Just a reminder that this blog has a new home with the same URL. Please reset your RSS feed. www.quicktakespro.com/blog
Today's entry is a quickie - partially since I am tired of fighting this blog manager. If anyone wants to suggest another one, besides blogspot or blogger, which I already know about, let me know.
Today's rally was long overdue but still did nothing to change the long-term top that I believe is in place. Don't forget the Dow was down 200+ Friday and its up less than that today.
There are some sentiment issues bothering me now, however, as bears are in teh majority now on the investor polls. The Vix is hardly there but I did not worry all weekend and need a hobby.
Another thing bothering me is the COT on Gold. Commercials are rather net bearish right now and I actually took a bit of profit on my GLD ETF postion today. Not all, just some. Might as well get paid for a good trade.
This blog host continues to be a problem and I may be switching very soon. A reader posted a comment on Friday's piece, repeated here:
I just read your latest piece in Barrons where you show a chart with a complex pattern on $SPX. When I go to stockcharts.com and change the chart from daily to weekly candles, I see a less complex chart with a head & shoulders pattern with the right shoulder lower than the left shoulder. Do you think this is a useful way of looking at the chart? Is a head & shoulders pattern a reliable reversal signal? I am relatively new to trading and don't have answers to these questions.
Your interpretation is just as valid as any. What we see is a pullback that failed to set a higher low and then a rally that failed to make it back to the previous high. It is a classic sign of weakness and usually a good topping signal - when support breaks. I think it has.
The latest viral news story circulating in financial, er, circles is about how the USA may lose its AAA rating within a decade. Yes, I understand about the economy and policies and all the other stuff that gives any debt issuer its credit rating. But perhaps the boneheads who got us here (and no, I am not saying "Bonehead Ben" because this is bigger than him and precedes him, too) don't quite get what kind of credit crisis that will trigger.
Think about it - everything in the credit market and fundamental valuations in the stock market (think capital asset pricing model) is priced of US treasuries. Mortgages, munis, corporates and even deal involving cross border debt. Even futures and options calculate time values based one it. Let me repeat that - EVERYTHING!!! Why? Because US treasuries, specifically T bills, are considered to be the risk free rate. No matter what the deal or bond, everything is priced from there.
Long maturity? Tack on interest rate risk to get the price.
Risky borrower? Tack on default risk to get the price
Overseas borrower? Tack on currency risk to get the price.
You get the picture. Even a whiff of default risk in US Treasuries is going to make the subprime crisis look like a mere annoyance. The credit markets will crumble and so will the financial world. The world? Just who do you think owns all of that US Treasury paper? Not Joe Subprime. Not Mary Main Street. Use some more exotic names.
I refuse to be political but I caught some of the Republican debate in South Carolina (rerun - it was 4 am and I couldn't sleep). Every candidate except one was talking about lowering interest rates and all sorts of band-aids. Only one, and I won't say who to remain non-political) said that it was low interest rates that created the mess in the first place. Basically, the government just does not get it that meddling with the free market delays, not prevents, problems and it makes them bigger when they finally arrive as a special added bonus.
I hope they wake up soon otherwise we are toast. If you think gold is high at $900 (I don't) then I'd advise hoarding Mylanta, too.
Remember that Bugs Bunny cartoon when our hero popped out of his rabbit hole in front of whoever the foil was that day who then drew a line in the sand? “If you cross this line, you die!” said the villain. Naturally, Bugs stepped over the line.
OK, said the bad guy as he retreated a few steps and drew another line in the sand, “Cross this line and you die!” And of course Bugs kept advancing. It happened one or two more times.
Does that look like the media and their constant reports of how stocks look ready to rebound each morning this month? The oversold market looks strong in the premarket and then tanks into the close. The stock market “should’ have rebounded days ago but it did not. And this morning, it “should” rebound again, based on oversold conditions and what still could be breaks of support thanks to momentum, not a shift in market tone.
Not quite a play on "what's in your wallet?" or "when Kennedy was shot" I'll ask the question, "Where were you when the Dow was down 300 points intraday before closing just about even? I was on the road that day on my way to a long family weekend in the Poconos and had no access to the markets at all. In fact, it was a news radio report that told me about the intraday shellacking.
The next morning, when I was working on the Quick Takes Pro newsletter before the open, all of the sudden I see on See En Bee Sea that stocks were up a "coupla hunerd" points. "What the heck happened?" I wondered. Actually, the words were slightly different.
Well, it was the surprise rate cuts. Remember those good old days? You know, when rate cuts meant something to the stock market?
But now, for the second time since then, the Dow is back under 12,800 and this time it closed at its lowest point since April. That's right, lower than any close of August during the height of the subprime debacle. Check this chart:
You know, I've been talking about capital preservation for about two weeks and am very glad I listened to my own advice. Personally, I remain long gold, long oil and short stocks. And for those of you still clinging on to the idea that the long-term trendline here (actually , in the S&P 500) is still intact, look at the Russell, the NYSE, the midcaps and the Nasdaq. The tribe has spoken.
Monday, the stock market should have rebounded a bit. After all, it got creamed last week and pundits were still calling for higher prices for 2008. Do the math - if so many people think the market is going to go up then after a big decline bargains galore are just waiting to be taken.
But stocks zigged and zagged and zigged some more. Basically, the bargain hunters, let alone the value buyers were not there. Or, perhaps they were but the sellers were there, too. In either case, it was not a good show for the stock market.
Here's something else to consider. If oil prices go down then oil stocks will likely go down, too. ANd what percentage of the market is energy? It's not as big as tech or financial but Exxon Mobil is still the biggest stock in the Dow. And every stock in the Amex oil index (XOI) is big enough to take a spot within the current Dow, too. That's a lot of weight.
See saw. In the current environment, whatever happens outside the stock market is going to hurt some stocks are help others. High gold, high oil, falling oil, falling base metals, falling interest rates, falling dollar. Think about it for a moment. At current commodity and currency levels, any change is going to be partially offset Therefore, we can only look within stocks for clues and not get trapped into thinking that one condition is good for the market and one is bad. It's mixed.
With that said, major index supports are broken in small cap and tech. And new 52-week lows on the NYSE are running at 15% of all issues. All that is not good.
Watching CNBC this morning, as I usually do when there is a commercial on Fox or CNN, I noticed the "ticker" at the top of the screen. Usually, there is a commodity, and index and a currency in rotation with the index and futures shown a lot, currencies often and commodities a little. This morning, one of the three slots was dedicated to crude oil. Every time the ticker changed the first slot stayed on oil.
Talk about a sentiment shift!
Is it possible that the public is finally aware that oil prices matter? Or is this the "magazine cover" indicator that says mainstream media only puts financial stuff on the cover just before the trend ends?
Well, CNBC is not exactly mainstream but such prominence with oil prices are not the norm, either. They are fascinated by the 100 dollar mark. I've been long that market (via ETF)for over a year, riding out the dip and drawdown with conviction in the long-term trend.
But now I have to wonder about the longevity of the trend. The public has finally caught on. Is this the meat of the move where the public is right or the end when the marginal public investor gets caught up in the frenzy?
I vote for the former. CNBC is not mainstream. Wait until Newsweek or the NY Post - or better yet the Economist - runs a cover about the runaway oil market.
And with that in mind, gold is hot, some grains went limit up Wednesday and commodities in general are the theme. I'll be in Marketwatch Jan 7 with more on that topic.
It's been a little while since I've written anything here but I have been taking my first vacation in years where I only worked for about 1/3 of the time. Usually, that percentage is closer to working everyday so this year I feel blessed. Sad, isn't it? The Smashmouth tune about her hand in the shape of an "L" on her forehead, comes to mind.
My view for the markets in the coming year is mostly the same as it has been for the past few months. Gold up, oil rocky but up due to political risk and booming economies overseas, inflation up and with it interest rates and stocks down.
The stocks part is tricky since the sicko dollar is bringing foreign investment and spending over here to prop up industries that might otherwise be rather sicko themselves. The year ending was one giant trading range and all trading ranges are susceptible to upside as well as downside breaks. They can also continue on or months and there is the rub. We can rally and the bulls win - for a while. Then we fall and the bears shine - for a while. To me, it seems that everyone loses and that is why I prefer commodities to equities now. At least there are nice trends in place to ride with good signals available to tell us they are over.
As for stocks, keeping what you have is just as important, if not more so, than seeking profits. The hippocratic oath for market technicians I suppose.
Happy New Year to all and thanks for reading.
Technical analysts love it when things are clear as it is such a rare event. Of course, the simple act of thinking something is clear puts its conclusions in jeopardy but we'll go with it in this case.
This morning, venerable Goldman Sachs released its earnings numbers and beat estimates to keep its streak alive. One analyst commented, "Perhaps even more impressive than the overall results that Goldman Sachs achieved was the broad-based nature of their success."
That sure sounds as if everyone loves Goldman and the credit crunch is easily overlooked. The stock was up a tad in the premarket, which made sense on two levels as the overall market was rebounding after two very weak days. So why, then, is the stock now leading the brokerage sector lower on the day? It's a little over an hour into the session and Goldman is down nearly 3%. That's not very nice. (be forewarned that there is a lot of trading left to go today so things may change).
So the company releases great numbers and allays a lot of fears but the stock gets taken to the cleaners. That's poor action on good news and it tells us that people were more hopeful than really fear free. The credit crunch lives on
C'mon Ben, fire up the 'copter! Actually, let the chips (and brokers and banks and housing stocks) fall where they may. The system needs a colonic, not more food.
Newer | Latest | Older