Good morning :)
Obviously I feel frustrated about the Main's results this year and my inability to act sooner, so I've been thinking about ways to improve or at least stabilize things.
Today I'll sell SYX because the stock fell 2.9% yesterday and I thought it would hold up fairly well until Monday (the ex-dividend date). Give or take $1, it doesn't matter much where I'll sell since I'm losing 48% already.
But I have a problem with the other 9 holdings. You see, they're special situations, each stock has its unique reasons for going up over the long term, regardless of the state of the US or global economies. Let's make a brief summary of each investment story:
CIMT - This is a $23.6 M market cap Israeli company. The company's fundamental trends are very positive and the stock is cheap. It operates in a niche market (Computer Aided Design/Computer Aided Manufacturing) which is worth about $900 M a year. CIMT will have revenues of about $40 M - $50 M in 2008. The company has been growing through organic growth and acquisitions. I believe they'll reach numbers over $100 M in revenues in two to three years time and will achieve a 15% net profit margin (meaning about $15 M in net income). If one attaches a conservative earnings multiple of 10 to this expectation, CIMT will be a $150 M market cap company, which is 6 times more than what it is now. I expect this to happen in two to three years time and have no reason to suspect it won't happen, even with all the swings in the US economy.
IMMR - Haptics will be present in most electronic devices in the near future. A person needs to feel what it is touching, not just seeing and earing. IMMR has 700 plus patents protecting its intellectual property and has licensing agreements with giants like Nokia, Samsung and LG. Most mobile devices will have touch feedback technology in one or two years. This will happen regardless of the US or global economic cycle. IMMR will see its revenues and profits rise and the share price, which is currently very cheap going down to almost net cash levels, should rise.
ASTI - If you believe in the future of alternative energy, especially solar energy, then ASTI is a pick with very high potential. It is unique in its space, since it is ready to produce flexible thin film modules in a grand scale. It also has two $100 B plus partners ready to distribute its products around the World. If one thinks the buildings and houses of the future will be build using a Building Integrated Photo-Voltaic (BIPV) material, then one should own ASTI for the long term. This will happen regardless of the US or global economic cycles. If Oil keeps going higher, electricity costs will also rise and solar will be a need, not a luxury. Not just because of the environment, but because of the economy and the necessity to cut costs.
SDTH - Chinese people will demand for more tires, paint, PVC, plastics and paper. SDTH makes a product, NPCC, which partially replaces the natural resources used to manufacture these goods. These natural resources (rubber, oil, wood, etc) are rising in price, therefore NPCC's need is also rising. The company is also undergoing an international expansion phase which is just starting. SDTH is a play on the growth of the Chinese consumer which will inevitably happen, those people have been saving more than 40% of their personal income for many years.
CHME.OB - This stock could have a powerful macro story (also it is incredibly cheap from a fundamental standpoint), but because it is an OTCBB stock, investors don't have any confidence to buy it. CHME.OB needs more time and continuous good results to show it's a real company. I have just 3.1% of capital in this penny stock and I'll keep holding it.
UTVG.OB - Another one with a perfect macro story, the growth of tourism in China. Fundamental trends and valuation are very attractive. But the company has poor internal controls and that coupled with being an OTCBB took it down sharply. But I think these are short term problems, over the long term, the business opportunity is great and UTVG, being a US traded company, will ultimately prevail in this market sector which I expect to grow very fast. This is regardless of the US or global economic cycles.
SIX - SIX has been under a bear market of its own for 10 years. Americans may not buy many LCD televisions or computers in 2008, but they surely won't lack money to spend a weekend in an amusement park with their families. The company has been under a turnaround plan with insiders buying heavily recently. I trust this company's management and believe the turnaround will be successful, which will put SIX's share price around $6 in 12 months time, in my current view.
OPMR - There will be challenges, but OPMR is trading at a fraction of revenues and closer to net cash levels. I believe in robots in our lives and prefer OPMR, as a toy and consumer electronics company, than JAKK or MCZ at this point. My hands aren't exceptionally strong on this stock, but I remain a believer and think the business isn't all that dependent of the economic cycle.
DROOY - Sure, I'm a bull on $GOLD, but most gold mining companies are very overvalued by any metric. DROOY actually looks quite cheap, because the company has been losing money, because it has a higher than average cost of production. But with $gold around $1,000 oz I see DROOY earning $1.5 - $2 EPS in 2008, making it the most attractive gold company around. I just wish that the Rand doesn't rise too much versus the USD, because DROOY receives in USD and has expenses in Rands and that can hurt profitability. But I don't think these changes will have a very material impact in DROOY's operations. I have to dig more on this subject, though.
Given all this I would like to keep holding all these 9 stocks, leaving me with just 37.63% of cash available to fight the general market's downtrend, by either shorting stocks or making short term trades.
I've been studying stocks to go short, but I find it so difficult ... the real bad stocks can't be sold short by most of you ... and it seems that every time one stock is heavily shorted it has a strong rebound to clean up the bears. Making short term trades would be hard to follow and because I'm handicapped by the impossibility of making intraday decisions, it would be difficult to perform.
I just would like to keep holding my stocks for the long term and at the same time protect capital from a further deterioration in the general market. Basically stay neutral on the direction of the market and concentrate myself in the unique investment stories that I have.
The way I see things going the FED will fail in its efforts to revive the economy (the market is telling me this, even though I thought differently before). The FED is creating more USD to lend to banks, not give. That money has to come back to the FED, it has to be paid. So it is just a temporary fix that allows banks to keep things going and keep pressuring consumers to pay their debts. And I'm sure consumers will ultimately pay, one way or the other, sooner or later, them or their descendants, they will pay. However, in this process, something will be lost and that's going to be the problem for the future: consumers will lose their appetite for credit. They'll value financial stability and health more than owning a bigger or better house, more than owning a great car ... in the end, peace of mind will rise as the most valuable "asset", instead of material things.
It may take several years for consumers to clean up their personal balance sheets and start viewing spending heavily as an option again ... this makes me think about another issue, which is, how could the public come in and bid this market higher if they, as a group, don't have any savings or more credit capacity? From where would the money come from?
One could think international investors, but with the USD falling sharply day by day ... they lack the incentive. There's negative return.
As for my "Global catch up thesis" the problem is that it may be too late, since on a PPP basis China already is the largest economy in the World.
I guess the SPY will just break down below the $126 level and there's going to be a panic throughout the spring and summer ... it appears we're not in a 1990-91 type of situation, but more like a 1973 situation, when the S&P 500 fell 50% in one year, going back down to the 1970 low. Inflation adjusted the S&P 500 fell more than 80% ... it was really awful, and unfortunately it may happen again.
Given this, I thought about shorting the SPY or the QQQQ, or both. I don't like those inverted Pro-Shares funds, which go up when the market goes down by double amount, because they can't accurately do that, unless they keep selling an higher and higher amount of shares ... the base would have to grow more than arithmetically. Then I started thinking that what I have are all small caps, so why would I hedge my small cap exposure by shorting large caps?
I concluded that I should short the Russel 2000 Index, which is composed by small caps (but larger than the stocks I have, since they are the 2000 smallest of the 3000 largest US companies). There's a very liquid tracker stock for this Index, which ticker symbol is IWM (it had a volume of 92.6 million shares yesterday).
I would like this short to perfectly hedge the Main's long exposure, but since I have 62.37% of long exposure and just 37.63% of cash available, I'm going to have to use some leverage.
If I sell short 3800 shares of IWM I'll be more or less perfectly hedged and that's what I'll do today.
I'm sorry for taking so long to do this ... I was wrong on the general market direction.
David, on my account I cannot sell stocks short. Is there an alternative I can buy that will equal shorting IWM? I remember there were some trusts that traded opposing SPY, QQQQ and Russel2000, just don't remember which ones.
Thanks!
I found this on Smart Money:
"The Amex list included the very liquid iShares Russell 2000 Index Fund (IWM: 66.52, -0.78, -1.15%), whose volume topped 16 million shares on Tuesday. The large number of failures to deliver shares on open trades implies there aren't enough shares available to meet trading demand — including demand from short sellers to borrow shares."
Quote from: berloga on March 13, 2008, 09:13:04 AM
David, on my account I cannot sell stocks short. Is there an alternative I can buy that will equal shorting IWM? I remember there were some trusts that traded opposing SPY, QQQQ and Russel2000, just don't remember which ones.
Thanks!
Yes, there's the Pro Funds UltraShort Russel 2000, ticker symbol is TWM.
It traded 9 million shares yesterday. Just beware with the calculus because this is supposed to go up by double amount the Russel 2000 goes down (or down by double amount the Russel 2000 goes up), while my short sale will perfectly match (in an inverse way), the Russel 2000. This is actually a way of getting leverage without leveraging your account ... I don't know if I'm making myself understand.
Quote from: Houlahan on March 13, 2008, 09:17:20 AM
I found this on Smart Money:
"The Amex list included the very liquid iShares Russell 2000 Index Fund (IWM: 66.52, -0.78, -1.15%), whose volume topped 16 million shares on Tuesday. The large number of failures to deliver shares on open trades implies there aren't enough shares available to meet trading demand — including demand from short sellers to borrow shares."
Yes, but since then there was a very strong up day with 117 million shares traded and yesterday there were 92.6 million. I think there won't be any problem in selling this short, but let me know if there are any problems (in case you try to short and can't do it due to whatever reason).
Anyone wishing to short the market using a basket of inverse funds can check out:
http://www.bearmarketcentral.com/mutualfunds.htm
I've been toying with the notion of getting a number of these funds as I am convinced that the overall market direction for some time to come is downward.
I guess I'm a contrarian in the ST, cause I've been selling off my hedges and hunting what look like bargains (I hope). I think my hedges have already served their purpose, for me anyway. GL.
David,
I will not be following you with this recommendation of shorting right now. I am sticking to my statement on the "cave in" message board last week. I will have a better picture soon. I believe you should have hedged the fund sooner by finding a few precious metal or commodity stocks that look attractive. I asked you on the message board on February 20th about looking into GRS, even after I bought it ( I still own it ) and never got a response. Maybe it would not have fit your criteria to buy it but it has done well for me. Anyway I may follow you soon but not for a while I think it may be the worst time to be shorting right now. It sounds like I am the only one left who thinks we will be at new S&P highs over 1600 by middle of next year. I am selective buying stocks now. I am not immune from being wrong and we Will know in the fullness of time. To all good trading and health.
Poli
Quote from: Houlahan on March 13, 2008, 09:17:20 AM
I found this on Smart Money:
"The Amex list included the very liquid iShares Russell 2000 Index Fund (IWM: 66.52, -0.78, -1.15%), whose volume topped 16 million shares on Tuesday. The large number of failures to deliver shares on open trades implies there aren't enough shares available to meet trading demand — including demand from short sellers to borrow shares."
That should tell you right there to stay away from shorting it. Shorts are now very late to the party, IMO., except maybe on oil. Nearly all the analysts are also very bullish on oil prices and I'm just about ready to short it myself or buy DUG.
BigSully1,
I am in agreement with your last post. Good trading and health to you.
Poli
I agree about buying DUG. I'm no expert,but don't you short what's been going up? Shorting the market in Oct would have been a contrarian call,but the right one. What's the right one now? The best trades are the hardest to make.
I must say I like today's market action for the first time this year. Seems like some "real" buying going on....and not just short covering.
Quote from: poli on March 13, 2008, 12:30:51 PM
David,
I will not be following you with this recommendation of shorting right now.
David is not shorting the market but rather removing the systematic risk.
If the stocks 3SOF is holding perform better than the market we will do great whether the market goes up or down.
Pretty smart if you believe you can beat the market but don't know which way the market is going ;)
Quote from: soxguy on March 13, 2008, 02:38:07 PM
I agree about buying DUG. I'm no expert,but don't you short what's been going up? Shorting the market in Oct would have been a contrarian call,but the right one. What's the right one now? The best trades are the hardest to make.
Yes you're right soxguy about very hard to go against fear (or euphoria) and the masses, but many times the right thing to do. Oil over $1.10 has brought in a whole slew of new buyers now, the analysts are pumping and I expect them to be wrong soon, although they may get another big spike first. I usually wait for such an extreme, an extreme much more than I could ever believe could happen, but I feel it's close and have started a position in DUG, will probably finish filling ftommorrow. Options expiry tommorrow.
Quote from: kslifka on March 13, 2008, 03:14:48 PM
I must say I like today's market action for the first time this year. Seems like some "real" buying going on....and not just short covering.
You might be right Kslifka, but IBD says a follow through day should come no sooner than 4 days after a rally attempt in order to discount short covering. Tommorrow will be the 4th day. Also options expiry tommorrow.
Quote from: BigSully1 on March 13, 2008, 03:52:40 PM
Quote from: kslifka on March 13, 2008, 03:14:48 PM
I must say I like today's market action for the first time this year. Seems like some "real" buying going on....and not just short covering.
You might be right Kslifka, but IBD says a follow through day should come no sooner than 4 days after a rally attempt in order to discount short covering. Tommorrow will be the 4th day. Also options expiry tommorrow.
We could see a nice rally for days .
BigSully1 we still have 9 days left for march option expiration
Quote from: Garoh on March 13, 2008, 05:03:59 PM
Quote from: BigSully1 on March 13, 2008, 03:52:40 PM
Quote from: kslifka on March 13, 2008, 03:14:48 PM
I must say I like today's market action for the first time this year. Seems like some "real" buying going on....and not just short covering.
You might be right Kslifka, but IBD says a follow through day should come no sooner than 4 days after a rally attempt in order to discount short covering. Tommorrow will be the 4th day. Also options expiry tommorrow.
We could see a nice rally for days .
BigSully1 we still have 9 days left for march option expiration
You're right on the options exp. Next week. My bad.
Will the Saudis and OPEC cooperate this time? If they do, they will likely make multi $B's on the downside also. The fed is REALLY caught between a rock and a really hard place now. Can they continue to make large IR cuts with commodities so high and the dollar so low? Something has to give, one way or another. I'm now leaning toward a bounce in the dollar and a fall in oil prices, at least temporarily.
Bush hopes Cheney's Mideast visit will rein in oil prices
By Brian Knowlton Published: March 10, 2008
WASHINGTON: With oil soaring to a record $108 a barrel amid mounting signs of U.S. economic turbulence, President George W. Bush said Monday that he was sending Vice President Dick Cheney to the Middle East to raise concerns about oil prices and to press Israeli and Palestinian leaders to move toward peace.
Cheney, who leaves Sunday, will meet with King Abdullah in Saudi Arabia, the world's biggest oil producer and the de facto leader of OPEC.
"Obviously, we want to see an increase in production," said Dana Perino, an administration spokeswoman. "The president does want OPEC to take into consideration that its biggest customer, the United States - our economy has weakened and part of the reason is because of higher oil prices. We think that more supply would help, and I don't anticipate that the vice president would have any other message than that one."
The Bush administration is struggling to revive an American economy that is sagging under the weight of a housing slump, rising prices and a credit crisis, and it has had little luck persuading OPEC to increase production levels.
At a meeting Wednesday in Vienna, OPEC rebuffed a Bush statement two days earlier calling for increased output.
OPEC said speculators and what it called the "mismanagement" of the U.S. economy were to blame for high oil prices. The cartel left its production levels unchanged, saying that the market did not need more oil.
Cheney will meet in Israel with Prime Minister Ehud Olmert and on the West Bank with Mahmoud Abbas, the Palestinian leader, to urge both to "uphold their obligations" to move toward a peace settlement a stated priority for Bush in his waning months in office.
Bush sent Secretary of State Condoleezza Rice to the area recently to persuade Palestinian leaders to resume peace talks with Israel after a deadly Israeli military incursion into Gaza. Hopes for a peace settlement were further shaken Thursday when a Palestinian gunman attacked a seminary in Israel, killing eight students.
A reporter asked Perino on Monday whether Cheney was on a "rescue mission" because Rice had failed to achieve what Bush wanted. Perino called that "a little bit outrageous" and praised Rice for being able to pull the parties "back from the brink and have them recommit to having discussions."
Cheney will also visit Oman, a significant non-OPEC oil producer, and hold talks with its leader, Sultan Qaboos, a respected intermediary between oil-producing and oil-consuming countries.
Cheney will also confer with Turkish leaders in Ankara.
At a time when some OPEC producers are skeptical of the U.S. role in Iraq and the region and others, like Venezuela, are frankly hostile, it was unclear what enticements Cheney might have to offer.
With the U.S. economy slowing, investors have been fleeing stocks in favor of commodities like oil. But oil is sold in dollars, and with the value of the dollar falling, oil exporters have to sell more to maintain their earnings levels.
OPEC members already are unhappy that the Bush administration has done little to prop up a weak dollar, something that makes oil more expensive but also bolsters U.S. exports.
Bush last week called it "a mistake" for OPEC to let prices reach levels where they slow the U.S. economy.
Still, oil prices have risen a further $4 a barrel since the OPEC meeting, hitting a record $108.21 a barrel on Monday on the New York Mercantile Exchange, after investors began buying oil futures to hedge against a depressed dollar and inflation.
Oil prices have risen more than 70 percent in the last year.
The record prices have sharpened tensions between OPEC and the United States, the world's largest oil consumer. An earlier plea by Bush, lodged in January during a trip to Saudi Arabia - during which he spent a night at King Abdullah's farm - also brought no result.
OPEC's 13 member countries produce about 40 percent of the world's oil exports.
The timing of Cheney's visit might be further complicated: Investors and analysts expect the Federal Reserve Board, meeting March 18 in Washington, to announce an interest-rate cut of perhaps 50 basis points, or a half-percentage point.
Lower rates can translate to a weaker dollar and thus higher oil prices, though the markets have largely taken the anticipated cut into account.
The U.S. economy is beset by a troubling combination of rising consumer prices and lagging growth, expected to remain anemic this year.
High oil prices, and the steady increase in U.S. gasoline prices to near-record levels, are problematic enough for the White House, but even more so in an election year.
Gas prices now average $3.23 a gallon nationwide, after rising 6 cents over the last week, the federal Energy Information Administration said Monday.
Bush, speaking to reporters Monday during a news conference with the visiting Polish prime minister, Donald Tusk, spoke at some length about his aspirations for a peaceful, two-state settlement involving Israel and the Palestinians.
He said he hoped that both the Israelis and Palestinians would re-engage in the peace talks and that he was still aiming for an agreement by January.
"But violence in the Gaza Strip and southern Israel has hampered the peace talks," Bush said.
Still, he said, "I'm optimistic that we'll be able to achieve a vision that shows a way forward, and I'm optimistic leaders will step forward and do the hard things necessary so people don't have to live in deprivation and fear."
Bush said that Cheney's goal in the region was "to reassure people that the United States is committed to a vision of peace in the Middle East," but also to call on Israelis and Palestinians to "uphold their obligations on the road map" plan for peace; and to talk about threats to the region, including Iran, while bolstering security relationships with friendly countries.
Quote from: BigSully1 on March 13, 2008, 03:52:40 PM
Quote from: kslifka on March 13, 2008, 03:14:48 PM
I must say I like today's market action for the first time this year. Seems like some "real" buying going on....and not just short covering.
You might be right Kslifka, but IBD says a follow through day should come no sooner than 4 days after a rally attempt in order to discount short covering. Tommorrow will be the 4th day. Also options expiry tommorrow.
Whoops! Monday would be the fourth day and options exp next week.
Quote from: soxguy on March 13, 2008, 02:38:07 PM
I agree about buying DUG. I'm no expert,but don't you short what's been going up?
Shorting strategies are exactly inverse to going long. You either short strength (shares going up in your view too much = unsustainable and due for pullback). Or you short weakness (shares in a confirmed downtrend and breaking through areas of historical support). Both approaches are valid.
Right now the market has no direction and leadership it is gyrating up and down largely on the latest Fed intervention or news item relating to write downs, employment news, consumer spending news, credit news etc. This creates volatility and makes trading an extreme challenge.
Personally I think todays action was just more of the same skittish behaviour and sooner rather than later the S&P500 will be making new lows. 1270 area is muli touched and once breached will signal the next downleg.
I could say I hope I am wrong, but I won't, why? Because I will position my approach to take advantage of that scenario and follow the current trend (which is down). Better than trying to fight the trend and be going long only.
Quote from: kslifka on March 13, 2008, 03:14:48 PM
I must say I like today's market action for the first time this year. Seems like some "real" buying going on....and not just short covering.
Hi kslifka :)
I'm not into "tic-tac" analysis (tic-tac meaning very short term technical analysis), but if I were I would consider two things:
1 - I would use the SPY chart instead of the $SPX chart. This is because the open on the $SPX isn't accurate, the first ticks are formed with just a few stocks counting and that distorts the opening value. An accurate opening value is important for a tool which I find somewhat valuable in tic-tac technical analysis, which is the Candlestick theory.
2 - Considering the candlestick theory, yesterday's white candle was bearish. It was an "In neck" pattern, which is a bearish continuation pattern:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44117;image)
Anyway, when tic-tacking one needs to be very flexible and this pattern needs confirmation. The SPY should open lower today and keep going lower. The pattern would be invalidated if the SPY were to close above Wednesday's midpoint, which is $132.05.
I didn't pay much attention to tic-tac yesterday and got an ugly day on the Main (because that hedge is very powerful, I made a small calculus mistake and went a bit further into margin than I wanted). Also the Russel 2000 was relatively strong yesterday, because it already touched its support level (the equivalent of $126 on the SPY). But I think it was just a one day phenomenon.
I agree with AussieTrader, ultimately the SPY will break down to new lows below $126. This thesis would be seriously compromised if the SPY were to close above $139.
Good luck :)
Quote from: David Randolph on March 14, 2008, 07:19:13 AM
Quote from: kslifka on March 13, 2008, 03:14:48 PM
I must say I like today's market action for the first time this year. Seems like some "real" buying going on....and not just short covering.
Hi kslifka :)
I'm not into "tic-tac" analysis (tic-tac meaning very short term technical analysis), but if I were I would consider two things:
1 - I would use the SPY chart instead of the $SPX chart. This is because the open on the $SPX isn't accurate, the first ticks are formed with just a few stocks counting and that distorts the opening value. An accurate opening value is important for a tool which I find somewhat valuable in tic-tac technical analysis, which is the Candlestick theory.
2 - Considering the candlestick theory, yesterday's white candle was bearish. It was an "In neck" pattern, which is a bearish continuation pattern:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44117;image)
Anyway, when tic-tacking one needs to be very flexible and this pattern needs confirmation. The SPY should open lower today and keep going lower. The pattern would be invalidated if the SPY were to close above Wednesday's midpoint, which is $132.05.
I didn't pay much attention to tic-tac yesterday and got an ugly day on the Main (because that hedge is very powerful, I made a small calculus mistake and went a bit further into margin than I wanted). Also the Russel 2000 was relatively strong yesterday, because it already touched its support level (the equivalent of $126 on the SPY). But I think it was just a one day phenomenon.
I agree with AussieTrader, ultimately the SPY will break down to new lows below $126. This thesis would be seriously compromised if the SPY were to close above $139.
Good luck :)
You're right...I should of used the SPY instead of the $SPX...I was just throwing up a chart for illustrative purposes.
I do believe with you that the market will go lower eventually...but after the action yesterday...I felt we could get a few good days ahead of us and we may touch the descending trendline eventually.
Anyway the market is responding positively pre-market to the CPI today...however I'm a little suspect of the "lagging" numbers going forward.
Well Bear Stearns just put a knife in decent CPI data this morning. :P
Citigroup is the next BSC, don't you think?
Quote from: kslifka on March 14, 2008, 09:54:46 AM
Well Bear Stearns just put a knife in decent CPI data this morning. :P
Indeed, very bad news coming out of BSC:
Bear Stearns gets help from Fed, J.P. Morgan (http://www.marketwatch.com/news/story/bear-gets-help-fed-jp/story.aspx?guid=%7BFB1471C5%2D8532%2D4893%2DB2A6%2D4869733CCD98%7D)
Broker admits its liquidity 'significantly deteriorated'; mulls alternative options
I always wondered how a firm like Bear Stearns, which was about $10 B market cap, had assets and liabilities approaching $400 B. It was weird for me how such "small" firm was moving so much capital, it had to have tremendous leverage. And Bear is not alone, most major brokerages are in this type of situation. The stock is down 48% as I write :o
With the selling volume that kicked in today I guess we'll have a long red candle on the chart below ... I guess we'll close around $127 on the SPY (continuing with the tic-tac analysis).
(note: the Main Portfolio is actually rising a bit today, but its calculation has some bug. I've called Ramsburg to fix the problem).
Volatility (Fear) index really up today...not to say it may even go up more.
David, I do not think the market has much downside potential at this level. Compared with globalization, the current finance problem is just a blip. Why do you change your mind at this point?? Is it because of TA or FA?
Is Wall Street Close to a Bottom?
Saturday March 15, 4:49 am ET
By Eileen Aj Connelly, AP Business Writer
The Stock Market Will Remain Volatile, but Some Analysts See Signs That the Bottom May Be Near
NEW YORK (AP) -- Investors nursing whiplash symptoms after watching the market's recent wild swings may find that Wall Street will deliver some relief in the coming weeks.
While volatility isn't going to disappear overnight, some experts suggest the market may be near the beginning of a recovery.
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"I think we've seen a bottom," said Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc., a division of Wachovia. "It's probably not 'the' bottom," he said, "I think it would be presumptuous to call it 'the' bottom."
Some might consider any positive view contrarian, especially given the shock caused Friday by news of a bailout needed by investment bank Bear Stearns Cos., but Goldman said he thinks long-term investors have reason to start expecting some relief ahead.
"I think what we have is a Bear Stearns crisis, not a stock market crisis," he said of the Wall Street bank's liquidity problems, which stemmed from investors, customers and lenders withdrawing their business and pulling back on credit lines. "Right now, I'm not aware of any other major brokerage firms or banks that have this type of solvency problem."
Still, Goldman said, such news can generate further negative feelings. "The level of pessimism, the calls I'm getting, are it's like the end of the Western world."
"The market is very nervous."
Those nerves were reflected in the market's moves this past week, as stocks on Monday sold off for the third straight day, then bounced back Tuesday after the Federal Reserve said it would put up cash to help loosen tight credit market. After a modest decline Wednesday, it got a lift Thursday from Standard & Poor's prediction of an end to massive write-downs of mortgage-backed securities, then dropped sharply Friday following Bear Stearns' revelation.
For the year, the Dow Jones industrial average is down about 10 percent, and off nearly 16 percent since its October high. The S&P 500 index has slipped 12 percent since the start of the year, and about 18 percent since October. The Nasdaq composite index is down about 16 percent for 2007, and off more than 22 percent since its October high -- officially within "bear market" territory.
David Wyss, chief economist for Standard & Poor's said he thinks several factors will likely mean the markets should hit their low point soon. "I think the economy is going to hit bottom in the summer," he said. "Normally, the market leads the economy by about three months," which would put the bottom sometime near the end of March, he suggested.
While there's still plenty in the economy to be worried about, Wyss said, he thinks that signs of a recovery in the market will be helpful in easing investor fears.
"I think people are going to have a little more confidence," he said, adding, however, "It doesn't mean they're going to be back to normal."
The coming week could bring some news that helps. Along with the Federal Reserve meeting that is expected to deliver another big interest rate cut, several major investment banks, including Bear Stearns, are slated to report their first-quarter financial results. Most major corporations will follow starting next month.
Global investment strategist Subodh Kumar expects the earnings reports will produce some difficult numbers, but that could help in the long run.
"I think there's one more leg of earnings reductions that the analysts haven't taken yet," he said. "What I'm anticipating is that as the first-quarter earnings are reported, (analysts) will cut their second quarter estimates and that will help us find a bottom."
"In terms of the market drop, I think most of that has already been done," he said. "In terms of expectations, in terms of earnings, I think there's more to come."
Brett Hammond, chief investment strategist at TIAA-CREF Asset Management, agreed that first-quarter results are not likely to be pretty. "Overall, I think we can expect some fairly negative news on the corporate front," he said, noting that, among other factors, financial companies are probably not done writing down the value of certain holdings.
He also said the credit crisis must also play itself out before market turns.
"The story over the last quarter or so is the 'sound of credit crunching' can be heard everywhere, and I think that's what driving both reality and perception," he said. "You have to talk about both reality and perception when you're talking about turn."
Still, Hammond said, while it might take a few more quarters before the markets show signs of real strength, "the chances of there being a much further downturn from here are less than there's going to be an upturn."
So David used leverage to make his portfolio "net short". I suspect most of his followers don't even have margin accounts to follow his actions and that may be a good thing. Most of, and maybe even all of his "low priced" holdings are non-marginable securities (meaning they are considered risky or volatile and cannot be used as collateral against the short borrow). That would depend on the particular brokerage, but none of them under $5 would be marginable. Also the maintenance margin will vary from broker to broker, but usually 40% for most. I would normally say that their is very little risk to using margin to hedge, even if all cash is fully invested in marginable long positions, but in this case I think there could be some small risk of a maintenance call if the short position goes against him very far. If that would happen, he could be forced to either add more cash to the portfolio, sell some long holdings to raise cash, cover the short position, or the brokerage could even decide this for him. It certainly wouldn't be catastrophic ,by any means, but it could cause some liquidation at inopportune times.
If you insist on the comfort of a hedge now when there seems to be so many great values out there currently, I still reccomend buying the Ultrashort ETF's. If you have cash you can buy these and gain leverage without using margin and also use to hedge your IRA's. Or if you are already fully invested, but have plenty of margin buying power you could also use it with liitle risk, as long as not overdoing it.
Th ultrashort etf's are approved by regulators and unlike David I don't believe they can ever go to zero or negative. I don't fully understand exactly how they work and neither does David, but I don't really care. I would never think of them (or any short, for that matter) as an investment anyway.
I don't really know how David is tracking his portfolio performance now using margin and leverage, but frankly I am rather surprised that it "only" shows a 23% loss with so many 40-70% individual losses.
I have probaly sold 85% or so of my hedges now, including metals and precious metals. If there is more downside to the markets now, I consider the risk very acceptable, but that is only my situation, to each his own. At some point I will be actively hedging again, but not now.
Interest rate cuts will very soon be coming to a halt, and if there is indication of that next week or if they cut less than most expect ( I think less), it could cause a flush of weak hands and hedging may pay off, but probably not in gold or oil in the ST.
Good Luck and Happy Trading or investing.
Quote from: BigSully1 on March 15, 2008, 02:32:12 PM
So David used leverage to make his portfolio "net short". I suspect most of his followers don't even have margin accounts to follow his actions and that may be a good thing. Most of, and maybe even all of his "low priced" holdings are non-marginable securities (meaning they are considered risky or volatile and cannot be used as collateral against the short borrow). That would depend on the particular brokerage, but none of them under $5 would be marginable. Also the maintenance margin will vary from broker to broker, but usually 40% for most. I would normally say that their is very little risk to using margin to hedge, even if all cash is fully invested in marginable long positions, but in this case I think there could be some small risk of a maintenance call if the short position goes against him very far. If that would happen, he could be forced to either add more cash to the portfolio, sell some long holdings to raise cash, cover the short position, or the brokerage could even decide this for him. It certainly wouldn't be catastrophic ,by any means, but it could cause some liquidation at inopportune times.
If you insist on the comfort of a hedge now when there seems to be so many great values out there currently, I still reccomend buying the Ultrashort ETF's. If you have cash you can buy these and gain leverage without using margin and also use to hedge your IRA's. Or if you are already fully invested, but have plenty of margin buying power you could also use it with liitle risk, as long as not overdoing it.
Th ultrashort etf's are approved by regulators and unlike David I don't believe they can ever go to zero or negative. I don't fully understand exactly how they work and neither does David, but I don't really care. I would never think of them (or any short, for that matter) as an investment anyway.
I don't really know how David is tracking his portfolio performance now using margin and leverage, but frankly I am rather surprised that it "only" shows a 23% loss with so many 40-70% individual losses.
I have probaly sold 85% or so of my hedges now, including metals and precious metals. If there is more downside to the markets now, I consider the risk very acceptable, but that is only my situation, to each his own. At some point I will be actively hedging again, but not now.
Interest rate cuts will very soon be coming to a halt, and if there is indication of that next week or if they cut less than most expect ( I think less), it could cause a flush of weak hands and hedging may pay off, but probably not in gold or oil in the ST.
Good Luck and Happy Trading or investing.
I should clarify that when I said you can use hedging and margin with very little risk, instead I should have said with very little overall portfolio risk or risk of margin calls if used properly. . hedging should get you through difficult periods with comfort and without losing your positions, but at some point you have to decide which way to go, or you will never get very far.
Quote from: BigSully1 on March 15, 2008, 02:32:12 PM
I don't really know how David is tracking his portfolio performance now using margin and leverage, but frankly I am rather surprised that it "only" shows a 23% loss with so many 40-70% individual losses.
Hey BigSully, David wrote on 3/14/2008:
"(note: the Main Portfolio is actually rising a bit today, but its calculation has some bug. I've called Ramsburg to fix the problem)." Maybe this helps to explain.
For a short term view: The Fed's emergency assistance to Bear Stearns concerns me. Is this the only failure lurking in the bushes. BS assured everyone they were OK and BAM 2 days later Bear Stearns may be on its way out. As someone posted earlier, who will be next? Could this happen again? It looks as if we are still riding the elevator down, b/c I think the financials will drag us down. Thanks for sharing your thoughts, i hope you enjoyed mine. May we have a big fat rally with the Feds help and the new IPO VISA next week.
Obviously someone knew something was up days before Friday's Bear Stearn sell-off.
Here's an interesting take on the sell-off
http://aaronandmoses.blogspot.com/
Saturday, March 15, 2008
What sank Bear Stearns?
Bear Stearns was taken to the very brink of insolvency over the past 24 hours by a sudden collapse in confidence on the part of its hedge-fund clients.
There was a wholly modern hedge-fund run on the investment bank.
Here's how it happened.
One of Bear Stearns's most profitable businesses was its prime brokerage, which provides lending and admin services to hedge funds with a fixed-income bent.
These hedge funds deposit their assets at Bear Stearns, which the investment bank uses as a source of liquidity.
But – according to a banker close to Bear Stearns – in the last day or so a number of those hedge funds decided to terminate their respective relationships with Bear Stearns.
They were spooked by the rampant speculation about Bear Stearns' fragility and its supposedly excessive exposure to US mortgages.
The hedge funds stampeded to withdraw their assets, so the investment bank was deprived of a vital source of liquidity.
That's why it had to go cap in hand to the New York Fed for financial succour.
Perhaps the most shocking aspect of this episode is that help was in sight for Bear Stearns at the very moment the hedge funds pulled the plug.
As of March 27, Bear Stearns would have been able to exchange its illiquid holdings of mortgage-backed securities for high-quality, liquid US Treasuries, under a scheme announced last Tuesday by the US Federal Reserve.
That would have provided Bear Stearns with sufficient liquid funds to continue as a going concern.
But its hedge-fund clients weren't prepared to stick with it even for 13 days.
It's a very frightening manifestation of the nervousness of even sophisticated investors such as hedge funds.
In today's highly uncertain markets, they are not prepared to give an 80-year-old Wall Street firm the benefit of the doubt for even a fortnight.
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/03/how_hedge_funds_sunk_bear_stea.html
Or maybe a bunch of hedge funds bought puts on Bear Stearns and then decided to jump ship. Anyone remember the 50,000 March 35 puts bought at .15 when the stock was at 60? For a cost of $750,000, these puts, that closed at $9 on Friday, were worth $45,000,000. Add in the exceedingly heavy purchases of the 50, 55 and 60 strike, and you are starting to talk real money.
Dr. J had this to say about BSC last week:
Bear Stearns (BSC) volatility in the front month March calls now tops 160 for the at the money 60 puts. Volatility in April at the money options is also sky-high, pricing at 125%. As a metric for comparison, the 100 day average volatility in Bear Stearns was 55%.
We've got very active put buying all the way down to the March 30 puts, but the institutional paper is trading in the March 60, 55 and 50 puts. In other words, the amateurs are buying up what they perceive to be "cheap" puts below the 50 strike, but most professional paper is more realistic.
The April 55 put (BVDPK) are up $3.90 to $6.00 on double the open interest. Volume tops 6,300 puts at this strike, against 3,200 open interest. Just how desperate are the put buyers?
Well, my DepthCharge shows buyers of the January 10 puts of 2009, where nearly 3,000 puts have trade up $.55 to $.85, a gain of 185 percent on the session. Like the action in Washington Mutual (WM) we cited Friday, this is bankruptcy fear rearing its ugly head in Bear Stearns, folks.
On the session over 95,000 puts have changed hands in BSC, or nearly five times the open interest in the first 2 ½ hours of trade.
http://www.optionmonster.com/#action=home
Only in this market, where nerves are so frayed, can a "run on the bank" start and end so quickly.
I'm going to sell DUG tommorrow. I'm not sure, but I think DUG is akin to shorting oil and gas companies and I don't want that, when I think they are reasonably priced and should continue to do well. Instead, I want to be short crude oil futures and I intend to short USO.
QuoteI don't really know how David is tracking his portfolio performance now using margin and leverage, but frankly I am rather surprised that it "only" shows a 23% loss with so many 40-70% individual losses.
Hey, what's the matter with you, raising suspicions about the Main's performance? ???
The Main was down 23% before the hedge or margin was put in place and it is now down 22.49% in 2008.
The Main's value was $408,812 in January 31st, 2007. The following trades were closed in 2008:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44136;image)
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44137;image)
And the open positions are as follows:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44138;image)
The current value of the Main is $339,260, down 22.49% in 2008.
The hedge (short 3,800 shares of IWM) is a huge position with a size of 74.1% of the Main, which isn't fully compensated by the long exposure which is 58.2% of the Main. Therefore the portfolio is actually net short.
Quote... so many 40-70% individual losses.
So many? And what about the 50.8% profit I made in GIGM, the 40% in SILC, the 85% in SDTH (just 1.8% position here), the 93% in PAL? These were all in 2008.
On SYX I lost 48% and I'm losing also 48% on IMMR. And then there are those two penny stocks where I'm losing 51% and 70%, but remember, those were initiated as 5% positions.
I'm not sure what's your problem?
The S&P futures are down 30 points as I write ...
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44139;image)
... with the futures at 1263 the SPY would open between $126 and $126.5 ...
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44140;image)
... so right at the crucial technical support!
I wonder if BSC will open around $2 a share (probably). That would be down 93.3% from Friday's close :o Well, Bear Stearns now has a weight of just 0.03% of the S&P 500 (http://www.indexarb.com/indexComponentWtsSP500.html) ... but I guess Bear's news (http://www.marketwatch.com/news/story/story.aspx?guid=%7B9B6A846F-A585-4123-BB53-CB3E07A3CFCE%7D&dist=LNQ) will have an impact across the whole financial sector, which represents roughly 20% of the S&P 500:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44141;image)
Hmm, now I wonder, since I'm short the IWM (Russel 2000 tracker stock), not the SPY, if the IWM will go down as much as the SPY today ... what's the percentage of financials in the Russel 2000? I can't find that information.
Anyway, on the long side the Main also doesn't have anything related to the financial sector so I think I'll be allright in today's storm.
Suggestions for a good ultrashort guys?!
Quote from: Se7en on March 17, 2008, 04:32:42 AM
Suggestions for a good ultrashort guys?!
You can check them all here Se7en: ProShares (http://www.proshares.com/)
I was going to say that probably today isn't a good day to initiate your hedging strategy Se7en (because the general market will open sharply down), but it appears that the open won't be as bad as it seemed a few hours ago, as people continue to hope that the $126 support will hold the market. Maybe the open will still be a good selling opportunity, like it happened in Germany this morning.
By the way, the DAX didn't hold its support, this is a signal that the S&P500 will have a hard time holding on to its own:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44146;image)
I wonder what tricks, if any, the FED will pull out today or tomorrow to prevent the stock market from breaking down below this important support area. The problem is the FED made it clear that it was trying to support the stock market, so if it fails ... it will lose all its credibility. Investors will lose confidence in the authorities and will bail out in mass. It won't be a pretty sight.
This Bear Stearns news (http://www.marketwatch.com/news/story/jp-morgan-buy-bear-stearns/story.aspx?guid=%7B9B6A846F%2DA585%2D4123%2DBB53%2DCB3E07A3CFCE%7D) is really bad because it raises red flags for the entire market and the current valuations. Two sessions ago BSC was worth more than $60 a share, it closed at $30 on Friday and on Sunday the company was sold for $2 a share ??? What does this tell us about the other investment banks and the general market valuation? Investors can be pricing stocks way out of whack with their true value.
We'll see what the next few days bring, I'm better hedged than fully exposed.
Oil's steep decline -- falling $4.17 to $106.04 a barrel on the New York Mercantile Exchange -- came hours after futures rose to a new trading high of $111.80 on the Federal Reserve's surprise Sunday move to lower a key interest rate by a quarter point. In the past several months, Fed rate cuts have fueled rallies in oil prices.
Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak. Interest rate cuts, and even the prospect of future cuts, tend to weaken the dollar further.
But the mass selling Monday -- despite the Fed's Sunday rate cut, the prospect of another cut at the Fed's regular Tuesday meeting, and the fact that the dollar dropped to new lows against the euro on Monday -- could be a sign that the oil market's momentum has turned negative, analysts say.
The FED has to defend $126 on the SPY at all costs and everybody knows that. The market went down to that support level yesterday and bounced strongly from it.
Today we have the futures up significantly ahead of the FOMC interest rate decision, to be released as usual at 2:15 pm ET. Market participants are expecting the FED to cut rates by 100 basis points (http://www.marketwatch.com/news/story/us-stock-futures-rise-banks/story.aspx?guid=%7B966B2226%2D498F%2D4A39%2D8133%2DEA400C77B107%7D), bringing the FED funds target rate from 3% to 2%.
The FED is taking really aggressive steps, using most of the weapons and munitions it has in a very short period of time. I personally dislike Bernanke's course of action. I used to trust him and his ability, but his recent moves changed my views ...
Now I recall what he said when people were taking 2nd mortgages on their homes and making those refinances to get cash for immediate consumption, he said something like this:
"People are just diversifying their assets, taking some equity out of their homes and using it for investing in other areas or consumption.". He thought it was actually a good thing. The same for derivatives:
"Derivatives spread the risk across more different players. They reduce the risk for each individual financial institutional."
Also, he doesn't seem to understand financial markets very well. He probably never traded futures or stocks. He's trying to support the stock market but these efforts are futile over the long term ... his rate cuts before the open and on a Sunday show lack of experience and understanding of the market dynamics.
I'll always remember that day when the markets were nosediving and while the market was open the FED comes in and cuts rates by a surprise 50 basis points. It was January 3, 2001. The Nasdaq went from negative to positive by 14% :o ... If Bernanke wants to gain time he should do things well at the right timing to really squeeze the shorts.
Anyway, the one who's being squeezed today is me with this huge short position in the IWM.
But I feel the market will feel disappointed even if the FED cuts the full percentage point. It will tank in the afternoon.
I'll remain hedged, as I'll keep holding the IWM short position.
I think that cutting the rate of 100 basis points is as committing suicide, this will give the weapons again to people to manipulate the market and devastate it again with junk bond, sub-prime etc.
American people just look at the short picture and does not understand that cutting again will produce a long term disaster.
Keep my fingers crossed.
I agree about buying DUG. I'm no expert,but don't you short what's been going up? Shorting the market in Oct would have been a contrarian call,but the right one. What's the right one now? The best trades are the hardest to make.
I still believe this. Why hedge at or near a bottom? When we're back over 14000 on the Dow and there are only blue skies,that's the time to do it. But what do I know?
Quote from: soxguy on March 18, 2008, 03:34:26 PM
I agree about buying DUG. I'm no expert,but don't you short what's been going up? Shorting the market in Oct would have been a contrarian call,but the right one. What's the right one now? The best trades are the hardest to make.
I still believe this. Why hedge at or near a bottom? When we're back over 14000 on the Dow and there are only blue skies,that's the time to do it. But what do I know?
You probably know more than I do, I hope so :)
QuoteWhy hedge at or near a bottom?
It looks like the bottom, but the trend is bearish, as evidenced by the 50 days SMA on the chart below. Everything points to the bottom in sentiment terms.
But, when homebuilders and banks fell 30% from the top, everybody was bearish on them ... and everybody was right, because indeed, fundamentals deteriorated a lot further and stocks went down a lot more.
My take is the same thing is happening with the general market now. The conventional wisdom of "contrarians" is wrong, as it has been the case in several markets over the past few years ... I still don't know why this has been happening, but it's happening, in my view.
Is it that thing that "democracy is good, but too much democracy is bad"? adapted to "capitalism is good, but too much of it can be nasty"?
I don't know, these questions are too big for me.
I'll let the market guide my actions ... as it is now, the IWM is stuck between the descending 50 days SMA and the horizontal support just above $64.2. Unfortunately I think we'll eventually break $64.2 to the downside ... but I can be wrong, as I thought differently just a while ago and I've been a loser.
I'll keep this hedge for now.
Good luck :)
This hedge has been inflicting considerable pain on the Main Portfolio but I'm not throwing down the towel on this one.
I've been studying the bulls and the bears arguments and the bears seem right to me.
Basically the bulls arguments refer to sentiment and technical analysis. They're calling a bottom because the SPY held $126 and bounced strongly from that level. I attribute this market action to the FED's involvement.
The bears arguments are more of a fundamental nature. They point to the future for banks, credit, consumer spending and employment. I believe that the full extent of this crisis remains to be seen and unfortunately will take a lot longer than currently perceived.
Of course, the market can do whatever it wants without the slightest regard for my or anyone else's opinion, but given the current situation, what I would like to see to turn long term bullish again, would be:
1 - A sharp rise in interest rates, due to inflation or the need to protect the USD's value;
2 - A sharp reduction in consumer spending;
3 - A rise in the savings rate.
The investments of the future will have to come from savings, not credit. The FED is using all its weapons to maintain the status quo, but it will ultimately fail in my humble opinion.
The SPY closed right at the 50 days SMA. We'll see where it goes today.
It's possible that I'll have to "cave in" again, but for now I'll keep holding IWM short position.
David: What time frame are you looking at in reference to the statement "the full extent of crisis remains to be seen and will take a lot longer than currently perceived" ? We have been in current downtrend since end of September. You know what my 'opinion' is from my posts on the 'cave in' thread.
Poli
It seems to me that if a person really wanted to hedge a microcap portfolio such as David's by shorting an index ETF, then IWC - Russell Microcap Index, with holdings having an average market cap of $390M would be a much better fit than IWM - Russell 2000 with average market cap of 1.3B. I don't believe any of his holdings are even in the Russell 2000.
Even so, I wouldn't be short on any of them at this point. Buy low, sell high.
Quote from: BigSully1 on March 25, 2008, 12:29:45 PM
It seems to me that if a person really wanted to hedge a microcap portfolio such as David's by shorting an index ETF, then IWC - Russell Microcap Index, with holdings having an average market cap of $390M would be a much better fit than IWM - Russell 2000 with average market cap of 1.3B. I don't believe any of his holdings are even in the Russell 2000.
Even so, I wouldn't be short on any of them at this point. Buy low, sell high.
Year-to-date returns
IWC -9.00%
IWM -1.75%
Quote from: BigSully1 on March 25, 2008, 12:42:08 PM
Quote from: BigSully1 on March 25, 2008, 12:29:45 PM
It seems to me that if a person really wanted to hedge a microcap portfolio such as David's by shorting an index ETF, then IWC - Russell Microcap Index, with holdings having an average market cap of $390M would be a much better fit than IWM - Russell 2000 with average market cap of 1.3B. I don't believe any of his holdings are even in the Russell 2000.
Even so, I wouldn't be short on any of them at this point. Buy low, sell high.
Year-to-date returns
IWC -9.00%
IWM -1.75%
Scratch those year to date figures, they are not correct. Outdated yahoo figures.
Quote from: BigSully1 on March 25, 2008, 12:29:45 PM
It seems to me that if a person really wanted to hedge a microcap portfolio such as David's by shorting an index ETF, then IWC - Russell Microcap Index, with holdings having an average market cap of $390M would be a much better fit than IWM - Russell 2000 with average market cap of 1.3B. I don't believe any of his holdings are even in the Russell 2000.
Even so, I wouldn't be short on any of them at this point. Buy low, sell high.
I agree with everything you say, I just don't know how you mix "buy low, sell high" with "the trend is your friend".
I'm going to cave in again, I feel this market is setting itself up for a big rally. I'm not sure if this is going to be the start of a new bull market (to me it would be the continuation of the old bull market after a very, very tough correction) or not, but I don't want to be short anything right now.
This position has been painful enough already and now bears have sentiment analysis and technical analysis in agreement and saying this market goes higher. The sentiment has been bearish but it appears it go to an historical extreme and even more important, as the market has been higher, bears didn't bail out, they're hanging on, hoping for the market to reverse.
It appears bears will pay a high price for their lack of flexibility. The following article, which isn't new but sentiment analysis isn't a short term thing, it may take several months for the chart to agree with contrarians, opened my eyes:
Was that the bottom?
Commentary: Contrarians growing more confident that bottom has been seen (http://www.marketwatch.com/news/story/contrarian-analysis-continues-support-notion/story.aspx?guid=%7B3AE0066B%2DFC46%2D48E6%2D968D%2D83AF29E27A87%7D&dist=morenews)
And the charts clearly shows a double bottom pattern, both in the SPY and the IWM, as you can see below.
I'm not going to think more. I'll just open my mind to the bullish possibility again and I'll buy to cover IWM at today's open.
David,like I said before,when everything is rosy and after the market makes a big upside move,that's when I would short. It's so contrary to human nature to expect bad news when all we see are blue skies,but betting against the crowd is the way to maximize gains. I added to my ASTI position under $9, and felt awful doing it. I'm smiling today.