Bring Out Your Dead
by ilene - August 26th, 2010 11:00 am
Portfolio house keeping – time to say goodbye to mistakes, rebalance what’s left and raise cash? – Ilene
Bring Out Your Dead
Courtesy of Joshua M Brown, The Reformed Broker
A slightly better than expected reading on weekly Jobless Claims has the market feeling bouncy this morning. We also just got AAII sentiment numbers that are as negative as you get (20% bulls, 49% bears!).
Combine these two data points and a Dow that just barely managed to keep itself above the 10,000 level yesterday and you have the recipe for a nice bounce.
I’m planning to use it. I’m planning on bringing out my dead for the cart man to carry away.
Sunlight is the greatest disinfectant known to man, so with this morning’s early rays of sunshine I will cleanse the house that is my long book. I’ll be scouring my portfolios searching for the stocks that have become corpses during the correction’s long night.
This is not because I don’t believe that the bounce could be sustainable (I’m willing to give it the benefit of the doubt for now). Rather, my expulsion of these stock market casualties has more to do with my desire for liquidity and my wish to be rid of that awful stench of death.
When the cart comes by, I’ll be heaping it with the bodies of a few nat gas stories that are going nowhere, a huge retailer that seems to have no bottom and a financial name or two.
I don’t give specific financial advice here on this site, but it certainly wouldn’t hurt to use this opportunity to accept some of the mistakes of the summer and prepare your portfolio for the fall.
Bring out your dead.
Weekly jobless claims fall 31,000 to 473,000 (MarketWatch)
Facebook
Twitter
LinkedIn 
del.icio.us
DiggJohn Taylor Calls The Top: “The Rally Is Ending”
by ilene - July 29th, 2010 12:51 pm
John Taylor Calls The Top: "The Rally Is Ending"
Courtesy of Tyler Durden
The Rally Is Ending
July 29, 2010
By John R. Taylor, Jr., Chief Investment Officer
For FX Concepts, this is a big day and a very scary one as well. Because our market view is now very precise, but at odds with the accepted wisdom, we are putting ourselves out on a limb. The euro is going to be hit again and commodity currencies will come under increasing pressure. Our cyclical analysis argues that the currency markets are making a major reversal right now, today, and that this will be at least a medium term reversal in equities and credit as well. Although it is more likely that the equity and credit markets will not begin their major decline until the last week of August, the odds favor an unimpressive month ahead which means that we are at the end of the exciting part of the rally of the past two months. By the end of next month, equities will be headed lower, credit spreads will widen sharply, and government bonds will begin a rally to new all time highs. Our completely technical cyclical work implies that there will be a return to dark times in September and October, with a sharp decline driven by liquidity and solvency issues likely to set the world back on a recessionary course.
Although the cyclical picture gets more uncertain the farther out we go, we believe that there will be a major cyclical low in risk during January and another one, possibly more aggressive in the third quarter of 2011.
Using this cyclical analysis as our base, we can work backward to generate a set of fundamental conditions that would allow a cyclical picture like this to occur. If the S&P 500 is going to challenge its March 2009 lows in the next year, and interest rates are going to drop sharply while credit spreads widen dramatically, what would the US economy have to do and what would the world look like? Clearly the widespread conviction that the 2008 recession is in the rear view mirror and that growth will slowly improve in the years ahead is wrong. All the forecasts of the G-20 governments are completely off base, which means that the politicians are not prepared for another downturn. We wonder what the downturn will…
Bears Go Into Hibernation – Stock Short Sales at 2-Year Low
by ilene - July 26th, 2010 7:26 pm
Bears Go Into Hibernation – Stock Short Sales at 2-Year Low
Courtesy of Mish
The summer stock market blast higher has wiped out the conviction of short sellers. Bears are back in hibernation and Stock Short Sales at 2-Year Low, Data Explorers Says.
Investors are exiting bearish bets on global equities, pushing bullish wagers on stocks to a two- year high versus short sales, according to Data Explorers.
The firm’s long-short ratio has risen to 9.5, having surged from 5.75 in September 2008 when Lehman Brothers Holdings Inc.’s collapse intensified the financial crisis, the London- and New York-based securities-research company said. The reading is the highest of the data that goes as far back as July 2008.
“Short sellers are now taking money off the table,” said Will Duff Gordon, a senior researcher at Data Explorers in London. “Perhaps the bears are going back into hibernation?”
Barton Biggs, the hedge fund manager who sold half his equity holdings at the start of July, said today that signs the U.S. economy will avoid a recession spurred him to build the stakes back up.
Whipsaw City
Many traders are getting whipsawed here. Chasing shorts lower and longs higher has certainly been the wrong approach most of this year.
Manic Markets Continue: ETF Daily Outlook
by ilene - July 22nd, 2010 8:06 pm
Manic Markets Continue: ETF Daily Outlook
Courtesy of John Nyaradi
Click here for a Special Report from Wall Street Sector Selector
Instratrader Indicators:
Red Flag: We Expect Lower Prices Ahead
Daily Technical Sentiment Indicators: Neutral
Short Term Market Condition: Overbought (short term bearish)
Short Term Trend: Up
Medium Term Trend: Down
Long Term Trend: Down
% of Stocks Above 200 Day Moving Average/Daily Change: 51%/ +23%
% of Stocks Above 50 Day Moving Average/Daily Change: 60% /+51%
Market Update:
| Market | closing price | % change |
| DIA | 10,322 | +1.99% |
| SPY | 1093 | +2.3% |
| GLD | $1194 | +0.8% |
| Oil | $79.10 | +3.3% |
| Vix | $24.63 | -3.9% |
| Shanghai Comp | 2562 | +1.1% |
Commentary
Back to back manic days as the markets continue to struggle with poor macro economic news and mostly positive earnings.
Today it was “risk on” as Microsoft, Caterpillar and UPS earnings were cheered while Amazon missed, housing reports and unemployment all were negative. Chairman Bernanke continued his commentary on Capitol Hill but today, unlike yesterday, the markets rallied. Jobless benefits were extended by Congress. Tomorrow brings earnings reports from Ford and McDonalds and the long awaited “stress tests” designed to show the health of the European banks.
For the weekend, we have a tropical storm heading for the BP well in the Gulf of Mexico and apparently the well be unattended and operations will stop. There are all kinds of varying forecasts about what will happen that range from nothing to a methane rain over the Gulf Coast.
1100 on the S&P remains formidable resistance as does the 200 Day Moving Average at 1113 just above today’s close. Point and Figure charts remain on “sell” signals but close to changing. This is a titanic struggle that will resolve one way or other over the coming days.
We remain in the “red flag” mode, expecting lower prices ahead.
Disclosure: psq, rwm, sh, skf, spy put
Things We Lost In The Fire
by ilene - June 8th, 2010 1:53 pm
Things We Lost In The Fire
Courtesy of Joshua M. Brown, The Reformed Broker
Over the last month, US markets have been burned to a crisp. Blame it on Europe, blame it on a softening of our own recovery data, blame it on the end of earnings season, blame it on the end of quantitative easing, blame it on the Gulf spill, blame it on the engineered cool-off in China.
Is it too soon to eulogize the March 2009 – April 2010 bull market, a 78% performer that even the most bullish never really believed in the entire way up? Depends on which support lines and moving averages you happen to be fixated on at the moment.
But it is certainly not too early to lament the Things We Lost In The Fire - the idiosyncrasies of the Impossible Rally that we may have lost for good. These include:
Apple as the Michael Jordan of the NASDSAQ- Steve Jobs had us from hello, we clamored around the television for each product release and conference, and Mr. Jobs did not disappoint. Nor did Apple stock, which seemed to go up 3 to 5 points a day for what seemed like an endless stretch of time. It was a reminder to stockpickers everywhere that ETFs didn’t control everything- that you could get one right on research. The release of the iPad and the move toward shattering the $300 per share mark epitomized the release of our pent-up optimism and will always be remembered as a special time in market history.
Cree Research, Green Mountain Coffee and Baidu- The hottest of hot…
Olivia Newton John Comments on Today’s Action
by ilene - May 3rd, 2010 1:07 pm
Olivia Newton John Comments on Today’s Action
Courtesy of Trader Mark at Fund My Mutual Fund
I don’t know what just happened around 12:15 PM EST but in the words of Olivia Newton John
"Let’s Get Vertical, Vertical
I wanna get vertical, let’s get into vertical "
(Note – this video is so wrong… so very wrong. Aside from Olivia. Those of you under the age of 35 who are not aware of such video and music… be afraid. Very afraid.)
My suspicion is Goldman was assured through back channels this is all a charade and it will be business as usual. They just need to be flogged publicly for appearance sake. Word got to Blankfein around 12:10 PM.
——————————--
I switched from those nasty SPY puts to some SPY calls. Hopefully the market can dump tomorrow back below the 20 day moving average so I can lose money yet again. Rinse. Wash. Repeat.
But most of all be physical ….err vertical.
x
On The Brink Of An Asset Explosion, II
by Zero Hedge - April 25th, 2010 11:46 am
Guest Post: On The Brink Of An Asset Explosion, II
Courtesy of Tyler Durden
Submitted by Toby O’Conner of GoldScents
Let me start off by saying the market should be correcting. Sentiment has reached ridiculous bullish extremes, the kind of extremes that led to the January /February correction.
That correction separated the second leg of the bull from the third. But let’s face it, sentiment has been in this condition for several weeks now and the best we could muster was a minor correction of 30 points on the news the SEC was filing charges against Goldman Sachs for fraud.
We’ve had three opportunities to “sell the news” with the April jobs report and recently with INTC and AAPL earnings. None of them have panned out. The market could use the Greek excuse as a downside catalyst, the same as it did in January. And now Greek short term bonds are tanking as the EU waffles about writing that check in front of the German elections in May.
All in all it boils down to the market has had every chance to correct and it has failed to do so.
Last month I speculated that we were On the Brink of an Asset Explosion. Well, we may not be on the brink anymore. We may very well be moving into the heart of the explosion right now.
We’ve just seen one of the most powerful rallies out of a corrective low in many years. Until Friday the market had held above the 10 day moving average 42 days in a row. That’s the longest stretch in over 10 years. Since the February 5th low the market has risen 71% of the time. That’s the kind of stuff parabolic blow off tops are made of.
I don’t really think we are in a parabolic blow off top just yet. What I do think is that we may have entered a runaway move similar to the August 06 to February 07 time frame.
During a runaway move, corrections tend to be uniform in both magnitude and duration. During the 06/07 rally all corrections fell in a range of about 20-35 points.
So far the rally out of the February bottom has followed this script. The February corrective move dropped 25 points in 4 days and the recent pullback on the Goldman news dropped 30 points in…
Volume: The Stock Market’s “Footprints”
by ilene - April 14th, 2010 2:03 pm
Volume: The Stock Market’s "Footprints"
Market volume changes can signal a trend change
Courtesy of Elliott Wave International
A few years ago, a question was posed to Elliott Wave International’s president Robert Prechter:
"Under the Wave Principle, what is the most important thing to watch other than price?"
Prechter answered via his monthly Elliott Wave Theorist: "Volume."
High trading volume is a chief characteristic of a healthy trend, bullish or bearish. The DJIA has rallied for over a year now off its March 2009 low, but volume has consistently been lacking. We’ve shared our thoughts on this fact many times with our subscribers.
"Many market watchers said that the low volume in December was merely seasonal and not bearish. But volume in January has been no higher than it was from December 1 to December 22, and it is still lower than October’s, which was lower than September’s, and so on."
-- Bob Prechter, Elliott Wave Theorist, January 2010.
Even lately, low volume has persisted. Here’s what is notable, though: The market’s down days have generally been on higher volume than the up days. This could mean investors are gradually leaving the market. Our Monday-Wednesday-Friday Short Term Update has been monitoring volume closely:
March 31 Short Term Update: "Today was the first down close since March 24 and it occurred on increased volume."
April 5: "A contraction in the number of NYSE issues closing up versus down over the past two weeks as well as the total daily NYSE volume that was up versus down shows [that] internally, the market was ‘correcting’."
April 6: "The S&P closed up, but breadth was noticeably weaker today versus yesterday, as was the NYSE up/down volume ratio."
On Monday, April 12, the Dow climbed over 30 points intraday before closing with a modest gain of just under 9 points and actually falling into negative territory for a time. While this did mark the first time the Dow closed above 11,000 in many moons, volume remained near the muted levels of April 9. Here’s the April 12 Short Term Update’s comment (online now):
"NYSE volume remains anemic, with just 964 million shares traded today (4/13). April has now consisted of 7 trading sessions of which 5 occurred with NYSE volume of less than 1 billion shares traded, which is a bit ‘zany’ in that the first two weeks of
…
The Wheel
by Chart School - April 11th, 2010 2:34 pm
The Wheel
Courtesy of Allan
Below is my QQQQ chart, including the Daily Trend Model, an EW count, Auto-Trend Channels and the Elliott Oscillator.
Since the mid-February LONG signal, the index is up about 10%. Prices have been contained in a well defined trend channel, all the time safely above the Daily Trend Line (navy). On the bottom oscillator, the recent new highs in price are not being confirmed by new highs in the oscillator. This suggests that the proposed wave count on the screen is correct and that after the completion of the Wave 5 of 5, a significant decline will be likely.
Below is the same QQQQ chart, less all of the bells and whistles save one, the Daily Trend Model:
This chart suggests only one thing: that the market is in an uptrend and traders/investors should be LONG. The late January EXIT was good for about a 10% decline before the index flipped back to the bullish camp. There is no suggestion here about any imminent declines, non-confirmations, wave counts or trend channels. Just that one thing: LONG.
There may be a market environment coming where such simple, observable, understandable analysis will fail. Alternatively, this kind of market analysis will continue to be an effective steering current for navigating market direction. All I can say is that this analysis continues to amaze me with its effectiveness across so many indexes, ETF’s and stocks, as well as across multiple time frames.
I don’t claim to have re-invented the wheel here, only to have found one and am now employing it in all of my market decisions.
*****
Allan’s new newsletter, “Trend Following Trading Model,” incorporates his chart-based, trend-following method. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a detailed introduction to the Trend Following Trading Model, read this introductory article.
On Stocks and the Costanza Paradox
by ilene - April 9th, 2010 4:36 pm
Joshua sheds light on market absurdity using the Costanza analogy. – Ilene
On Stocks and the Costanza Paradox
Courtesy of Joshua M Brown, The Reformed Broker
George Costanza: "My life is the opposite of everything I want it to be. Every instinct I have, in every part of life, be it something to wear, something to eat … It’s all been wrong."
In a classic episode of Seinfeld called The Opposite, perma-loser George Costanza comes to the realization that if he would just act completely contrarily to his own instincts, things would begin to go his way.
Jerry Seinfeld: "If every instinct you have is wrong, then the opposite would have to be right."
One cannot help but see the parallels between George’s epiphany and the paradox of the high beta market rally that has left even the most experienced players in utter disbelief.
Think about how rewarding it’s been for traders who have completely violated any sense of prudence or market savvy:
*AIG ($AIG) barely avoids liquidation – buy it and enjoy percentage gains in the thousands!
*Unemployment remains at around 10%, inital jobless claims are still climbing – so buy some specialty or even luxury retailers!
*Mortgage rates are inching higher and housing has not truly bottomed – so snag some Hovnanian ($HOV), some lumber names and why not a little Home Depot ($HD).
*Oil breaks out above $85 – and the airlines go wild!
*Congress passes a de facto takeover of Healthcare – OMG! Healthcare stocks are rallying on the news of their newly subjugated status!
*Commercial RE is a time bomb – REITs! I gotta have more REITs!
We can document dozens of these types of paradoxical setups. Investors are taking almost any opportunity to do the opposite of what they’d normally be expected to do. If everyone in the market is a contrarian, is the true contrarian the non-contrarian? Heh – "Whaaaaat is the deeeeaal with contrarians?" Thanks, Jerry.
If Georgie was running a hedge fund right now and abiding by his counterintuitive life strategy, he’d be absolutely killing it.
George Costanza: "I tell you this, something is happening in my life. it’s all happening because I’m completely ignoring every urge towards common sense and good judgment I’ve ever had. This is no longer just some crazy notion. Jerry, this is my religion!"
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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
(