3SOF

well, we got the first .025% on Sunday the rest today, so we did get the already preplanned one full point rate cut.

After the initial sell-off...which I typically like...as weak hands run.  We're moving back up.

Maybe we've suffered enough this year so far.

Just throwing up a S&P chart.

U.S. stock rally propels Dow to best day in more than 5 years
Marketwatch - March 18, 2008 4:39 PM ET
   

 
NEW YORK (MarketWatch) -- U.S. stocks on Tuesday blasted skyward, with the Dow rocketing to its fourth-largest point gain ever after earnings from Goldman Sachs Group and Lehman Brothers Holdings Inc. proved better than expected and a rate cut by the Federal Reserve.

Up nearly 300 points before the Fed said it would cut a key interest rate by three-quarters of one percentage point, the major stock indexes briefly trimmed a session-long advance, only to gain steam as the close neared, with all three ending at session highs. See full story on Fed rate cut

The Dow Jones Industrial Average $INDU rallied 420.41 points, or 3.5%, to 12,392.66, topping last Tuesday's rise of 416.66 points and chalking up its biggest point gain since July 29, 2002, when it climbed 447.49 points



and then there's my portfolio, barely moved after this historic day. Seems to go down with the others but not the same reaction back north. Oh well, one positive is that I wasn't able to margin with IWM so at least I finished green today...for a change

13200 before 11200.

Is today the beginning of a 1000 point rally?
Or, do we sell the rally to protect capital?
Head to the sidelines?

Barton Biggs Expects 1,000-Point Gain in Dow Average

By Brian Sullivan and Michael Patterson

March 14 (Bloomberg) -- The decline in U.S. stocks is ``way overdone'' and the Dow Jones Industrial Average may rally 1,000 points, investor Barton Biggs said.

``We're in a financial panic,'' Biggs said during a telephone interview with Bloomberg Television from New York. ``We're setting up for a really big rally. I don't mean three or four hundred points on the Dow, I mean 1,000 points on the Dow. I don't know if we're going to get it next week or the week after. But this thing has gotten crazy and is overdone.''

Biggs, a former Morgan Stanley strategist who now runs the $1.5 billion hedge fund Traxis Partners LLC, said stock markets from Germany to Hong Kong may bottom out soon after tumbling this year. Biggs's prediction in March 2007 that U.S. stocks were near a low preceded a 16 percent rally in the Dow average during the next four months. His forecast that the Dow would climb as much as 19 percent in 2007 overshot its actual gain by almost 13 percentage points.

``We're at a really crucial point,'' Biggs said. ``This is a time to be buying stocks around the world and not to be selling them.''

The Dow average has tumbled 16 percent to 11,951.09 since reaching a record in October after the subprime-mortgage market's collapse caused $195 billion in asset writedowns and credit losses at global financial firms including Citigroup Inc. and Bank of America Corp. A 1,000-point gain in the Dow from today's (March 14) close would amount to an 8.4 percent rise.
``Yeah, it's scary. It's always scary at bottoms...."

We shall see.

OK, how do you get a up 420 points day and NOT have more volume than the prior day?  Thus, we didnt get the expected market in confirmed rally signal from IBD:

-------------------------------------------
Stocks Notch Big Gains As Fed Cuts Rates, But Volume Finishes Surprisingly Lower
BY JONAH KERI

INVESTOR'S BUSINESS DAILY

Posted 3/18/2008

Stocks soared Tuesday, but lukewarm volume and scant action among market leaders tempered the advance.

The major indexes got off to a hot start ahead of the Fed's decision to cut the fed funds rate by 75 basis points. Stocks pulled back immediately after the 2:15 p.m. EDT policy statement, then took off again in the session's final hour.

The Nasdaq and S&P 500 vaulted to 4.2% gains. The Dow industrials jumped 3.5%, the NYSE composite 4%. The small-cap S&P 600 galloped 4.5%.


Riding some of the biggest gains in months and with the news of an interest rate decision, you'd have expected volume to swell. Instead, trading levels disappointed.

Nasdaq volume eased less than 1% compared with Monday's level. NYSE turnover fell 5%.

Tuesday's big gain on Day 6 of the Dow's rally attempt would have signaled a follow-through day. But lighter volume prevented such a rally confirmation from happening.

Go beyond the flashing headlines and you'll find a trading session that proved lacking in many ways.

As you can see in today's Market Pulse, few leading stocks marked significant price gains in higher volume, especially given the size of the market's overall move.

A lot of that shortfall is due to a lack of fundamentally sound stocks holding above key support levels.

When the market enters a harsh downtrend, most stocks will correct, often forming new bases. Whether or not a follow-through occurs, this market still has work to do to generate a fresh batch of leaders.

Tuesday's two best-performing groups were the battered mortgage lenders and investment banks.

Three investment banks gave the NYSE indexes a lift.

Lehman Bros. (LEH) rocketed 46% after reporting quarterly sales and earnings numbers that beat estimates.

The company said it was taking $1.8 billion in write-downs for bad mortgage bets, but reassured investors that it has maintained plenty of liquidity and won't collapse the way rival Bear Stearns (BSC) did.

Fellow investment banking giant Goldman Sachs (GS) leapt 16% after also beating analysts' quarterly revenue and profit estimates.

Those results, along with expectations of big rate cuts by the Fed, helped spark the day's early rally. Even the beleaguered Bear Stearns found some daylight, climbing 23% after an 84% collapse on Monday.

When the central bank weighed in Tuesday, it delivered a big cut in its fed funds rate, down to 2.25% from 3%. The Fed also slashed its discount rate by 75 basis points to 2.50%, after an emergency 25-basis-point cut over the weekend.

In its policy statement, the Fed noted soft consumer spending, an iffy job market and rising inflationary pressure. Most troubling was the continued crises in the housing and credit markets, which the Fed said meant continued "downside risks to growth" for the economy.

Financial markets remain under "considerable stress," according to the statement.

Stocks fell initially on the news, as many on the Street had predicted a full percentage-point reduction to 2%. But the market quickly regrouped and took off again up to the closing bell.

The bigger question is whether or not the Fed's action will have a tangible effect on the stock market going forward.

As we've noted often, the Fed has taken many steps to try to boost the economy. It has slashed the fed funds rate six times over the past six months, pumped billions of dollars into banks' coffers in an effort to ease credit pressures, and even intervened directly in investment bank bailouts, as it's preparing to do with JPMorgan Chase's (JPM) bid to acquire Bear Stearns.

Thus far, those moves have failed to jump-start the market. Gains have popped up for a day or two, only to quickly fizzle out.

The Nasdaq's Feb. 13 follow-through didn't take, and a new correction soon emerged. One big up day doesn't cancel out all those negatives, nor does it signal the start of a new uptrend.

Kirby (KEX) offered at least a glimmer of good news for leading stocks.

The stock cleared a 50.26 buy point of a cup-with-handle base, jumping 7.76 to a new high 52.26 in heavy volume.

The provider of marine transportation services rallied on a bullish earnings forecast. Kirby has notched accelerating earnings growth in the past three quarters.
----------------------

I would like to buy, but this is confusing to see no volume signal on a day like today.  Maybe it comes tomorrow?

IBD Market Wrap for today.

http://www.investors.com/MediaCenter/MediaCenter.aspx?MediaID=1011&t=V

Quote from: BigSully1 on March 18, 2008, 11:53:36 PM
IBD Market Wrap for today.

http://www.investors.com/MediaCenter/MediaCenter.aspx?MediaID=1011&t=V

While there, check out the "New America" report on ITRI.

just fyi:
this is the worst case scenario

The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster
by Nouriel Roubini

Why did the Fed ease the Fed Funds rate by a whopping 125bps in eight days this past January? It is true that most macro indicators are heading south and suggesting a deep and severe recession that has already started. But the flow of bad macro news in mid-January did not justify, by itself, such a radical inter-meeting emergency Fed action followed by another cut at the formal FOMC meeting.

To understand the Fed actions one has to realize that there is now a rising probability of a "catastrophic" financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown.

That is the reason the Fed had thrown all caution to the wind - after a year in which it was behind the curve and underplaying the economic and financial risks - and has taken a very aggressive approach to risk management; this is a much more aggressive approach than the Greenspan one in spite of the initial views that the Bernanke Fed would be more cautious than Greenspan in reacting to economic and financial vulnerabilities.

To understand the risks that the financial system is facing today I present the "nightmare" or "catastrophic" scenario that the Fed and financial officials around the world are now worried about. Such a scenario - however extreme - has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.

Start first with the recession that is now enveloping the US economy. Let us assume - as likely - that this recession - that already started in December 2007 - will be worse than the mild ones - that lasted 8 months - that occurred in 1990-91 and 2001. The recession of 2008 will be more severe for several reasons: first, we have the biggest housing bust in US history with home prices likely to eventually fall 20 to 30%; second, because of a credit bubble that went beyond mortgages and because of reckless financial innovation and securitization the ongoing credit bust will lead to a severe credit crunch; third, US households - whose consumption is over 70% of GDP - have spent well beyond their means for years now piling up a massive amount of debt, both mortgage and otherwise; now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted. So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters. What will be the consequences of it?

Here are the twelve steps or stages of a scenario of systemic financial meltdown associated with this severe economic recession.

First, this is the worst housing recession in US history and there is no sign it will bottom out any time soon. At this point it is clear that US home prices will fall between 20% and 30% from their bubbly peak; that would wipe out between $4 trillion and $6 trillion of household wealth. While the subprime meltdown is likely to cause about 2.2 million foreclosures, a 30% fall in home values would imply that over 10 million households would have negative equity in their homes and would have a big incentive to use "jingle mail" (i.e. default, put the home keys in an envelope and send it to their mortgage bank). Moreover, soon enough a few very large home builders will go bankrupt and join the dozens of other small ones that have already gone bankrupt thus leading to another free fall in home builders' stock prices that have irrationally rallied in the last few weeks in spite of a worsening housing recession.

Second, losses for the financial system from the subprime disaster are now estimated to be as high as $250 to $300 billion. But the financial losses will not be only in subprime mortgages and the related RMBS and CDOs. They are now spreading to near prime and prime mortgages as the same reckless lending practices in subprime (no down-payment, no verification of income, jobs and assets (i.e. NINJA or LIAR loans), interest rate only, negative amortization, teaser rates, etc.) were occurring across the entire spectrum of mortgages; about 60% of all mortgage origination since 2005 through 2007 had these reckless and toxic features.

So this is a generalized mortgage crisis and meltdown, not just a subprime one. And losses among all sorts of mortgages will sharply increase as home prices fall sharply and the economy spins into a serious recession. Goldman Sachs now estimates total mortgage credit losses of about $400 billion; but the eventual figures could be much larger if home prices fall more than 20%. Also, the RMBS and CDO markets for securitization of mortgages - already dead for subprime and frozen for other mortgages - remain in a severe credit crunch, thus reducing further the ability of banks to originate mortgages. The mortgage credit crunch will become even more severe.

Also add to the woes and losses of the financial institutions the meltdown of hundreds of billions of off balance SIVs and conduits; this meltdown and the roll-off of the ABCP market has forced banks to bring back on balance sheet these toxic off balance sheet vehicles adding to the capital and liquidity crunch of the financial institutions and adding to their on balance sheet losses. And because of securitization the securitized toxic waste has been spread from banks to capital markets and their investors in the US and abroad, thus increasing - rather than reducing systemic risk - and making the credit crunch global.

Third, the recession will lead - as it is already doing - to a sharp increase in defaults on other forms of unsecured consumer debt: credit cards, auto loans, student loans. There are dozens of millions of subprime credit cards and subprime auto loans in the US. And again defaults in these consumer debt categories will not be limited to subprime borrowers. So add these losses to the financial losses of banks and of other financial institutions (as also these debts were securitized in ABS products), thus leading to a more severe credit crunch. As the Fed loan officers survey suggest the credit crunch is spreading throughout the mortgage market and from mortgages to consumer credit, and from large banks to smaller banks.

Fourth, while there is serious uncertainty about the losses that monolines will undertake on their insurance of RMBS, CDO and other toxic ABS products, it is now clear that such losses are much higher than the $10-15 billion rescue package that regulators are trying to patch up. Some monolines are actually borderline insolvent and none of them deserves at this point a AAA rating regardless of how much realistic recapitalization is provided. Any business that required an AAA rating to stay in business is a business that does not deserve such a rating in the first place. The monolines should be downgraded as no private rescue package - short of an unlikely public bailout - is realistic or feasible given the deep losses of the monolines on their insurance of toxic ABS products.

Next, the downgrade of the monolines will lead to another $150 of writedowns on ABS portfolios for financial institutions that have already massive losses. It will also lead to additional losses on their portfolio of muni bonds. The downgrade of the monolines will also lead to large losses - and potential runs - on the money market funds that invested in some of these toxic products. The money market funds that are backed by banks or that bought liquidity protection from banks against the risk of a fall in the NAV may avoid a run but such a rescue will exacerbate the capital and liquidity problems of their underwriters. The monolines' downgrade will then also lead to another sharp drop in US equity markets that are already shaken by the risk of a severe recession and large losses in the financial system.

Fifth, the commercial real estate loan market will soon enter into a meltdown similar to the subprime one. Lending practices in commercial real estate were as reckless as those in residential real estate. The housing crisis will lead - with a short lag - to a bust in non-residential construction as no one will want to build offices, stores, shopping malls/centers in ghost towns. The CMBX index is already pricing a massive increase in credit spreads for non-residential mortgages/loans. And new origination of commercial real estate mortgages is already semi-frozen today; the commercial real estate mortgage market is already seizing up today.

Sixth, it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt. Thus some big banks may join the 200 plus subprime lenders that have gone bankrupt. This, like in the case of Northern Rock, will lead to depositors' panic and concerns about deposit insurance. The Fed will have to reaffirm the implicit doctrine that some banks are too big to be allowed to fail. But these bank bankruptcies will lead to severe fiscal losses of bank bailout and effective nationalization of the affected institutions. Already Countrywide - an institution that was more likely insolvent than illiquid - has been bailed out with public money via a $55 billion loan from the FHLB system, a semi-public system of funding of mortgage lenders. Banks' bankruptcies will add to an already severe credit crunch.

Seventh, the banks losses on their portfolio of leveraged loans are already large and growing. The ability of financial institutions to syndicate and securitize their leveraged loans - a good chunk of which were issued to finance very risky and reckless LBOs - is now at serious risk. And hundreds of billions of dollars of leveraged loans are now stuck on the balance sheet of financial institutions at values well below par (currently about 90 cents on the dollar but soon much lower). Add to this that many reckless LBOs (as senseless LBOs with debt to earnings ratio of seven or eight had become the norm during the go-go days of the credit bubble) have now been postponed, restructured or cancelled. And add to this problem the fact that some actual large LBOs will end up into bankruptcy as some of these corporations taken private are effectively bankrupt in a recession and given the repricing of risk; convenant-lite and PIK toggles may only postpone - not avoid - such bankruptcies and make them uglier when they do eventually occur. The leveraged loans mess is already leading to a freezing up of the CLO market and to growing losses for financial institutions.

Eighth, once a severe recession is underway a massive wave of corporate defaults will take place. In a typical year US corporate default rates are about 3.8% (average for 1971-2007); in 2006 and 2007 this figure was a puny 0.6%. And in a typical US recession such default rates surge above 10%. Also during such distressed periods the RGD - or recovery given default - rates are much lower, thus adding to the total losses from a default. Default rates were very low in the last two years because of a slosh of liquidity, easy credit conditions and very low spreads (with junk bond yields being only 260bps above Treasuries until mid June 2007). But now the repricing of risk has been massive: junk bond spreads close to 700bps, iTraxx and CDX indices pricing massive corporate default rates and the junk bond yield issuance market is now semi-frozen.

While on average the US and European corporations are in better shape - in terms of profitability and debt burden - than in 2001 there is a large fat tail of corporations with very low profitability and that have piled up a mass of junk bond debt that will soon come to refinancing at much higher spreads. Corporate default rates will surge during the 2008 recession and peak well above 10% based on recent studies. And once defaults are higher and credit spreads higher massive losses will occur among the credit default swaps (CDS) that provided protection against corporate defaults. Estimates of the losses on a notional value of $50 trillion CDS against a bond base of $5 trillion are varied (from $20 billion to $250 billion with a number closer to the latter figure more likely). Losses on CDS do not represent only a transfer of wealth from those who sold protection to those who bought it. If losses are large some of the counterparties who sold protection - possibly large institutions such as monolines, some hedge funds or a large broker dealer - may go bankrupt leading to even greater systemic risk as those who bought protection may face counterparties who cannot pay.

Ninth, the "shadow banking system" (as defined by the PIMCO folks) or more precisely the "shadow financial system" (as it is composed by non-bank financial institutions) will soon get into serious trouble. This shadow financial system is composed of financial institutions that - like banks - borrow short and in liquid forms and lend or invest long in more illiquid assets. This system includes: SIVs, conduits, money market funds, monolines, investment banks, hedge funds and other non-bank financial institutions. All these institutions are subject to market risk, credit risk (given their risky investments) and especially liquidity/rollover risk as their short term liquid liabilities can be rolled off easily while their assets are more long term and illiquid. Unlike banks these non-bank financial institutions don't have direct or indirect access to the central bank's lender of last resort support as they are not depository institutions.

Thus, in the case of financial distress and/or illiquidity they may go bankrupt because of both insolvency and/or lack of liquidity and inability to roll over or refinance their short term liabilities. Deepening problems in the economy and in the financial markets and poor risk managements will lead some of these institutions to go belly up: a few large hedge funds, a few money market funds, the entire SIV system and, possibly, one or two large and systemically important broker dealers. Dealing with the distress of this shadow financial system will be very problematic as this system - stressed by credit and liquidity problems - cannot be directly rescued by the central banks in the way that banks can.

Tenth, stock markets in the US and abroad will start pricing a severe US recession - rather than a mild recession - and a sharp global economic slowdown. The fall in stock markets - after the late January 2008 rally fizzles out - will resume as investors will soon realize that the economic downturn is more severe, that the monolines will not be rescued, that financial losses will mount, and that earnings will sharply drop in a recession not just among financial firms but also non financial ones. A few long equity hedge funds will go belly up in 2008 after the massive losses of many hedge funds in August, November and, again, January 2008. Large margin calls will be triggered for long equity investors and another round of massive equity shorting will take place. Long covering and margin calls will lead to a cascading fall in equity markets in the US and a transmission to global equity markets. US and global equity markets will enter into a persistent bear market as in a typical US recession the S&P500 falls by about 28%.

Eleventh, the worsening credit crunch that is affecting most credit markets and credit derivative markets will lead to a dry-up of liquidity in a variety of financial markets, including otherwise very liquid derivatives markets. Another round of credit crunch in interbank markets will ensue triggered by counterparty risk, lack of trust, liquidity premia and credit risk. A variety of interbank rates - TED spreads, BOR-OIS spreads, BOT - Tbill spreads, interbank-policy rate spreads, swap spreads, VIX and other gauges of investors' risk aversion - will massively widen again. Even the easing of the liquidity crunch after massive central banks' actions in December and January will reverse as credit concerns keep interbank spread wide in spite of further injections of liquidity by central banks.

Twelfth, a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy. Market prices include a large illiquidity discount on top of the discount due to the credit and fundamental problems of the underlying assets that are backing the distressed financial assets. Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions. Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit. The triggering event for the next round of this cascade is the downgrade of the monolines and the ensuing sharp drop in equity markets; both will trigger margin calls and further credit disintermediation.

Based on estimates by Goldman Sachs $200 billion of losses in the financial system lead to a contraction of credit of $2 trillion given that institutions hold about $10 of assets per dollar of capital. The recapitalization of banks sovereign wealth funds - about $80 billion so far - will be unable to stop this credit disintermediation - (the move from off balance sheet to on balance sheet and moves of assets and liabilities from the shadow banking system to the formal banking system) and the ensuing contraction in credit as the mounting losses will dominate by a large margin any bank recapitalization from SWFs. A contagious and cascading spiral of credit disintermediation, credit contraction, sharp fall in asset prices and sharp widening in credit spreads will then be transmitted to most parts of the financial system. This massive credit crunch will make the economic contraction more severe and lead to further financial losses. Total losses in the financial system will add up to more than $1 trillion and the economic recession will become deeper, more protracted and severe.

A near global economic recession will ensue as the financial and credit losses and the credit crunch spread around the world. Panic, fire sales, cascading fall in asset prices will exacerbate the financial and real economic distress as a number of large and systemically important financial institutions go bankrupt. A 1987 style stock market crash could occur leading to further panic and severe financial and economic distress. Monetary and fiscal easing will not be able to prevent a systemic financial meltdown as credit and insolvency problems trump illiquidity problems. The lack of trust in counterparties - driven by the opacity and lack of transparency in financial markets, and uncertainty about the size of the losses and who is holding the toxic waste securities - will add to the impotence of monetary policy and lead to massive hoarding of liquidity that will exacerbates the liquidity and credit crunch.

In this meltdown scenario US and global financial markets will experience their most severe crisis in the last quarter of a century.

Can the Fed and other financial officials avoid this nightmare scenario that keeps them awake at night? The answer to this question - to be detailed in a follow-up article - is twofold: first, it is not easy to manage and control such a contagious financial crisis that is more severe and dangerous than any faced by the US in a quarter of a century; second, the extent and severity of this financial crisis will depend on whether the policy response - monetary, fiscal, regulatory, financial and otherwise - is coherent, timely and credible. I will argue - in my next article - that one should be pessimistic about the ability of policy and financial authorities to manage and contain a crisis of this magnitude; thus, one should be prepared for the worst, i.e. a systemic financial crisis.

Your working too early in Phoenix analyst,

By John Mauldin

http://www.marketoracle.co.uk/Article3677.html

just hope he is wrong

Do you suppose people were ignoring the high/low line because of the market turn around rather than just ignoring bad news. That they were just focusing on the turn around and figuring it was a given that with the market down that far, what a was it 118XX., it was bound to set a bunch of lows.

With oil and NG at such high prices and food commondies like wheat, corn, cocoa, coffee, etc. up so dramatically that it has to be costing the heck out of you and me. Consumers. I mean isn't that what inflation is all about? The only cheap thing is houses. Wow that's good news. Cars are so expensive that dealers offer 72 months financing. Gas at over 3 bucks at most stations in the country and might hit 4 bucks this summer. People are alright cutting back on driving if you can believe the polls. This isn't a political poll or a feel good poll so there is no real reason to lie.

I know it is always different this time and it is. It always is. Humans are always different. There is the end with the big blow off and the end with the whimper and a bunch in between. Who knows how this will end? How many times will the market test 11800? Who the heck knows? How come the commodities market took a big hit yesterday? How far will that go?

The standard of living in the world is going to get way better and the countries that are going to suffer are the ones that are now enjoying a really good standard of living now. Why? Because there isn't enough goodies to go around. What ever idiot in Congress decided to use food for fuel should be literally tarred and feathered. That is beyond pure stupid. That is what one gets when these elected (and I use the term loosely) Congress people through the media feel that they can BS an unthinking (and I use this term succinctly) populous.

My point is that the bottom in this downturn probably will take some time in coming. JMHO, we are going to get more false starts before it is finished. But then who the heck am I.

Rule- A good way to spot a TRUE bottom is when people start ignoring bad news.

A word of caution. If the markets don't try to form a bottom on rate cuts of .75 or more. Then it means real trouble.

Hi David,

I think you did not fail in micro-analysis and neither in macro-analysis: it was just the timing wrong, not the analysis.

In my opinion, you could think to a different asset allocation for the years to come, looking and digging not only in small cal that, traditionally, can fluctuate a lot and have high volatility, but also investing in medium cap that are going in trend.

The past years have seen plenty of opportunities to make money in "safer" way just riding the stocks that were clearly on the best up-trend (TIE-HANS-MEDI-FSLR-ILMN and dozens of others).

Small caps nowadays are more than a bet rather than an investing: yes we can find the good ones, but how many losses an investor should incur before getting the 10-folder?

Just my opinion, of course

Enjoy your Easter time, ciao

Andrea

Looking for OPTIMISM! :-)

$INDU 12,099.66, -293.00, -2.4%) ended the day with a gain of 420 points, the biggest one-day point gain in more than five years. ( Read full story.)
But there's more reason for the bulls to cheer than the magnitude of the day's point gain. Tuesday's action also was strong enough to trigger a bullish technical event known as a "Double Nine-To-One" signal.

This indicator is based on the volume of all NYSE-listed stocks that go up on a given day, expressed as a percentage of the total volume of all stocks that rose or fell on that day. On a day when rising stocks' volume is the same as declining stocks' volume, for example, this ratio would be exactly 50%.

A single "Nine-To-One Up Day" occurs when this ratio is 90% or higher on a given day. According to Martin Zweig, who helped to develop this indicator several decades ago, such a huge imbalance of up volume over down volume "is a significant sign of positive momentum. In other words, when daily up volume leads down volume by a ratio of 9-to-1 or more, that tends to be an important signal for stocks." The quotation comes from Zweig's 1986 book, "Winning on Wall Street."

An even more bullish signal, according to Zweig, is when two "Nine to One Up Days" take place within a short period of time -- something he called a "Double Nine-to-One" signal. It is this more bullish signal that got triggered on Tuesday: March 11, one week ago, was a Nine-to-One Up Day, and so was Tuesday, when up volume constituted more than 95% of the combined volume of both rising and falling stocks.

How bullish is a "Double Nine-to-One" signal? One answer is provided by David Aronson, an adjunct professor of finance at Baruch College. Professor Aronson is the author of a book titled, "Evidence-Based Technical Analysis" (Wiley, 2007), in which he discusses how to use the "scientific method and statistical inference" when judging investment strategies.

Aronson, along with the students in a class he teaches at Baruch College, tested the statistical significance of "Double Nine-to-One" signals. Aronson told me that he and his "class used data from the beginning of 1942 through fall of 2006, and we looked at what happens in the stock market in the 60-trading-day period following a ... double Nine-to-One signal, versus what happens the rest of the time.

In those 60-trading-day windows, the S&P 500 index  produced an average annualized return of over 22%, on the assumption that an investor entered the market on the close the day after a double Nine-to-One signal was triggered and held until the end of the 60th trading day later."

"In the non-signal periods," Aronson continued, "in contrast, the return averaged 4.5% annualized. The difference between these two average returns is statistically significant."
Aronson told me that these calculations do not include dividends.
Are there are flies in the ointment? Of course. There always are.
One is that "Double Nine-to-One" signals aren't foolproof. Such a signal was triggered last November, for example, and, far from rising at an above-average rate over the subsequent three months, the stock market fell.

Another objection is that it may not be entirely fair to consider March 11 to have been a "Nine-to-One Up Day." That's because NYSE up volume on that day, as a proportion of total volume of both rising and falling issues that day, came to 89.998%.
A technician who rounded percentages to two or fewer decimal points would have concluded that March 11 was a Nine-to-One Up Day. But someone who calculated the ratio out to more decimals would have concluded that March 11 didn't qualify and, if so, then we didn't get a Double Nine-to-One signal this week.

However, Aronson, in an interview Tuesday afternoon, indicated that in his opinion, March 11's volume data came close enough to qualify. Had it been included in the sample studied by him and his class, March 11 would have been considered a "Nine-to-One Up Day."
Finally, a more serious objection is that there have been around a dozen nine-to-one down days over the past couple of months. However, Zweig argued in his book that Nine-To-One Down days do not have as much bearish significance as Nine-to-One Up days have bullish significance.
The bottom line? Tuesday's "Double Nine-to-One" signal may not prove to be as reliable a signal as it has in the past. But the bulls can nevertheless console themselves that the burden of proof has shifted so that it's now the bears poking holes in the bullish argument rather than the other way around. 

LINK: http://www.marketwatch.com/news/story/tuesdays-market-flashed-double-9-to-1/story.aspx?guid=%7BC61515A8%2D00F0%2D4460%2DAC40%2D51E2BA8D864B%7D&dist=TNMostRead

shadowtrader update:

http://www.shadowtrader.net/videos/sunday033008ro.html

I'm taking profits on alot of stuff today/yesterday and starting to hedge again.

BigSully1,   Good luck to you.  I believe the market goes up on balance until April 25th to 28th or so, then down on balance into May 20th-25th and then back up on balance again into late June, early July.  We will know in the fullness of time.  Good trading and health to you...

Poli