri, 02/01/2013 - 19:45 | 3207834 Divided States ...
Divided States of America's picture

Why sell at a discount of 5% when you know the week after you will be up 5%, minimum.

Fri, 02/01/2013 - 19:31 | 3207811 Joe moneybags
Joe moneybags's picture

It took me two years to figure out what ROFLMAO stood for, all while posters were ROLTAO at me.  Now, I have to figure out MSCI ACWI and AUM.  I think I got Bank of America Merrill Lynch.

Sat, 02/02/2013 - 01:01 | 3208622 slightlyskeptical
slightlyskeptical's picture

MCSI ACWI tracks the whole world index. AUM is assets under management.

Fri, 02/01/2013 - 19:36 | 3207813 Ham-bone
Ham-bone's picture

Not saying I know shit but what could be different now is that never ending cash printing will continue to come in every day and it all needs a home (.25% from Fed won't get it done)...I guess there is nothing saying it all has to go long, suppose recipients could swarm short to and then re-establish long?

Fri, 02/01/2013 - 20:53 | 3207942 Freddie
Freddie's picture

My concern is we are now starting to enter Zimbabwe inflationary mode where the Fed thinks the only way out is to keep driving the market up. 

Total insanity and facism but Bernake and Ob-MAO are out to destroy.


Fri, 02/01/2013 - 19:32 | 3207814 BlueStreet
BlueStreet's picture

I've been positioned for it for about the past 5%.



Fri, 02/01/2013 - 19:32 | 3207815 MachineMan
MachineMan's picture

it's different this time.  Really, scout's honor..

Fri, 02/01/2013 - 19:33 | 3207818 Desert Irish
Desert Irish's picture

Add a zero and then we're talking...


Fri, 02/01/2013 - 19:35 | 3207820 ekm
ekm's picture

Pure bullshit.

Once it starts there's no way in hell it stops at 5%.


Is anybody aware that any single real and fake security has gone to the moon? That means that there is only one buyer: The governments of the world.


When they remove the finger from the button, it's 1987. Abyss out of nothing.

Fri, 02/01/2013 - 20:04 | 3207869 fonzannoon
fonzannoon's picture

I don't know ekm they have been practicing their drop and stops for what seems like ever now. Everyone is salivating for a 5% drop. I don't even think they will get to 5% before money comes in to scoop up some yield on sale. If it gets to an 8% drop they will media bomb us with the buy the dip bunker busters. That is not even including Keven and his buddies in there.

Fri, 02/01/2013 - 21:12 | 3208019 Cdad
Cdad's picture

You are making a mistake here with the notion that "money will come in and scoop."  Corrections need that money to come in dip buying...and the resulting action of dip buyers who are not immediately rewarded.  Dumb money chasing is part of it.

Just looking at SPY volume...and using the comp between this year and 2011...volume is lower now [if you can believe that].  Part of the price of that is...the correction will be faster and harder.  This tape will not react well to actual selling.  


Fri, 02/01/2013 - 21:22 | 3208061 fonzannoon
fonzannoon's picture

I hear you cdad. I throw my shit against the wall on here because I want people to beat me up, not agree with me. My question is, who is selling, and why would they sell?

Fri, 02/01/2013 - 21:55 | 3208184 disabledvet
disabledvet's picture

I've exited the indexes and am now long treasuries (hopefully for the short term--three months max.) so far I've been completely wrong (did this three days ago) but my thinking is this. Growth is slowing, deficits are coming down dramatically at the State level (save for Illinois which really is the worst Government in America), I think tax revenue will surprise to upside at the Federal level..but the higher taxes and dramatically lower spending could put the USA in a technical recession and cause a dramatic spike in savings by Americans. When combined with a Fed MASSIVELY monetizing and Europe on the precipice of "collapse part deaux" and I think you could see a dramatic decline in already low interest rates in the USA. I still hold individual stocks...and would recommend many even now...but I am hopeful that "now is the time to hold back and look for entry points of the good stuff." Of course watch it rally 20% from here instead...bull markets in my view are much harder to trade than the bear ones.

Sat, 02/02/2013 - 08:35 | 3208868 samcontrol
samcontrol's picture

don't try French if you can't spell it.

Fri, 02/01/2013 - 22:04 | 3208219 Cdad
Cdad's picture

Who?  Mega banks and hedge funds that are levered long up to the gills.  All it really takes to set it off is one disruption in an asset class somewhere...to start the margin calls coming.  I can think of any number of possible candidates.  

Take the GLD for example.  It has been under heavy pressure for months now.  If they should break that baby down...gap it...margin calls will come in, and folks will sell the S&P.  A sharp reversal in the Euro would do it...and I think that is coming.  Or how about a Yen crash?  It has been crashing for weeks...but what about a FXY print of 95...and a trade that quickly becomes a currency crisis? 

I rather think you have been lulled into complacency...if you cannot see what might cause heavy selling on this ridiculously over extended equity rally.

Fri, 02/01/2013 - 22:08 | 3208235 fonzannoon
fonzannoon's picture

Personally I think a sharp reversal in the euro is coming, and I have scratch on it. I just think, like everything else, it will be a controlled demolition.

Fri, 02/01/2013 - 23:08 | 3208412 ekm
ekm's picture

People who own all stocks, Primary Dealers, are the ones who have all the idiotic money on the sidelines, the reserves that were created out of nothing.


In theory they can keep selling stocks to each other until Dow goes to 10000000, however that would mean that crude oil would go to 100000. 

It's crude oil that desides, not Primary Dealers, not the Fed, not the Gov.

Fri, 02/01/2013 - 21:04 | 3207991 TotalCarp
TotalCarp's picture

Ekm, no it doesnt mean that sadly. Every idiot fund manager i know is behind the benchmark and are shitting themselves. They will look to buy any dip. They dont care if stocks go down 60%, its not their money, but if stocks go up another 10% they will be sacked. Its called career risk.

The fin services industry focus on shortvterm and incentive structure is completely upside down. And it will feed buying unless a major dislocation occurs.

Fri, 02/01/2013 - 22:01 | 3208208 disabledvet
disabledvet's picture

That is the fund manager's job and it's a hard thing to work against...especially when so much money is indeed flooding in. This is my own money however and I've been long for so long now I feel no compunction whatsoever to chase thing. At least...not yet. It really is hard cuz playing this thing on the long end has been a great ride...and should a material correction appear I'll be chomping at the bit to get back in (probably too early.) but again...if this thing shoots higher over the coming weeks I'm going to be a right pissed off at myself...and then worried about doing anything.

Fri, 02/01/2013 - 23:05 | 3208403 ekm
ekm's picture

Fund managers have no more money. Hedge funds are getting closed left right and centre.

Fri, 02/01/2013 - 19:37 | 3207824 Dre4dwolf
Dre4dwolf's picture

It only took unlimited money to doit, wow guys the economic "recovery" was cheap.

I guess those few dozen people who got trillions of monopoly dollars handed to them for nothing really know how to run a country, I mean look can you argue? 14,000!

Sure people are earning less, but like all the other bad news thats "transitory" or doesn't mean anything, F(*@## those losers , the economy doesn't need them anyway right?

Fri, 02/01/2013 - 19:40 | 3207828 VonManstein
VonManstein's picture

a 5% correction is bullish and expected.

Fri, 02/01/2013 - 19:41 | 3207833 Bunga Bunga
Bunga Bunga's picture

Forget about corrections.  Rules do not apply anymore. The new and only rule is:

"The more absurd it goes, the higher it will go"

Fri, 02/01/2013 - 19:54 | 3207851 James-Morrison
James-Morrison's picture

Geesh, I thought it was a graph of a ball from the original Atari 64 PONG game.

That might be the last time that the old rules still applied...

Fri, 02/01/2013 - 19:48 | 3207838 l1b3rty
l1b3rty's picture

Right before silver began to go to $50


Fri, 02/01/2013 - 19:47 | 3207839 FreeMktFisherMN
FreeMktFisherMN's picture

The market is already down a lot when you price it in crude, gold, etc. 

Fri, 02/01/2013 - 20:35 | 3207903 Dr. Engali
Dr. Engali's picture

This is just incredible. We are reduced to looking forward to a 5% correction. And that "correction" will probably draw in enough stupid shorts who think "this is it" only to get squeezed out by Ben and his magic press driving this market to new highs. The "market " is not going to blow up until something else blows up first.

Fri, 02/01/2013 - 20:38 | 3207913 fonzannoon
fonzannoon's picture

Doc you said before. It all starts with the currency. This could take a while.

Fri, 02/01/2013 - 20:47 | 3207928 Dr. Engali
Dr. Engali's picture

I'm getting impatient. I watched CNBS today for the first time in ages and watching the bulls dancing around there was sickening. I used to have a philosophy that whe Bartiromo got all giddy like she knew she was going someplace nice on a jet it was the time to sell. When she looked all down and out like a used up whore it was the time to buy. Now she's all giddy, but you can't fight 85 billion a month.

Fri, 02/01/2013 - 20:54 | 3207953 Whiteshadowmovement
Whiteshadowmovement's picture

Doc loved these posts of yours, I think youre completely right although as far as I see it that 85bil has very little to do with this. Its really just that people want to believe. "The road of excess leads to the palace of wisdom"

Fri, 02/01/2013 - 21:18 | 3208018 Whiteshadowmovement
Whiteshadowmovement's picture

Doc, Id just like to say that I would of course feel out of place giving you anything like advice due to the fact that your experience is much deeper than mine, but I just want to sharw with you something that has helped me over the past year. I had an extremely hard time putting cash to work in early 2012 and maintained a high cash balance. I realized I was losing out to the indexes by the day and it was painful. I put my self through a mental exercise every couple of days to costruct a hypothetical portfolio from scratch investing 100% of it within 24 hrs. Because the real challenge of this new normal is adjusting even the most iron stomach to the concept of buy high, seller higher. I found when I employed various correlatioms and used the dead-beta theme to my advantage (look at biotech right now) it overall this really improved and sharpened my risk/reward analysis to better analyze alpha in this extremely stupid market that abhors cash like a vaccuum. So I hope you wont be insulted by my post, I just have found the exercise of investing an entire portfolio on the spot in one sitting like the money would rot if you didnt to be an interesting way to finesse my trading in this situation.

I often take more interesting risks in these hypotheticals so it often leads to further research ideas

Fri, 02/01/2013 - 22:00 | 3208206 fonzannoon
fonzannoon's picture

Doc not sure if you watched this today. But listen to Schiff. Listen to every word. Listen to the guest opposing him. Look how many times the other guy tries to put him on the "end of the world" crap.


Fri, 02/01/2013 - 22:33 | 3208317 stormsailor
stormsailor's picture

every huge sell off i've ever seen started in the credit markets.

Fri, 02/01/2013 - 20:38 | 3207911 Grimviewer
Grimviewer's picture

5% big fucking deal......I'm long and loving it......i'll buy more on a 10-20% fall.....5% is a tiny condensed turd in a constipated market.

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