Click charts to enlarge The chart of the Dow at the top shows the market's inability to break out of a 4 month trading range. Support is obvious, it's in the 7900 area with 7500 as the "last resort, must-hold or all bets are off" bottom. Resistance is not as obvious, but it is descending. That much is clear, hence the large descending triangle we drew on the chart. We used a 75 day moving average simply because it served as resistance in September and again in early January. If you want to use a moving average as resistance, start with the 75dma. A break of the 50dma is meaningless, as we've broken it several times with no great consequence. At some point, it is inevitable that the market will break support or resistance. The convergence of these lines suggests that one of them will be broken before April Fool's Day. Considering its a downtrending chart trading below a downtrending moving average, our guess would normally be that it will break down. As logical as this sounds, we have to take into account that the market is still grossly oversold (technically) from its crash in early October. The chart at the bottom shows the larger perspective.
The market "normally" corrects at the angle indicated by the channel. October's crash puts us into technical oversold territory. Our running theory has been that the market will "bounce back" to the averages before falling further. At least this approach carried little risk, considering another plunge following October's crash seemed a highly unlikely scenario. Unfortunately, there simply hasn't been enough buying interest to prop the markets back up. Hence this slow, painfully boring sideways market. Considering the likelyhood of a powerful, sustained rally is unlikely, it looks like only two options remain.
Option 1: A continuation of the same. A range-bound market which spends the next 12 to 18 months consolidating between Dow 7500 and 9500.
Option 2: A break of support. A new leg down. Dow 6,000.
We feel that while the market could make new lows, a substantial new leg down to a level like Dow 6,000 is unlikely. Dow 7,300 perhaps, but not much worse than that. We're going to take the approach of buying on dips below 8,000 and selling on rallies as close to 9,000 as possible. That's our game plan for 2009. If we're wrong and the market moves to 11,000, then we'll make a nice profit on the 33% of our account which is stubbornly staying in DDM and SSO through thick and thin. If instead the market moves to 6,000, America will be in such poor shape that our stock market losses will be the least our our problems.
Madoff update:
Madoff remains under house arrest after stealing $50B, free to distribute his stolen assets to his friends and family at his discretion.
A New Jersey toll collector was sent to jail for 3 years after stealing $11,000 from a safe, and has been ordered to return every penny of the stolen money.
The message is clear. In America, justice is served based not on your crime, but on the power of your legal team. If you plan on being a thief, just be sure to steal a few million extra to pay for the right representation. OJ was not available for comment.
52 comments:
Snot, I check your columns frequently and also this comments section frequently, looking for your perspectives. This section is cluttered with day traders that your site is becoming watered down and sooner or later I won't take the time to scan it. Wondered if you could somehow start a separate comments section that only you can contribute to ... you can keep this one, too, if you must, but I'll only have to check the other to read your comments.
"Wondered if you could somehow start a separate comments section that only you can contribute to"
Yeah, its called a blog, genius.
stupid moron
what the fuck and which one you call?
Snot
These last couple of posts are poison to a blog. If left as is, and not removed, they serve to drive away sincere astute posters. The anons strike again.
If, as you say, 'as goes January, so goes the rest of the year,' what do you think of the markets' prospects now? The markets seem to have one great hope left, and that is massive injection from the government. It is amazing to think that businesses, corporations throughout the world that have prided themselves with self-reliance, ingenuity, determination are now desperately panting at the doorsteps of governments for help. This is especially true with banks. They are completely at the whim of government.
What this means to me as an investor is that I will plan on a rotten year, and invest accordingly. The wild card will be the occasional injection of money from government, and the ensuing reaction of the market.
Joe thinks that Wall Street likes it that corporations are trimming budgets, getting rid of personnel, and the like. Believe me, no corporation likes downsizing, having buildings sitting empty, equipment idle. Typically, this is the extreme Wall Street shortsitedness that pervades their thinking.
I wasn't planning on posting any more here because of the poison posters, but since sbbuilder mentioned my name in a REASONABLE discussion, the kind that is needed here, I'll respond "briefly" (ha) and then be gone.
I got my idea on the market liking cost cutting measures from some commentary on CNBC where they reported on some company's bad earnings, accompanied by layoffs and other cost cutting measures, and as a result the stock was up in spite of the bad quarter. Here are some links on how the market sometimes likes corporations cutting costs, even through extreme measures. The human side of it everyone hates, but this is why the market will reward some companies with a 5% pop in their stock price when they announce layoffs or other measures along with lousy earnings.
Link 1: in Britain
Link 2: a different kind of cost cutting with GOOG
Link 3: the travel industry predicts business will continue to cut costs in their travel budgets which will impact their business
Link 4: a corny video from a company that specializes in helping businesses cut costs
I have a friend who works for Fed Ex. They recently cut everybody's salary 5%. He and others liked the move. Instead of laying people off, the pain is spread evenly and everyone still has a job. My friend still has a job and is happy or it.
Oh, BTW, Suomynona, I'm not bored. Being an associate professor and being involved in a variety of projects, personal and professional in publishing, insurance, investments, family, GRANDKIDS, etc., leaves me with too little time to get bored. :)
Snot's long term investment strategy involves trying to find the new leading sector once we can begin to emerge from this bear market and then pick the strong stocks from that sector, as he used to do with Ferts from the Ag sector. What potential does energy have to be that new sector? Since the plunge in October, the energy sector has been fairly stable and it almost looks like it is trying to uptrend slightly. Or am I reading the charts wrong, sbbuilder and Icon and others?
XLE on Yahoo
XLE on Stock Charts - notice the uptrend on RSI on the top or is that valid?
Joe
Gary's performance is now -70%. :D Or did I calculate wrong?
ANW was not the best pick (shorted at the temporary bottom).
Ohh, sorry, not -70% but -7%. :D
SP500 is -15%. :)
sb,
If all the market has to look forward to in '09 is bailout money from the government, then it will be a horrible year. Investors know that bailouts are just a way of borrowing against our future to save the day. It's akin to a business on the brink of bankruptcy taking out a huge loan to keep itself afloat for a few more months. It's financial suicide. The market would be a lot better off if it can tread water all year without any injections. We're betting on a sideways market all year, and are going to be very aggressive at 7500 and 9500.
seeer, you may be right about Gary. Haven't calculated his performance in a couple weeks. His approach to the market has a shelf life. In other words, eventually stocks reverse trend. Gary version 1 has no defense against those changes. When we have a minute, we're going to see how Gary 1 did, and see how long his gig lasted. Then we'll start Gary 2, with improved short term entry timing, and the ability to replace stocks that break out of trend. With that ability, Gary should be able to continue his performance. You're right that ANW is his worst performing short. MMM is more what we were looking for. Unfortunately, Gary 1 did not distinguish between large cap (stable) and small cap (volatile). He made a good choice with MMM and a bad choice with ANW. The net effect was a loss because the small cap went against him and the large cap went his way. If the tables were turned, he'd be ahead. Gary 2 will choose all mid to large caps in order to help him avoid such whipsaws. Gary will get the gig down soon, just give him time. Chimps have learning curves, too.
Seeer, just checked MMM vs ANW. ANW has a market cap of 700M compared to MMM's 37B, making MMM more than 50 times the size of ANW, hence the difference in predictability/volatility.
Joe, I'm not seeing anything on XLE that would make me want to buy or sell it at this time. I am starting to like the look of FXI's chart though. From a short perspective anyway. If it closes around 25.16 today I'm going to buy FXP.
Snot
Well, the Dow's below 8000. Does that mean you'll be buying more DDM?
I can't help but notice how the market seems to shrug off bad news. What the traders are focused on is the pending bailout monies, how soon they will come, in what form, with what strings attached, and on and on. I think this is a dangerous mentality to have.
Still parked on the sidelines, but I think I'll be jumping in soon. I'm happy to sit and wait until the picture clears a bit.
Hope you guys are reading the market ticker. I think Karl is right... the money to buy these t-bills is going to have to come out of the stock market. The Fed does have the power to create demand for the t-bills the treasury is trying to sell -- by creating a market crash! Karl caught onto it on Sept 24th (5 days after I said they were deliberately crashing the market).
Ok, Lets say that the omnipotent "They" are crashing the market deliberately. How do they make money by doing so, how much are they making and what is their exit strategy?
Before you suggest that they are shorting the market and so profiting from the collapse i would suggest that it would have been far easier to engineer the collapse of a sector (Say automakers, given that they were critical anyway) and just as profitable rather than going to the trouble of trashing the whole country. Remember, it's not as if someone made $100BN from shorting the market (Given that the worlds richest man is worth $40bn) and its not a crew of 200 people teaming up as a group this size would be caught and jailed.
Sure, there are 200 people, probably even 2 million people profiting here, but they are riding the wave not causing it.
They is no money any group could gain from causing this crash that a group of such resources and ingenuity couldn't make in an easier way.
Conspiracy theorists just want someone to blame so that they can say "Hey, its not my fault i lost money, i was blindsided over by the "They".
Total rubbish. There is no one to blame but yourself..
(Before someone starts taking about the bubble being inflated deliberately and hence causing a crash, that is a totally different matter to deliberately causing a crash)
Conor, the richest person in the world may only be worth billions, but the real wealth is foundational. And it measures far beyond money. The truly rich are not interested in wealth, but domination. They want control over capital, and when they get that they go for control over information and even knowledge itself. And they got it. Look around. Common knowledge has been sucked right out of the average person on the street. One from any other era would rightly call it black magic. The manifestation of occult and arcane forces. THAT is what the elite care about. Money is only a means to that end. That's why I put this video on my youtube home page.
The Federal Reserve is sucking massive amounts of assets onto its balance sheet at a record setting pace. They are capturing those assets. They do NOT care about making money. They do NOT care whether the DOW is at 1600 or 16000. They DID cause the crash. Through multiple deliberate, open acts of sabotage combined with ownership of a compliant media which will never assemble the facts and present the case.
The short selling ban: the order came from banker minion Paulson, admitted by Cox. This was done to deliberately crash the market.
Fed draining the slosh fund just days later: to deliberately cut off liquidity. This was done to deliberately crash the market.
There is much more. And much much more is going to come out.
Why do they do it? So the treasury can sell more bonds and the Fed can print more fiat money. The more All Seeing Eyes they can put into circulation, the more arcane power they believe it gives them. Meanwhile, they are loading up their balance sheet with all sorts of assets. Eventually there will be a fire sale of public assets. Roads, bridges, everything. The banksters will have it all. Then they will excercise their right to cleanse the peasants off their land. That is and has always been the goal of the Federal Reserve System, the 100 year plan. 1913-2012. As Jordan Maxwell says, its not even political, not even philosophical. It's truly demonic.
LOLOLOLOLOLOL!!!! Unbunch your panties Iconoclast421 and quit being such a drama queen. If you really believed all that crap you just spewed forth then you should be 100% short. Are you? No. That says it all.
While some may be slightly interested in your stock guesses, please keep the conspiracy garbage to your own blog and quit clogging up the post section on this one.
Thank you.
I must agree with the last poster even if it wasn't a polite request. If "Common knowledge has been sucked right out of the average person on the street" then what does Iconoclast know that we don't? He's nothing but a "average person" himself, as no uber wealthy person busies themselves with posting conspiracy theories all over the web. Only an angry "blamer" that refuses to take responsibility for their own actions has as many sour grapes as Iconoclast has. If you really believe the market is headed for Armageddon then why not go 100% short with your cash, plus use 100% of your margin buying power to sell short and make money off of it? That is supposed to be the purpose of Snot's blog, to help people make money. Not to advance your theories, which are just that; theories. In this day and age of instant information from around the world via the Internet I bunch people like Iconoclast in with the conspiracy theorists that say man never landed on the moon. Mildly entertaining for a few minutes and then it gets tedious.
Say what you will about Icon's 'theories', but I for one believe there is some truth to what he is saying.
The powers that be (i.e. Federal Reserve, Central Banks of the World) own the monetary system of our country and most countries of the world. Each and every time they print more fiat currency, our country (and citizens...us) become more enslaved to them, because they give to us now only to take more back in the future. It is truly a no win situation. It's like the grandest ponzi scheme of all. We are basically mortgaging our next generations economic futures to pay for our mistakes now. As the amount of indebtedness increases, the ability to pay back our debt PLUS interest becomes more & more impossible. At some point it will reach critical mass. Many feel that time is near.
Historically, no central bank system has ever lasted more than 100 years. That's in the history of modern civilization! Our central bank system was established in 1913...
Ok, enough conspiracy theory talk. I know that most in our society are not willing to believe there is evil amonst us, even as those evil forces operate right in front of our faces. I believe that is what Icon was eluding to when he said common knowledge being sucked right out of the average joe.
rl
Much too extreme. Why are you in the market if the Four Horsemen are saddling up their horses? Do you guys really believe what you're posting when you write it?
And as far as the "evil forces" operating right in front of our faces- YES they HAVE been working right in front of our faces. For the last 8 years to be exact.
C.L.
In this highly unusual day and age, I think it's fair to say that there are a lot of frustrated traders. How we got here, who's to blame, who 'they' are, are all debatable. Fact is, this is where we are, and so the question is 'how will this affect your trading?' Thats all I'm interested in. I personally think that the measures being taken now are stop-gap at best, and will hurt in the long run. In a pure market dialectic, the weak would be left to perish. As tough as that sounds, it rewards the strongest. In this society where everybody gets to hold a ribbon just for showing up, I'm all for giving the trophy to the winner and let the rest suck it up.
I say they're following a 100 year plan. So why would I be short? Or even paranoid? I have complete confidence in what I say, and trade based upon what I know to be true. Not what I feel or how I think the world should be. I dont care what anybody thinks about my conspiracy garbage. That garbage has helped me predict the future with much greater accuracy than anyone currently living in denial.
Anyway, I'm setting a buy price target of 20.55 for EBS. That target price is falling about 7 cents per trading day.
Anybody who still thinks Icon is a smart guy and worth listening to just take a second and think.. That Video he linked to is a guy saying that THEY are breeding two races of humans, one tall and blond and one small, inferior and goblin like!
Gimme a fucking break.. Why would anyone listen to a moron like this for advice on their investments?
"I trade on what i know to be true" ?? Scary that you are making decisions based on insane paranoia and worse, other people are following you.
"Goblin-like" creatures. It's metaphorical. Not literal goblins. Do you really need to have that explained to you? What exactly are you denying? Are you saying there isnt a group of wealthy eugenicists who write books talking about this? HG Wells was a part of that group. Go read his NON-fiction. It is all morloch vs eloi. They love that stuff, and are actively trying to create that reality, in countless ways. And they're doing it. Deny it all you want, but it IS real. Just because you cant be bothered to open a book doesnt mean the text isnt there. Do you know who Bertrand Russell is? Here's one of his many famous quotes: "Diet, injections, and injunctions will combine, from a very early age, to produce the sort of character and the sort of beliefs that the authorities consider desirable, and any serious criticism of the powers that be will become psychologically impossible. Even if all are miserable, all will believe themselves happy, because the government will tell them that they are so."
Bertrand Russell helped shape the modern education system. Instead of reacting with mindless accusations of conspiracy and paranoia, maybe you ought read a little about the people who shaped our modern day systems.
What is wrong with you Icon? You believe everything your college profs fill your head with? You believe everything you read? Who cares about your continuous "everyone's out to get me" rantings. And rantings they are. You claim "not to care" what others think yet you come back here again and again and again, each time making yourself look worse and worse. You are the Cliff Clavin of this blog. An idiotic blowhard who garners zero respect. Today has proven that. In spades.
Cliff Clavin. LOLOLOLOLOLOLOL!!! Exactly.
The other name that would fit Iconoclast421 is IBCNU. He's become the IBCNU of this board as well.
California taxpayers may be receiving IOU's instead of rebate checks...
http://gocalifornia.blogspot.com/2009/01/state-may-issues-ious-instead-of-tax.html
We haven't pulled the trigger yet with further buying. Near 7,500, with a little panic, maybe a spike in the VIX, then ok, but otherwise there's no reason to be diving in right now. Chart of BAC, even more so than C, looks like it may be making headlines soon. Something along the lines of talk of a BAC bankruptcy could give way to a spike in the VIX and entice us in.
Of course Iconoclast knows what he is talking about. When he was in first grade he asked his 3'9" mummy why he was so different from all the other children. She then broke the news to him that he was a Morloch, and would only fit in with the other children on one day of every year. Halloween! Then she rolled up his sleeve like she did every day of his life since he was incubated and gave him his daily shot.
Cliff Clavin huh? Thanks for making my point. Cliff Clavin is a meaningless character on a sitcom designed to fill your mind with useless garbage while the real world closes in around you. While you were watching that sitcom, I was reading about the people who shaped today's world 50 and 100 years ago. Making pointless personal remarks about me will not change their plans for you. So go ahead and keep shoveling out the drivel, and I will continue profiting from the willful ignorance of people like you.
While you guys were mud slinging, you may have missed Snot's prescient post about BAC. Prescient, because it gives an indication about where the financials are headed. BAC lost over 3B in valuation today. They are simply in no position to get themselves out of the fix they are in. Given that the government is still wrangling with the bailout details, I think a short term short of the financials is a very good bet.
Now, Icon may have three eyes, is green and only 3'9", but at least he posts both trades and his reason for his trades. What constructive advice have the anons contributed? Please, enamor us with your pearls of trading wisdom. No? No analysis? No insightful commentary? I thought so.
Correct, sbbuilder. I asked Icon about his conspiracy beliefs on this blog a couple of months ago and was attacked, in part, at east, by the same juvenile group, one of whom was defending Icon then. I wanted to know if his stock advice was really based on this stuff. It seems to me that his stock picks are based on chart reading and I can look at the chart and see if he has something (like SRS) or doesn't have something worth noting.
Snot, a regional bank where I live, Regions Bank - RF, has gone from the $8 to $10 range from November to the first week of January into a freefall in 2009 -- to $2.61. That is about a 70% drop in a month. Another bank around here, SunTrust - STI , with whom our mortgage was made, has dropped from $30 to $10 and change in a month, a 65% decline. I'm staying away from financials, even for a short, because as soon as someone shorts, the bank may get another $10+ billion from government welfare.
I feel sorry for Icon. How sad his angry little life must be to harbour such paranoia and distrust of everyone and everything. Life is what you make it, and from the sounds of it he's made his pretty bleak. One can only hope that he hasn't and won't propagate, because that child will end up in a Texas belltower with a sniper's rifle shooting everyone he sees crying "that's for you daddy!"
I'll be buying a large amount of FXP in the $35.50 to $36.80 range. Hopefully today, maybe tomorrow.
You guys say Icon ought to be short considering his pessimistic conspiracy theories. Haven't you been reading his posts. What does he buy? SRS and now FXP. He is double short.
I trade with Zecco. Today when I checked my account I had to meet a $3000 margin call. I called to see what was going on. They told me FXI has been pulled from the marginable equity list. Is that across all brokers? DO they know something I don't?
The "buy american" clause of the stimulus/spending bill will hurt China if it goes through. That's one possibility. The 20 million newly unemployed migrant workers is another possibility. The collapse of Japan I suspect is the primary cause. Brokers are starting to seriously shy away from asia.
FXP didnt hit my target. I apparently got some of the math wrong because FXI squarely hit my target of 26.75. This is why in the past I've always said "I'm going to buy FXP when FXI does such and such..." Making calculations on a double inverse derivative like FXP is never precise. If I'm going to be away from my computer during the day, what I do is set up a trade trigger to buy FXP with a market order when FXI trades at my target price. This is the best way to hit a precise target on a double (or triple) derivative if you are going to be busy during the trading day.
IYR is in the process of failing an rsi support line test. The next lowest support is at 29.50. URE under 3.80 would be a nice bounce play.
Icon and others, does GDX look like a buy?
I dont think so. Until it actually breaks its 200-day, I have to assume it is going to continue to bang its head on that ceiling. a lot of indexes are lining up for a major breakout, or a major drop, take your pick. Something is coming. I am watching XLF closely for signs of what to do next. If/when it hits 9.60 I am going heavy into FAZ and ERY. Irrational or not, I cant buy into a rally now.
Anon, I have been in gdx and dgp for a short while now. gdx chart has been uptrending since oct and moving in a nice uptrending channel, something snot looks for when going long. gold has been testing 925 recently and I am hopeful it will break thru 925.
my chart on gdx currently shows the bottom of the channel ~32, fwiw.
good luck,
rl
Thx Icon and rl.
You got that right Icon. We are either lining up for a major OMG the government is saving the financials market rally or a major OMG the government can't save the financials market selloff.
Feels like the craps tables in Vegas right about now. Except the government can load the dice if they want. Anyone placing any bets?
GDX does have a very pretty chart. My analysis works very well for it. It is currently producing one buy signal, but the real time to buy was mid january when it triggered two buy signals. That was the last time I said GLD was at support... I'm not seeing any resistance lines on the rsi chart that correspond to the 200dma, so there is a very good chance it will puncture the 200dma this time. Unfortunately I am fndamentally opposed to gold because we're still in a credit contraction. My guess is it breaks the 200-day intraday then closes below it and triggers a whole slew of bearish signals.
Before deciding to buy GDX, you should take a good look at HL. It too was at the bottom of a channel... up until yesterday. It's now deep in the mud.
icon, thanks for your view on gdx/gold. i 1st got into gdx 1/7 @ ~29, so i haven't been watching it closely for too long. but as long as it doesn't break thru the bottom of the channel, i'm hoping to keep playing it for a while.
in regards to gold, a few things i noticed i thought i'd share:
over the last 1 year, gold is almost exactly even, which is pretty good considering how other investments have faired (i wish i could say i was even from a year ago, i would gladly take that)
the 5 year and 10 year charts of gold are solid uptrends that haven't broken down. prices went parabolic around 9/07 but have corrected and now back on almost the exact slope from before going parabolic.
i'm watching gdx and gold charts pretty closely now. hoping both will continue to uptrend, but will quickly pull out if the charts break down.
rl
just took a look at hl chart. no doubt it broke down & fast. once the 50dma broke, the bottom fell out.
hl chart is certainly not as strong looking as gdx, even before the breakdown. broke down just before reaching the 100dma, and the 50dma didn't hold at all.
looking at gdx again now, looks like the 200dma and the bottom of its channel are closing in. so i guess something will give way here pretty soon.
rl
What a twisted bit of thinking behind today's market moves! Gut wrenchingly bad employment news brings us a huge rally.
This is no time to be in the ballgame. Idiocy and pandemonium prevail. This just confirms my notion about how reliant industry has become to the government. How very sad.
I did something today against my better judgement and bought some DDM, (actually a sizeable amount). I think it's silly the way the market is responding, but if that's the way it wants to go, then so be it. The very moment that sanity returns, and a downturn appears imminent, I'll sell those shares as fast as I can.
Right now it seems that you can take all of your TA, your trendlines, channels and everything else and throw it out the window. This is because Pennsylvania Ave has become the defacto Wall Street. So, does anyone know how to trade Congress?
And, again, it looks like we'll have another of those 'weekend' deals like we did last fall. Remember how fun it was white knuckleing the weekends? Steve W. got it right about the craps shoot. But, heck, if you ain't in the game, you ain't in the game.
Candidate for the Oscars: "SWINDLER'S LIST", coming to a theater near to you directed by Bernie Madoff, starring Kevin Bacon, John Malkovich, Carl Shapiro, Larry Silverstein, Larry King, the B'nai Brith, Yeshiva University and others.
hi guys, um, i know it's a funny time to ask this, but .... i was wondering what TA books/learning tools you guys recommended. indeed it's a weird time to be following the market at all, and certainly a weird time to start looking for 'rules of sanity'. but i'm here & it's now. so any recommendations?
thanks in advance.
jf
Their are a number of good books out there. Snot has recommended: "Secrets for Profiting In Bull And Bear Markets"
by Stan Weinstein, this is a good one. Two others that are good that I know of: "A Beginners Guide To Short Term Trading" 2nd edition by Toni Turner. "Trading In the Zone" by Mark Douglas'.
Some web sites: www.freetradingvideos.com, www.cboe.com.
www.investopedia.com
Hope others will contribute also.
Good Luck!
Some good books on technical analysis: "Technical Analysis Of The Financial Markets" by John Murphy.
"Introduction To Technical Analysis" by Martin Prang.
"Technical Analysis From A To Z" by Steve Achelis.
"Technical Analysis for Dummies".
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