Thursday, July 30, 2009

Consistently Strong Last Hour

The last hour rally has been common lately. The last hour is often viewed as the “smart money” hour, when institutions place many of their trades. Some indicators track either just last-hour movement or 1st hour and last hour. While the market has consolidated the SPY has moved up in the last hour for 4 days in a row now. I looked at other situations like this.

Strong moves in the last hour are often interpretted as bullish. My rather simple test here shows no evidence of that going forward over the next week. I intend to explore the last hour concept in greater detail in the future.


Anonymous said...

I believe last hour buying is more common in down trends. Smart money coming in to buy after a day long sell off. And last hour selling is more common in up trends. Smart money coming in to sell after a day long rally.


Anonymous said...

these last hour buys have been almost laughably consistent over the past month.

Daniel said...

Examination of the evidence gives me hope that it is true, that there is a consortium of program traders who are nurturing the U.S. markets by guiding the final hour, or last 20--30 minutes, to more benign levels than intraday charts would otherwise indicate they are heading.

I'm not an insider, I have no way to know why we are seeing such ‘Stick-Saves’ (term of David Fry, ETF digest) in the final bar of so many days that were down, prior to that point. Huge volume, every sector, every major country-etf, tall bar pointing to the sky. On his website Mr. Fry often opens his daily market review with a color photo of a hockey goalie making a stick save, on such days.

I have eaten the beef of Bush. It is very tasty, nicely corrupted. These big boys in the Financial-Industrial-Complex (again a tip of the brim to D.Fry for the term) likes their payday, and they are very smart individuals.

Bernanke knows about things like support and resistance lines; he knows what a head and shoulders formation looks like. For his purposes, and that of the Wall Street establishment, it sometimes would look like a NICER close if the SP500 were just ABOVE that line over there, as opposed to below it...

And they have lots of taxpayer money to play with.

The Japanese financial mafia tried such massages and manipulations back in the early 1990s and produced short term effects; clearly no long term ones. They eventually abandoned it. Rivers flow to the sea. Value flows to the appropriate level of valuation.

Warren Buffet is right when he says that frequent short-term odd variances aside, in the end the stock market is a good long term weighing machine.

So Rob, the direction you are honing in on is best served by trying to distinguish btw times when there was NO reason for such manipulations-- like all the times studied by pioneers like Appel and Fosback who used last-hour indicators, and the obvious and egregious 'stick-saves' that even my low-power binoculars can see, much less your powerful telescopes!

The JOY of manipulation is that it is rational! Small fish like us just need to swim in for the feedings.

The Piper will need to be paid-- if these 'stick-saves' are signs of 'weak hands', then they are NOT believers in the long term health and potential of etc etc, and they are holders of mere "inventory to be dumped".

And this is still somewhat toxic inventory. I don't know the full nuances of the Fed’s objectives, but I do know the full nuances of the objectives of Goldman Sachs and Drexel Burnham and the others..

Get large paydays!! Get big bonuses!!

To do that they will need to drop inventory at some point.

So IF THIS IS the cause of the stick saves, then the wise investor tries to sympathize with these sweet patriots who are buying American junk for the cause, and are wondering how and where to unload it. Poor devils, how ARE they going to get the others to take it back from them..?

But if this is NOT the cause then one needs to dig out the work of Marty Zweig and Appel and Fosback and see how they used this tricky sentiment indicator.

I've reviewed some of their writings on it in past years, and none of it stuck, but that could be a comment on me more than on its merits-- one can only use so many indicators before smoke comes out of the ears and brain...


quantivity said...

Recent article from Cheng and Madhavan at BGI explain MOC action vis-a-vis leveraged ETFs; easy to imagine the last hour has become the new vogue way to front-run this inevitable rebalancing. I elaborate in a recent post:

Levered ETFs and Market Close