MARKETS RARELY BOTTOM ON A FRIDAY
by ilene - February 8th, 2010 5:09 pm
MARKETS RARELY BOTTOM ON A FRIDAY
Courtesy of The Pragmatic Capitalist
Jeff Saut at Raymond James, entered the year very cautious and continues to think we are in the middle range of a selling stampede. In addition he points to the interesting fact that
“Recall that “selling stampedes” tend to last 17 – 25 sessions, with only one- to three-session counter-trend rallies, before they exhaust themselves on the downside. Therefore, we “put blinders on” to last Friday’s late-day upside reversal, consistent with our mantra of “never on a Friday.” That mantra was learned from numerous Friday “head fakes” implying that markets rarely bottom on a Friday once they are into a downtrend. Rather, participants tend to go home over the weekend, brood about their losses, and show up the following week in “sell mode.” So, while the markets may attempt to build on Friday’s late reversal, we have little confidence that any rally will last more than one to three sessions since today is only session 14 from the trading top of January 19th.”
Saut is also suspect of the new secular bull
“we remain suspect this is the first leg of a new secular bull market. Rather, we think it is just another “bull move” within the context of the range-bound stock market we have been mired in for the last 10 years. Another driver of Friday’s reversal could have been the “break” below 10,000 on the DJIA, which is also a psychological support level that should be respected.”
Backing up his continued near-term bearish thesis is action in the metals. Saut made a prescient call in mid January when he referred to the copper markets as being overheated and warranting some caution in equity markets:
“Then there is ‘Dr. Copper,’ the metal with a Ph.D. in economics, which recently recorded a 12-month rolling rate of return in excess of 150%. Historically such a ‘copper cropper’ has marked a ‘trading top’ in copper and telegraphed caution
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DiggIS THIS THE BEGINNING OF A NEW BEAR MARKET IN CHINA?
by Chart School - February 2nd, 2010 12:03 pm
IS THIS THE BEGINNING OF A NEW BEAR MARKET IN CHINA?
Courtesy of The Pragmatic Capitalist
The most basic definition of a bull or bear
RUSSELL: HERE COMES THE “SECOND ROUND OF PAIN”
by ilene - January 29th, 2010 6:14 pm
RUSSELL: HERE COMES THE “SECOND ROUND OF PAIN”
Courtesy of The Pragmatic Capitalist
Recent action in the markets has Richard Russell growing increasingly concerned about the future market performance. He is now warning investors of an impending “second round of pain”:
“I know of only one rule that always holds true for the stock
market . The market will advance to a state of overvaluation and over-enthusiasm, and this will usually identify a top. The top is followed by a long road to a state of over-pessimism and undervaluation and this will identify a bottom. We call the extended and winding travels between these two — bull and bear markets. Most unusual is the investor who can stay invested for the full length of a bull market or the investor who will remain OUT for the full length of a bear market.Why so? It’s because of greed that investors won’t stay out of a bear market. And it’s because of fear that an investor won’t stay in during the full length of a bull market. I’ve often likened the stock market to a living animal. It’s an animal that is scheming and fighting to part us from our money. It’s been said that never has anything invented by man been so frustrating to man as the stock market.
The remarkable thing about the stock
market is that it contains the sum total of what everybody knows about absolutely everything. It’s been said the “everybody knows more than any one person.” And that’s what I find so fascinating about the stock market. The combined wisdom of hundreds of millions of people are reflected in the action of the stock market every minute and hour of each session.The trick is to interpret the action of the market and what the action is telling us. I’ve searched for 50 years trying to find that “pot of gold,” and as far as I know, nobody has ever succeeded. It’s the eternal mystery, it’s the everlasting puzzle. The day that some genius fully understands and beats the market, that day the market will cease to exist.
I note that most analysts are now bullish, and that they are recommending stocks for the “continuing advance.” At the same time, most economists are optimistic, arguing that the “longest
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Gold: What’s REALLY Behind the Record Rise, Bull or Bubble?
by ilene - October 21st, 2009 1:35 am
Gold: What’s REALLY Behind the Record Rise, Bull or Bubble?
By Nico Isaac of Elliott Wave International
When prices in a financial market go from Sea Level to Outer Space in a relatively brief time, two scenarios are at work — and they both start with the letters “B-U.”
When a precious metal goes from being a popular long-term investment of buy-and-holders to the quick, get-away “vehicle” of day-traders, two scenarios are at work — and they both start with letters “B-U.”
And when the majority of mainstream pundits see a "new paradigm" in which prices continue to rise indefinitely, two scenarios are at work – and, you guessed it, they both start with the letters “B-U.”
Enter: the recent Gold Rush of 2009, when ALL of the above conditions apply. Everyone from hedge funds to housewives now hustle to hitch their asset wagon to the rising gold star. Which begs this question: Which of the possible two scenarios are at work: B-U-ll
— Or B-U-bble?
Here’s the difference: A genuine bull market is driven by a self-sustaining internal dynamic that’s reflected by a host of technical indicators. A Bubble, on the other hand, is the result of untenable psychology that could shift at any moment and bring prices plummeting down.
It goes without saying into which category the mainstream experts put Gold: namely, a new bull market that has years, if not decades more to soar. “Gold Will Hit $2,000 an ounce,” reads an October 8 Market Watch. And — “Gold Has More Upside… The metal’s bull run is just getting started,” adds a same day Barron’s.
I found hundreds of news items which agree about the long-term potential for gold’s uptrend. But not a single one could tell me why the rally would continue, other than because the experts say so.
To know whether a diamond is real, it must cut glass. And, to know whether the bull market in gold is real, it must encompass at least one of these FOUR traits:
- A surge in demand that outpaces supply
- A falling stock market, which raises the “safe haven” appeal of precious metals.
- A real (not imagined) threat of inflation
- An increase in value relative to major foreign currencies
Right now, the Gold market can NOT check off a single one of these items. Case in point:
Supply:…
Sell equities
by ilene - September 18th, 2009 3:49 pm
Edward doesn’t leave you wondering about where he believes the greatest risks lie. – Ilene
Sell equities
Courtesy of Edward Harrison at Credit Writedowns
In late August, I wrote a post called “Getting bearish again” in which I said that the bear market rally I had anticipated back in March was long in the tooth. At the time, I mentioned 1026 on the S&P 500 as a sell signal. With the S&P 500 now well over 1060 and gains of well over 50% from those March lows, it’s definitely time to sell.
And when I say sell, I’m not talking about going overweight bonds or commodities by putting additional new money disproportionately in other asset classes – which is what you should have been doing in August. I am talking about lightening up on equities and selling existing positions.
Now, if you missed the rally, I’m sorry but, now is not the time to get in. And if you have been there from the start, remember, bulls make money, bears make money but pigs get slaughtered.
David Rosenberg sums up the logic.
The S&P 500 is now up more than 60% from the lows, which is truly amazing and kudos to those who called it. But the question is whether the fundamentals will ever catch up to this level of valuation — usually after a 60% rally, we are fully entrenched in the next business cycle. Never before have we seen the stock market rise so much off a low over such a short time period, and usually at this state, the economy has already created over one million new jobs — during this extremely flashy move, the U.S. has shed 2.5 million jobs (as many as were lost in the entire 2001 recession).
Do you really think there’s huge upside here? After a 60% run to the upside? Laszlo Birinyi does and sees 1200 before year end. I’d rather sit this one out. The downside is a lot greater at these levels than the upside. I would say lighten up on risk all around. High quality over low quality. Low beta over high. Consumer staples over discretionary.
But, if you are not going to run with the liquidity-seeking-return crowd and chase high beta and low quality stocks or high…
A REAL BULL MARKET OR A MARKET FULL OF BULL?
by ilene - August 5th, 2009 4:24 pm
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A REAL BULL MARKET OR A MARKET FULL OF BULL?
Courtesy of The Pragmatic Capitalist
Can you have a true bull market without a rising currency? The S&P 500 is up 11.5% year to date, but the dollar is down 7% 5.5% year to date. As we saw during the 2003-2007 bull the real returns of the bull market were fairly poor and turned out to be built on a foundation of horrible underlying fundamentals, most obviously represented by a plummeting dollar. As the Greenback continues to fall into the abyss you have to wonder whether it’s possible to have a real bull market with a plunging currency and whether the collapsing dollar doesn’t represent the true economic outlook….
Source: WE Pollock
NASDAQ Win Streak Will Crash To A Halt
by ilene - July 23rd, 2009 10:25 pm
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NASDAQ Win Streak Will Crash To A Halt (MSFT, AMZN)
Courtesy of Joe Weisenthal at Clusterstock
Well, we don’t know for sure that the NASDAQ’s winning streak will come to an end… but when you have Microsoft (MSFT) and Amazon (AMZN) both tanking after hours on disappointing earnings reports, you kind of know tomorrow is going to be a down day.
Microsoft, in particular, missed by a mile and since they’re still so huge, that itself could doom the NASDAQ right there.
See Also:
NOT YOUR CONVENTIONAL BULL MARKET
by ilene - July 22nd, 2009 3:12 pm
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NOT YOUR CONVENTIONAL BULL MARKET
Courtesy of The Pragmatic Capitalist
Credit Suisse analysts must have been furious Monday morning. After working all weekend on a brand new upgrade of the U.S. equity markets they needed one more day to touch up the report before issuance. Lo and behold, Government Sachs beat them to the punch with their own upgrade of U.S. equity markets on Monday morning. Poor guys because it’s one heck of a good report. Credit Suisse not only upgraded their outlook on U.S. stocks (new S&P target of 1050), but issued an excellent piece on why this bull run is unlikely to be similar to past bull markets.
They list 6 reasons to be less optimistic in the long-term and why this will almost certainly be a W shaped recession (they currently believe we are on the first V so expect a double dip down in 2010). The 6 reasons will sound awfully familiar to regular readers, but CS does a nice job of condensing them:
1) There is over $7 TRILLION in excess leverage in the system:
2) Global housing prices are still too high:
3) U.S. housing inventories could hinder home prices for another 2-3 years:
4) Global growth going forward is likely to be below trend:
1. a lower investment share of GDP tends to lead to lower investment growth;
2. the demographics are clearly deteriorating (the working age population is declining in Europe from next year and is contracting by nearly 1% pa in Japan)
3. there is more red tape / regulation.
5) Margins are likely to contract further:
1. corporate tax rates may have to rise
2. emerging markets are causing commodity prices (the input costs for developed market companies) to be structurally higher.
3. more red-tape / regulation.
6) There is no big cap bull market theme:
Each bull market typically needs a different driver. We believe that the new key themes of the new bull market are the Non-Japan Asian consumer and technology. Yet, European equities don’t have strong exposure to this theme.
Source: Credit Suisse
Photo: Toro Bronce, the statue in Downtown Manhattan in honor of the Bull Financial Markets, originally posted to Flickr by James & Vilija at http://flickr.com/photos/15238715@N00/224568741, at Wikipedia.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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