3SOF

Quote from: chinaguru on February 28, 2007, 12:27:38 AM
A bloody day. I'm in China and has been watching the financial channel til now, 13:15 here. Right now, shanghai composite is 1.48% up with more ups than downs. Government has just cleared a few rumors which will make stocks down. So market is up again. The hot sectors today is 3G, energy.

The analysts predicted that the down is a correction of bull market, many stocks are still undervalued (I don't agree with this, though). The future market will be a heavy ups and downs between 2500-3500 (shanghai composite index).

Anyway, I don't think this is justified. Shanghai composite index tripled in one year,  a 10% correction is all it deserves. But did the major indices in the USA  triple in the same period? US markets over reacted.

I added more positions yesterday...it's a hard, but I did

Cool to have someone actually in China share their perspective! 

You may well be right, this could all be an over-reaction that got compounded by computer glitches, etc.  But I will likely wait till IBD tells me we are back in confirmed rally mode here in the US before I go long again.

Rest of Asia is still tanking though, Japan, Singapore, Australia all down bad as I watch Bloomberg now.... 

Today was anything but pretty to say the least. Dropping my portfolio around 7.5% which makes that the biggest one day decline i think i've ever witnessed in my trading career. Several factors played a roll in todays decline.

Quoted from an article on MSN:

Quote* An overbought stock market. The stock market had gone more than four and a  half years without a correction of 10% or more. Plus some sectors, especially materials, had enjoyed huge gains and were ripe for profit taking. Gold and copper stocks were hit very hard. Freeport-McMoRan Copper and Gold (FCX, news, msgs) fell nearly 10% to $55.75. Rio Tinto (RTP, news, msgs), the global mining giant, was down 6.7% to $215.13.

    * Higher oil prices. Crude oil jumped 32 cents a barrel to $61.46. So far in February, crude is up 5.44% after a big sell-off in January. The Dow Jones Transportation Index ($TRAN) fell 3.4% today and has fallen more than 6% since hitting a record 5,178 a week ago.

    * Concern about housing and subprime lenders. Traders are obsessed about how deep the housing slump that began last year will go and how vulnerable lenders are if large numbers of mortgages go bad. One result: Big brokers and banks have been pummeled. Goldman Sachs (GS, news, msgs) fell 6.7% to $199.76 today. Lehman Bros. (LEH, news, msgs) was off 4.7% to $74.19. The Amex Securities Broker/Dealer Index ($XBD.X) fell 4.4%.

    * Alan Greenspan. The former Federal Reserve Chairman said yesterday that the U.S. economy faced a risk of a recession later this year. "When you get this far away from a recession, invariably forces build up for the next recession, and indeed we are beginning to see that sign," Greenspan said via satellite link to a business conference in Hong Kong. Greenspan didn't say a recession was imminent, but traders didn't care.

     * Disappointing economic news. Here the culprit was a report that new orders for durable goods plunged 7.8% in January, more than the 5.5% drop expected by economists. Durable goods rose a revised 2.8% in December. A big drop in airplane orders at Boeing (BA, news, msgs) was the biggest contributor, but even without Boeing, orders had fallen 3.1% last month, the biggest drop since July 2005. Boeing was off 1.9% today.

Technicals



On a 6 month chart the COMPX was trading steadily in a bullish ascending channel in which price was attempting to make a 3rd stab at the upper resistance line. Technicals suggested a pullback from here but we got a lot bigger pull back then we bargained for. Pummeling strait through the ascending support line of the channel as well as the 50ma. Suggesting bearish behavior in the near future.



On a 1 year chart we see the COMPX decline was halted at support near 2400. So we could possibly expect to see some stabilization right here. But with such a powerful move on the nasdaq's most heavily traded session in history and the largest decline in stocks since the market opening after 9/11. I think The COMPX dropping near 2300 support is more realistic.



On the 3 year chart we see that price has been trading in a mini channel over the last 4 months within the much larger channel that the compx has been associated with over the past 3 years. Price has been hugging the upper resistance line of the 3 year ascending channel struggling around 2500. I predicted back in November that 2500 may be the mark before a real correction.

Quote from: fous on November 06, 2006, 12:24:52 AM
Notice on the longer term chart price still may continue north to retest the top resistance line of the ascending wedge just south of 2500 before we might see the real correction if and when it comes. Man it would be great to have another 1999;)

-fous

On the past 2 tests of the upper resistance line of the 3 year channel price has declined fairly rapidly for a large correction. So with this huge sell-off today along with record breaking volume. I won't be surprised at all for this to be the 3rd leg of a major correction in the bullish channel.

So as of right now its very difficult to predict what the market is going to do. Which is why i sold a lot of my positions today. I feel that the markets will be volatile and highly unpredictable over the course of the next weeks. This kind of reminds me of the beginning of May of last year, that was some rough times. Hopefully we don't go through another one of those but we should be prepared. In the case of bearish behavior of the markets i generally stick long on otcbb's and short on most amex,nyse, and nasdaq stocks i trade. Too early to see where the markets going after one day of a sell off, but im bringing out my short filter again , so lets see what the rest of the week has in store for us.

happy trading

-fous

now 3.1% up now in Shanghai. I think it's stupid to watch Financial channel for more than 4 hours today as I never watched a minute before yesterday.

Yesterday Jims Cramer (thestreet.com) bouht CAT on market open and added more upon dip. This builds up some confidence for me.

Right now, another Chinese analyst confirmed the big sellof is ridiculous. Technical correction he called it. More stocks are surging right now.

And again, China markets are extremely bull with average price of 40 times earning. I think it's very stupid to link US market to China market. Totally different economy structure and stock market mechanism.

chine's market is up 3.85% at the moment ....

I hope it closes positive today , this will help us markets after the big sell off  

Nice we may rebound .

market finally closed, another hard day (watching TV til now)

Shanghai composite 2,732.88 - 2,888.90    2,881.07     +109.28     +3.94%

Shenzhen composite 7,596.02 - 8,097.33    8,039.70     +248.88     +3.19%

If globalization or domino effect still works today just as yesterday, how about a strong rebound?

http://www.bloomberg.com/markets/stocks/futures.html

Futures are up DOW future up +95pts, NASD future +10pts S&P future +10pts

Email to my stockbroker:

Joe: So how's the view from under your desk. Hope they're sending you food down there. Whole thing wasn't so bad. It was sort of like a mass circumcision: everybody lost just a little bit  (but how about that VSGN...little guy sure kept his pecker up and uncut....only stock on my board to be green)

I was on a plane from L.A. to London for 11 hours and got to our flat about 3PM (GMT). Market opens here at 2:30(GMT). I was too knackered to open my computer. Had a snack, took a nap and was awakened by daughter Regina in L.A. She told me the DOW had dipped 500 points and when I said WTF, she told me she had called because I might want to get on line and pick up some cheap stocks. That's my kid: all those years in the collectibles business with us has thought her that when calamity strikes, don't moan and groan. It's a time to start ripping off all those people with their heads in their hands. Do you know how much perfectly good wallboard went to waste during Katrina because nobody had the foresight to drive around with a pick-up truck?  As my grandfather (a great stockpicker who had no idea when to sell)  said: when life gives you lemons, buy Minute Maid. Regards, rudy

government confirmed there's no bubble in China stock market, and the economy development speed is very fine

and another major local evening newspaper comes out with headline: 2007: STLL BULL.

who knows? 

But anyway the reality is China market has been bullish for only one year...

Quote from: jorgegr on February 27, 2007, 11:50:33 PM
No Tokyopua, as far as I know this is just an index
can't trade it.  Never seen "VOLUME" on any statistic.

There are $VIX futures, but to trade that one needs a futures account, or an Interactive Brokers account.

David is in the house! Cheers hopefully you feeling better today. Looks like we may rebound if the futures hold up .

Sure the market will rebound, but the technical side is already been damaged and bears is already controlling the market. It may take months before bulls will take over again....

I don't think going long now is not a good idea, you never know what lies ahead. I guess the best move is, go cash, sit tight, and watch the market for now.

Quote from: nullzero on February 28, 2007, 02:53:01 AM
David is in the house! Cheers hopefully you feeling better today. Looks like we may rebound if the futures hold up .

Good morning nullzero

I was awake all night, reading and studying the situation. I'll write an article about it now.

Good discussion, guys.

Yesterday's selloff might have been an over-reaction to China, as most of the analysts and pundits seem to be billing it, but at the end of the day, my bottom line is: "What does the chart look like?"

This is a candlevolume chart of the SPY.  The width of the candle expresses volume, so we can see that, not only were all of the gains since November 28 (3 months) given back, they were given back on huge volume.

Independent of the fundamental factors, that's some serious selling, and some technical damage to the chart, so we could be in for a bit more selling than the "few days to a week" of selling that I've been hearing on CNBC.

Short-term, what I would expect on any rally is what I personally experienced in my GIGM trade yesterday.  It gapped down on me from 13.12 and fell to 11.21 in early trading. 

YEEKS. 

That certainly seemed like an over-reaction to me, but my opinion about that doesn't matter much when a huge part of my gain evaporated in minutes.  I didn't expect GIGM to rally all the way back to the gap above 13.00, so I was real happy to get out it, and sell into strength at 12.69 on the late morning recovery.

A lot of stocks didn't have the kind of recovery that GIGM did yesterday, and if they do, I suspect that players will react the same way that I did, and sell into strength.

If this is more than than "just a blip" of a few days to a week that I've been hearing on CNBC. the 200DMA currently is at 134.40.  A 50% retractement of the rally off the summer low is 134.38. 

Below that is horizontal support, at 132.77-132.80.

If I had my druthers, I'd like to see a selloff to one of those levels.  Corrections of the kind of gains that we've had are healthy.








   

These guys at IBD rock IMO, their article below contrasts the "everything will be OK, start buying now, Bernanke rally" type stuff I heard on CNBC most of the day.  Their comment about what happened last time a correction came out of Asia is also sobering but something I hadnt yet thought of in that context (I bolded it below). 

This Big Picture column alone (which I read nightly) has been worth my subscription price:

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Stocks Rebound Lethargically After Tuesday's Rout
BY JONAH KERI

INVESTOR'S BUSINESS DAILY

Posted 2/28/2007

Stocks tried to rally Wednesday, but modest price gains, lighter volume and so-so action by leaders failed to offset Tuesday's sell-off.

The Nasdaq rose 0.3%. The S&P 500 gained 0.6%. The small-cap S&P 600 inched up less than 0.1%.

While better than another day of heavy selling, the session fell far short of a convincing rebound after Tuesday's huge losses. The Nasdaq plunged 3.9%, leading a broad decline that scuttled the rally dating back to Aug. 15.


The Market Pulse reflects the new correction. The distribution day count, tracked during market rallies, dropped off the Pulse. Distribution days aren't relevant during corrections. You're looking for the market to find a bottom, then stage a follow-through.

Portfolio management is the name of the game under these adverse conditions. If you froze up during Tuesday's debacle and didn't raise cash, today was a good day to take money off the table. Don't compound an initial mistake by getting stubborn and trying to hold a vast portfolio of stocks through a correction.

Following a smart investment plan should get you off margin and prompt you to sell weaker stocks, rather than trying to fight the market's choppy waters.

The last time we saw problems out of Asia in 1997, the market fell into a three-month correction. With both history and current conditions working against you, it's best to step aside.

Ideally you'll come out of the market's correction with your portfolio and psyche intact. If you try to fight it, you could get your confidence crushed. The upshot? When the market turns, as it always does, you could freeze and miss out on the next big round of gains.

Using a sound set of trading rules makes all the difference. To a certain extent, you don't have to worry much about the broad market. If you're cutting losses quickly and taking profit where appropriate, you'll naturally move to cash and reduce your exposure.

If you want to try to ride your bigger winners through a correction, so be it. Just make sure you make a stand with your top dogs, not your laggards. Whatever you decide to hold, stay alert for sell signals.

Some leaders have held up. Futures exchange operator IntercontinentalExchange (ICE) regained half its loss in higher volume Wednesday.

But that kind of action was rare. A number of stocks that ran up for months have suffered heavy selling. Overwhelming downside volume has dragged many of these stocks below key support levels.

Panamanian airline Copa Holdings (CPA) broke out of a bullish base Aug. 16, one day after the Nasdaq followed through. The stock enjoyed one of the smoothest run-ups of any growth stock, nearly tripling over the next six months.

But heavy downside volume and a plummeting Accumulation/Distribution Rating have tagged Copa as a possible sell candidate, even though it's found support at its 50-day moving average.

The IBD 100 echoed the broad market's action, reclaiming just a small chunk of its Tuesday losses. The index rose 1.3% Wednesday, after diving 5.8% Tuesday.

Related Resources:

Review the basics of market analysis according to the CAN SLIM™ Investment Research Tool.

Learn from market-related Q & A's in the Ask Bill O'Neil Archives.

Read After The Close for critical announcements that affect both business and the economy.

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