We are about to leave this decade and I tend to hear commentary saying that it is one that people will want to forget. It was plagued with 2 devastating bear markets, scandal, terrorism and a near collapse of the global financial system with the US as a shadow of its former self on the verge of being over taken by China as the super power of the world. We enter 2010 with consumer confidence still near all time lows (although slowing rising now), mistrust and hatred of anything to do with Wall Stree, consensus thinking of deficits as far as the eye can see and a new normal of subpar growth in the years ahead with the high risk of a double dip recession. All of this has resulted in the typical retail investor to be characterized by a seemingly unshakable deep rooted pessimism.
Exiting the 1990's into the 2000's it was the complete opposite. We had just experienced a roaring bull market thanks to the longest economic expansion ever, budget surpluses as far as the eye can see with the US as the undisputed superpower of the world. We were supposedly on the cusp of a new era whereby thanks to the technology driven expansion and the infancy of the internet, the old business cycle of boom and bust was no longer applicable - there would be no more busts due to the growth that lied ahead. Therefore, the high P/E of the market was justified. Consumer confidence was at all time highs and the typical retail investor was heavily invested in stocks like Nortel, Yahoo and dot com names and many used margin or took out loans to do so.
A lot of newbies who weren't involved in the markets 10 years ago might be saying "how stupid could people have been to believe there would be no more boom and busts and to buy dot com stocks on margin"? Well, you had to have lived through the 90's to understand why. The economy had expanded for 9 straight years. If you watched for 9 years the market go up on average of about 18% a year with the last 5 years going gangbusters it would have made you a believer that bear markets were exinct. Watching the market go up week after week, month after month, year after year would have been enough to convert every last skeptical retail investor to a "new era" bull. Then when the internet came along it was simply the icing on the cake to seal the deal. Of course we all know what happened.....the market made fools of as many men as possible.
Now we have come full circle as I have described. It seems inconceivable that we could see a roaring economic boom this decade just like it was inconceivable that we could ever see a devastating recession heading into 2000s. This doesn't automatically mean we will see a roaring boom this decade because few are expecting it, but, I would say odds are far higher of it happening when the expectations are low as opposed to sky high like they were 10 years ago.
Every decade tends to have a dominant investment theme. In the 1970's it was energy/materials, in the 80's consumer products, in the 90's technology, in the 00's energy/materials and emerging markets. What will this decade be? Odds are it will not be energy and materials again. Perhaps technology will be at the forefront once again. Alternative energy/clean tech and biotechnology are subsectors that offer tremendous growth potential but haven't yet become market leaders. Alternative energy is definitely commanding serious respect. Money is pouring into the sector as governments provide grants and subsidies for development. It is the most popular sector for venture capitalists right now as well. The problem for investors is sorting out the winners. Which subsector has the most potential? Is it wind, solar. biofuels or geothermal? Geothermal is an interesting one. It’s under the radar right now. Geothermal is the cleanest and most efficient out of the 4 but it has it's weaknesses as well, namely, it is only possible to construct plants in a limited number of areas in the world, it is capital intensive and takes a long time to build a plant. But once a plant is up and running its costs and output are known with certainty and there are zero carbon emissions.
4 speculative "pure play" geothermal stocks out there trade on the TSX and they are
MXY, GTH, SRA and NGP. These companies are quite small but many of these could end up being takeover candidates from big utility companies one day. Right now these companies are in early development stages losing money which makes them speculative. These stocks will be influenced by news developments regarding government grants/subsidies and by developments towards the global level of commitment in reducing greenhouse gases. It could be a month, a year before geothermal catches fire which is why if you play it, you have to use a buy and hold strategy with very wide stops....if none at all.
I intend to learn a lot more about geothermal in the near future. I currently have a position in GTH with a watchful eye on the others I mentioned.
Wednesday, December 30, 2009
Monday, December 28, 2009
ST bearish LT still bullish
The market continues to grind to new highs. With the market now up 6 days in a row, mostly with small gains, bears have been suffering in a Chinese water torture type fashion.
As of tonight, 2 out of the 3 rydex indicators I look at are now in bearish territory. I will find out tomorrow morning about the 3rd. As I've mentioned before, momentum can squeeze the market higher as it has been doing, but the bull tank appears to be running close to empty and the coming correction will likely be in the 2.5-5% range and it will happen at the point of maximum frustration in the trading community.
Longer term the market is in good shape from a sentiment and fundamental standpoint. There are still plenty of doubters, nervous nellies and retail perma bears out there to power this market higher. Despite a 70%, 9 month advance and a fresh new 52 week high, people are STILL calling this a bear market rally. lol! I suppose only when the market makes new all time highs and unemployment is back to 5% these idiots will admit to a bull market.
Meanwhile, we have a steeply sloped yield curve which is signaling strong economic growth lies ahead with practically a ZERO percent chance of a recession within the next 12 months. It boggles my mind how I see predictions for a double dip recession from the likes of many pundits out there who are seasoned veterans when it comes to the markets and economics...guys like Hussman and Mauldin, and yet these guys never once mentioned how the very steeply yield curve is giving them the middle finger with their double dip recession forecasts. EVERY recession that has occurred has been preceded by an inverted yield curve. The only double dip on record as far as I can tell were the 1980 and 1982 recessions. The yield curve became inverted both in 1979 and in 1981 successfully forecasting the double dip. The steeply sloped curve right now is sending the complete opposite message: NO CHANCE for a double dip.
So, these experts want you to believe that a double dip recession, which has only happened 1 other time, is going to happen next year in the face of one of the most steeply sloped yield curves on record. How in the blue hell can these "experts" not see what I'm seeing? I'll tell you why. It's denial. It's trying to save face for being so wrong. They know the shape of the yield curve but they are dismissing it because it doesn't fit with their bearish outlook for the market which has been embarrassingly wrong. Instead of admitting they are wrong or at the very least very premature, they simply "double down" on their bearish convictions claiming that they are "early" but are going to be proven right shortly.
As a trader/investor you don't have the luxury of the Prechters and Hussmans of the world who claim to be right but "early" whereby early is measured in several months, years or decades (in the case of Prechter). Instead of making money you will be broke before you will be able to cash in on your "convictions". Find another way. If you can't then give up trading/investing because you will lose big time.
My way is to look at market sentiment from a contrarian perspective in the context of general market conditions both in the ST and LT. The "context of general market conditions" part is important because in bull markets it’s natural to see bullish sentiment and in bear markets it's natural to see bearish sentiment. Therefore, what is considered "too bullish" or "too bearish" in a bull market is different then what is "too bullish" or "too bearish" in a bear market. A lot of rookie traders this year failed to make that adjustment and got ran over. For example, overbought conditions simply became even more overbought, low put/call ratios simply got lower. Only when these indicators became chronically stretched did the market rollover and it only did so marginally with the biggest drop being 7%. I believe we are close to getting one of those corrections right now. My best guess is anytime between now and January 14.
But longer term, there is no danger on the horizon as per the large amount of investor skepticism, the yield curve and the trend in earnings growth. The time to worry about the long term is when joe public is not worried but the stock market is. Right now joe public is worried big time and the stock market hasn't been. ..that’s always been a very bullish sign longer term.
Going forward I'm probably going to cut down to making 1-2 posts per week. The emphasis will be more on the bigger picture then the day to day wiggles of the market.
As of tonight, 2 out of the 3 rydex indicators I look at are now in bearish territory. I will find out tomorrow morning about the 3rd. As I've mentioned before, momentum can squeeze the market higher as it has been doing, but the bull tank appears to be running close to empty and the coming correction will likely be in the 2.5-5% range and it will happen at the point of maximum frustration in the trading community.
Longer term the market is in good shape from a sentiment and fundamental standpoint. There are still plenty of doubters, nervous nellies and retail perma bears out there to power this market higher. Despite a 70%, 9 month advance and a fresh new 52 week high, people are STILL calling this a bear market rally. lol! I suppose only when the market makes new all time highs and unemployment is back to 5% these idiots will admit to a bull market.
Meanwhile, we have a steeply sloped yield curve which is signaling strong economic growth lies ahead with practically a ZERO percent chance of a recession within the next 12 months. It boggles my mind how I see predictions for a double dip recession from the likes of many pundits out there who are seasoned veterans when it comes to the markets and economics...guys like Hussman and Mauldin, and yet these guys never once mentioned how the very steeply yield curve is giving them the middle finger with their double dip recession forecasts. EVERY recession that has occurred has been preceded by an inverted yield curve. The only double dip on record as far as I can tell were the 1980 and 1982 recessions. The yield curve became inverted both in 1979 and in 1981 successfully forecasting the double dip. The steeply sloped curve right now is sending the complete opposite message: NO CHANCE for a double dip.
So, these experts want you to believe that a double dip recession, which has only happened 1 other time, is going to happen next year in the face of one of the most steeply sloped yield curves on record. How in the blue hell can these "experts" not see what I'm seeing? I'll tell you why. It's denial. It's trying to save face for being so wrong. They know the shape of the yield curve but they are dismissing it because it doesn't fit with their bearish outlook for the market which has been embarrassingly wrong. Instead of admitting they are wrong or at the very least very premature, they simply "double down" on their bearish convictions claiming that they are "early" but are going to be proven right shortly.
As a trader/investor you don't have the luxury of the Prechters and Hussmans of the world who claim to be right but "early" whereby early is measured in several months, years or decades (in the case of Prechter). Instead of making money you will be broke before you will be able to cash in on your "convictions". Find another way. If you can't then give up trading/investing because you will lose big time.
My way is to look at market sentiment from a contrarian perspective in the context of general market conditions both in the ST and LT. The "context of general market conditions" part is important because in bull markets it’s natural to see bullish sentiment and in bear markets it's natural to see bearish sentiment. Therefore, what is considered "too bullish" or "too bearish" in a bull market is different then what is "too bullish" or "too bearish" in a bear market. A lot of rookie traders this year failed to make that adjustment and got ran over. For example, overbought conditions simply became even more overbought, low put/call ratios simply got lower. Only when these indicators became chronically stretched did the market rollover and it only did so marginally with the biggest drop being 7%. I believe we are close to getting one of those corrections right now. My best guess is anytime between now and January 14.
But longer term, there is no danger on the horizon as per the large amount of investor skepticism, the yield curve and the trend in earnings growth. The time to worry about the long term is when joe public is not worried but the stock market is. Right now joe public is worried big time and the stock market hasn't been. ..that’s always been a very bullish sign longer term.
Going forward I'm probably going to cut down to making 1-2 posts per week. The emphasis will be more on the bigger picture then the day to day wiggles of the market.
Thursday, December 24, 2009
Watch the leader
Always pay attention to the market leader. During the bear market financials led the way down and any relative weakness in them was often a great tell of impending general market weakness.
On the way up it's been tech which has been the market leader and that's a good thing because the tech sector is the engine for long run economic growth potential in the US and a healthy bull market should have such a sector leading if it's going to have legs in the long run. We have seen the NASDAQ break out here and so we shouldn't be too surprised if the SPX soon follows suit. A push to 1150+ before the year is up is doable and yes, I still think the market is running on fumes and if we saw this breakout to 1150 it would likely be retraced eventually to 1100 or so at least.
From sources I've been reading, 4th quarter earnings are poised to be quite good again and we have the non-farm payrolls coming up in 6 trading days which is in position to show a positive number for the first time in about 2 years. Despite this potential good news however, if the market continues to run up like this, it runs the risk of a "sell on the news" reaction.
But the bottom line is this; making money on the short side will always be difficult and frustrating when you are swimming against the stream like this i.e. when a firm uptrend is in place with fundamentals incrementally improving. It doesn't matter what bearish signs may be out there...momentum can simply render these bearish indicators to get more extreme before the market finally responds. I think I've hammered this point home many times but it's worth repeating. It works the same way with bullish indicators in a bear market. I remember many times in 2008 when people would say "the market is oversold it's gotta bounce here" but the market simply became even more oversold.
The rydex indicator I've been mentioning has been swinging violently back and forth from bullish to bear in whipsawed frenzy. It's now back neutral territory giving the SPX room to make that final push higher to break out to new YTD highs. Again, if we do see a break out I suspect it will get retraced eventually because we don't have the "powder keg" type build up of ST pessimism in the market as per the behavior in the VIX, the put/call ratio and bonds.
I would like to wish all a Merry Christmas! All the best to you and your family!
On the way up it's been tech which has been the market leader and that's a good thing because the tech sector is the engine for long run economic growth potential in the US and a healthy bull market should have such a sector leading if it's going to have legs in the long run. We have seen the NASDAQ break out here and so we shouldn't be too surprised if the SPX soon follows suit. A push to 1150+ before the year is up is doable and yes, I still think the market is running on fumes and if we saw this breakout to 1150 it would likely be retraced eventually to 1100 or so at least.
From sources I've been reading, 4th quarter earnings are poised to be quite good again and we have the non-farm payrolls coming up in 6 trading days which is in position to show a positive number for the first time in about 2 years. Despite this potential good news however, if the market continues to run up like this, it runs the risk of a "sell on the news" reaction.
But the bottom line is this; making money on the short side will always be difficult and frustrating when you are swimming against the stream like this i.e. when a firm uptrend is in place with fundamentals incrementally improving. It doesn't matter what bearish signs may be out there...momentum can simply render these bearish indicators to get more extreme before the market finally responds. I think I've hammered this point home many times but it's worth repeating. It works the same way with bullish indicators in a bear market. I remember many times in 2008 when people would say "the market is oversold it's gotta bounce here" but the market simply became even more oversold.
The rydex indicator I've been mentioning has been swinging violently back and forth from bullish to bear in whipsawed frenzy. It's now back neutral territory giving the SPX room to make that final push higher to break out to new YTD highs. Again, if we do see a break out I suspect it will get retraced eventually because we don't have the "powder keg" type build up of ST pessimism in the market as per the behavior in the VIX, the put/call ratio and bonds.
I would like to wish all a Merry Christmas! All the best to you and your family!
Wednesday, December 23, 2009
ST bearish signals are gathering
A week ago I posted the market was showing vulnerability and within 2 days the SPX dropped about 15 points. Obviously that decline was very short lived and here we are back to slightly higher levels. Well, I'm seeing even more cause for ST concern this time around. The same rydex indicator I mentioned last week is flashing the same bearish sign. Adding to this is the volatility crush we are seeing in the VIX and its siblings the VXO, QQV and VXN. Another warning sign is the continued deterioration in bonds. Take a look for instance at TLT. It's close to the same level we saw in June whereby equities topped and eventually pulled back about 7%. And finally another bearish sign today was the very low total put/call ratio reading registered today which came in at 0.60. The last time such a reading was registered was in late August whereby the market had made a short term peak and then pulled back sharply about 3% a few days later. Let's also not forget the unfilled gap that lies below us.
Bottom line: the market is running on fumes here and is in danger of correcting again. As I've mentioned repeatedly, ST bearish signals in a strong bull market don't always bear fruit right away (especially during this unique seasonal period) and sometimes they bear no fruit at all. So, if you play the short side here or hedge, don't go whining like a bitch about Goldman Sachs propping up the market if things don't go your way. One thing's for sure is that it's definitely not a good idea to add beta here unless your holding period is measured in minutes or hours. Any further run up from here no matter how impressive is very likely going to be a false breakout and will get completely retraced and then some if we continue to see this "poor" market action i.e. collapsing VIX, low put/call ratio and weakening bonds.
Bottom line: the market is running on fumes here and is in danger of correcting again. As I've mentioned repeatedly, ST bearish signals in a strong bull market don't always bear fruit right away (especially during this unique seasonal period) and sometimes they bear no fruit at all. So, if you play the short side here or hedge, don't go whining like a bitch about Goldman Sachs propping up the market if things don't go your way. One thing's for sure is that it's definitely not a good idea to add beta here unless your holding period is measured in minutes or hours. Any further run up from here no matter how impressive is very likely going to be a false breakout and will get completely retraced and then some if we continue to see this "poor" market action i.e. collapsing VIX, low put/call ratio and weakening bonds.
Monday, December 21, 2009
Filling a gap with a gap
Well, we sure filled that upside gap quickly didn't we? The problem is...now there's a gap below us, which if history repeats as it has during this 5 week trading range, will be filled in due time even if more upside progress is made from here.
I continue to see frustration from the hard core bear types some of which have thrown in the towel or are on the brink of doing so. Of course, they will be quick to turn bearish the moment the SPX drops 5 points. It's like a crack addict for these hard headed jokers. They can't stop being bearish no matter how much punishment they take. And I've never heard these perma bear clowns even once mention the improving data such as the normalizing of credit spreads, explosion in earnings, positive trend in non-farm payrolls and the steeply sloped yield curve to name a few. Nope. According to them the market has been going up mainly because of Goldman Sachs "rigging" but if that's the case then the global equity, CDS and corporate bond markets must also be rigged as well by Goldman Sachs since they too are trending in the same direction as US equities. That's what... at least $300 trillion that GS is rigging? That's a whole lot of rigging don't you think? rig, rig, rig, rig, it's all a rig. Your favorite sports team loses a crucial match....it was rigged....the ref was being paid off. You fail a test....it was rigged....they wanted to fail a lot of people on purpose. You bump your head against a wall...it's rigged....the wall shouldn't have been there. You make a good trade...it's because you were such an intelligent, savvy trader. Blame everyone else for your hardships and take all the credit when things go your way....what a great philosophy to live by. Actually, losers in general think this way.
This trading range as been crunching traders left right and centre and I'm glad I've had nothing to do with it. Indicators are still not giving a strong IT signal one way or the other and so as a result I continue to do nothing with respect to index based trades. One thing notable is that NASDAQ has in fact broken out making a new 52week high and that's bullish because the NASDAQ has been the market leader which means the SPX may very well follow. But with today's gap unfilled odds are high that we'll see it get filled in due time...perhaps after Christmas.
Take a look at the following Yahoo message board post I just read
I am on the verge of the final solution.
I have been decimated going long last January and going short in September trying to time this manipulated ponzi scheme. I have been wiped out.
I am not a stupid person. I follow the markets closely and am very knowledgable in ta but i did not use stops. It kills me to see the sheeple who have made lots of money just buying into the propaganda that has been fed to them while i follow the markets as close as anyone yet i continually get fukked.
My savings have been wiped out. I am a failure and i want to die. I pray to God to take me in my sleep.
Amen.
That folks is capitulation and I've been seeing these posts all throughout the summer anytime the market makes a new high. One by the one these retail perma bears will capitulate until 90%+ are wiped out. We're not there yet folks. But admittingly these types of posts indicate a ST top isn't too far off. But for anyone who thinks this is a sign that this rally from March is hitting a final top...think again. With the market near its highs we should be seeing people brag about how much money they have been making not crying about how money they've lost. The latter simply indicates the likelihood of forced capitulation due to crippling loses. When I see most retail investors actually start embracing this bull market then we'll be in the final stage of this rally. Until then, capitulation such as the above is only indicative of a possible ST top....nothing more in my opinion.
During this agonizing chop I have uncovered what I believe is a very promising sector - Geothermal. There are a handful of stocks worth considering which I will mention shortly.
I continue to see frustration from the hard core bear types some of which have thrown in the towel or are on the brink of doing so. Of course, they will be quick to turn bearish the moment the SPX drops 5 points. It's like a crack addict for these hard headed jokers. They can't stop being bearish no matter how much punishment they take. And I've never heard these perma bear clowns even once mention the improving data such as the normalizing of credit spreads, explosion in earnings, positive trend in non-farm payrolls and the steeply sloped yield curve to name a few. Nope. According to them the market has been going up mainly because of Goldman Sachs "rigging" but if that's the case then the global equity, CDS and corporate bond markets must also be rigged as well by Goldman Sachs since they too are trending in the same direction as US equities. That's what... at least $300 trillion that GS is rigging? That's a whole lot of rigging don't you think? rig, rig, rig, rig, it's all a rig. Your favorite sports team loses a crucial match....it was rigged....the ref was being paid off. You fail a test....it was rigged....they wanted to fail a lot of people on purpose. You bump your head against a wall...it's rigged....the wall shouldn't have been there. You make a good trade...it's because you were such an intelligent, savvy trader. Blame everyone else for your hardships and take all the credit when things go your way....what a great philosophy to live by. Actually, losers in general think this way.
This trading range as been crunching traders left right and centre and I'm glad I've had nothing to do with it. Indicators are still not giving a strong IT signal one way or the other and so as a result I continue to do nothing with respect to index based trades. One thing notable is that NASDAQ has in fact broken out making a new 52week high and that's bullish because the NASDAQ has been the market leader which means the SPX may very well follow. But with today's gap unfilled odds are high that we'll see it get filled in due time...perhaps after Christmas.
Take a look at the following Yahoo message board post I just read
I am on the verge of the final solution.
I have been decimated going long last January and going short in September trying to time this manipulated ponzi scheme. I have been wiped out.
I am not a stupid person. I follow the markets closely and am very knowledgable in ta but i did not use stops. It kills me to see the sheeple who have made lots of money just buying into the propaganda that has been fed to them while i follow the markets as close as anyone yet i continually get fukked.
My savings have been wiped out. I am a failure and i want to die. I pray to God to take me in my sleep.
Amen.
That folks is capitulation and I've been seeing these posts all throughout the summer anytime the market makes a new high. One by the one these retail perma bears will capitulate until 90%+ are wiped out. We're not there yet folks. But admittingly these types of posts indicate a ST top isn't too far off. But for anyone who thinks this is a sign that this rally from March is hitting a final top...think again. With the market near its highs we should be seeing people brag about how much money they have been making not crying about how money they've lost. The latter simply indicates the likelihood of forced capitulation due to crippling loses. When I see most retail investors actually start embracing this bull market then we'll be in the final stage of this rally. Until then, capitulation such as the above is only indicative of a possible ST top....nothing more in my opinion.
During this agonizing chop I have uncovered what I believe is a very promising sector - Geothermal. There are a handful of stocks worth considering which I will mention shortly.
Thursday, December 17, 2009
1097 gap filled..... is Bernanke on Time magazine a contrarian indicator?
We have now finally filled that 1097 gap and now there's a gap above to be filled which is good news for the bulls given that in due time it should get filled as well....question is do we go lower first? Nothing notable to mention from the indicators. We are still stuck right in the middle of this trading range. Can the bears finally show some game? Every time I've said that during the past 4 weeks they have failed to follow through. Can they finally do it this time???
In case you didn't know, Bernanke was featured on the latest Time Magazine cover as "person of the year" thanks to his extraordinary efforts to avert Great Depression 2. This is very similar to the story ran by Time in February 1999 whereby Greenspan, along with Rubens and Summers were featured on the cover as "the committee to save the world". They came to the rescue after the collapse of LTCM in the fall of 1998 threatened to destabilize the financial system.
So, what can we decipher from this from a sentiment perspective? Well, first of all the 12 months that followed the 1999 cover story turned out to be a great time to be long the market. Ultimately however, the market made a major peak in March 2000 and dropped 50% in the 2 years that followed. Can we expect a similar outlook i.e. 1 year of gains followed by a big bear market? I wouldn't count on it.
Circumstances are a lot different this time around. In Greenspan's case, the collapse of LTCM didn't put as much as a scratch on the economy. Unemployment was near historical lows and consumer confidence near historical highs before and after the collapse. Bernanke dealt with a hell of a lot more than Greenspan did. This time around on the other side of the crisis, unlike in early 1999, unemployment is near historical highs and consumer confidence near historical lows however both are just now turning in the opposite direction. Therefore, there's a lot of room and time for things to get better unlike in 1999 whereby things were close to being as good as it gets.
Also, back then most people praised Greenspan whereas now, although Time is praising Bernanke, the typical retail investor seems to hate his guts. Take a look at the comment section from this article Every single person bashes him.
So, in conclusion I would not be so haste to view Bernanke on Time as a contrarian indicator. As I've noted many times since this blog was started in April, the entire rally that began in March has been given no respect. It's been hated the entire way and calls for a crash, double dip recession, the next shoe to drop or whatever are abundant. That folks is called a wall of worry which strongly suggests the market ultimately has a lot further to go on the upside. It's not going to be clear sailing the entire time by any means but I haven't seen a bear market, crash or reccession begin with this type of sentiment backdrop coupled with a steeply sloped yield curve.
It's easy to be bearish and difficult to be bullish longer term isn't it? If you agree then being bullish LT is probably the right path to take because in this game the easy (i.e. obvious) path is the wrong path to take in the LT. When you make money taking the easy path then it's likely that the trend you are riding is old and is going to reverse on you in a big way in the near future (6 months or less). Mind you, this tends to be where you see a blow off type move which can in fact be quite profitable if you get out before the music stops (such as the dot com bubble or other bubbles)....but few people do that.
Gold took quite a spanking today and made a new low since the drop that began since the begining of the month. It's going to be interesting to see if it can hold around these levels or go to 1050 wherby everyone and his grandmother are waiting to buy.
In case you didn't know, Bernanke was featured on the latest Time Magazine cover as "person of the year" thanks to his extraordinary efforts to avert Great Depression 2. This is very similar to the story ran by Time in February 1999 whereby Greenspan, along with Rubens and Summers were featured on the cover as "the committee to save the world". They came to the rescue after the collapse of LTCM in the fall of 1998 threatened to destabilize the financial system.
So, what can we decipher from this from a sentiment perspective? Well, first of all the 12 months that followed the 1999 cover story turned out to be a great time to be long the market. Ultimately however, the market made a major peak in March 2000 and dropped 50% in the 2 years that followed. Can we expect a similar outlook i.e. 1 year of gains followed by a big bear market? I wouldn't count on it.
Circumstances are a lot different this time around. In Greenspan's case, the collapse of LTCM didn't put as much as a scratch on the economy. Unemployment was near historical lows and consumer confidence near historical highs before and after the collapse. Bernanke dealt with a hell of a lot more than Greenspan did. This time around on the other side of the crisis, unlike in early 1999, unemployment is near historical highs and consumer confidence near historical lows however both are just now turning in the opposite direction. Therefore, there's a lot of room and time for things to get better unlike in 1999 whereby things were close to being as good as it gets.
Also, back then most people praised Greenspan whereas now, although Time is praising Bernanke, the typical retail investor seems to hate his guts. Take a look at the comment section from this article Every single person bashes him.
So, in conclusion I would not be so haste to view Bernanke on Time as a contrarian indicator. As I've noted many times since this blog was started in April, the entire rally that began in March has been given no respect. It's been hated the entire way and calls for a crash, double dip recession, the next shoe to drop or whatever are abundant. That folks is called a wall of worry which strongly suggests the market ultimately has a lot further to go on the upside. It's not going to be clear sailing the entire time by any means but I haven't seen a bear market, crash or reccession begin with this type of sentiment backdrop coupled with a steeply sloped yield curve.
It's easy to be bearish and difficult to be bullish longer term isn't it? If you agree then being bullish LT is probably the right path to take because in this game the easy (i.e. obvious) path is the wrong path to take in the LT. When you make money taking the easy path then it's likely that the trend you are riding is old and is going to reverse on you in a big way in the near future (6 months or less). Mind you, this tends to be where you see a blow off type move which can in fact be quite profitable if you get out before the music stops (such as the dot com bubble or other bubbles)....but few people do that.
Gold took quite a spanking today and made a new low since the drop that began since the begining of the month. It's going to be interesting to see if it can hold around these levels or go to 1050 wherby everyone and his grandmother are waiting to buy.
Some this and that
AAII sentiment is showing the most bullish ratio since the rally began in March. 42% are bullish while 28% are bearish for a ratio of 1.5 bulls vs. bears. That's still not extreme bullishness by any means especially in the context of this massive rally but it does give the nod for a pullback.
I'm noticing gold is trying to make a base here and I emphasize the word "trying" because it's too early to tell. Originally when gold had its first big drop from the recent peak I suggested it would be just a correction (even though I think the LT trend is close to being over from a time perspective) with room to go to 1100-1120. I also said to see if it can base from those levels as an indication that gold would go higher again. Well, here we are and gold is indeed trying to make a base but again, it's too early to say one has been made.
I'm finding a lot of people want to buy gold at around the $1050 level as a long term entry point. Well, if we get to $1050, then you better watch out below because like I always say, when the market gives you those convenient entry points it's usually an invitation to take away your money.
We are seeing dollar strength right now due to the Greece situation. There's the risk that debt agencies may start to downgrade other European countries and that fear would result in the Euro being put under more pressure not only from a quality standpoint but because it would make it likely that the European central bank would be even more reluctant than the Fed to raise rates. I've never liked Europe from an investing point of view due to their poor demographic profile and socialist mentality relative to the rest of the developed world. However I'm of Italian decent and I do like Europe for their culture, soccer and exotic looking women (I shouldn't be saying that anymore because I'm married now).
I continue to just watch the markets here until the dust settles. Do I have regret for not pulling the trigger yesterday on the short side? Not really because I would have covered it by the end of the day which would have resulted only in a modest profit. Also, I'm always very hesitant to make short trades in a bull market especially when the trend has been so solid with plenty of doubters of it which makes it even more likely to somehow keep on going. In a bull market, when I'm cautious I usually just raise cash as opposed to going short because as I've said many times before, a bull market can be very resilient when there's danger signs and just keep going higher before correcting or it can take weeks before bearish omens show significant results and in those weeks it's easy for a bear to get stopped out for losses and we’ve certainly have seen this in the past 5 weeks during this trading range.
I'm finding it more interesting, profitable and less stressful to look for individual stocks that are showing good actions but are not highly correlated to the market. I heard from a report on BNN that correlations between the general market and individual stocks are dropping. That's a welcomed sign and it also means that the market is now becoming more a stock pickers market.
I've been under the weather lately and so I haven't completed the list of stocks I said I would post....stay tuned.
I'm noticing gold is trying to make a base here and I emphasize the word "trying" because it's too early to tell. Originally when gold had its first big drop from the recent peak I suggested it would be just a correction (even though I think the LT trend is close to being over from a time perspective) with room to go to 1100-1120. I also said to see if it can base from those levels as an indication that gold would go higher again. Well, here we are and gold is indeed trying to make a base but again, it's too early to say one has been made.
I'm finding a lot of people want to buy gold at around the $1050 level as a long term entry point. Well, if we get to $1050, then you better watch out below because like I always say, when the market gives you those convenient entry points it's usually an invitation to take away your money.
We are seeing dollar strength right now due to the Greece situation. There's the risk that debt agencies may start to downgrade other European countries and that fear would result in the Euro being put under more pressure not only from a quality standpoint but because it would make it likely that the European central bank would be even more reluctant than the Fed to raise rates. I've never liked Europe from an investing point of view due to their poor demographic profile and socialist mentality relative to the rest of the developed world. However I'm of Italian decent and I do like Europe for their culture, soccer and exotic looking women (I shouldn't be saying that anymore because I'm married now).
I continue to just watch the markets here until the dust settles. Do I have regret for not pulling the trigger yesterday on the short side? Not really because I would have covered it by the end of the day which would have resulted only in a modest profit. Also, I'm always very hesitant to make short trades in a bull market especially when the trend has been so solid with plenty of doubters of it which makes it even more likely to somehow keep on going. In a bull market, when I'm cautious I usually just raise cash as opposed to going short because as I've said many times before, a bull market can be very resilient when there's danger signs and just keep going higher before correcting or it can take weeks before bearish omens show significant results and in those weeks it's easy for a bear to get stopped out for losses and we’ve certainly have seen this in the past 5 weeks during this trading range.
I'm finding it more interesting, profitable and less stressful to look for individual stocks that are showing good actions but are not highly correlated to the market. I heard from a report on BNN that correlations between the general market and individual stocks are dropping. That's a welcomed sign and it also means that the market is now becoming more a stock pickers market.
I've been under the weather lately and so I haven't completed the list of stocks I said I would post....stay tuned.
Wednesday, December 16, 2009
Didn't pull the trigger
Fed says they are going to keep rates exceptionally low for an extended period...this is an invitation for more dollar weakness in the weeks ahead. I didn't pull the trigger on the fade trade I was contemplating....I don't feel there's enough of an edge......it's yet another coin flip whipsaw situation which is something I'd rather not be a part of. Good luck to the gamblers out there....
Tuesday, December 15, 2009
Market vulnerable here
One rydex indicator is giving a moderate sell signal now. As I've noted yesterday, perhaps there's too much complacency regarding the end of the year rally people are expecting... including many bear clowns I track. Bonds are also acting badly here which is not good. Anytime I've warned about potential market weakness during the past 4-5 weeks all we've seen is marginal weakness or market resiliency. But we haven't seen the market take off either haven't we? The market will often frustrate the maximum amount of people possible before making its move and I think that's what this trading range is doing.
Tomorrow we have the fed meeting and it's usually followed by volatility. People will be watching carefully for hints of when rate hikes are coming. There's a good chance given current conditions that any strength following the fed meeting will be faded. I may decide to play this trade depending on how things look.
Bottom line: Be on guard for more ST weakness either tomorrow or Thursday. It's not a lay-up but I see vulnerability.
Tomorrow we have the fed meeting and it's usually followed by volatility. People will be watching carefully for hints of when rate hikes are coming. There's a good chance given current conditions that any strength following the fed meeting will be faded. I may decide to play this trade depending on how things look.
Bottom line: Be on guard for more ST weakness either tomorrow or Thursday. It's not a lay-up but I see vulnerability.
Monday, December 14, 2009
Mixed signals...bears seem to be stepping aside here
I'm noticing yet again, for god knows how many times these past 4 weeks, mixed signals tonight. It's very frustrating but that's the way it goes. It's also very, very tempting to try and make money by day trading during these times but intra day trading is not my style. I've probably broken even in my attempts to do so and when I make trades out of frustration/boredom I've lost money.
I was hopeful that last week we could see a downside break of this range to set up for a bear trap but no dice. Now we are back to the top of the range. I've noticed bears are stepping aside here given that the end of the year is approaching. I said before bears had untill the middle of the month to do damage otherwise we could see an end of the year melt up. Well, here we are. Are we going to get the melt up? It's chicken shit of me to say mabey but that's what I'll say because of the mixed signals. I see equal risks to both sides of the market.
One thing I've noticed is that a lot bears I follow are stepping aside here fearful of the end of the year ramp that I've noted. I don't like being in the same boat with these clowns and I think this means that the end of the year ramp is less likely to happen unless we see some weakness first. There's probably a lot of weak longs out there right now. That doesn't mean we can't ramp higher (especially during this unique seasonal period) but what it does mean is that the market is more vunlerable to dropping than normal.
I will continue to do nothing when it comes to trading. I'm currently sitting here with a few long term positions and plenty of cash. I've been compiling a list of stocks that are exhibiting nice charts with minimal correlation to general markets. They are tough to come by but they are out there. I will post a list of these stocks when I'm done my search and DD if anyone is interested.
I was hopeful that last week we could see a downside break of this range to set up for a bear trap but no dice. Now we are back to the top of the range. I've noticed bears are stepping aside here given that the end of the year is approaching. I said before bears had untill the middle of the month to do damage otherwise we could see an end of the year melt up. Well, here we are. Are we going to get the melt up? It's chicken shit of me to say mabey but that's what I'll say because of the mixed signals. I see equal risks to both sides of the market.
One thing I've noticed is that a lot bears I follow are stepping aside here fearful of the end of the year ramp that I've noted. I don't like being in the same boat with these clowns and I think this means that the end of the year ramp is less likely to happen unless we see some weakness first. There's probably a lot of weak longs out there right now. That doesn't mean we can't ramp higher (especially during this unique seasonal period) but what it does mean is that the market is more vunlerable to dropping than normal.
I will continue to do nothing when it comes to trading. I'm currently sitting here with a few long term positions and plenty of cash. I've been compiling a list of stocks that are exhibiting nice charts with minimal correlation to general markets. They are tough to come by but they are out there. I will post a list of these stocks when I'm done my search and DD if anyone is interested.
lol!
The clown I was talking about earlier already closed out his calls for a small loss.
unbelievable! lol!
unbelievable! lol!
Waiting for a resolution....bulls should be on guard for weakness
We are still stuck in this trading range and the tape is still quite edgeless and dangerous for the intraday gamblers...or should I say traders. I continue to see these guys get slaughtered. I mentioned before there's this one gambler I've been following who has been absoultely horrific with this trading and has been self destructing before my eyes losing just about everything he has. It seems everything he touches turns to mush. Fading him would have been like having a liscence to print money and I was really tempted to do just for shits and giggles while I wait for a clean set up, but the problem is that he doesn't always post his trades real time. He was long puts on the market and long VIX calls for the past week or so and just now has threw in the towel. Now, with whatever few dollars he has left, he went all in long Janurary calls on SPY and he says that his system is to go long from now on. Uh oh! Should bulls be worried...in the short run yes! This guy is such a loser because he trades on pure impulsive emotion and so now he's impulsivley going long after getting spanked playing the bear side. But if history repeats, this guy will end up taking yet another loss and will give up on playing the long side. To support the ST bearish case, there's unfilled gaps in the chart down to about 1096.
In the meantime I continue to scour the TSX for individual names with good looking charts.
In the meantime I continue to scour the TSX for individual names with good looking charts.
Wednesday, December 9, 2009
General public still very pessimistic
I just read an interesting article which you can find here. Notice the strong disbelief that Americans still have regarding the economy. It's understandable mind you given the shell shock of last year's collapse and the fact that the lagging indicator of unemployment is still high which is how American's judge the economy. But whenever you see the behavior of the stock market and public's perception of the economy diverge so much like it has been in the past 9 months it sends such a powerful confirmation of the trend that's in place. The stock market is a leading indicator and public opinion is a lagging one. This is when contrarianism works best....when you see strong signs of doubt/skepticism towards the trend that's in place - a signal that the trend has a long ways to go still. There's no shortage of doubt/skepticism and anyone who says otherwise is a liar. If you think this article is just a one-off then you may want to look at well known consumer confidence indicators such as the University of Michigan Consumer Confidence Index and you will see how they remain near multi-decade lows.
Skepticism/pessimism is the fuel for bull markets. Bull markets advance by converting former skeptics to believers (whether by choice or by force in the case of shorts who cover) and there's a grand canyon sized number of skeptics out there that can fuel this market to all time highs one day...you heard me....all time highs.
This is why LT I remain quite bullish. ST I continue to be remain neutral given the status of the indicators although the bears are showing some life here and a downside break of this range wouldn't suprise me. Either way, I'm just a spectator.
Skepticism/pessimism is the fuel for bull markets. Bull markets advance by converting former skeptics to believers (whether by choice or by force in the case of shorts who cover) and there's a grand canyon sized number of skeptics out there that can fuel this market to all time highs one day...you heard me....all time highs.
This is why LT I remain quite bullish. ST I continue to be remain neutral given the status of the indicators although the bears are showing some life here and a downside break of this range wouldn't suprise me. Either way, I'm just a spectator.
Tuesday, December 8, 2009
Waiting for the bears to over reach
Jitters regarding Moody's sovereign debt downgrade of Greece and warnings regarding the US and UK's AAA ratings have the market down. Yet another worry to tack on to the W.O.W
We've been stuck in a tight trading range for 3 weeks now and the main indicators I track have been stuck in neutral as well during this time and the words "edgeless" and "meat grinder" are what I've been using to describe this chop. I've also said that bears need to get their game going before the middle of month otherwise we could see an end of the year melt up. Well, they are trying to do that right now as I type this.
What bulls need to see is for the bears to over-reach again going for the kill by piling into shorts/puts/bear etfs. In July the Head and Shoulders top was a perfectly laid trap which achieved this. If the market breaks down out of this trading range, that might do the trick again.
The bottom line is that I continue to remain patient waiting for a good set up for an IT trade. In the meantime, I've been using this time to scan for individual small cap stocks and I've found some interesting plays...
We've been stuck in a tight trading range for 3 weeks now and the main indicators I track have been stuck in neutral as well during this time and the words "edgeless" and "meat grinder" are what I've been using to describe this chop. I've also said that bears need to get their game going before the middle of month otherwise we could see an end of the year melt up. Well, they are trying to do that right now as I type this.
What bulls need to see is for the bears to over-reach again going for the kill by piling into shorts/puts/bear etfs. In July the Head and Shoulders top was a perfectly laid trap which achieved this. If the market breaks down out of this trading range, that might do the trick again.
The bottom line is that I continue to remain patient waiting for a good set up for an IT trade. In the meantime, I've been using this time to scan for individual small cap stocks and I've found some interesting plays...
Monday, December 7, 2009
Mania phase for gold? looks like we are going to see it now
I just read a bloomberg article which could be found here which states that currency traders have bid up the cost of calls to buy dollars at a substantial premium indicating strong fear/speculation of a dollar rally. According to the article, this call preimum hasn't been this high since November 2008 when it hit a record but that's also the time when the dollar made a major top which means that the call premium turned out to be a great contrarian indicator.
Also, take a look at the price action and volume spike in the bullish dollar fund UUP.
Spikes in volume with these types of ETF often coincide with ST climaxes. In this case it's a buying climax. Notice the similar volume spike in UUP in early November which marked a ST top. So, we are seeing all this excitment in UUP and yet it is still in a well defined downtrend....this is a contrarian bearish sign. Thefore, the call premium to buy dollars and the price and volume behavior of UUP both suggest the same thing - the pop in the dollar was just a correction and is poised to resume it's downward trend.
I know I've been warning about the giddyness in gold which is hence a bullish sign for the dollar but in the ST the dollar looks like it's going to head down again which means gold should head up again. It seems despite the LT bearish omens for gold I've noted (and hence bullish omens for the dollar) it appears as though there's too much bottom picking still going on with the dollar. I made note of excessive dollar bottom picking back in the summer which made me go long puts on UUP which turned out to be a nice trade....I might very well do it agian or use some other veichle which benefits from a drop in the dollar.
Folks, we could very well be in the early part of the mania phase for gold which can carry on for the next 2-4 months. I know I've been warning about the end of the road for gold and I'm sure it will end badly for those who "buy and hold" at these prices, but if I'm right about the mania phase, we could still see gold go up another $200-300 in a short period (if not more) as the US dollar tanks even more.
Mabey I'm out to lunch on this, but I got to call it as I see it even if that means going against what I felt before. You see, when you have no ego to defend it's easy to be flexible and see things without being biased.
Also, take a look at the price action and volume spike in the bullish dollar fund UUP.
Spikes in volume with these types of ETF often coincide with ST climaxes. In this case it's a buying climax. Notice the similar volume spike in UUP in early November which marked a ST top. So, we are seeing all this excitment in UUP and yet it is still in a well defined downtrend....this is a contrarian bearish sign. Thefore, the call premium to buy dollars and the price and volume behavior of UUP both suggest the same thing - the pop in the dollar was just a correction and is poised to resume it's downward trend.
I know I've been warning about the giddyness in gold which is hence a bullish sign for the dollar but in the ST the dollar looks like it's going to head down again which means gold should head up again. It seems despite the LT bearish omens for gold I've noted (and hence bullish omens for the dollar) it appears as though there's too much bottom picking still going on with the dollar. I made note of excessive dollar bottom picking back in the summer which made me go long puts on UUP which turned out to be a nice trade....I might very well do it agian or use some other veichle which benefits from a drop in the dollar.
Folks, we could very well be in the early part of the mania phase for gold which can carry on for the next 2-4 months. I know I've been warning about the end of the road for gold and I'm sure it will end badly for those who "buy and hold" at these prices, but if I'm right about the mania phase, we could still see gold go up another $200-300 in a short period (if not more) as the US dollar tanks even more.
Mabey I'm out to lunch on this, but I got to call it as I see it even if that means going against what I felt before. You see, when you have no ego to defend it's easy to be flexible and see things without being biased.
Saturday, December 5, 2009
What's it's going to take?
A huge positive surprise in the payroll numbers on Friday with only 11k jobs lost vs the expected 150K. The US is now in position to add jobs in the coming months...imagine that! So, let me ask the doubters this...do you still think this 9 month rally has been based on manipulation by Goldman Sachs/the fed? Or could it be that maybe, just maybe the market all along has been yelling and screaming that things are going to get better but few are listening? Its bizzaro year 2000 folks...I've said it so many times. The perma bears on the yahoo message boards aren't even close to capitulating and admitting even just a little bit...that the jobs report was a positive. Such clowns. Such losers.
Job growth will likely begin with fits and starts making the optimists sweat while giving bears hope. There's a bear blog called "the slope of hope" named after the adage that bear markets descend on a slope of hope. It's the bears now who are on their own slope of hope....hope that the upside economic momentum we are seeing will end soon and that any new 52 week high will be the last one.
Meanwhile gold got slammed for about $50. Fears of sooner than expected rate hikes perhaps? I've been warning about gold for at least a few weeks but I'll be honest with you, that drop felt more like a knee-jerk correction than the start of a LT trend change. Gold is certainly overbought enough to go down a lot more but if within the next 7-10 days gold suffers a correction less than about 10% and starts to consolidate then we could see a move back towards the highs or greater.
I've already read a couple of articles in the financial post that say any pullback in gold for the next month or 2 is a buying opportunity as the LT outlook is still good. When I hear people talk about a good LT outlook when the chart is showing a LT parabolic formation this tells me the days are numbered this trend. We'll see how this plays out....
ST indicators for equities are still in neutral territory but the chart is telling me that an upside breakout it imminent and tis the season for it to happen. Expect more meat griding of ST bullish and bearish traders in the week ahead.
Job growth will likely begin with fits and starts making the optimists sweat while giving bears hope. There's a bear blog called "the slope of hope" named after the adage that bear markets descend on a slope of hope. It's the bears now who are on their own slope of hope....hope that the upside economic momentum we are seeing will end soon and that any new 52 week high will be the last one.
Meanwhile gold got slammed for about $50. Fears of sooner than expected rate hikes perhaps? I've been warning about gold for at least a few weeks but I'll be honest with you, that drop felt more like a knee-jerk correction than the start of a LT trend change. Gold is certainly overbought enough to go down a lot more but if within the next 7-10 days gold suffers a correction less than about 10% and starts to consolidate then we could see a move back towards the highs or greater.
I've already read a couple of articles in the financial post that say any pullback in gold for the next month or 2 is a buying opportunity as the LT outlook is still good. When I hear people talk about a good LT outlook when the chart is showing a LT parabolic formation this tells me the days are numbered this trend. We'll see how this plays out....
ST indicators for equities are still in neutral territory but the chart is telling me that an upside breakout it imminent and tis the season for it to happen. Expect more meat griding of ST bullish and bearish traders in the week ahead.
Friday, December 4, 2009
Stuck in the middle with you
Today's late day plunge sent the market smack dab in the middle the trading range that's been in place for the past couple of weeks. The put/call ratio closed bearishly today and with rydex indicators smack dab in neutral territory and the market neither overbought or oversold bears have some room here to do damage tomorrow. Of course, it's all going to depend on the big kahuna tomorrow a.k.a the non-farm payrolls.
Bears are already getting excited on yet again just the smallest of pullbacks. I've give props where it's due though...today was a bearish looking day because we started off strong and ended very weak with a low put/call ratio. Tuesday's gap has been partially filled now.
Today was yet another meat grinder day. I saw one guy post a message admitting that he got stopped out of his SDS position this morning, which he had been holding for 2 months, 1 cent above the low of the day. Ouch!
I believe that any downside we see will end up being yet another bear trap. Here's an interesting thing I read just now from a marketwatch article regarding equity mutual funds
"from the beginning of March through the end of November, net withdrawals amounted to $25 billion"
So, despite the fact that we had the best rally in 75 years, people are running for the hills. Can you get a more LT contrarian bullish signal than that?
What a nation of permabears we live in!
Here's a comment made by the leader of a popular bear blog today
"There is no place for optimism the next few years"
No place for optimism? What a miserable SOB this guy must be. This guy must wake up every day hoping for the end of the world. That's a shitty attitude to have...especially when we are seeing signs of things getting better. And it's not like this guy can claim he's just being a realist. We have been seeing clear signs of a recovery for months and this guy is rooting for it to fail just so he doesn't feel so bad missing out on the rally while getting burned by his serial shorting.
This guy also calls himself a technical analyst and he even wrote a book on it. But this guy is no technical analyst...he's a permabear who tends to see things in a bearish light and will use t/a selectively by seeking out bearish patterns most of the time. This is no way to trade or live for that matter. Don't be a miserable SOB just because you got burned by the market and want revenge and don't be dedicated to just one side of the market especially the bear side which in the very LT has been a loser.
I've said this before....I don't believe not one single permabear you see today first started played the stock market to bet against stocks, hoping for a depression. Chances are these bears got burned on the long side at some time in their life and turned to the "dark side" to get revenge and can't go back to being bullish because they felt "betrayed" or "cheated" by the system in some way.
Once you learn to let go of your emotional hang-ups, pride, ego and personal grudges you have against the market, the fed, GS or whoever, you will finally see and accept the market for what it truly is and do what you are supposed to do...make money. The best traders in the world couldn’t give a rat’s ass which way the wind blows. They don’t trade based upon what’s intellectually and personally satisfying because that’s ego talking and ego has no room in this game. I find that these permabears have the biggest egos out there even though they probably won’t admit to it.
Bears are already getting excited on yet again just the smallest of pullbacks. I've give props where it's due though...today was a bearish looking day because we started off strong and ended very weak with a low put/call ratio. Tuesday's gap has been partially filled now.
Today was yet another meat grinder day. I saw one guy post a message admitting that he got stopped out of his SDS position this morning, which he had been holding for 2 months, 1 cent above the low of the day. Ouch!
I believe that any downside we see will end up being yet another bear trap. Here's an interesting thing I read just now from a marketwatch article regarding equity mutual funds
"from the beginning of March through the end of November, net withdrawals amounted to $25 billion"
So, despite the fact that we had the best rally in 75 years, people are running for the hills. Can you get a more LT contrarian bullish signal than that?
What a nation of permabears we live in!
Here's a comment made by the leader of a popular bear blog today
"There is no place for optimism the next few years"
No place for optimism? What a miserable SOB this guy must be. This guy must wake up every day hoping for the end of the world. That's a shitty attitude to have...especially when we are seeing signs of things getting better. And it's not like this guy can claim he's just being a realist. We have been seeing clear signs of a recovery for months and this guy is rooting for it to fail just so he doesn't feel so bad missing out on the rally while getting burned by his serial shorting.
This guy also calls himself a technical analyst and he even wrote a book on it. But this guy is no technical analyst...he's a permabear who tends to see things in a bearish light and will use t/a selectively by seeking out bearish patterns most of the time. This is no way to trade or live for that matter. Don't be a miserable SOB just because you got burned by the market and want revenge and don't be dedicated to just one side of the market especially the bear side which in the very LT has been a loser.
I've said this before....I don't believe not one single permabear you see today first started played the stock market to bet against stocks, hoping for a depression. Chances are these bears got burned on the long side at some time in their life and turned to the "dark side" to get revenge and can't go back to being bullish because they felt "betrayed" or "cheated" by the system in some way.
Once you learn to let go of your emotional hang-ups, pride, ego and personal grudges you have against the market, the fed, GS or whoever, you will finally see and accept the market for what it truly is and do what you are supposed to do...make money. The best traders in the world couldn’t give a rat’s ass which way the wind blows. They don’t trade based upon what’s intellectually and personally satisfying because that’s ego talking and ego has no room in this game. I find that these permabears have the biggest egos out there even though they probably won’t admit to it.
Thursday, December 3, 2009
AAII bull/bear ratio is back to 1 again
Once again, there continues to be a lack of any extreme in bullisness from these guys despite the fact that the market is sitting near 52 week highs. The other sentiment survey I follow, Investor's Intelligence (II) is in fact however showing extreme bullishness with a 3:1 ratio of bulls over bears. So, who do you believe with respect to the contrarian message?
I go with AAII because II sentiment tends to be usefull for the longer term and tends to show extreme bullishness during the first rally of a new bull run without any serious bearish consequences. In fact, it's been showing a bull to bear ratio of 2 or more since early August and yet here we far comfortably above those levels. This happened during the 2003 bull market rally as well wherby there was extreme bullishness all through the spring and summer. Also keep in mind where we are comming from...II sentiment was showing extreme bearishness (often times off the charts) for the last 7-8 months of the bear market and so now we are unwinding this bearishness.
Also as per what I said before, in bull markets bearish contrarian omens can either be ingorned or resisted for quite some time but any bullish ones tend to support the bull run almost immediately.
The best trio of indicators have been rydex, put/call ratio and AAII sentiment and so I'll continue to focus on them untill they don't work anymore.
The ST is tricky right now. Ultimately I think we go to 1150+ before the end of the year but there's still this week's unfilled gap to deal with which makes the next 1-3days very tricky.
I go with AAII because II sentiment tends to be usefull for the longer term and tends to show extreme bullishness during the first rally of a new bull run without any serious bearish consequences. In fact, it's been showing a bull to bear ratio of 2 or more since early August and yet here we far comfortably above those levels. This happened during the 2003 bull market rally as well wherby there was extreme bullishness all through the spring and summer. Also keep in mind where we are comming from...II sentiment was showing extreme bearishness (often times off the charts) for the last 7-8 months of the bear market and so now we are unwinding this bearishness.
Also as per what I said before, in bull markets bearish contrarian omens can either be ingorned or resisted for quite some time but any bullish ones tend to support the bull run almost immediately.
The best trio of indicators have been rydex, put/call ratio and AAII sentiment and so I'll continue to focus on them untill they don't work anymore.
The ST is tricky right now. Ultimately I think we go to 1150+ before the end of the year but there's still this week's unfilled gap to deal with which makes the next 1-3days very tricky.
Wednesday, December 2, 2009
a few more comments
Rydex data continues to be in neutral territory and the market has been in a sideways trading range from about 1110 to 1085. One word to describe this.....edgeless. This sideways chop has been making a meat grinder out of the fast money types. That one trader I mentioned last week before who has been self destructing with this account has been getting his clock cleaned even futher during this chop. He says he's just about ready to give up trading. I think that will do him a lot of good.
Gold is making new record highs yet again and I still think it's not done. I know the move is crazy relentless but that's what you see in the blow-off phase. Remember how banks stocks were ruthlessly dropping every day in Feburary and early March after already having taken such a beating the year before? It's the same idea. The same thing happened with oil in the summer and the same thing with tech in early 2000.
As mentioned with my previous post, the noose is tightening around the necks of the bears. This gap we've seen today gives them some hope that we could see another bull trap if the market breaks out tommorow. But I ain't going to bet on it because there's no edge with my favorite rydex indicators which are neutral. If you are going to play the short side for a trade in a bull market everything's gotta be lined up perfectly because as I've been saying for weeks, in a bull run, bearish signals have less bite and can be ignored or resisted for quite some time.
Watching how the market handles bearish signals and bullish signals has always been an objective way to know if you are in a bull or bear market trend. This is why in early April I had strong suspicions that the trend had changed from bear to bull. Admitingly I wasn't fully convinced but by about mid May I was.
A lot of the bear signals I made mention about 2 weeks ago typcially resulted in immediate and swift downside 18 months ago wheras this time and all through out the spring and summer, all we've seen was market resilliancy and/or modest pullbacks.
I was watching "Poker After Dark" just now and I saw Poker ledgend Johhny Chan make a rather big mistake with his play. He was holding AK while his oppenent Laak was also holding AK. Laak made a big raise and Chan re-raised him. It took Laak quite a long time to decide what to do. While talking out loud Laak figured Chan had QQ and so given that Laak had AK the proper play would be to either call or go all in and he chose the latter. As a result of this move Chan was put to a big decision and he too thought about it for a while. Chan ended up folding saying out loud that if Laak felt he (Chan) had QQ Laak could only go all in if he had KK. Did you follow all of that? lol!
This was a rather large blunder made by someone of the caliber of Chan. If Laak had KK and he openly admitted that he believed Chan had QQ, it would have been a no brainer for Laak to have gone all in almost immediately after Chan raised him. It's a no brainer and anyone would have done that because KK is the second best starting hand possible (only AA is better). For Laak to have thought about what to do for so long he couldn't have had KK unless he was putting on a show pretending to be perplexed. I suppose that's possible but I've never seen pros do such shameless things especially to others respected pros like Chan.
What's the point of this story? The point is that Chan, although a pro, is human and humans are fallible. They get it wrong and wrong big no matter how right they've been in the past .This applies especially to the markets. I've seen Gurus who have nailed it time and time again get it wrong and get it wrong big. Take for example Doug Kass who called the bottom in March almost to the day. He ended up going net short around SPX 940 or thereabouts and then "all in" short at 1030 with his top of year call in August. I'm sure Doug is still up on his calls overall this year but the point is that nobody is infallible and I tend to see people worship the ground of the guru who's had the hot hand. Take this guy Prechter you hear a lot about. He correctly called the beginning of the secular bull market in 1982 and then warned of an oncoming crash and great depression 2 in 1987. It would have been hard not to think that this guy found the holy grail of market timing. But he stayed long term bearish after his 1987 crash call and had the worst performance of market timers for decades missing out on the entire 1990's bull market. Nobody and I mean nobody is infalible.
Gold is making new record highs yet again and I still think it's not done. I know the move is crazy relentless but that's what you see in the blow-off phase. Remember how banks stocks were ruthlessly dropping every day in Feburary and early March after already having taken such a beating the year before? It's the same idea. The same thing happened with oil in the summer and the same thing with tech in early 2000.
As mentioned with my previous post, the noose is tightening around the necks of the bears. This gap we've seen today gives them some hope that we could see another bull trap if the market breaks out tommorow. But I ain't going to bet on it because there's no edge with my favorite rydex indicators which are neutral. If you are going to play the short side for a trade in a bull market everything's gotta be lined up perfectly because as I've been saying for weeks, in a bull run, bearish signals have less bite and can be ignored or resisted for quite some time.
Watching how the market handles bearish signals and bullish signals has always been an objective way to know if you are in a bull or bear market trend. This is why in early April I had strong suspicions that the trend had changed from bear to bull. Admitingly I wasn't fully convinced but by about mid May I was.
A lot of the bear signals I made mention about 2 weeks ago typcially resulted in immediate and swift downside 18 months ago wheras this time and all through out the spring and summer, all we've seen was market resilliancy and/or modest pullbacks.
I was watching "Poker After Dark" just now and I saw Poker ledgend Johhny Chan make a rather big mistake with his play. He was holding AK while his oppenent Laak was also holding AK. Laak made a big raise and Chan re-raised him. It took Laak quite a long time to decide what to do. While talking out loud Laak figured Chan had QQ and so given that Laak had AK the proper play would be to either call or go all in and he chose the latter. As a result of this move Chan was put to a big decision and he too thought about it for a while. Chan ended up folding saying out loud that if Laak felt he (Chan) had QQ Laak could only go all in if he had KK. Did you follow all of that? lol!
This was a rather large blunder made by someone of the caliber of Chan. If Laak had KK and he openly admitted that he believed Chan had QQ, it would have been a no brainer for Laak to have gone all in almost immediately after Chan raised him. It's a no brainer and anyone would have done that because KK is the second best starting hand possible (only AA is better). For Laak to have thought about what to do for so long he couldn't have had KK unless he was putting on a show pretending to be perplexed. I suppose that's possible but I've never seen pros do such shameless things especially to others respected pros like Chan.
What's the point of this story? The point is that Chan, although a pro, is human and humans are fallible. They get it wrong and wrong big no matter how right they've been in the past .This applies especially to the markets. I've seen Gurus who have nailed it time and time again get it wrong and get it wrong big. Take for example Doug Kass who called the bottom in March almost to the day. He ended up going net short around SPX 940 or thereabouts and then "all in" short at 1030 with his top of year call in August. I'm sure Doug is still up on his calls overall this year but the point is that nobody is infallible and I tend to see people worship the ground of the guru who's had the hot hand. Take this guy Prechter you hear a lot about. He correctly called the beginning of the secular bull market in 1982 and then warned of an oncoming crash and great depression 2 in 1987. It would have been hard not to think that this guy found the holy grail of market timing. But he stayed long term bearish after his 1987 crash call and had the worst performance of market timers for decades missing out on the entire 1990's bull market. Nobody and I mean nobody is infalible.
Tuesday, December 1, 2009
Mr. Market can be your friend or your unbeatable enemy...it's up to you
I noticed an unusual level of boldness on the message boards/blogs from retail bears last night and so it figures that today they took it right up the kiester. We ended November without the pullback to 1070 I was expecting about a couple weeks back....we only got as low as 1085 and now here we are once again at about the same levels as mid November and a stone's throw away from new 52 week highs.
Today we've seen the all too familiar gap and run day which we've seen tends to eventually get filled within about 1 week's time even if the market goes higher beforehand. But not all upside gaps have been filled since March....for instance, there's one made in mid July that's still unfilled and far below where the market is now.
This is a bull market and bull markets work higher so that's why not all upside gaps will get filled. If you don't give the market respect you will get slaughtered. How many times have I said that this year? The trend is up and has been up since March and that's the respect I'm talking about. This rally has been the biggest we've seen in over 75 years and yet it has been given near ZERO respect. It’s the most hated rally I've ever seen by far. The higher it goes the angrier people seem to get. This is such a weird, weird thing to see. People are supposed to get more bullish. Just now I saw a headline on marketwatch that reads "stock tips for a rough 2010". Here's a couple of other ones "Low volume may be source of concern", "Obama leading us right to Great Depression 2". It seems so many people actually want to see the economy tank, they want a depression. Such bitterness and sour grapes. There are probably so many people out there who wake up every day hoping for a crash just so they don't feel so bad for either panic selling last year, selling into the first rally off the bottom in March, getting burned shorting the rally or a combination of the 3. I know for a fact that many people did this. These people bought into the media Armageddon hook line and sinker the same way they bought into the new era hype in 1999 and now they can't shake themselves lose of their perma bearishness because doing so will be to admit that they got hoodwinked...yet again. It's so sickening. Such losers. Now I sound angry! lol!
One thing I know for sure is that the wall of worry is as solid as granite for the bull to continue. I'm not oblivous to the "time bombs" that the bears are ranting about but my experience shows that either a)these time bombs are just duds or b)they will go off when most people have given up looking for them which is cleary not the case right now.
It could be game over the bears if they can't wrestle back control of the market shortly because whenever the market tends to be trading near the YTD high come around mid December, it typically keeps running right through to the end of the year. This happened every year in the bull run that began in 2003 through to 2006 and the situation we are in is similar in many respects to the market in 2003.
Economic reports such as the ISM and Purchasing Managers Index continue to show expansion every month and so long as that keeps happening with earnings growing the bears are swimming upstream. The economic momentum is with the bulls and whether or not you think it's a sustainable in the long term the market doesn't care as it tends to look ahead as far as about 6 months or so. Many people will call the market short sighted as a result...I call the market....the market. It is what it is. To those who use dogma when investing....good luck to you...you'll need it.
Bottom line: the gap and run action is suspicious but should be respected given unique seasonality tendencies this time of the year and the fact that the market is testing the 52 week high for the 3rd time now poised to break out. Bears have had plenty of time and opportunity to take this market down and couldn't do it and their time is running out....they got less than 2 weeks to make headway before Santa runs them over....tick tock bears....tick tock
Today we've seen the all too familiar gap and run day which we've seen tends to eventually get filled within about 1 week's time even if the market goes higher beforehand. But not all upside gaps have been filled since March....for instance, there's one made in mid July that's still unfilled and far below where the market is now.
This is a bull market and bull markets work higher so that's why not all upside gaps will get filled. If you don't give the market respect you will get slaughtered. How many times have I said that this year? The trend is up and has been up since March and that's the respect I'm talking about. This rally has been the biggest we've seen in over 75 years and yet it has been given near ZERO respect. It’s the most hated rally I've ever seen by far. The higher it goes the angrier people seem to get. This is such a weird, weird thing to see. People are supposed to get more bullish. Just now I saw a headline on marketwatch that reads "stock tips for a rough 2010". Here's a couple of other ones "Low volume may be source of concern", "Obama leading us right to Great Depression 2". It seems so many people actually want to see the economy tank, they want a depression. Such bitterness and sour grapes. There are probably so many people out there who wake up every day hoping for a crash just so they don't feel so bad for either panic selling last year, selling into the first rally off the bottom in March, getting burned shorting the rally or a combination of the 3. I know for a fact that many people did this. These people bought into the media Armageddon hook line and sinker the same way they bought into the new era hype in 1999 and now they can't shake themselves lose of their perma bearishness because doing so will be to admit that they got hoodwinked...yet again. It's so sickening. Such losers. Now I sound angry! lol!
One thing I know for sure is that the wall of worry is as solid as granite for the bull to continue. I'm not oblivous to the "time bombs" that the bears are ranting about but my experience shows that either a)these time bombs are just duds or b)they will go off when most people have given up looking for them which is cleary not the case right now.
It could be game over the bears if they can't wrestle back control of the market shortly because whenever the market tends to be trading near the YTD high come around mid December, it typically keeps running right through to the end of the year. This happened every year in the bull run that began in 2003 through to 2006 and the situation we are in is similar in many respects to the market in 2003.
Economic reports such as the ISM and Purchasing Managers Index continue to show expansion every month and so long as that keeps happening with earnings growing the bears are swimming upstream. The economic momentum is with the bulls and whether or not you think it's a sustainable in the long term the market doesn't care as it tends to look ahead as far as about 6 months or so. Many people will call the market short sighted as a result...I call the market....the market. It is what it is. To those who use dogma when investing....good luck to you...you'll need it.
Bottom line: the gap and run action is suspicious but should be respected given unique seasonality tendencies this time of the year and the fact that the market is testing the 52 week high for the 3rd time now poised to break out. Bears have had plenty of time and opportunity to take this market down and couldn't do it and their time is running out....they got less than 2 weeks to make headway before Santa runs them over....tick tock bears....tick tock
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