Click graph to enlargeThe bar graph above shows our performance each month. Assuming it acts like an oscillator (which it may not), we're at an extreme right now. However weak an indicator this may be, it suggests that the market is not likely to extend its losses for the rest of November. It also suggests that December is likely to be a neutral or positive month, as we have not changed our net long bias for some time. The elusive return to the averages that has been a prevalent pattern in all bear markets to date seems to elude us this time around. As much as we expect the rules to be constantly changing, the market simply cannot go straight down for several quarters on end without the country slipping into a depression, and we don't think it will get that bad. A prolonged recession, a restructuring of Wall Street, yes, but depression no.
The wealth in the U.S. built over the past 10 years (computer and internet productivity, widespread real estate development, etc), still exists. It is tangible wealth. Market sentiment (fear) brought the indexes down to 10 year lows, but there's no way all of the past 10 years of the world's progress meant nothing.
Much of the market's plunge is, in our opinion, people voicing their disgust for Wall Street rather than a real feeling that we deserve to be back to 1998 levels.
29 comments:
Snot,
Your current holding, by percentages. Do you post them daily? If not, can you please.
We post them on the left side of the blog, but don't update them every day unless they change in a major way. We have a lot of patience with trades if we think they are sound long term holds, so our allocation doesn't usually change too dramatically.
We just tallied Gary's results for week three of this experiment. He is up 1.3% compared to the market's loss of 17.9%.
Gary's approach is not one which will produce immediate returns. What he is doing is betting on a longer term appreciation of uptrending charts, and simultaneous attrition of downtrending charts. We don't expect his performance to really reflect its goals for months. Still in all, he is far outpacing the indexes thus far, despite horrible timing on entering his longs positions, and some questionable short candidates.
So far, the experiment is a success, but it's far too early for the experiment to reach its goal. He is not betting against wild weekly swings, but rather on overall trend, which plays out over many months. Ideally, if Gary's premise is correct, there will be a point where all of his longs are profitable, as are all of his shorts.
citi got 20b injection and 300b bad debt buy out. Market rock maybe???
today's trading strategy? hk, iconoc?
Futures were up about 3% earlier in the morning, now they're up about 2%, falling very steadily. I am still counting on a sucker's rally today, with a sharp selloff ending the day lower. I bought some FXP at 64.50 this morning. I am waiting, for the most part. If we dont close lower today then I'll be back on the sidelines for probably the rest of the week.
Some insight into these harrowing downward moves of FXP: Financials have a big effect on all overseas stocks. If you look at the chart of the MSCI world index, it is nearly identical to the financials. The rumors of a solution at C no doubt caused FXP to drop like a stone. But since they dont fully understand what is wrong with C, they cant possibly have a solution yet.
Technically, FXP could fall a lot further. I wont be holding it for more than a couple days. I'm still hoping for a drop today followed by big news tuesday or wednesday or even friday. Last year, the day after thanksgiving was the day I bought heavily into LDK, during the shortened trading session. I am hoping to find another blowout this year. I'm thinking BGU might be it.
The reason gold is up is surely because of this news:
http://www.bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home
I've been saying for months that they need to create an $8 to $12 trillion bubble in order to fend off the "inevitable" deflation. Well, now it appears they are at least seriously considering moving their Monopoly Money slider up to 7.4 trillion. And that puts them in the ballpark. If they pull this off we're going to see an inflationary explosion. It's a huge mistake what they're trying to do, but it does give me confidence knowing that they are finally being realistic about the amounts needed to keep this floating cheese grater of an economy from sinking. This should take the market a while to digest, since $7.4 trillion is such a staggering figure. But IMO this is the kind of news that signals some kind of bottom. Maybe we'll see that bottom this week.
Icon,
When the market broke support a few sessions ago, we thought that it would either drop enough to take out the stops placed right below support, or start a new leg down. At the time, we were only thinking it would drop enough to take out the stops that were right below these recent support levels. Instead, in hindsight, it appears to have dropped just enough to take out the stops placed just below the 2002 lows. Whether or not you believe that "they" control the market in this way anymore (we think they do), isn't it possible that the market now rallies over the next few weeks?
We should get a very large rally. It should carry us all the way up until holiday sales numbers start pouring in.
I just dont know whether that rally is going to start from 800 or 700. Or 600. lol. Now that we have that $7.4 trillion dollar black cloud floating around, we could see massive gyrations in the market. Pledging the money is one thing. But it will take another 9/11 to get congress to go along with it.
Icon, today a pullback or a new low?
I believe we are going higher today, but this could be suckers rally, but I do believe we are going higher today, S&P just broke resistance with several of my stocks. Right now MM's are just trying to get a feel for the market.
You can see a definite rally forming. Look at chart of FSLR to see a definite breakout above 103. This is a bullish sign.
This chart is why I bought only a small amount of FXP this morning:
http://i468.photobucket.com/albums/rr44/iconoclast421/FXI11-24-AM.jpg
There are 3 lines converging on a point that is right in a spot where a large rally could bring it today. If FXI rallies up to those lines, then that is the time to load up on FXP. Until then I am just waiting.
I dumped my longs friday... too soon as it turns out. I wont go long again till I get a buy signal. I do see one right now, here:
http://i468.photobucket.com/albums/rr44/iconoclast421/SPX-11-24-AM.jpg
That signal isnt valid until the end of the day though.
Keep us posted icon. BTW is there any way you can make your charts bigger?
hk22, what's your take today?
you still believe the market could go higher this week with the "citi" news...?
thebat
Here is another chart, similar to FXI, where the rsi is moving right towards a convergence of orange lines:
http://i468.photobucket.com/albums/rr44/iconoclast421/COMPQ-11-24-AM2.jpg
That seems to be a very bullish phenomenon, though I have never cfrafted a trading rule from it. So watch out shorts! It isnt time to short until we actually get to one of those convergences. I wish I had more time to analyze these charts...
eer, Hang on a second there icon.. On Friday you said that we had to drop on Monday and then rise on tuesday order to provide a buy signal, otherwise we dont make three peaks on the RSI..
Its hardly scientific to chuck away that chart and whip out two others where the lines do match up when the market goes against you....
Anon,
We might have a pull back tomorrow-profit taking (makes sense) but as long as the pull-back is a low % we will be alright.
People will realize that the world is not coming to an end. And I see no reason for new lows yet.
New President- New staff- new stimulus.
Creating Jobs is no. 1 priority for a recovery. 73% of the GDP is consumer related. 2.5mill it won't be enough jobs but is a good start.
And we have GM.(or the big 3)
I believe we will find a soulution for that also, otherwise it will act against Obama's plan to create new jobs. That doesn't make sense.
If you want to start taking some profit off the table (if you got in last week) you might as well do it just to be safe.
That's my opinions.
Here we go throwing more good money after bad. Except it's really pretend money we're using.
Vegas calls this chasing your bets.
I'm still on the sidelines, 100% cash. The problem is is that the market is moving too fast. Way up one day, way down the next. Not one of the big problems we have is anywhere near fixed, so we have inherent instability. If I make a trade, I'm afraid it will be based more on market sentiment than anything else. Lately, more charts = more confusion. If SKF goes down another 10-15%, I'll probably buy. Same with QID, except I'll wait for another 5-10% drop first. For some reason, I can't bring myself to ride the market on an up-swing.
If the rally today holds, then this next signal will be the 2nd buy signal, or the Confirmation. Here's a chart that summarizes the two signals generated so far in this rally:
http://i468.photobucket.com/albums/rr44/iconoclast421/SPX-11-24-bullish-confirmation.jpg
It's really pretty simple when you look at that chart. The tough part is knowing when to sell. I hope this chart explains why this rally could fizzle pretty early tomorrow:
http://i468.photobucket.com/albums/rr44/iconoclast421/SPX-11-24-sell-point.jpg
And that is precisely why I hoped today would be a down day. Hopefully we rally hard enough today to break right on through this line too. If we close ON the line, then it invalidates the previous buys because SPX will be testing another resistance line. You cant generate any signals while sitting on an orange line.
Dow will hit 8900 within a week.
I sold gold stocks and bought mtl, cx, and flr in the morning
well,
Sold half of my UYG shares,
Gotta lock that profit so nobody steals it from you :-)
As of right now I have some NCC shares (which I plan to hold till next year or whenever it reaches 2.5) and some UYG shares.
And Plenty of cash. :-)
7500 is the bottom in this year.
imho.
I'm looking at FAZ :-)
Quick buy before 4 and quick sell tomorrow.
very tempting.
Dman,
too late now..
I had an order at 75/share
Well, SPX closed right on an orange line, so I have to remain on the sidelines. I'll start going short when SPX reaches 890. It should not go higher than 925. The 50sma is rapidly approaching.
The last few minutes was ridiculous.
It's a manipulated, crappy, junk, scum, joke, cripple market (sorry).
I'm off for a couple of days. Who knows what will happen next? Nobody. Expecially me. But I don't care anyway.
(and no, I didn't lose money today, it's just my opinion)
Fundamentally nothing has changed in last 2 days and everyone in the market seem to believe that the crisis that is gripping all the countries in the world is all but over.
It is safer to be on the sidelines when the market is moving 10% in each direction. Unless we are extremely lucky on the right side of the trade, there is no point in buy and hold theory anymore.
The way market has moved QID,SRS and FAZ may be the right trades in the next few days.
AK.
I meant to write ...
Fundamentally nothing has changed in last 2 days and everyone in the market seem to believe that the crisis that is gripping all the countries in the world is all but over.
It is safer to be on the sidelines when the market is moving 10% in each direction. Unless we are extremely lucky to be on the right side of the trade, the buy and hold concept is very risky here.
The way market has moved QID,SRS and FAZ may be the right trades in the next few days.
AK.
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