Click chart to enlargeThe Dow is within 25 points of its 200 day moving average. Technically, we're still in a bear market until we move above it. If the market does start a new bull run from here, then it's going to just be another bubble because the economy isn't ready for it. Not with oil, food and insurance prices rising at 50% a year. No doubt Bush's stimulus package (you know, the one where we get $600 this year and a tax bill for $15,000 next year) will artificially pump the numbers over the short term. But what happens as this bubble expands and then two quarters from now corporate profits show that Americans weren't spending their money on anything but oil? Could be ugly, kind of like last Fall, where the market rallied strongly in the face of severe underlying economic problems.
While it's fun to guess at, we don't attempt to outright "time" the market. In that spirit, despite the beginnings of a bubble forming in the indexes, we added to POT, AGU and MTL today. CF and MOS also offered a good entry point, but we're already overweight in them relative to their respective locations in their channels, so we held off on adding to those names. POT at the midpoint of its arithmetic channel today... too good to pass up.
Tech... quickly getting overbought. AAPL can keep right on going because its investors are the most loyal cult-like followers around (second only to AMZN's). But at 25% growth, we'd only pay a p/e of 25. Maybe 30. After all, AAPL's market cap is such that it isn't a company that's likely to double in size anytime soon. Based on a p/e of 25/30 and an eps of $5.20, we'd pay about $130 to $150 for AAPL. By the end of 2009, it will be worth about $190 (30p/e x $6.30eps). Considering it's trading at $180 now, we don't understand why people would buy it here. That said, AAPL is not the kind of stock you want to short while it has upside momentum going for it.
5 comments:
Snot,
I sent you a mail. Did you get it? If not: What's your e-mail-adress?
newfrankyboy
Franky,
We have no interest in profiting from this hobby of ours (other than capital gains when the market is so generous). We have a viable work life outside of the market, so our involvment with it is purely a release from the stress of the daily grind.
Our hope is that people enjoy reading our blog, and are saavy enough to not take the ideas presented herein as gospel.
While we have developed a disciplined approach to trading that has helped us avoid the beginner's mistakes of buying high and selling low, we are far from foolproof. We don't want to be the reason people lose money. They have to incorporate our ideas into the hundreds of others that shape their own approach to trading, and decide for themselves what works best for their own circumstances and tolerance for risk.
It's the lemmings, the sheep, the blind followers that prevent us from having any desire to ever present our work as investment "advice".
That said, feel free to use our basic concepts in your newsletter. There is nothing proprietary about channel trading. There are many other websites that offer similar concepts.
Thanks for the flattering offer, but we're in this purely for the enjoyment of it, and for finding like minds to trade opinions with.
Snot,
I respect your decision and will not bring up the issue again.
Taking the responsibility for advice is certainly one of the hardest parts in the publishing business. And keeping investment as a hobby is probably a good way not to get entangled too much – the stock market can be pretty stressful.
However, I disagree with your view on “blind followers”: Lots of people try investing in the stock market, they just don’t know how to do it - and usually, they have the right ideas and just get the timing wrong.
Good advice is hard to find, I think it is noble to lend a hand. If you change your mind, you have my mail-address. Keep up the good work, I will certainly take some ideas from this blog (although I cannot quote you – a reference to “snotwheel” is more than strange…).
F.
Hey Snot,
If you do end up as a hi-flying hedge fund manager (in case you are not already!) , how about throwing some tips this way for whatever bad or good constructive comments, I have contributed - hahahah
Personally, I started reading TA and understanding charts, only after stumbling upon your LDK posts. Before that my gurus were the analyst on various news sites and no wonder, I got thoroughly slaughtered.
I even name the channel trading style when writing to other people, the snot channel technique.
--clarke
Come on guys. The SNOTWHEEL is already a hedgefund manager.
He manages over 50 Million. I believe, perhaps, a lot of his own money. Perhaps family.
He or she is a great person and writer.
I appreciate your blog very much Snot and keep it up.
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