Posts Tagged ‘overbought’

Hussman: I Was Wrong, And Didn’t Realize How Stupid Investors Were

Hussman: I Was Wrong, And Didn’t Realize How Stupid Investors Were

Courtesy of Joe Weisenthal at Clusterstock

In his latest essay, John Hussman offers a kind of mea culpa, in explaining why he hasn’t been more on-board the rally this year.

His rationale: he didn’t realize how little investors had learned from the bust, and how much Wall Street would overreact to a "lull" in mortgage resets.

In other words: he’s been wrong because Wall Street is dumb.

I was wrong.

Not about the implosion of the credit markets, which I urgently warned about in 2007 and early 2008. Not about the recession, which we shifted to anticipating in November 2007. Not about the plunge in the stock market, which erased the entire 2002-2007 market gain, which was no surprise. Not about the “ebb and flow” of short-term data, which I frequently noted could produce a powerful (though perhaps abruptly terminated) market advance even in the face of dangerous longer-term cross-currents. I expect not even about the “surprising” second wave of credit distress that we can expect as we move into 2010.

From a long-term perspective, my record is very comfortable. But clearly, I was wrong about the extent to which Wall Street would respond to the ebb-and-flow in the economic data – particularly the obvious and temporary lull in the mortgage reset schedule between March and November 2009 – and drive stocks to the point where they are not only overvalued again, but strikingly dependent on a sustained economic recovery and the achievement and maintenance of record profit margins in the years ahead.

I should have assumed that Wall Street’s tendency toward reckless myopia – ingrained over the past decade – would return at the first sign of even temporary stability. The eagerness of investors to chase prevailing trends, and their unwillingness to concern themselves with predictable longer-term risks, drove a successive series of speculative advances and crashes during the past decade – the dot-com bubble, the tech bubble, the mortgage bubble, the private-equity bubble, and the commodities bubble. And here we are again.

Read the whole thing >

 

The Second Wave Of Mortgage Resets Begins

Hussman: The Market Is More Overbought Than Any Time In History

 

 


Tags: , , , , ,




Strenuously Overbought But …?

Mish discusses his thoughts on the market, drawing a few Elliott Wave patterns towards the end. – Ilene

Strenuously Overbought But …?

strenuous climb up, market overboughtCourtesy of Mish

Inquiring minds are once again reading excellent commentary by John Hussman. Please consider Strenuously Overbought.

Last week, we closed out our modest "anti-hedge" in index call options, which we have carried in the Strategic Growth Fund during recent months, and we moved back to a fully hedged investment stance. I should note that we are not “calling” or “predicting” a market decline in this particular instance. Rather, we are tightening of our defenses because the overall conformation of evidence we observe here has generally not been followed by an acceptable return/risk profile, on average.

My discomfort about strenuously overbought and moderately overvalued conditions overlaps with skepticism about the U.S. economic “recovery,” which appears to be nothing but an artifact of government spending, while intrinsic economic activity remains weak. Stimulus induced “strength” is unlikely to propagate because, as I’ve noted before, economic recoveries are invariably led by expansion in debt-financed forms of spending such as gross domestic investment and durable goods. These classes of spending tend to lead other forms of economic activity by nearly a year, and it is difficult to expect this in an environment of heavy continued deleveraging pressure. Rather than abating, foreclosures and mortgage delinquencies are setting further records (pressured even more by continued net job losses), and we have now hit the point where Alt-A and Option-ARM resets are beginning (after a lull in the reset schedule since March). We know that post-crash markets feature partial recoveries followed by a very extended period of sideways movement. To expect an entirely different result in this instance – to assume that this is a typical post-war recovery and that everything is back to normal – seems hopeful to say the least.

The percentage of bullish investment advisors now rivals that seen at the 2007 peak. Stocks are strenuously overbought. The S&P 500 is overvalued to the extent that we now expect just a 6.6% annual total return over the coming decade (a level that except for the period since the mid-1990′s has corresponded more to bull market peaks than bases for sustained advances). Historically, such combinations of overbought, overvalued, overbullish evidence have generally been unrewarding, so we don’t even need to consider special cases.


continue reading


Tags: , , , , , ,




THE STOCK MARKET HASN’T BEEN THIS OVERBOUGHT SINCE 1983

THE STOCK MARKET HASN’T BEEN THIS OVERBOUGHT SINCE 1983

Courtesy of The Pragmatic Capitalist

Excellent data here from Bespoke. The market hasn’t been this overbought in over 25 years:

sp500 moving averages THE STOCK MARKET HASNT BEEN THIS OVERBOUGHT SINCE 1983

This additional chart from Quantifiable Edge shows the extreme level of stocks above their 200 day moving average.  The stock market hasn’t been this oversold ever in terms of this indicator:

2009-9-17 png

Source: Bespoke Invest, QE

 


Tags: ,




STRATEGY UPDATE – HEDGE, HEDGE & HEDGE

Click here for a FREE, 90-day trail subscription to our PSW Report!  

STRATEGY UPDATE – HEDGE, HEDGE & HEDGE

Courtesy of The Pragmatic Capitalist

The market has made an enormous move in a very short period of time.  The 8% move over the past 6 trading sessions is beyond normal.  Unlike the March bottom where we were coming off of extremely oversold levels, the current rally is coming off of only slightly oversold levels.  Unlike the March bottom where we said the initial 10% was likely to lead to more follow-through, I am not as optimistic here.  The recent move has sent the market into an overbought scenario in a very short period of time.  It’s likely that the smart money will begin waiting for a better opportunity to get in.  That means we could see the buying begin to taper off in the coming days.  I still believe there is no real catalyst to send the market substantially lower, however, so don’t expect the market to fall off a cliff here.

Quick moves like we’ve seen in the last few days never make me feel comfortable.  The “better than expected” earnings trade has gotten extremely crowded.  As regular readers know, when one side of the boat starts to get too crowded I always like to jump off or move to the other side.  At this time, I think it’s prudent to move to a more mildly bullish position, but I certainly don’t feel comfortable getting short at these levels.  The risk of near-term downside is very high, however, I would expect any downside to be short-lived and relatively minor.  I would expect buyers to come in 3-5% lower from here.

With that said, it’s prudent to throw on some hedges here if you haven’t already.  The current JP Morgan strategy outlook provides a relatively good framework:

strategy, stock market

One of the best ways to hedge potential downside is to write calls on the positions you might own, however, since we’re not all options traders I’ll detail a few other potential ideas.   If you’re a small investor without an options account you might consider a fund like PBP which is an option writing S&P 500 fund.

Although JP Morgan likes shorting oil here I have to disagree.   I prefer to hedge with non-correlated assets and oil’s correlation to


continue reading


Tags: , , , ,




 
 
 

Phil's Favorites

Stream On '22

 

Stream On ’22

Courtesy of Scott Galloway, No Mercy/No Malice@profgalloway

Two weeks ago, at the Code Conference, Endeavor CEO Ari Emanuel claimed “the total addressable market of content is infinite.” Netflix is spending $17 billion a year to validate his thesis. So far, they’re both right. Since last Friday, Netflix raised subscription prices in 11 countries by as much as 40%. A company’s ability to raise prices is a function of the delta between the price and the perceived value. Nothing better illuminates this delta than the below chart:

Glocal

Squid Game was sourced, written, and produced in South Korea. Within 10 days of its rele...



more from Ilene

Zero Hedge

Notorious Haitian Gang Demands $17 Million Ransom For Kidnapped Missionaries

Courtesy of ZeroHedge View original post here.

A local gang that days ago kidnapped a group of 17 American and Canadian missionaries in Haiti, among them children, is demanding a $17 million ransom to obtain their release, or $1 million for each person.

Since the Saturday kidnapping which drove world headlines, the group has been identified as the powerful and noto...



more from Tyler

Digital Currencies

Facebook Chooses Coinbase As "Custody Partner" For Digital Wallet Ahead Of Stablecoin Launch


Image by Gerd Altmann from Pixabay

Courtesy of ZeroHedge

With crypto markets in the green and equities still riding high on their latest comeback rally, Coinbase has just dropped a bombshell update about Facebook's great attempt to seize control of the global monetary supply (or at least a slice of it) thanks to its nearly 3 billion monthly users who would have immediate access to whatever monetization options they...



more from Bitcoin

Chart School

Price and Volume Swing Analysis on Bitcoin and Silver

Courtesy of Read the Ticker

Many take guidance from news, pundits or advisors. Well sometimes the swings of price and volume are a better measure of what happens next.

The big boys do not accumulate or distribute in single 1 second trade, they build positions over weeks, months and years. They use price swings in the market to build or reduce positions, and you can see their intent by studying swings of price and volume and applying Tim Ord logic as written in his book called 'The Secret Science of Price and Volume: Techniques for Spotting Market Trends, Hot Sectors, and the Best Stocks'.

Tim Ord is a follower of Richard Wyckoff logic, his book has added to the studies of Richard Wyckoff, Richard Ney and Bob Evans.

Richard Wyckoff after years of...

more from Chart School

Politics

Steve Bannon faces criminal charges over Jan. 6 panel snub, setting up a showdown over executive privilege

 

Steve Bannon faces criminal charges over Jan. 6 panel snub, setting up a showdown over executive privilege

Defiant or following Trump’s direction? John Lamparski/NurPhoto via Getty Images

Courtesy of Kirsten Carlson, Wayne State University

The House committee investigating the Jan. 6 attack on the U.S. Capitol is tasked with providing as full an account as possible of the attempted insurrection. But there is a problem: Not everyone is cooperating.

As of Oct. 14, 2021, Steve Bannon, a one-tim...



more from Politics

Biotech/COVID-19

Ivermectin is a Nobel Prize-winning wonder drug - but not for COVID-19

 

Ivermectin is a Nobel Prize-winning wonder drug – but not for COVID-19

While ivermectin was originally used to treat river blindness, it has also been repurposed to treat other human parasitic infections. ISSOUF SANOGO/AFP via Getty Images

Courtesy of Jeffrey R. Aeschlimann, University of Connecticut

Ivermectin is an over 30-year-old wonder drug that treats life- and sight-threatening parasitic infections. Its lasting influence on global health has been so profound...



more from Biotech/COVID-19

Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



more from Promotions

Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



more from Kimble C.S.

ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



more from ValueWalk

Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



more from M.T.M.

The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



more from Tech. Traders

Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



more from Lee

Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

http://www.insidercow.com/ more from Insider





About Phil:

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...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.