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

 

 


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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.


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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

 


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STRATEGY UPDATE – HEDGE, HEDGE & HEDGE

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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


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Phil's Favorites

Online shopping: why its unstoppable growth may be coming to an end

 

Online shopping: why its unstoppable growth may be coming to an end

What goes up … Bogdan Vija

Courtesy of Ralf Seifert, IMD Business School and Richard Markoff, EPFL- École Polytechnique Fédérale de Lausanne - Swiss Federal Institute of Technology in Lausanne

Many people probably assume that online stores are making a fo...



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Zero Hedge

The Road To Perdition - 10 Cautionary Tenets About US Air Power

Courtesy of ZeroHedge. View original post here.

Authored by William Astore via TomDispatch.com,

The American Cult of Bombing and Endless War

From Syria to Yemen in the Middle East, Libya to Somalia in Africa, Afghanistan to Pakistan in South Asia, an American aerial curtain has descended across a huge swath of the planet.

Its stated purpose: combatting terrorism.

Its primary method: constant surveillance and bombing -- and yet more bombing.

...

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Insider Scoop

5 Stocks Moving In Monday's After-Hours Session

Courtesy of Benzinga.

Gainers
  • PhaseBio Pharmaceuticals Inc (NASDAQ: PHAS) shares are up 18% after reporting preliminary results from a Phase 2a clinical trial of PB2452 for reversal of antiplatelet activity.
  • Lannett Company, Inc. (NYSE: LCI) shares are up 4% after reporting a restructuring plan related to Cody Labs. The company says it sees incurring around $5 million in costs to implement Cody API Restructuring Plan.
  • EQT Corporation (NYSE: EQT) shares spiked up 3% after announcing it sees second-quar...


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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Kimble Charting Solutions

Gold Bugs Index Attempting 8-Year Breakout, Says Joe Friday

Courtesy of Chris Kimble.

Are Gold Bugs fans about to receive positive news they haven’t had in years? Possible!

This chart looks at the Gold Bugs Index (HUI) on a weekly basis over a couple of decades. The index has spent the majority of the past 20-year inside of rising channel (1).

The index hit the top of the channel in 2011, where it peaked and started creating a series of lower highs for the past 8-years, which has formed line (2).

The index is now kissing the underside of falling resistance and the underside the 2016/2017 lows at (3).

Joe Friday Just The Fa...



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Chart School

Silver Review

Courtesy of Read the Ticker.

The folks in the federal reserve will debase the US dollar currency to an extreme degree silver will finally lift off the floor.. 

Note: Readers should re watch the silver back screen news video, here.

The following video looks at price action and Wyckoff logic.

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Chart in video

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If gold moves, silver wi...

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Digital Currencies

Cryptos Are Crashing As Asia Opens, Bitcoin Back Below $8k

Courtesy of ZeroHedge. View original post here.

Having survived the day's bloodbath in US tech stocks, cryptos are crashing in the early Asian session, apparently playing catch-down to the day's de-risking.

While no catalyst is immediately evident, there are some reports noting 13 large global banks are preparing to launch digital versions of major global currencies next year, though we suspect this drop was more algorithmic that fundamental-driven.

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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 ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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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...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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