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Three Of The Four JPMorgan "Market Bottom" Indicators Are All Flashing "Oversold" Green

Tyler Durden's picture




 

In the past week we discussed how to determine market bottom (or top) conditions either in extensive verbiage, or various pretty charts of the most prominent inflection points in US market history. Whether or not those are relevant to the current centrally-planned regime, where all of a sudden everyone is shocked, SHOCKED, to learn that there is no bond market liquidity (something we kept warning about again and again and again), remains to be seen. Still, some such as JPM, are already rushing to the defense of their clients (i.e., the people to whom JPM's prop desk may have some selling left to do) by providing a handy backtest of which key technical indicators proved useful in the past when determining market bottoms (if not tops - that one JPM will probably never, ever disclose), and what these are saying at this moment.

So for all those who need convincing that the "bottom is now in", and are desperate to BTFD because other, greater fools will also BTFD and so on, here it is, straight from Jamie Dimon's (well, technically Nikolaos Panigirtzoglou's) mouth:

The recent correction is also raising questions about which indicators have been useful in gauging equity market bottoms. The current equity market correction is the 19th (with 5% or more decline in the S&P500 index) since the current equity bull market started in March 2009. One simple way to assess which indicators have been useful in calling the bottom is shown in Table 2. Table 2 shows the minimum reading of four technical indicators within 2 days before or after each equity market bottom. These four indicators are 1) 14-day- RSI or Relative Strength Index which is a price based technical indicator comparing the magnitude of recent price gains and losses to identify overbought or oversold conditions, 2) 14-day VZO or Volume Zone Oscillator which is a volume based technical indicator. VZO separates up volumes from down volumes, it smoothes these volumes by an Exponential Moving Average for a given period, and then divides by the total volume for the same period. Similar to RSI, VZO’s usefulness is in identifying overbought/oversold volume conditions, 3) the S&P500 skew which is an option based price indicator we regularly use in our Option Skew Monitor in Chart A8 in the Appendix and the 4) call/put turnover ratio for US equities as reported by CBOE which is an option based volume indicator.

 

The green colour denotes a “successful” indicator, i.e. an indicator which happens to be below its lower threshold within 2 days before or after the market bottom. The lower threshold is defined as two standard deviations below the mean since 2009, for all of the four indicators. The message from Table 2 is that RSI and VZO appear to be the most useful indicators followed by the call/put turnover ratio. All these three indicators are currently pointing to oversold conditions. Last time this happened was in August 2011. One of the characteristics of the August 2011 correction was that the equity market was slow to recover.

 

What are you doing still reading this? You should be out there BTFD with both hands (and certainly the mini bounce into Friday was telegraphed from a mile away)! And after all, JPM has a lot of selling left into this "oversold" market.

 

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Sun, 10/19/2014 - 21:01 | 5353734 Dungholio
Dungholio's picture

Well,what do you expect, gartman called for a bear market last week...

Sun, 10/19/2014 - 21:04 | 5353736 kliguy38
kliguy38's picture

reel the muppets in for the BTFD.....and crush um like maggots

Sun, 10/19/2014 - 21:06 | 5353738 knukles
knukles's picture

Hitler finds out Obama's letting EBola into Texas

http://www.youtube.com/watch?v=cQ0zrvgwVRM#t=95

Sun, 10/19/2014 - 21:17 | 5353751 El Oregonian
El Oregonian's picture

Scotty: "I con't pull 'er out capp'in! I need more POWER!"

Sun, 10/19/2014 - 22:03 | 5353949 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

So much for the doomsday stuff as asian markets are exploding upwards

Sun, 10/19/2014 - 22:28 | 5354024 Squid-puppets a...
Squid-puppets a-go-go's picture

pretty bloody cheeky of JPM

fancy triggering the buy signals before any of the big CBs have confirmed Moar

Sun, 10/19/2014 - 22:29 | 5354025 El Oregonian
El Oregonian's picture

Ah... but the night is still young Mr. Leo... Be patient...

Sun, 10/19/2014 - 23:29 | 5354131 OpTwoMistic
OpTwoMistic's picture

Three promos this week,  than all down

Sun, 10/19/2014 - 21:44 | 5353872 Zirpedge
Zirpedge's picture

+1 Equities are poised for a break out

Mon, 10/20/2014 - 01:26 | 5354262 LithiumWarsWAKEUP
LithiumWarsWAKEUP's picture

SPX only has to get above 1943.39 for this 'breakout' to happen. fwiw. 1886.76 friday close.

Sun, 10/19/2014 - 22:18 | 5353987 nuke ISIS now
nuke ISIS now's picture

Predicting a Black Swan event between now and 12/31/2014, possibly by 10/31/2014...this thing is ready to roll over big time

 

 

Mon, 10/20/2014 - 05:41 | 5354417 ParkAveFlasher
ParkAveFlasher's picture

If you're predicting it, then it isn't a Black Swan.

Sun, 10/19/2014 - 21:03 | 5353735 Dungholio
Dungholio's picture

..

Sun, 10/19/2014 - 22:51 | 5354069 Took Red Pill
Took Red Pill's picture

It's easy to call the bottom when you control the market

Mon, 10/20/2014 - 15:49 | 5353739 Keltner Channel Surf
Keltner Channel Surf's picture

The other things “flashing green” are JPM’s equity algo trade logs, which produce few losing days per quarter -- but I’m sure client’s acting on their research notes have similar success rates.

Sun, 10/19/2014 - 21:09 | 5353743 Billy Shears
Billy Shears's picture

Headline-reading algos will go ape over this tripe...Good Luck!!!

Sun, 10/19/2014 - 21:13 | 5353760 Bangalore Equit...
Bangalore Equity Trader's picture

"What are you doing still reading this? You should be out there BTFD with both hands (and certainly the mini bounce into Friday was telegraphed from a mile away)!"

Listen.

Let me be real clear here. Time to steal another puppy!

http://s22.postimg.org/pdfjyqtgx/puppythief.jpg

Sun, 10/19/2014 - 21:22 | 5353786 FredFlintstone
FredFlintstone's picture

What are you doing with all of those puppies?

Mon, 10/20/2014 - 05:31 | 5354413 ParkAveFlasher
ParkAveFlasher's picture

Making them "listen".

Sun, 10/19/2014 - 21:16 | 5353765 ekm1
ekm1's picture

Sharks wondering around desperately looking for fish.

No fish left

 

Now sharks has eat shark

Sun, 10/19/2014 - 21:42 | 5353865 WillyGroper
WillyGroper's picture

Well here's some insanity for you.

Rickards went from shilling SDR's to gold confiscation.

Sun, 10/19/2014 - 21:45 | 5353882 ekm1
ekm1's picture

Rickards has an agenda.

I challenged him on twitter about SDRs acceptance from the world as world currency.

He retreated his position.

 

But, again, he has an agenda. Rickards is brilliant.

Sun, 10/19/2014 - 21:52 | 5353904 WillyGroper
WillyGroper's picture

He may be connected & brilliant, but he's a lousy actor. 

When the cadence of one's voice is stacatto, you've got a used car salesman.

He has an agenda. I have yet to fit that puzzle piece. 

Twitter challenge is awesome!

Sun, 10/19/2014 - 22:33 | 5354034 Squid-puppets a...
Squid-puppets a-go-go's picture

perhaps he seeks to be the man they tap on the shoulder to oversee the reinstatement of the gold standard.

Given that nearly every other gold advocate despises the insiders of the system that has maligned preshy metalz, its an open niche

Sun, 10/19/2014 - 23:14 | 5354112 Rememberweimar
Rememberweimar's picture

Richards is 100% chosenite

Mon, 10/20/2014 - 01:56 | 5354288 piceridu
piceridu's picture

Agora is the a newsletter puppy mill. Rickards must need money very badly because he's a very smart guy with some great insight but this is pure newsletter shilling for Agora.

Mon, 10/20/2014 - 05:39 | 5354415 ParkAveFlasher
ParkAveFlasher's picture

I think Rickards ate too many oysters while playing his DoD & D.

Mon, 10/20/2014 - 02:56 | 5354336 Jack Sheet
Jack Sheet's picture

Ricktards= See Eye Eh limited hangout. Grooming himself for a seat at the NWO.

Mon, 10/20/2014 - 03:10 | 5354346 Jack Sheet
Jack Sheet's picture

"We ( the US) have 8300 tonnes of gold"
J Ricktards

Mon, 10/20/2014 - 09:18 | 5354724 lakecity55
lakecity55's picture

"We have Moar."
--Xi, Vlad.

Mon, 10/20/2014 - 03:27 | 5354353 Latitude25
Latitude25's picture

Yeah well theer's no link to any Rickards video or article.  So Arabian money says he said it.  Until a good link is provided it's bullshit.

Mon, 10/20/2014 - 09:16 | 5354721 lakecity55
lakecity55's picture

I just sold off equities to buy some land.

Then I am going to move there, make a small garden and catch fish nearby in a mountain stream.

Bit-chez.

Meanwhile, I keep the bolt-hole in Uruguay.

Sun, 10/19/2014 - 21:15 | 5353766 X.inf.capt
X.inf.capt's picture

LISTEN!

banger! you have lost your mind...

you just might fit in here...

:)

Sun, 10/19/2014 - 21:53 | 5353907 Bossman1967
Bossman1967's picture

bla bla buy buy a fools dream market but I would say the market will not crash till just before the 2016 election. it will be time for a party change like 2007 when the Dems took over and we are at 20 trillion in debt and the Dow at 20,000 and the a&up at 2,000 look good everyone. now we can go back to buying PM

Sun, 10/19/2014 - 22:16 | 5353981 Freddie
Freddie's picture

Clinton did the same thing.  The ZioCon RINOs and Zio Con Dems are all the same.  Any Constitutional conservatives are destroyed or races stolen.

Sun, 10/19/2014 - 22:00 | 5353934 Bunga Bunga
Bunga Bunga's picture

Buy, what can go wrong?

Sun, 10/19/2014 - 22:04 | 5353951 geotrader
geotrader's picture

Up to 1906ish and back to 1790.  

Sun, 10/19/2014 - 22:06 | 5353953 razorthin
razorthin's picture

Well now, does not the market remain "oversold" the majority of time during a bear market?

Sun, 10/19/2014 - 22:06 | 5353954 Said In CONTEXT
Said In CONTEXT's picture

 BTFD..huh?...I'd feel more confident going "all in" on OTC pink sheets.....

Sun, 10/19/2014 - 22:21 | 5353995 q99x2
q99x2's picture

Go for the green. BTFD bitchez.

Sun, 10/19/2014 - 22:46 | 5354048 devo
devo's picture

Smart money is buying stocks and trading profits for gold or land. Dumb money is on the sidelines and/or buying gold with their paychecks. Dumbest money is buying bonds or bitcoins.

Sun, 10/19/2014 - 23:50 | 5354162 PrecipiceWatching
PrecipiceWatching's picture

Good old Market timing redux.

 

Unless you know exactly WHEN buying stocks is no longer the "smart money" move.

Sun, 10/19/2014 - 23:05 | 5354102 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

Can any of you guys who trade options explain how you go about calculatng the Put/Call ratio??

 

I've been keeping an eye on a few equities and using Yahoo/Google finance and downloading the Option Chains and dividing the Puts by the Calls using Volume and using it as a contrarian indicator...so.......

 

PCR < .6 = Bearish

PCR > 1.0 = BULLISH

 

 

 

 

 

 

some say use the dollar amount on each side and others say use a moving average and combine volume and price...I know somebody here is an options pro so why dont you help a fellow Zero HEdger out?

 

~DipshitMiddleClassWhiteKid

 

 

Sun, 10/19/2014 - 23:13 | 5354110 hooligan2009
hooligan2009's picture

here you go, knock yourself out!

http://www.theoptionsguide.com/put-call-ratio.aspx

personally i think trading the gamma of put ratio backspreads on the e-minis is about as useful to smaller investors as this ratio..

Sun, 10/19/2014 - 23:25 | 5354125 devo
devo's picture

It's stupid because many times the put or calls are just a hedge of the opposite position rather than someone placing big bets on a market move. Don't bother with options... like 99% expire worthless. By the time you buy them the volatility has been priced in. The only time to buy options is maybe some puts when the VIX is very low and you sense a top.

Mon, 10/20/2014 - 00:10 | 5354184 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

ive heard this as well but unless you have 50K or so, it makes no sense to trade cash equities since you cant go short and they have all these gay ass rules.

 

 

 

Options let you get creative and give you the ability to sculpt trades..granted you know what you're doing.

 

people tell me the same shit about forex and ive been profitable so, liek anything else...if you bet all your chips you're gonna get fucked but with disicpline and risk management you can do alright.

 

~dipshitmiddleclasswhitekid

 

Mon, 10/20/2014 - 00:59 | 5354241 TheRideNeverEnds
TheRideNeverEnds's picture

Put call ratio is totally useless bullshit.

 

You have no way of knowing why people are buying or selling those options unless you are the one doing it.  They could be hedging positions in the underlying one way or another or making a speculative bet or trading off some inside information or doing a volatility arb with some other thing or synthetic long or short stock or a basis arb or whatever else.    

Sun, 10/19/2014 - 23:06 | 5354103 hooligan2009
hooligan2009's picture

don't worry...the US debt clock is starting to shpw thefiscal deficit is reducing for this year about 1,000 bucks every 3 seconds, as is treasury interest paid.

ya i know the deficit is still going to be over 480 billion this year, and treasury debt is increasing to beyond 105% of gdp now but every little helps hey?

http://www.usdebtclock.org/

 

Sun, 10/19/2014 - 23:27 | 5354127 chubbyjjfong
chubbyjjfong's picture

usdebtclock.org also shows US debt held by foriegn countries increasing appreciably, like thats happening.  Belgium perhaps.  Sometimes I wonder how accurate their data is.  A lot of fudge factor involved I suggest.

Mon, 10/20/2014 - 00:59 | 5354242 Bunga Bunga
Bunga Bunga's picture

I guess they were flashing green in 2007 and 2008 a lot.

Mon, 10/20/2014 - 01:56 | 5354289 Moonrajah
Moonrajah's picture

BTFD stands for Buy The Final Dip, amirite?

Mon, 10/20/2014 - 02:37 | 5354320 chump666
chump666's picture

The algo's read this article http://www.usatoday.com/story/news/nation/2014/10/19/ebola-quarantine-en... that's all.  Humans will buy the dips (helps if oil is bid) on the vacuum pumps.  Apart from that, liquidity dry market is still risky buying dips, say Ebola shows up again, or the Swedes fire on Vlads mini nuke sub.

Mon, 10/20/2014 - 02:38 | 5354322 Rock On Roger
Rock On Roger's picture

Are you sure its not 'USS Maine'?

Mon, 10/20/2014 - 07:00 | 5354453 SilvertonguedAngel
SilvertonguedAngel's picture

You had me until you started talking like Obola about Russia.

Mon, 10/20/2014 - 06:41 | 5354438 CHX
CHX's picture

And who are the muppets - always 3 steps behind - buying from? 

Mon, 10/20/2014 - 08:58 | 5354652 tedstr
tedstr's picture

The uptrend broke in August folks.  Only question now is how far and how fast.  You should have been takaing profits last summer.  Daily RSI will look oversold from here on out.

Mon, 10/20/2014 - 15:03 | 5356064 mkhs
mkhs's picture

Look, Tyler, some of us dinosaurs do not use twitter.  A little consideration would be nice, but you do what you think is best. 

As an aside to Bangedalot in someplaceIndia, you can't listen to a typed message.

Do NOT follow this link or you will be banned from the site!