The melt-up continues today as “buy the dip” has turned into “buy the rip”. David Rosenberg is dusting off Bob Farrell’s 10 rules as the market soars:
Not only have sentiment indicators flagged a high level of investor complacency but also the equity market looks highly overbought right now. Looking at the internals, there is much less buoyancy than there is on the surface. As an example, back in April there were at least 600 stocks on the Big Board making new highs versus around 180 right now. Moreover, back at the April highs, we had well over 90% of the S&P 500 universe trading above their 200-day moving average and currently that share is barely above 70%. Keep these metrics in mind when judging the health and breadth of the overall market, and be sure to dust off Bob Farrell’s Rule 7: “Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.”
But let’s not forget Farrell’s first rule either:
1. Markets tend to return to the mean over time
The Nasdaq 100 has rallied 21% in 7 weeks. The Russell 2,000 has rallied 20% in 7 weeks. These are your greed indices. The ones where the pigs go to die at market peaks. At the May peak , the Russell was 10% from its 50 day moving average while it is 9% from its 50 day moving average today. The Nasdaq 100 was 6.5% from its 50 day moving average in May. Today it is 9.5%! This does not spell impending doom, but the 3 month risk adjusted returns from such a level are very poor.
The risks just strike me as being extraordinary at these levels. Complacency is high, everyone is bullish, everyone buys every dip, all the news is good, etc. The pool of greater fools has gotten mighty crowded and my hands are starting to get pruny. I wouldn’t buy this market with my worst enemy’s nest egg.
As I have written many, many times, the “unexpected” events of January and February were a dramatic wake-up call for central banks. Last August’s global liquidation they could at least try to ignore because it could possibly fit within the paradigm of “transitory”, a one-off aberration that was some mysterious Chinese viral contagion and thus of not any great, lingering importance. The...
Note: The charts in this commentary have been updated to include the Q2 2016 Second Estimate.
The chart below is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics:
The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE) and exports that were partly offset by negative contributions from private inventory investment, residential fixed investment, state and local government spending and nonresidential fixed investment. Imports...
“Simulations of the FRB/US model of a severe recession suggest that large-scale asset purchases and forward guidance about the future path of the federal funds rate should be able to provide enough additional accommodation to fully compensate for a more limited [ability] to cut short-term interest rates...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer. One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."
Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.
Genetic components are the DNA sequences that are 'inherited.' Some of these genes are stronger than others in their expression (e.g., eye color). Yet, some genes turn on or off due to external factors (environmental), and it is und...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.