3SOF

I am pretty bearish right now about next week.  Micron tanked, DIS had an outside trading week, Master Card reported good numbers and sold off.  When high flier market darlings like this start selling off its also a sign of impending correction. 

Oil going up is bad, some Fed governors implied that a rate hike could be in the cards, the sub prime lenders are imploding, next week is options expiration week, and we had distribution days on all indexes Friday.  That makes 3 for the Nasdaq recently, not good.  I just feel that the market is like Scotty from Star Trek "giving it all she's got" but this time the dilithium crystals are not going to do the trick. 

I plan to stick with AUY and SLV, maybe buy some CGR (a gold play), as well as maybe stick with some of my high fliers, but I wont buy anything in non energy or gold next week unless maybe its a 3SOF fast portfolio suggestion. 

I might also get some QID ultra short fund, which allows me to short the QQQ without needing to actually short it. It was up 3.2% Friday on its largest volume ever.

Well, I hope I am wrong and would love to hear opinions as to why I am not, just thought it should be discussed.

hi,
i'll let the chart do the talking.
glta
maxi

Quote from: tokyopua on February 11, 2007, 02:41:21 PM
I am pretty bearish right now about next week.  Micron tanked, DIS had an outside trading week, Master Card reported good numbers and sold off.  When high flier market darlings like this start selling off its also a sign of impending correction. 

Oil going up is bad, some Fed governors implied that a rate hike could be in the cards, the sub prime lenders are imploding, next week is options expiration week, and we had distribution days on all indexes Friday.  That makes 3 for the Nasdaq recently, not good.  I just feel that the market is like Scotty from Star Trek "giving it all she's got" but this time the dilithium crystals are not going to do the trick. 

I plan to stick with AUY and SLV, maybe buy some CGR (a gold play), as well as maybe stick with some of my high fliers, but I wont buy anything in non energy or gold next week unless maybe its a 3SOF fast portfolio suggestion. 

I might also get some QID ultra short fund, which allows me to short the QQQ without needing to actually short it. It was up 3.2% Friday on its largest volume ever.

Well, I hope I am wrong and would love to hear opinions as to why I am not, just thought it should be discussed.

I think you could be right.  I too am just holding gold and other minerals  stocks right now, those should be pretty safe. But, I think some plays in the medicine field might be pretty safe also.   

Just to add one more thing, on his show Friday Cramer also felt that a big correction was coming this week. 

Quote from: pompano on February 11, 2007, 05:49:44 PM

Quote from: tokyopua on February 11, 2007, 02:41:21 PM
I am pretty bearish right now about next week.  Micron tanked, DIS had an outside trading week, Master Card reported good numbers and sold off.  When high flier market darlings like this start selling off its also a sign of impending correction. 

Oil going up is bad, some Fed governors implied that a rate hike could be in the cards, the sub prime lenders are imploding, next week is options expiration week, and we had distribution days on all indexes Friday.  That makes 3 for the Nasdaq recently, not good.  I just feel that the market is like Scotty from Star Trek "giving it all she's got" but this time the dilithium crystals are not going to do the trick. 

I plan to stick with AUY and SLV, maybe buy some CGR (a gold play), as well as maybe stick with some of my high fliers, but I wont buy anything in non energy or gold next week unless maybe its a 3SOF fast portfolio suggestion. 

I might also get some QID ultra short fund, which allows me to short the QQQ without needing to actually short it. It was up 3.2% Friday on its largest volume ever.

Well, I hope I am wrong and would love to hear opinions as to why I am not, just thought it should be discussed.

I think you could be right.  I too am just holding gold and other minerals  stocks right now, those should be pretty safe. But, I think some plays in the medicine field might be pretty safe also.   

Just to add one more thing, on his show Friday Cramer also felt that a big correction was coming this week. 

I saw that Cramer show just now too, had it recorded from Friday.  But I had seen Fast Money already when I wrote this, and Eric Bolling was the one who pointed out the DIS chart, and how he felt next week could be tough.  He was trader of the year for Trader Magazine, I always listen to him. 

Also, I had already posted recently in "Look at the DOW" thread recently that I thought that tech stocks were due for a downturn by looking at the longterm $COMP chart :

Quote from: tokyopua on January 30, 2007, 07:32:10 PM
I am not worried about the DOW too much, but the $COMPX chart looks a bit toppy to me:

http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&st=2002-01-29&id=p69663617056&a=96399436&listNum=1

With the 3 distribution days in the Nasdaq, all you need is one or two more, which seems almost inevitable next week, and according to IBD principles a correction is really likely.

Not that the overall long term bull market trend would break, still a lot of positives from globalization, technology ,etc, but its not fun to have too many long positions in a correction, so its worth getting ready for it if the writing seems to be on the wall.

I have heard this as of late too. I guess the market is due for a correction but isn't long term holding always a good idea in case you are wrong? Is it also the opinion of some that the Main Portfolio may fall as a result in addition to the 3SOF? Do you think David has been thinking of this recently?

I think these are valid questions and hopefully David reads this thread and addresses it, I would be most interested in hearing his thoughts and analysis on the topic. I would rather sell all of what i have which is about 85& of what is in the 3SOF and Main stuff.

I have just seen such wonderful advances, I would hate to lose a good chunk of my gains at this point.

Is it just a market correction coming or the start of "The Next Rogue Wave"?

http://www.financialsense.com/stormwatch/2006/1215.html

Quote from: BigSully1 on February 11, 2007, 10:56:29 PM
Is it just a market correction coming or the start of "The Next Rogue Wave"?

http://www.financialsense.com/stormwatch/2006/1215.html

Thanks for sharing this link.  Sobering stuff... the one thing I caught is that he said "expect this to begin in the subprime lenders" which is was all over the news last week.  He wrote the article on December 15th 2006, so was pretty spot on in predicting that only 2 months later... hope he is wrong about the Rouge Wave scenario lol.

some more commentary and charts;

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1926808

Quote from: tokyopua on February 11, 2007, 11:21:50 PM

Quote from: BigSully1 on February 11, 2007, 10:56:29 PM
Is it just a market correction coming or the start of "The Next Rogue Wave"?

http://www.financialsense.com/stormwatch/2006/1215.html

Thanks for sharing this link.  Sobering stuff... the one thing I caught is that he said "expect this to begin in the subprime lenders" which is was all over the news last week.  He wrote the article on December 15th 2006, so was pretty spot on in predicting that only 2 months later... hope he is wrong about the Rouge Wave scenario lol.

Jim Puplava has been writing those articles since 2001 and I read most of them. He has been wrong since early 2003. We're in 2007, that's 4 years, a long time for a man to be wrong.

Someday he will be right, but I don't think it is in the near future. It can be 10 years from now.

I know your bearish concerns and that might keep you from making as much money as you ought to (it can even make you lose, if you employ leverage), by being a bear in a bull market. Moreover, that QID product is the worst financial product I could think of buying. It can not only go to $0, but to negative values in my opinion, or else it doesn't do what it is meant to do, that is, short the Nasdaq 100 with two times leverage.

I'm a bull in a bull market and will remain a bull for as long as it a bull. Corrections don't matter, you can't time them, only lose your position in the main trend.

Someone asked for my opinion on the subject and I gave it. Anyway, good luck

Quote from: rickjust on February 11, 2007, 02:59:10 PM
hi,
i'll let the chart do the talking.
glta
maxi

Hmmm, looks like after David's post I need to reconsider my buy on QID longer term.  But for now, its interesting how the H&S top rickjust pointed out corresponds to the inverse H&S pattern I see on the QID.  I am in QID at 53.31 this morning, and aside from CPNE and a quick daytrade on ONXX, its the only green I have been seeing all day.

I know your bearish concerns and that might keep you from making as much money as you ought to (it can even make you lose, if you employ leverage), by being a bear in a bull market. Moreover, that QID product is the worst financial product I could think of buying. It can not only go to $0, but to negative values in my opinion, or else it doesn't do what it is meant to do, that is, short the Nasdaq 100 with two times leverage.

Someone asked for my opinion on the subject and I gave it. Anyway, good luck
[/quote]

I think your only seeing the UltraShort ETF's as a horrible LT investment, and absolutely rightfully so. But I see them as  highly effective ST to MT defensive or hedging tools employing much of the same strategy used by hedge funds and institutions. In fact I strongly suspect there is high institutional interest in these.

"I'm a bull in a bull market and will remain a bull for as long as it a bull. Corrections don't matter, you can't time them, only lose your position in the main trend."

Using the UltraShorts, you don't necessarily have to lose any long positions, agressive or not, you can hedge against them and perhaps more comfortably stretch out  capital gains for a longer period, maybe even turning ST gains into LT. JMHO.

I used to read a lot of online bloggers relating to the stock market. At the height I had more than 20 bookmarks on my browser in that category. More than once I was convinced that "doomsday is coming!" and sold a few stocks or exchange some mutual funds into money market funds, only to see the market going up again.

The problem I now see is that online bloggers have a bearish bias! (Somewhere I read the same conclusion a few weeks ago, but I couldn't find the link anymore). Bearish comments make a nice story, and a "crash is imminent!" warning catchs eyeballs. It is almost the same reason why TV headline news are mostly negative (at least in America anyway).

Last summer when the market was pulled back (not even a hugely severe one), most of these bloggers were extremely negative, and most of them turned out to be wrong. Besides self-serving purpose I think why they were wrong is because they relied too much on technical analysis. Technical analysis might be successful here and there on a short timeframe, but in order for a major bear market to occur, there got to be convincing fundemental reasons!

David has laid out its bull-market thesis a few months ago. And the only other source I rely upon (Bob Brinker's Markettimer) these days continue to be bullish (by the way, he called a buying opportunity for S&P below 1250 last summer). As long as we are still in a bull market, I wouldn't care too much about a profit-taking driven correction. Moreover, a good stock in a correction should hold up well and come back stronger in the next upturn. And this is even a good opportunity to weed out weak stocks and replace them with fundementally stronger ones!

Although one day does not make a wonder, I am very happy looking at the stocks in the main portfolio today: half of them are actually up today on a down market! That tells a lot about the quality of David's picks.

I want to point out that my original post was not based on any newsletter or blogger, rather my own observations.

I sat through the correction last time gradually getting shaken down and didnt enjoy it.  I agree a correction doesnt necessarily mean a bear market, but lets say for argument sake you could time a correction, isnt it better to sit it out until an uptrend starts again and you can be assured of making money?

I think the question then becomes whether you can tell when a correction is going to happen.  I dont claim to be able to do that, but IBD does seem to have a good track record doing that by counting distribution days.  They show how it worked to predict the 2001 peak. 

They define distribution days as a day when one of the major indices is down .2% or more on volume that was greater than the prior day.  This is supposed to be a sign of institutional selling.  Get 3 of these in 4 weeks and they advise caution.  Get 4 or 5 and they tell you to go to cash.  We are at 3 for the S&P and Nasdaq so far.  Add to this all the other factors I cited in my original post, and that is what has me thinking the correction is going to start. 

I am not worried about a Rogue Wave or major crash, just losing more money than I have to if indeed a correction is starting.  I do agree that some clear growth stocks like SYX can still be held through corrections, but I dont want to hold anything that I am not damn sure of.  The correction last time shook me out of everything I was in.  I can maybe tell myself I will have the strong hands this time, but its different when you are looking at red day after day, you can forget your resolutions from a few weeks ago when you still saw some green. 

Anyway, I am just sharing my perspective from the one correction I ever expereinced.  I am a novice trader, only been at this game for 18 months.  A veritable babe in the woods compared to David and some others here.  All I have is what I have been through personally. 

All this being said, I guess the crux of the debate here is whether you can possibly time a correction. 

As such, I am curious if anyone else follows the IBD distribution day theory?  I could probably ignore all the other glaring signs but that right now.  It sure would have saved me some money last correction, and I hope it will again...

QuoteLast summer when the market was pulled back (not even a hugely severe one), most of these bloggers were extremely negative, and most of them turned out to be wrong. Besides self-serving purpose I think why they were wrong is because they relied too much on technical analysis. Technical analysis might be successful here and there on a short timeframe, but in order for a major bear market to occur, there got to be convincing fundemental reasons!

Nice thought realcoolhead. I think you're close, but not there yet. To understand why they were wrong you need to grasp the Contrary Opinion Theory. I read several books on the subject. They're mostly oriented for futures traders (who trade the stock market indexes, like the S&P500 and the Nasdaq 100, through the ES and NQ futures), but can also be helpful for stock market traders that want to try to time the market.

The problem is that the "hall of fame" of the stock traders don't try to time the market, they don't care about the general market trend to judge their investments, because they invest in the perspective of the business.

QuoteAlthough one day does not make a wonder, I am very happy looking at the stocks in the main portfolio today: half of them are actually up today on a down market! That tells a lot about the quality of David's picks.

Thanks realcoolhead I hope you're still holding SYX and all others with strong hands.

Tokyo, you look like me when I had 18 months in the stock market. Looking for everything around, studying several strategies to make the most out of my money. Getting excited about new indicators, strategies, strategists. I think it is a journey you need to take to fully understand the game.

But I tell you that in my 11 years of experience, I spent several years studying hard and thinking I had something and no, I was wasting my time. The time I took to learn the game (obviously, I'm still learning), was a lot longer than what it could have been, had I been somewhat more, how should I say it, conservative?

I wonder, you want to try to time a general market correction to save some money or else do you want to do it to make more money than what you've been doing?

One of the things I've learned (but it took me several years, unfortunately), is that the trend is your friend, and the trend doesn't change until it has changed. If you look at the chart of the SPY below, the trend is bullish.

One always thinks he can get out when a correction starts and then get in lower when the bull begins again. My believe is that this is an illusion. A bull market is made with few big gaining weeks, and if you miss one of those because "a correction is due", you miss the biggest part of the move. You end up making a $4 profit in a $20 move, as Livermore explains.

As for the QID, if the Nasdaq 100 rises 50% from this point the QID will be worth $0. And if the Nasdaq 100 rises 50%, it will still be 45% below its all time high set in 2000. In fact, the Nasdaq 100 needs to rise 175% to approach a new all time high. I don't know when will the Nasdaq hit a new all time high, perhaps that will be just 10 years from now (the Nasdaq would need to rise 10.6% a year, on average), but that is the trend! Or do you think the technology sector in the US will never be at its highs again? Think again, the history tells you the bulls always win over the long run, because losers fade away (I mean, losing stocks). It also has to do with the way the indexes are constructed.

There's a lot more to say about this subject. We'll keep talking, thanks for the thread

I find this thread interesting and this is probably coming out at the right time due to a lot of US media proclaiming the market is due for a correction and having many people indulging in this theory.

The one thing I have found interesting is the recent conversations regarding gold. Not holding gold mining companies but actual gold or gold certificates for those who have IRA's. I am to understand that having companies that mine for gold are not all that safe in certain market's due to political volatility, such as the recent coupe in Figi and them taking control over the mining in that country.

In regards to protfolios and having actual gold or again, gold certificates (maybe that is not the right name of that but it's just the same as holding real gold but in IRA's). Any opinions or suggestions as it relates to this?