3SOF

According to the article Riding the Storm (http://www.3stocksonfire.org/trading/index.php?topic=4158.msg39936#msg39936) I will sell the S&P500 tracking stock around tomorrow's open, 6.66% of the 3 Stocks on Fire Portfolio, as always.

As I was searching for stocks that met my short and long criteria I got more convinced that my bear case is correct. Why?

Because home construction, mortgage, consumer and oil related stocks are trading at a deep discount to the market's multiple. This means stocks are already starting to discount an economic slowdown, although you still can't see it in the averages.

As for gold stocks, they seem to be trading at very high multiples. This means gold is going up, almost for sure.

Anyway, this short on SPY is fully explained on the article on the link above. The change from an expected 3 - 4% GDP growth to an economic recession in late 2006 can produce a steep decline at this point.

The plan is to hold this short position for as long as the SPY is set to close below the blue descending trendline on the chart below, which for tomorrow stands at $126.07.

Did I not understand your trading instructions on this trade. You indicated to hold unless SPY is set to close above 126.07. That tells me I should have covered on the close. This morning you say continue to hold.

SPY also at breakout from short term sideways channel, basically it just made a quick trip from bottom bollinger to top bollinger band (with the help of 50sma) and now sits right at resistance 127.50. Again just like QQQQ will it breakout here or be sent back. Right now I don't know, we have ascending averages, decent volume and retail exuberance for the New Year, which suggest continuation,  but resistance is resistance  ;) will trade accordingly once the chart shows its hand.
Good luck

Thanks Aussietrader. Now I've got a clear plan

Quote from: 1reilly on January 04, 2006, 08:49:40 AM
Did I not understand your trading instructions on this trade. You indicated to hold unless SPY is set to close above 126.07. That tells me I should have covered on the close. This morning you say continue to hold.

I also want to thank Aussietrader for his analysis.

1reilly, things change, and the trading plan may change from one day to another. Initially my plan was to cover on a close above $126.07, but then it changed to hold whatever happened.

This was because I don't see much validity to the current rally, only due to seasonal factors as the beginning of the year, news that were no news and short covering. In fact, these type of strong rallies is what one should expect as a bear market behavior (if you go back to see the biggest advance days, they were all during bear markets).

The chart below isn't my best SPY chart, but I see the current situation as distribution, building a top for a steep decline that will follow.

I'll continue holding SPY short.

The market is heating up for what maybe a hot December jobs report. I would like the market to  open gap higher and then close at the low of the day, completely engulfing the previous day candle.

The best scenario was that the number was a bit on the light side, but futures rally because that would mean not much more rate hikes from the FED.

Personally I think everybody knows the FED is about to stop raising rates and that there will be an economic slowdown. On the magnitude of the slowdown is where I differ from the majority.

I think everything is in place for a consumer recession (there wasn't any for the past 15 years) and most investors think there will only be just a modest slowdown.

There's a reason the FED says it will pause, it is looking at new trends emerging in the housing market and consumer spending.

Anyway, I feel free to change my opinion if the market proves I'm wrong. Unfortunately that won't happen until the SPY's close above $130, so I have a potential loss of about 3.8% on this trade, nothing special.

I'll continue holding SPY SHORT.

Is this a closed trade now!!!

I'm still holding this short and don't see anything about buynig to cover.

Please advise.


Thx...Jody

The SPY held, albeit just barely, the $143.7 support level on close yesterday and futures at this time of the day are sharply positive:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41974;image)

This tells me we'll probably bounce off support and the short term low was made yesterday. Since it is my belief that the SPY is in a lateral trend I expect an upward movement between now and the end of 2007.

This lateral trend will be resolved when investors get a better feel of which is more important, the credit troubles in the US or the unprecedented growth and participation in the global economy.

I believe the growth experienced by major countries like China, India, Russia and Brazil can only be compared to the Industrial Revolution in Britain in the late XVIII century and the post-War economic miracle of Japan. In my humble opinion this growth isn't likely to stop before the GDP per capita in these countries achieves at least 1/3 of the US GDP per capita.

US GDP per capita currently is $41,889. China's is $1,712, India's is $736, Russia is $5,336 and Brazil is $4,270. So I think we're still a very long way to go before the economic growth in these countries reaches a plateau. And this is good for the US and European economies too, very good, especially for the companies with the ability to export.

From these comments you know how I think the long term will play out, but of course the market will have the ultimate word. We'll see what happens next.

From now on I'll use this thread to write comments on the general market.

After a lot of turbulence, like it usually happens at market bottoms, the SPY managed to close the day above the "crucial" $143.7 technical support.

The market started the day higher, but then the FED minutes (http://money.cnn.com/2007/11/20/news/economy/fed_minutes/index.htm) came out with the FED forecasting slower growth in 2008 and the market tanked to new lows.

But, by the close, the Big Boys (or, another expression I like to use, the "Men of the System") showed up to buy the market on one of the heaviest volume days of the year.

I'm aware that today futures are sharply negative, so we'll have a lower open. The SPY is trading at $143.06 in the pre-market as I write this, after closing at $144.64 yesterday. Gee, we knew the Thanksgiving week would be volatile, but this much?

I believe today's open is being influenced by generally the same factors which made people sell yesterday, and the Men of the System already responded to that information by buying, so I think this sharp fall at the open is a buying opportunity.

Of course, I can be wrong, but so far everything is playing out like we're at the bottom (usually I'm one or two days early on these short term timing forecasts).

However, even though the market ended in positive territory yesterday, that didn't help the Main Portfolio, which closed down 3.7% and now it is up just 8.34% for the year, down from a 37% gain just about a month ago. Nobody feels more sorrow than I for this sharp correction.

A similar situation also happened at the August 16th bottom, I remember clearly that on the day the SPY made its low the Main went down 4% plus and it lagged in the first days of recovery. But then it caught up with the SPY and surpassed its performance by a wide margin. I believe this happens because the Main is essentially a small cap portfolio and investors' attention and cash takes a bit longer to get there, but when it does it has a big impact.

Anyway, I invest using a microeconomic approach which tends to ignore the general market fluctuations. I believe my stocks are very attractive from a fundamental standpoint and will surely go up over the long term. Peter Lynch used to say that most people fail to make money in stocks because they're always getting scared out of them. I want to invest in stocks for the upcoming 30 to 40 years until I retire and I'm not planning to cyclically get out of the market because I sense a Bear Market can happen, because I believe I will, like most if not all people, fail in my market timing efforts over the long term. If I get just two or three tenbaggers and the others compensate each other that will make a stellar long term performance over the next three years or so (three to five years is the expected time frame of my current holdings).

I plan to just sit tight throughout the current storm and don't think all that much, because thinking too much may make me lose my long term focus. Six months down the road I believe we'll see the benefits of this attitude.

Happy Thanks Giving :)

Thank you for your contribution, David.

I appreciated a lot!

David,
I know from reading the boards that you used to be a short term trader and have now changed to a long term investor but I was thinking maybe we need a couple of short term trades that would help the main get back some of the lost profits rather quickly.
Although I was not able to participate in the GOAM trade earlier this year, I think we need a couple of short term trades like that, that could help the Main Portfolio in the short term and so help the main in the long term over all performance.
what do you guys think?

I am all for it. I think Stocky had a great idea too.

Stocky's post:
http://www.3stocksonfire.org/trading/index.php?topic=10059.msg109095#new (http://www.3stocksonfire.org/trading/index.php?topic=10059.msg109095#new)

Thanks for the analysis David. I'm still a bull as well but these past days have been very hard to watch!

Quote from: ygtrdr on November 21, 2007, 09:41:51 AM
Thanks for the analysis David. I'm still a bull as well but these past days have been very hard to watch!

how can you be a bull after 5 year bullmarket and its obvious that a recession will hit the usa....plus high oil next year probably 120-140 dollar a barrel....dont forget al kaida ...weak dollar and and and....the credit crisis will hit stronger than anyone thinks.

Plus a Dow Jones that had it s top....sell off with big volume = distribution...the weekly looks ugly we broke the trendline. There is strong resistence about 13400....

so now telll me a reason to be a bull next year...he?

(not bashing just my meaning)

good luck bulls

Hi ket130.

I'm a bull because I feel overall the positives outweight the negatives. I've yet to see any news come out that signals a severe slowdown is in the works for our country or the world for that matter. Now I could always turn out to be wrong at any day and I remain vigilant for news that will change my mind because in this environment that sort of thing is very possible. Housing is surely in a recession but housing only makes up a small percentage of our GDP and other sectors of our economy are expanding, like exports for example.

The pundits have been screaming about Oil causing a recession since it was at 40. Here we are at 100 and the economy has absorbed every price increase well. I think this is chiefly because consumers buy gasoline and not oil by the barrel. Gasoline has remained relatively inexpensive to date.

I want to see the S&P confirm the Dow before I become bearish. The S&P is a much broader average and therefore a more reliable indicator. As well the Nasdaq has not confirmed a bearish signal either. So we have two index's that are broader than the Dow that have not turned bearish yet. I'm not putting all my bets on the Dow.

I think the worry over the dollar is overdone. Really, a weak dollar isn't that bad for Americans. Who it really hurts are the export nations we purchase goods from. Overall though the dollar's weakness hasn't impacted the day to day living of  most Americans. I  think it's more an issue of  national pride than anything.

Al-Qaida. We have been fighting them since the inception of this bull market. I don't see why I would be shorting stocks on the odd chance that they do something. Risk reward isn't worth it at all.

Lastly the Fed has shown itself to be market friendly. Don't bet against the fed and they're lowering rates. I remain bullish until something comes out that tips the balance for me but until then I will not be shorting more than just for hedges.

Good luck.

sure the S+P i also like more to watch at....more firms in the index.

it looks like the rallies get weaker look at the last 3 circles on the macd hist....this is one of the best indicators....bulls get weaker.....at the close of 1416 doesnt look bullish more like freefall....and big resistence at 1440 and 1489.....

With so much bearishness and so much chart reading, its seems to me that all the drum beating by press and the wall st is being done to force Fed to lower the interest rates.

Quote from: stocky on November 23, 2007, 01:09:48 AM
With so much bearishness and so much chart reading, its seems to me that all the drum beating by press and the wall st is being done to force Fed to lower the interest rates.

the latest rate cut in october didnt help much...longs that bought on that day are deeply in red now...

1. Introduction

I've spent the Thanksgiving holiday with my family but unfortunately my mind was elsewhere, thinking about the current state of the stock market and potential future developments. All my adult life I've been a "macro-economist" until about eight months ago, when I've decided to embrace stock picking and investing for the long term from a business perspective, because I believe this is the most logical and productive way to build and grow one's wealth in a 30 to 40 years time span. I will never own a tenbagger (in Peter Lynch's terminology, a stock with a 1,000% return over the years) if I keep getting in and out of the market as I feel bullish or bearish.

But for this article I want to put back my economist's skin, because I believe everybody wants to read opinions on where this market is going and I think I got a valid idea.

2. The 1990-91 Recession and Now

I have a central thesis for my long term bullishness, but I wanted to find some evidence in history that things could and will probably unfold the way I predict. In my studies I found important similarities between the 1990-91 Recession and the period we're living. I've read several articles explaining what caused the early 90's recession and the mood of the moment.

The following excerpt of the "Economic Review - Federal Reserve Bank of San Francisco, 1993 (http://www.frbsf.org/publications/economics/review/1993/93-2_34-48.pdf)» gives us a nice summary of what happened in 1990-91:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42049;image)

Does "pessimistic consumers", "debt accumulations", "jump in oil prices" and "credit crunch" ring a bell? It sure does, this is what we have now.

But back then, as I believe it is the case now, a much bigger and more relevant economic trend was going on in the backstage, and that's why the 1990-91 Recession had the following effect on the S&P 500:

3. Stock Market Reaction

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42050;image)

The 1990-91 sure was a painful period for stock market investors and many if not most bailed out and said: "Stock market? Never again". Yet, it took just seven months for the S&P 500 to march to new all time highs and you see what happened from then on, the market jumped four fold between 1991 and 2000.

I believe this happened because the central theme of the bull market, which was a productivity spurt given by technological advances (with the personal computer taking center stage) was far more important for the US and the World economy than a simple cyclical recession.

At the present moment we also have a long wave of growth and bull market theme which is far more important than a cyclical economic fluctuation, so my best guess says the long term reaction of the stock market will be similar.

4. The Current Long Term Bull Market Central Theme

The current long term bull market central theme is Globalization and the emergence of new economic powerhouses in the World.

A few years ago there were only three relevant economic regions in the World, where just 13% of the population lives: North America, Europe and Japan. Now and just mentioning the biggest, we have China, India, Brazil and Russia emerging as economic powerhouses. In these four countries lives roughly half of the World's population. If, over the long term they get nearly as developed as North America, Europe and Japan, what you have is 3 billion more people with purchasing power in the World, which is an immense new market for companies to sell their goods and services. And there are no barriers ... if you have a superior technology you'll sell it around the World, not just in the US. If you have a successful business model you'll implement it around the World, not just the US. Forget the countries, it's just one World now. It is connected like it has never been, and this means ideas and innovation will spread faster than ever before.

A quadrupling of consumers will lead to a quadrupling of sales and a quadrupling of profits, in general. And this has to mean a quadrupling of the stock market, so I predict the S&P 500 will be around 6,000 points, say, in 2018. 

5. The Stock Picker's job

Being a stock picker is a tough job, because one has to think long term and yet deal with all the short term developments. He has to pick a business, not a stock, that he believes will grow quite a lot over the next several years and then see if the price to pay for that expected growth is attractive or not. The stock picker's most important difficulty, in my view, is the non-linearity between the present and the future and the time it takes to get evidence that one is right. Stock prices don't say "you're right" everyday, they'll always keep you in doubt ... at the starting point and then in every step it takes to build a multiple bagger.

But just one tenbagger compensates for 10 complete disasters, you think about it (not that I think I own 10 complete disasters, of course I believe none is). This is why diversification is so important.

6. Conclusion

With this background in mind I'll just keep holding all the stocks currently in the Main Portfolio and will look to add three more over the next couple of weeks.

I hope you had a nice Thanksgiving and wish you a good weekend :)

Quote from: David Randolph on November 23, 2007, 06:42:10 AM
1. Introduction

I've spent the Thanksgiving holiday with my family but unfortunately my mind was elsewhere, thinking about the current state of the stock market and potential future developments. All my adult life I've been a "macro-economist" until about eight months ago, when I've decided to embrace stock picking and investing for the long term from a business perspective, because I believe this is the most logical and productive way to build and grow one's wealth in a 30 to 40 years time span. I will never own a tenbagger (in Peter Lynch's terminology, a stock with a 1,000% return over the years) if I keep getting in and out of the market as I feel bullish or bearish.

But for this article I want to put back my economist's skin, because I believe everybody wants to read opinions on where this market is going and I think I got a valid idea.

2. The 1990-91 Recession and Now

I have a central thesis for my long term bullishness, but I wanted to find some evidence in history that things could and will probably unfold the way I predict. In my studies I found important similarities between the 1990-91 Recession and the period we're living. I've read several articles explaining what caused the early 90's recession and the mood of the moment.

The following excerpt of the "Economic Review - Federal Reserve Bank of San Francisco, 1993 (http://www.frbsf.org/publications/economics/review/1993/93-2_34-48.pdf)» gives us a nice summary of what happened in 1990-91:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42049;image)

Does "pessimistic consumers", "debt accumulations", "jump in oil prices" and "credit crunch" ring a bell? It sure does, this is what we have now.

But back then, as I believe it is the case now, a much bigger and more relevant economic trend was going on in the backstage, and that's why the 1990-91 Recession had the following effect on the S&P 500:

3. Stock Market Reaction

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42050;image)

The 1990-91 sure was a painful period for stock market investors and many if not most bailed out and said: "Stock market? Never again". Yet, it took just seven months for the S&P 500 to march to new all time highs and you see what happened from then on, the market jumped four fold between 1991 and 2000.

I believe this happened because the central theme of the bull market, which was a productivity spurt given by technological advances (with the personal computer taking center stage) was far more important for the US and the World economy than a simple cyclical recession.

At the present moment we also have a long wave of growth and bull market theme which is far more important than a cyclical economic fluctuation, so my best guess says the long term reaction of the stock market will be similar.

4. The Current Long Term Bull Market Central Theme

The current long term bull market central theme is Globalization and the emergence of new economic powerhouses in the World.

A few years ago there were only three relevant economic regions in the World, where just 13% of the population lives: North America, Europe and Japan. Now and just mentioning the biggest, we have China, India, Brazil and Russia emerging as economic powerhouses. In these four countries lives roughly half of the World's population. If, over the long term they get nearly as developed as North America, Europe and Japan, what you have is 3 billion more people with purchasing power in the World, which is an immense new market for companies to sell their goods and services. And there are no barriers ... if you have a superior technology you'll sell it around the World, not just in the US. If you have a successful business model you'll implement it around the World, not just the US. Forget the countries, it's just one World now. It is connected like it has never been, and this means ideas and innovation will spread faster than ever before.

A quadrupling of consumers will lead to a quadrupling of sales and a quadrupling of profits, in general. And this has to mean a quadrupling of the stock market, so I predict the S&P 500 will be around 6,000 points, say, in 2018. 

5. The Stock Picker's job

Being a stock picker is a tough job, because one has to think long term and yet deal with all the short term developments. He has to pick a business, not a stock, that he believes will grow quite a lot over the next several years and then see if the price to pay for that expected growth is attractive or not. The stock picker's most important difficulty, in my view, is the non-linearity between the present and the future and the time it takes to get evidence that one is right. Stock prices don't say "you're right" everyday, they'll always keep you in doubt ... at the starting point and then in every step it takes to build a multiple bagger.

But just one tenbagger compensates for 10 complete disasters, you think about it (not that I think I own 10 complete disasters, of course I believe none is). This is why diversification is so important.

6. Conclusion

With this background in mind I'll just keep holding all the stocks currently in the Main Portfolio and will look to add three more over the next couple of weeks.

I hope you had a nice Thanksgiving and wish you a good weekend :)

Nice Analysis David.

One thing we don't have Yet...is high U.S. unemployment.  I remember the early 1990s well...since I was graduating college back then.  Many were having trouble finding a job coming out of school.  I luckily had a job lined up.

I noticed the U.S. unemployment rate jumped from a low of 5.2% in early 1990 to a high of 7.8% in the summer of 1992. 

The U.S. unemployment as of October 2007 was only 4.7%.  We'll have to keep watch to see if this starts to rise.

David: Great post! I'm fully invested in US, China, Hong Kong and Japan right now and no fear. Your analysis encourages me.

David, great post.

Strong Risk of a crash

The S&P 500 is headed for a test of primary support at 1400. Failure would signal the start of a primary down-trend. Twiggs Money Flow displays a large bearish divergence, warning of a reversal. Recovery above 1500 is not expected, and would indicate that the threat is over. I am positioning for shorts. Great we are buildung a bit of right shoulder.....Looks like a double top....and we reached the level of 2000.

David,

With .OB and very micro stocks like UTVG.OB, CHME.OB, CIMT amd PFSW out of consideration due to HIGH RISK FACTOR, many subscribers like me would like to see the main with atleast 20 holdings, so that if 5 of them are HIGH RISK we can have atleast 15 of them which we would like to buy and hold in our portfolios.

Also the 3SoF policy of "high return with low risk" seems to have lost focus due to these .OB and ultra micro plays being part of the main. Hope the focus could be achieved again.

Also giving some perspective about David call for BRIC countries and new consumers, I think the phenomena is even bigger. The race to prosperity is not just restricted to Brazil, Russia, India and China, infact it is much more broad based. Let me give you an example. Even with all kind of troubles in Pakistan, the growth in telecom sector has been more than 10 fold in last 8 years and its still very strong. The same is true for Sri Lanka, Bangladesh, Nepal, Vietnam and other smaller countries whose name you may have never even heard. And these are not oil rich middle east which are booming on oil but these are just poor countries now seeing some global prosperity.

The US may have housing and credit problems which may rush to recession but the world as a whole is going to see some exciting growth and the population demand for services and goods are going to be there. The stock picker job to focus on businesses should be actually focus on 'Global Businesses'. Short term things could be nasty but you wont like to miss the big run of SPY to 6000 as David predicted. 

Mean while, it would be great if David can analyze each main holding with the percentage of revenue from the global consumer.

In my own opinion, of the all main holdings only ASTI, TBSI, IMMR, GIGM and JAKK fit the global consumer phenomena. While SDTH could be a legitimate China growth play.

the bearish look:

But what if we put in a triple bottom at 1376 or so?

Wouldn't that be a stronger setup for a rally than if any double bottom took place?

March 14 at 1364 and August 16 at 1370 would be the first two bottoms in a triple bottom, and the next bottom would most likely be the 3rd bottom, from which a very powerful rally might ensue?

Thanks for your input

Bourbon  ;D

The MACD Hist goes red the first time since the bullmarket started(yellow circle).......monthly...sure the month is not finished yet...but closed weak today.

Is SPY going to rebound from here.  ???

Notice it closed right around the steeper trend line going back to July '06 and also closed just about at the August 15th close of 1406.7.

s&p 500 closed almost at high of the day. Here 10 days 30min candle looks like a breakout....could bounce from there tomorrow.

the dow broke out like expected....target 13370....for the s+p 1489....i will buy some ultra shorts when we get up there the next days.  Yesterday i bought ACH

Profit taking seems inevitable here, due to the chart and because the market opened sharply higher because Bernanke said what everybody already knew, that the FED will lower rates at the December 11th meeting. I say everybody knew but of course, not everybody ... it's just that another FED member gave that hint on Wednesday and we already had a big rally on that ... the market doesn't like to dance twice with the same partner.

Longer term this mambo jambo doesn't mean anything, we're in a Bull market.

chart quotation, just fyi:

Hi, I think we might have seen all the profit taking that there was to be and the bullish trend will just continue.

I say this because in conjunction with the positive factor of the FED lowering rates again at its December 11th meeting (which was already expected since last Wednesday's big rally) we're having another, unexpected Christmas gift:

- Instead of oil and gold going higher on the expectation of lower rates (showing worries of inflation), they both went down sharply, and ...

- The USD also went up on the expectation of lower rates.

So, the two major worries on the "if the FED lowers rates it will bring more upside to oil and gold and further depress the dollar", didn't materialize. I believe this is the fuel market participants needed to take this market near all time highs, and then, at the 3rd rate cut, make a bullish breakout to unchartered territory.

My advice is for you to be bullish with all you got and for the long term. Good luck :)

what about the gap at 143-144?

Quote from: David Randolph on December 03, 2007, 06:07:28 AM
Hi, I think we might have seen all the profit taking that there was to be and the bullish trend will just continue.

I say this because in conjunction with the positive factor of the FED lowering rates again at its December 11th meeting (which was already expected since last Wednesday's big rally) we're having another, unexpected Christmas gift:

- Instead of oil and gold going higher on the expectation of lower rates (showing worries of inflation), they both went down sharply, and ...

- The USD also went up on the expectation of lower rates.

So, the two major worries on the "if the FED lowers rates it will bring more upside to oil and gold and further depress the dollar", didn't materialize. I believe this is the fuel market participants needed to take this market near all time highs, and then, at the 3rd rate cut, make a bullish breakout to unchartered territory.

My advice is for you to be bullish with all you got and for the long term. Good luck :)

the last sentence is dangerous....the S+P looks bearish....what if it was the last time for the bulls to get out....the 1490 resistance looks like a big barrier and many indicator look bearish....and the last rally was just technically painted from the stupid fed guy nr. 2 after bernanke...last weeks rally could have taken in many bulls that will bleed  if yo ask me...i am not going long 100% as long as we are not closing over 1500 points....

Quote from: ket1390 on December 03, 2007, 09:09:35 AM

Quote from: David Randolph on December 03, 2007, 06:07:28 AM
Hi, I think we might have seen all the profit taking that there was to be and the bullish trend will just continue.

I say this because in conjunction with the positive factor of the FED lowering rates again at its December 11th meeting (which was already expected since last Wednesday's big rally) we're having another, unexpected Christmas gift:

- Instead of oil and gold going higher on the expectation of lower rates (showing worries of inflation), they both went down sharply, and ...

- The USD also went up on the expectation of lower rates.

So, the two major worries on the "if the FED lowers rates it will bring more upside to oil and gold and further depress the dollar", didn't materialize. I believe this is the fuel market participants needed to take this market near all time highs, and then, at the 3rd rate cut, make a bullish breakout to unchartered territory.

My advice is for you to be bullish with all you got and for the long term. Good luck :)

the last sentence is dangerous....the S+P looks bearish....what if it was the last time for the bulls to get out....the 1490 resistance looks like a big barrier and many indicator look bearish....and the last rally was just technically painted from the stupid fed guy nr. 2 after bernanke...last weeks rally could have taken in many bulls that will bleed  if yo ask me...i am not going long 100% as long as we are not closing over 1500 points....

Actually everything looks good now , we may see some decline but the market is heading north anyway  :)

Quote from: kpunarc on December 03, 2007, 09:01:26 AM
what about the gap at 143-144?

What about it? If all gaps were closed that would be a very simple way of making a lot of money in the stock market, and unfortunately I don't think such thing exists.

Quotei am not going long 100% as long as we are not closing over 1500 points....

That's Ok.

Thanks for your contributions ket1390 :)

Ok David in a couple of weeks we now where we are heading:)  good luck

some bearish points showing up:

• possible double top on high volume (climax)
  macd Hist red the first time since beginning of bull market ! (
  Best Indicator if you red the book a. elder living in a tradingroom)
  trendline broken ? it seems

more examples:
http://www.3stocksonfire.org/trading/index.php?topic=10702.0

QuoteBest Indicator if you red the book a. elder living in a tradingroom)

I read them several times, Trading for a Living and Come Into My Trading Room, by Alexander Elder. Don't recommend them to anyone interested in making money over the long term out of the stock market.

The SPY will rise 2% plus today in my humble opinion.

Quote from: David Randolph on December 04, 2007, 05:59:34 AM

QuoteBest Indicator if you red the book a. elder living in a tradingroom)

I read them several times, Trading for a Living and Come Into My Trading Room, by Alexander Elder. Don't recommend them to anyone interested in making money over the long term out of the stock market.

The SPY will rise 2% plus today in my humble opinion.

The chart i posted was a long term 6-7 year chart....is that short term?? i bet not. At least you should be a little alert in your position...

QuoteThe SPY will rise 2% plus today in my humble opinion.

I just forgot to say that I'm always 1 or 2 days ahead of the market. Today we'll rise 2% plus. Next "real" resistance for the SPY will show up just at the short term descending trendline which for today stands at $150.98 (it declines $0.17 per trading day).

Longer term, as I've written on this thread, I believe we're in a long term bull market and probably the next rate cut (the 3rd) will be the catalyst to take this market to new all time highs.

Today's early morning rally is fueled by short covering before the all important FED rate decision due tomorrow. When the short covering ceases we'll probably get some profit taking, with the S&P 500 slipping into negative territory in mid-session. It will probably close the day around the opening levels, that is, up slightly.

Longer term this short term noise is meaningless (please don't consider it, I'm often wrong and it doesn't pay to bet on short term fluctuations), I believe we're in a long term bull market and on our way to new all time highs.

ugly

My take is the FED cut interest rates by just a quarter of a percentage point, instead of the half a point many hoped for, because the FED is looking ahead, not through the review mirror.

The FED already cut interest rates a full percentage point and they currently stand at 4.25%. This is less than what rates were in the 1990-91 recession we've talked earlier on this thread (http://www.3stocksonfire.org/trading/index.php?topic=10600.msg109167#msg109167):

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42488;image)

Perhaps, if the US economy enters a cyclical recession and I think it will, the FED lowers rates another half a point during the course of 2008 and that's it.

I've already shown you what the stock market did while the 1990-91 recession was still ongoing:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42050;image)

It just took off, as the long term Bull Market continued.

I believe the outcome will be similar this time. The causes for this recession are cyclical and normal. Home builders and banks got greedy, had very fat profits while the party went on, but now they're paying the price of being reckless and greedy. They lent money to people they shouldn't have and now have these huge write downs in assets to make. And they are making them, they're feeling the pain and paying the price. The economy is functioning well.

In the meantime the World economy is growing and united like never before. We have the emergence of economic powerhouses where before nothing relevant in economic terms existed. The BRIC countries will, in my opinion and within a decade, bring 3 billion new consumers with purchasing power to the world market. People often downplay the inequalities the World has. People in these countries are 20 times poorer than the average American, if they rise to be just 10 times poorer, that's a double. And if they rise to be just 5 times poorer, that's a quadruple.

I've heard yesterday on CNBC that now more than half of the S&P 500 companies' revenues come from outside of the United States. More than half. So the S&P 500 is now more dependent on the World economy than the US economy.

The 1 million or 2 million Americans defaulting on their home payments or credit card payments is nothing compared to the World economy strength and what that means for the stock market's future.

I've a 700 pages book here called "The Wealth and Poverty of Nations" which explains why countries got richer or poorer throughout the centuries and I can assure you we're living an unprecedented time. Never in its history the World has been so open and everybody is using the same economic model (finally), the model that made the US what it is today. Capitalism is at work throughout the whole World now (with a few small exceptions) and it should work elsewhere the same way it worked in the US.

I think investors have plenty of reasons to be optimistic for the next decade. Sometime down the line everybody will rush in to buy shares and will drive valuations to stratospheric and unsustainable levels and then the S&P 500 will have a 50% hair cut, just like it happened in the 2000-2003 period.

My take is the S&P 500 will reach 6,000 points sometime between now and 2018 and then it will fall back down to 3,000 points ;D The march towards 2,000 points will be the slowest, then it will take 5 years or more to move from 2,000 to 4,000. The final 2,000 points, especially the final 1,000, will be made rather quickly, as the usual speculative bubble at the top progresses and then it blows out.

We're not at the top now, the market is in a prolonged trading range before it makes a bullish breakout to new all time highs. Be bearish or a weak hand and risk missing your way to a small fortune, depending on your initial capital.

I'll just hold on to my holdings throughout the storm and I expect to be paid handsomely for my patience. Anyway, the Main Portfolio is up 22% this year, I wish all years were like this, but I expect better results going forward, as the general market will probably help the stockpicker's job.

I am very bearish on the market now...after the fed decision and failed rally a day after....bull running out of power...the index shows a deadcross coming MA 50 moves into MA 200. And the highs getting lower. Bothe MA are now heavy resistence.

So the chance for a 1520 breakout is at 30 % for me...

i stole david r. pictures and painted some future graphic in case we drop under 1400. A possible scenario:)

a long term ascending triangle. The funny thing is...the more i watch this picture the more i think it s gonna happen...

I've been reading another post and this is what this guy said Friday.

QuoteOur trading range remains between 1460-1490, we break above 1490 and a lot of shorts will cover... we break 1460 and a lot of shorts will hammer the market down. Always keep your eye on GS. The way GS goes so does the market.

I have only been following him this past month and he has been making short term predictions and he has been right on the money with every single one just in this past month. when he talks to his people he also reminds them of how right he has been this year even with the big drops.

and he like me totally hates Cramer but I digress.  ;D

He also mentioned this;

QuoteThe banking index $BKX has been butt ugly and closed in negative territory for 3 straight days and dropped 8% of it's value, its time for a short term rally in this group because short players know the value stock players and they will come and buys this group.

Quote from: pinoleropuro on December 15, 2007, 05:50:34 AM
I've been reading another post and this is what this guy said Friday.

QuoteOur trading range remains between 1460-1490, we break above 1490 and a lot of shorts will cover... we break 1460 and a lot of shorts will hammer the market down. Always keep your eye on GS. The way GS goes so does the market.

I have only been following him this past month and he has been making short term predictions and he has been right on the money with every single one just in this past month. when he talks to his people he also reminds them of how right he has been this year even with the big drops.

and he like me totally hates Cramer but I digress.  ;D

He also mentioned this;

QuoteThe banking index $BKX has been butt ugly and closed in negative territory for 3 straight days and dropped 8% of it's value, its time for a short term rally in this group because short players know the value stock players and they will come and buys this group.

I agree under 1460 it will go down fast to test 1407 lows....longs shoud be careful....and be ready to short...some stocks are still really high.

a bearfriend wrote this:

Like the permabull said to his girlfriend............this is going to be quick.

Well, not that quick. Because I want to get across at least one important thought: the week that just ended was terribly important - - and valuable - -for the bears.

It's not because it's the first down week we've had. There have been plenty of those in the prior five months. What's crucially important, and probably makes it the most important week of the entire year, is that the Paulson/Bernanke crooks tried not once but twice to save their stupid bull butt-buddies, and they failed. It is my belief that the government has shown it is powerless to stop the unfolding financial catastrophe. And, as I've said all along, it is my general goal to profit from the misery and chaos. I cannot say if the bear market has arrived yet. But I think all but the most idiotic momentum players would have to agree that at least we're not in a clear bull market anymore.

I've tinted in yellow this week on the Dow. I won't rehash it, because I've done something like 30 posts or more this week. Anyway, take note of the red trendline for two reasons. First, obviously, because it was broken. But second - and much cooler to my eyes - is the fact that yet again the price perfectly kissed the underbelly of the broken line (and I took full advantage of that bull trap by buying puts early Wednesday).

The SPY went down further than I thought on a reaction to what the FED has been doing. From what I've been reading I guess the final punch in sentiment is coming from a disbelief in the FED.

It usually happens like this. Remember 2001? "We're bad, but the FED is cutting rates and that will save the stock market". And 2002? "There's nothing the FED can do, we're going lower."

The Nasdaq made its low in 2002.

I think we're witnessing a similar phenomenon, but on a much smaller scale. Even though it took a 50% fall on the Nasdaq to make the bears confident back in 2001/02, now just a 10% correction was enough. 

Anyway, I don't have a clue if we'll go down to close the gap at $143.23 or not. I'm unsure about the short term.

Longer term I remain confident we're in a bull market and there's going to be a bullish breakout to new all time highs over the next 6 months.

comments for 1st picture: we broke 1490 support where i bought QID and reduced my longs.

comments for 2nd picture: deadcross ma 50 moves into ma 200....lower highs....if 1460 doesnt hold i add shorts.

as expected a fall through 1460

Diamand top reversal

A technical analysis reversal pattern that is used to signal the end of an uptrend. This relatively uncommon pattern is found by identifying a period in which the price trend of an asset starts to widen and then starts to narrow. This pattern is called a diamond because of the shape it creates on a chart. 
 
Since technical traders use this pattern to predict a reversal of an uptrend, a short position is taken when the price falls below the lower ascending trendline. In general, price targets are usually set to be equal to the entry price minus the distance between the top and the bottom of the pattern.   

see you there

So you're shorting this?


edit:  Very nice analysis

Despite all the negative news on the economic front, the SPY is still within its trading range. Maybe we'll even break the range slightly to the downside, just to really throw all weak hands out of the market before a surprising rally to new all time highs unfolds.

This is my view, anyway, of course, I can be wrong. Insiders seem to agree with my view, according to the following article:

Executive suite not afraid of bears yet
Commentary: Corporate insiders continue to be bullish on their firms' stock (http://www.marketwatch.com/news/story/executive-suite-not-afraid-bears/story.aspx?guid=%7B72AC0EB7%2D3023%2D4F29%2DAE81%2D4D20806CE334%7D)

Quote from: David Randolph on January 08, 2008, 07:30:04 AM
Despite all the negative news on the economic front, the SPY is still within its trading range. Maybe we'll even break the range slightly to the downside, just to really throw all weak hands out of the market before a surprising rally to new all time highs unfolds.

This is my view, anyway, of course, I can be wrong. Insiders seem to agree with my view, according to the following article:

Executive suite not afraid of bears yet
Commentary: Corporate insiders continue to be bullish on their firms' stock (http://www.marketwatch.com/news/story/executive-suite-not-afraid-bears/story.aspx?guid=%7B72AC0EB7%2D3023%2D4F29%2DAE81%2D4D20806CE334%7D)

looks really bearish out there...i would be carefull with your longs...index technicals are broken. Why not playing what your seeing....i cant count on hope...like for a possible new breakout...sure everone sees it different.... :)

Quote from: 422fwhp on January 07, 2008, 07:15:38 PM
So you're shorting this?


edit:  Very nice analysis

hey thanks 422fwhp....i shorted some in an out like Qid, dxd....today i made good cash with crox, isis, sigm...on daytrades...now 100% cash overnight.....so my mind can think clear:)

Yea, I'm mostly cash too...with the exception of a short some pink I bought way back when...bagholder on that one.

GLTA...Jody

I'm mostly cash too except some gold stocks. $SPX has the next support at 1350 (currently at 1390). Then the next support at 50ma is at 1280. Some analysts feel it will attempt to form a handle on the current 4-year cup. Sorry - I do not know how to post charts...

Quote from: brandyjoco on January 08, 2008, 07:01:40 PM
I'm mostly cash too except some gold stocks. $SPX has the next support at 1350 (currently at 1390). Then the next support at 50ma is at 1280. Some analysts feel it will attempt to form a handle on the current 4-year cup. Sorry - I do not know how to post charts...

brandyjoco
Here's link in help topic on how to add chart when posting. hope this helps
http://www.3stocksonfire.org/trading/index.php?topic=7157.0

In speculation when the market goes against you, you hope that every day will be the last day — and you lose more than you should had you not listened to hope ........ And when the market goes your way you become fearful that the next day will take away your profit, and you get out — too soon ........ The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a far bigger loss, and hope that his profit may become a big profit.

~ Jesse Livermore

My notes on the QID,maybe one more swoon down if my count is correct

check this guy's video on the SPY.

Awesome video! It is really right on according to all of the charts that I have been studying.

There was a bearish 50/200 cross this week on the Wilshire 5000, Dow, Sp500, etc. Even if there are  bounces the 20 & 50 MA will be resistance. The $NDX has a 5 yr major support at 1700 but is currently at just below 1900. The Wilshire 5000 ($WLSH) is below the 4yr major support of 13,900 and is currently at 13,772. Many of the sectors have already dropped below their long term support lines.

Please be cautious! I am in cash. There may be a nasty 10% drop ahead of us and very soon. Is anyone else as concerned about this as me? :o

If $compq breaks below 2375 then the next stop is 2000 - that is about 15%. The $NDX is now at 1857 - the next stop is 1700. Please be careful....

The bears have built a nice pattern here on the QID/QQQQ since my last visit. I don't see any overlapping waves up to this point and the latest triangle pattern for the QID or (Bear Pennant on the QQQQ) looks more convincing now that it's a five wave impulse even though I'm still suspicious of wave (1). Anything's possible when it comes to triangle's but it looks like the continuation type to me. If the QQQQ were break downward in a 5th wave we could be looking at 6-7 points lower, much like  in wave 1.On the DOW and SPX, I'm counting them as ABC's as both seem to have some overlapping waves and internal structures made of 3's instead of fives.Stay focused!

Best case to worst case on the QQQQ:

1) The 5th wave Truncates at or near the Jan 23 low of 41.61

2) The 5th wave ends up equal in price to wave 1 approx 6-7 points ending near 36.43

3) The 5th wave extends 1.618 x wave 1-3 added to the low of wave 4 ending near 21.14

So far case 1 looks ok as the triangle break or thrust has been fairly subdued on a price/volume basis.I'm hoping for the best preparing for the worst..

Here some quick technical notes for the SPX:

- From October to March, a solid bear trend was in place, with several down-swings of bigger intensity and heavy volume for the extended selling zones. The last down-swing, ended in March, creating a false downside breakout.

-  After the false breakout (March), the index is developing a steady up-swing (still in play), that ended the previous pattern with an upside breakout and new relative higher highs. During the process an Inverted H&S was designed and triggered (a pattern that is still in play). This kind of price action (after a false breakout), suggests a big Baskerville signal in place (compatible with the Inverted H&S target near 1500).

- Moving average analysis: the EMA-50 is still below the EMA-200, still marking the presence of the down trend, but the EMA-50 has already a positive leaning while the EMA-200 is flat. These are lagging indicators, but its current layout suggest an upside inversion taking place for the mid-term (not yet confirmed).

-Short term analysis: the index reversed today at 1440, creating a new resistance level for short term. Momentum analysis may suggest a consolidation to take place before a new advance, but the up swing is still intact at this point. On the downside, I would point 1406 (aprox the EMA-200) and 1388 which has been a reaction zone, both values to take in consideration in a probable consolidation scenario.

My overall sentiment for the SPX is bullish right now despite from a possible short term consolidation or selling action.

In attach 2 annotated charts.

Best regards,

Quick Update:

SPX started a consolidation as suggested by momentum analysis, selling off to the exact 1388 breakout point mentioned on the previous update (1388 was the intraday low for Wednesday session).
This drop didn't change the overall pattern yet, so the Up Swing is still in Play and we may look at it as normal consolidation process after a breakout.

It is important that the SPX holds above its EMA-50 or in a worst case scenario above 1370. Otherwise the current Up Swing may be compromised.

Here's an updated chart:

Regards,

pretty interesting video check it out!

Copy of my latest notes on QID,its possible its entered a 3rd of a 3rd in Elliott terms..

Within the 60min chart breakdown of the latest wave1? there's a small five wave sub-structure thats not easily seen on the daily in case you're wondering

Bounced off the fib 50% area of 1170,today's action may have provided some clues of where another bottom will be.If this is a diagonal wedge,I think it may need another upper and lower touch within to complete a 1,2,3,4,5. Also the A wave was  roughly 300 points from the top,which leaves about another 40 points lower from 1170 for C to equal A. The QID kinda looks stalled right now,got me thinking of an alternate to the 3rd since its lacking to show any real speed..

Diagonal didn't materialize, but 1133 might have completed the C leg for a major low..I'm thinking next run is to 1450 over next several months

Well since the big swoon from several weeks ago many forecasters are searching for some clues for what's next. There is one potential chart pattern which I haven't seen mentioned which is a Tower Bottom,but that would require a big move up as or near equal the big leg down.The other pattern which favors the current downtrend is the Bear Pennant,which could bring on another wave of selling.These are viewed on the weekly chart.. 

Some are suggesting an ending diagonal which after today's close it begins to take on the look of a falling wedge,we shall see as time goes on..

Updated QID chart notes,looks like its in a wave [4] with the short term c? leg in play..now if the $spx can take out it's 50 dma we might have a nice rally for the next few months.

The ending diagonal or wedge on the $SPX still looks ok as it was tested and now heading back up.Maybe the surge is finally underway..

Dont't like that small todays gap,  we're still better off daytrading.

The chart for the S&P 500, as represented by the S&P 500 SPDRS (NYSE:SPY) ETF, clearly shows the established trading range. The boundaries for this broad trading range are $113 and $104. With all eyes on the $113 level above, the breakout will be easy to spot if it does occur.
However, traders should also keep an eye on the important levels below. A pullback from these levels would not necessarily rule out an eventual breakout. While the August low near $104 is certainly very important, there are a few possible support areas that can support a mild pullback. The 200-day moving average lies near $111.80 and is one area that could attract buyers. Another area to watch would be near $110. This has been an important inflection point over the past several months and is approximately where the 20- and 50-day moving averages will be in a few days.

Anyway, I feel free to change my opinion if the market proves I'm wrong. Unfortunately that won't happen until the SPY's close above $130, so I have a potential loss of about 3.8% on this trade, nothing special.

huxuecan,
One user name will do, other user name that seems to be you as well > (zhxia)
If you want to run post that has nothing to do with the markets go to the Lounge.