3SOF

Although Intel missed guidance, it is not that big of a deal, in my view. However, they predicted a 10% reduction in revenues in Q1-08, compared to Q4-07. Of course, noone looks at the fact they've been growing a lot for more than a year, so a small set back in the slow quarter can be fine. Nevertheless, QQQQ follwed INTC and closed 4.5% down...

SPY is trading below $137. With the good help from INTC, it should shed no sweat breaking breaking the $135 tomorrow. I guess it pays to be a masochist in the stock market! 

Quote from: berloga on January 15, 2008, 04:45:52 PM
Although Intel missed guidance, it is not that big of a deal, in my view. However, they predicted a 10% reduction in revenues in Q1-08, compared to Q4-07. Of course, noone looks at the fact they've been growing a lot for more than a year, so a small set back in the slow quarter can be fine. Nevertheless, QQQQ follwed INTC and closed 4.5% down...

Bad news is bad news...no matter how little the miss is.

Right now the market is decimating stocks on any bad news.  Until the market rewards stocks...even on "bad" news...the market will go lower.

Right now I think only a fed cut would turn the market into a sharp rally....but I still believe that a rally would be short-lived.  To some extent this still reminds me of 2000-2001. 


I wouldn't expect a "V" shape recovery...

Hopefully...I'm wrong. 

I assume there will a big gap down in the morning. Is this the real buying opportunity,or just another leg down? David's target is 137,but he gives the disclaimer"I could be wrong". I have have no doubt this will all go away someday,but is tommorow the start?next month? next year?

Quote from: soxguy on January 15, 2008, 05:09:47 PM
I assume there will a big gap down in the morning. Is this the real buying opportunity,or just another leg down? David's target is 137,but he gives the disclaimer"I could be wrong". I have have no doubt this will all go away someday,but is tommorow the start?next month? next year?

I say we "have to break $137", so I have $135 in mind, but it can be $136 or even $134, who knows?

Look, if I were to tell you "I'm absolutely sure" I would be lying, no man knows what the market will do next with 100% certainty.

QuoteRight now I think only a fed cut would turn the market into a sharp rally....but I still believe that a rally would be short-lived.

I agree with you kslifka, a rate cut induced rally would be short lived.

It is the disbelief that will bring the bottom, not the belief. Not hope, but the end of it.

I would be worried if the S&P 500 went down 10-20% from the top and everybody called it "just a correction, the economy is fine" ... like they did in late 2000 and early 2001. I remember perfectly that analysts at that time attributed the market's fall to the "uncertainty about the Presidential election". The real issue, that is, the blow-out of the technology bubble, was only seen by the majority of people just a few months before the Nasdaq bottomed in late 2002.

Now you have what seems to be the real issue splashed in all media channels everyday.

To me the real issue isn't the US economy but the emergence of 3 billion new consumers in the World. Remember that more than half of the S&P 500 revenues come from outside the US. But this you don't see in the news, at least not that often.

Cramer is saying the dow will be down another 250 tommorow. If so,i'm definately buying something,or adding to a position.

I wouldn't be bottom fishing quite yet. There's going to be more downward pressure coming as soon as support for the indexes are broken which will probably occur tomorrow unless Bernanke steps in with an overnight rate cut.

Talk about a rate cut Friday. We'll see.

IBD Market Wrap for Tuesday

http://www.investors.com/mediacenter/MediaCenter.aspx?MediaID=835&t=v

Quote from: soxguy on January 15, 2008, 09:49:36 PM
Talk about a rate cut Friday. We'll see.

Well...if they are talking about a rate cut on Friday...then it won't happen Friday.  A rate cut... will happen Wednesday, Thursday, next week or not until the Fed meeting...just not Friday.

Old Fool Notes – 01/15/08

Nasty bloody day for the bulls.  The ugliness started early with C.  Volume was back up as the sellers were all over the breakdown.  Volume was 2.4 billion with a ratio of 8.4 to 1.  Hard to read efficiency with such a high ratio and 61 points down – we will just have to say that's a lot of points and a big ratio.  INTC and Asia are not helping the bull case.

The charts have not been updated – my new speed zoomer machine does not like the annotate feature at SC.  I'm guessing it's a Java problem but have not had time to investigate.

The daily chart continues to point down.  Nothing much else to say.

The hourly charts show the gap down and are now sitting slightly below support at the 2420 level.  We can expect another gap down tomorrow and the bulls then have the ball.

The ratio chart looks bad but may have further to fall.  Not pretty.

The weekly chart continues to weaken.

The Wilshire looks like it wants to punch in a new low.  Not good.

And the P&F indicates a "bearish triangle breakdown".  That's a signal you don't see very often and it is ugly.  Not good.

I punched out of the QLD as soon as I could premarket.  Premarket was not very favorable (but better than the open) and the trade from yesterday cost me a few bucks.  In retrospect, I would have made the trades again – so I don't feel too bad.  Just a trade that did not work.  No further trades today – much too busy with conference calls, meetings and other mess at work.  Tomorrow is a very difficult call.  Everyone knows we will have a deep gap down at the open – so the question is what do we do with it?  My suspicion is that we get a very deep gap down at the open followed by a push back.  That should be followed by another dip.  The double bottom is the area that should be bought.  Or you could just sit it out.  Tough to call in advance.

Charts link below,

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2071209

Big news tomorrow will be the CPI numbers. If we see consumer inflation being hot then all bets are off and the markets will tank BIG TIME. Bernanke is surely waiting for the CPI numbers before deciding on making any Fed cut decisions.

With Afterhours on INTC the start tomorrow looks rather gloomy.

from IV:

Technical look at the US broad markets.
I'm not going out on a limb telling anyone things look bearish.  I found it interesting that the Dow on the daily and weekly charts have two separate chart patterns yet their measured moves are the same.  The Nasdaq really needs to stay above 2300 or 2000 will likely be its next stop in the months ahead.  This action must be terrifying the Washington incumbents.  You can probably guarantee a 0.50% rate cut in two weeks.  No way the Fed won't obey its masters (Wall Street and Washington).  My suspicion is that the rate cut will boost all indexes for about 6 weeks and then the bear will rear its head again.

As for gold and the shares, the market looked terribly forced down to me.  Gold finished the day off $2 yet the HUI plunged 19 points.  In fact, gold was in positive territory most of the day while the shares were 5 points down.  Such large drops in the HUI usually mean that gold will be hit hard the next day.  This is usually carried out by pushing gold down after-hours followed by a pounding after the London AM fix around 3 AM EST.  My gut tells me due to the global nature of the gold bull market, those wishing to push it down won't get much movement.  Many, including myself, are actively buying the dip.

Dow Jones - Daily,
http://stockcharts.com/h-sc/ui?s=$INDU&p=D&yr=0&mn=6&dy=0&id=p80435366402&a=128028437&listNum=3

Dow Jones - Weekly,
http://stockcharts.com/h-sc/ui?s=$INDU&p=W&yr=2&mn=0&dy=0&id=p59491674830&a=113378532&listNum=3

Nasdaq,
http://stockcharts.com/h-sc/ui?s=$COMPQ&p=W&yr=1&mn=6&dy=0&id=p75662807509&a=113690123&listNum=3

S&P 500,
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=1&mn=10&dy=0&id=p76888624666&a=113591019&listNum=3

&


Market Thoughts
Well, it looks like we are preparing to break the Aug. lows and head to the Feb lows. Actually many of the sub-sectors have already gotten there and more. Look at the devastation in the SOX for example. Many of them are at multi-year lows.

The butchering of retail is amazing. Look at some of the women's apparel or restaurants. Many of them are going bankrupt. We are way over-retailed and now we are going to have to clean out the excess. There is going to be a huge closing of stores and already many concepts that haven't been working are planed to be shut down. Even Starbucks is going to close stores. We are going to have an absolute glut of commercial real estate. Speaking of which, those guys keep building even as the market has turned. The fundamentals of commerical, office, hotels etc are all turning fast. REVPARs are tanking and hotels are trading at 52-wk lows, yet the construction of hotels is out of this world. Of course many of the big projects keep on going ahead so its no surprise that inyork's DOD contracts are going great, but its only a matter of time before big cuts in state budgets start to bite into some of those type of projects. So the slowdown in CRE is taking a lot longer to arrive, but there is no doubt that it is coming. The more that they build now, the bigger the bust.

Likewise the rest of the OECD is rolling over, its only a matter of time as the same credit bubble existed in those countries. We are seeing the last grasp of tech. Many thought they could hide in tech since international demand is better than here. If you look at IBM's number though, they had 10% rev growth, but 6% of that was from currency gains from a lower $ and so the organic growth is more like 4% and that is backward looking. As stores close, layoff hits, we are going to see big budget cuts in tech spending - worldwide.

We are only now getting recognition of the slowdown. We still do not know the extent of it. The US is not in a stock market bubble, but the consumer is overspent and so the real question for the market is when does the consumer start spending again. I don't have an answer and neither does the market. Thus, I expect the market to continue to slowly sell-off, no matter what the Fed does, until we see a change in consumer spending. That could be while off since we are only now getting our big layoffs as opposed to low rate of hiring we saw last year. We are going to see huge retail/hotel and construction layoff coming. I expect to see 6.5% unemployment rate at least. and that is not priced into the market yet. I don't see a huge selloff in the market but the downturn could last a lot longer than most are thinking. So we will probably bounce around a bit with a general mild downtrend.

None of this is bullish for metals. Everyone is hiding in the Bric trade, but as the year goes on people are going to learn that decoupling does not exists. Why is Europe and Japan going under if there was no coupling ? Why isn't China holding up Japan since they are huge trading partners ? People have the relative values all wrong, China/India economy is a fraction of the world's economy. The slowdown in the rest of the world is going to hit China. We need to watch inventory levels in China, though I have no data sources for that. In the fixed investment, we are seeing a lot of peaking already. Look that the Scotia report, new power adds are going from 90 GW add to 60 GW next year. Steel production growth is supposed to go from nearly 20% to 5%.  Fixed investment is going to slow and once inventory levels builds and factories slow and shut, the whole infra spending is going to turn. It always has and always will. Look at the history of every country that has gone through the same development process. You get a boom w/ 30% increases in spending and when its busts it goes steeply negative and you get a deep gut crunching recession. China has a huge credit bubble from negative real interest rates, and it is reaching its peak already even w/o the hit from the worldwide slowdown. The runaway inflation is an another sign. You are also seeing other signs of the late stage of the cycle there, look at the stock market culture and a huge jump in grey,illegal/fraudulent and "pink sheet" trading in China. Its gone clearly into wild speculative stage and that's the last before the bust. We will see the stock market bust first, which I expect as the worldwide slowdown hits profits of Chinese exporters. Then 6-9 months later we will see it in actual infra spending.  That will be end of the metals bull for this cycle.

For copper, we are seeing the restocking earlier as people try to outrun last year's moves. However the growth in China's  demand was so huge last year - far beyond the actual growth in end demand that this year we should get more muted growth. I expect the restocking to less extreme and of shorted duration.  So this year I expect an oversupply of 400 kt barring no strikes. Last strikes probably took out over 100kt and that left us evenly balanced rather than oversupplied. IF the Mexican strike really ends and we get no more, then after the restocking exercise we should smash through the old levels downward. We had a huge rotation into commodities early in the year. These are all the late players jumping on the commodity bandwagon - too late. They are going to be the bag holders for the smart money. So we may stay in this range or we break out somewhat upwards as the restocking goes on, but just like last year, just wait for it to end and then watch copper drop for the rest of the year. So we didn't get to $2.25 last year, let's see if we do this year. The surplus w/o strikes look to be even higher.

Look at nickel to see how too much new fund money keeps the price up. There is no reason that nickel should be at $13 given the inventory and new supply to come as well as the worldwide slowdown, but it stays up there. Its true we should see some strong demand and nickel draws soon as SS. stocks get rebuilt, but again we should be muted this year than last and I expect us to get down to at least $10, but for now we are going to see some strong nickel demand.

Zinc -already washed out, but we should break below $1 at some point. Demand numbers are going to come down as the OECD CRE estimates come down. SRZ is not worth it until they get they Ga/Ge plant up and running, its Ga/Ge play not a zinc play at this point.

So 2008 looks like the year that everyone hangs on to China demand right before it rolls over. However, the world is slowing while supply is increasing  which sets up for a much more bearish dynamic than last year - even though last year we got a good butchering of many of the metals. So the last of the metals, copper which is still hanging on and frankly the one I thought would roll over first last year should finally do so this year. We have a small window before the OECD demand truly rolls over for the BMs and while China still booms, so trade 'em if you can, but there is very little doubt in my mind that we will end up much lower in price for the BMs. The only exception to that might be moly, but we should see some hit as projects slow, but the big drivers of oil and gas, desal plants and the like look still to be very strong and seems like the only BM that might make it  for the year... at least until Climax starts.

In the big picture, it looks like the bond conundrum was the sign of the top of the 25 year boom in the credit cycle. It didn't make sense and of course that should be sign that something was extreme in a huge way. We are now starting to puncture that bubble but we are nowhere close to seeing a normal world. Japan, China, and the other money pumpers are still creating massive liquidity and eventually that has to bust - and it should when China busts. Rationality in the price of money will come back as it does for all asset classes eventually. At that point, the CBs of the OECD will really start pumping money and we get massive inflation or we take the pain and setup for a new upcycle w/o conundrums. In the meantime, the situation is deflationary. We are going to build overcapacity and that leads to price cuts. Though here in the USA, we are going to be importing some inflation as China continues to revalue. Until we see the OECD countries really start pumping money - and they are actually doing everything not to, I see downward pressure on inflation. This should be bearish for gold. A lot of the systemic risk has come out w. some of the big financial players being saved. We will need to see some big players blow up before gold can make the next move up. We are clearly in speculative levels in gold now and we will need a sequence of bad news to keep the price going upwards. I just don't see it, but when the speculative juices start running who knows. That doesn't mean the risk isn't there of financial blow isn't there . Step by step we are seeing credit quality in cards, CRE, and corporate bonds going down. So much for only subprime. clearly that decoupling theory went out the door. But we will need further and deeper stresses on the banks before we get the next huge move in gold.

BTW, DRYS is looking good for a bounce at $50. It might be worth a nibble here at $55 on the options and hope for a big bounce of a surprise Fed cut. I expect some bankruptcies in the dry bulkers in '09.

QuoteBernanke is surely waiting for the CPI numbers before deciding on making any Fed cut decisions.

Of course the FED doesn't know the numbers at the same time we do, but earlier.

I think Bernanke shouldn't cut rates right away ... he should wait for the market to move towards the highs again and then cut rates for a bullish breakout into all time highs.

The plan is already set and doesn't depend on incoming information. The few people that really have the power to move the market in one direction or another already know what they will do.

I watch the market for 12 years on a tick by tick basis and I believe I know how things work, the market is a money game, not an economy game.

Time will tell ...

IBD Daily stock analysis

http://www.investors.com/MediaCenter/MediaCenter.aspx?MediaID=836&t=V

IBD is very big on fundamentals, and David won't agree with this, but notice how she again stresses never to buy or hold based on fundamentals alone.