Market Discussion

[BigSully1]

IBD Market Wrap Wednesday

http://www.investors.com/mediacenter/MediaCenter.aspx?MediaID=840&t=v

[capricho]

Here's what Ira Epstein had to say today:

http://www.youtube.com/watch?v=KIG7ojeF6xg

[la-onda]

 
Old Fool Notes – 01/16/08
The bulls fought a nice battle today but fell short at the end.  But we are getting there.  The volume was huge at 3.4 billion.  The ratio was 1.3 to 1 in favor of the bears.  Pretty good efficiency for the bears.  While there were big boys playing today, they did not jump in to support the close – still in "bleed" mode I'm guessing.

The bears still have total control of the daily and hourly charts.  We punched through the Aug low today and that is never a good sign.

All of the rest of the charts with one exception look horrible so I won't spend any time on them – except to say there is blood in the street.

The ratio chart is the lone exception and it shows a slight uptick today.  The option boys are feeling nervous – and that is good.

No trades today in the TP.  I was much too busy to buy the double dip as suggested last night – if you did and managed to exit properly today, you could have made some nice pocket change.  The way I read the tea leaves tonight is that we are setting up for a solid move out of the gate.  Can the bulls hold it?  I don't know but it's probably not worth chasing until they clear 2430 on the top side – we have plenty of time to catch the up elevator if it's going that way.  I did pick up some mutual funds, XLF and BRK.B for the LT port today.  We may not be at the bottom but it is time to start averaging in on the LT port.
Charts link below.

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

[Rmagos]

Bernanke Aims to Avoid Reprising Greenspan `Regret' on Stimulus

Jan. 17 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may encourage lawmakers today to stimulate the economy while aiming to avoid his predecessor's ``regret'' of being tied to specific measures.

Legislators will question the Fed chief on steps to avoid the first recession since 2001 when he testifies to the House Budget Committee in Washington. Bernanke told members of Congress this week that some kind of fiscal stimulus is needed, according to Democratic lawmakers.

Former Chairman Alan Greenspan ``misjudged'' the environment in which he endorsed tax cuts in 2001, and had ``intense'' regret the eventual legislation excluded his specific guidance, he wrote in his 2007 book. Bernanke will try to avoid backing any particular tax or spending policies because doing so could earn criticism from legislators who oppose them, putting the Fed's reputation for independence at risk, analysts said.

``Bernanke will be far more circumspect than Greenspan in terms of specifics,'' said Greg Valliere, chief political strategist at Stanford Group Co. in Washington. ``The last thing he needs is another controversy.''

Greenspan, through spokeswoman Lisa Panasiti, declined to comment.

The hearing with Bernanke, 54, is scheduled to begin at 10 a.m. Washington time. Spokeswoman Michelle Smith declined to comment on his testimony.

Conferring With Democrats

The Fed chief told Democratic congressional leaders this week he does back some stimulus. He met with House Speaker Nancy Pelosi of California Jan. 14, and has spoken by phone with House majority leader Steny Hoyer of Maryland and Senator Charles Schumer of New York.

Schumer, chairman of the congressional Joint Economic Committee, said Bernanke told him that ``while he wasn't going to endorse a specific plan, if an economic stimulus package was properly designed and enacted so that it enters the economy quickly, it could have a very positive effect.''

President George W. Bush and his aides have pushed to make permanent the tax cuts passed in 2001 and 2003 that are scheduled to expire in 2010. Democratic lawmakers have warned against any effort to push those reductions, which they argue threaten the longer-term budget outlook and are geared toward higher-income earners.

Hoyer said in an interview with Bloomberg Television that the Fed chief agreed that the steps being considered now ought to be ``kept separate'' from making tax cuts permanent.

$100 Billion

Democratic lawmakers have suggested a package of about $100 billion that includes a rebate for middle-income taxpayers as well as expanded unemployment and food-stamp benefits.

``I believe it can be done in 30 days,'' Hoyer told reporters in Washington yesterday. ``Whether it will be done in 30 days is another question.''

An acknowledgement that the economy is weak enough to need some fiscal medicine may reinforce forecasts the Fed will lower interest rates by half a percentage point when policy makers next gather Jan. 29-30.

``If they're looking for help in this area, it would suggest that they see a lot more downside than they saw three or six months ago,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, who previously worked as a senior economist in Congress.

Traders see a 100 percent chance of at least a half-point reduction in the Fed's benchmark rate this month, with a 34 percent chance of another quarter-point, futures prices show.

Beige Book

The Fed said in its Beige Book regional business survey yesterday that the economy expanded ``at a slower pace'' in late November and December, with districts reporting ``disappointing'' holiday sales.

Starting with his November 2005 confirmation hearing, Bernanke, a former Princeton University economist, has strived to avoid letting lawmakers use his remarks to advance fiscal legislation.

``I'm going to begin now, I think, a practice of not making recommendations on specific tax or spending proposals,'' Bernanke said at the time.

Bernanke may support some short-term stimulus while urging lawmakers to mind the longer-term budget outlook, Silvia said.

The Fed chairman warned lawmakers a year ago the U.S. may face a ``fiscal crisis'' in the coming decades if it fails to deal with the rising costs of retirement and medical benefits for the aging population.

`Politically Explosive'

Greenspan, 81, similarly urged in the 1990s that the White House and Congress work to eliminate budget deficits. When he told lawmakers in 2001 that excessive surpluses could cause ``disruptions'' and favored tax cuts to limit them, it ``proved to be politically explosive,'' Greenspan wrote in ``The Age of Turbulence.''

``Within weeks, it turned out that I'd been wrong to abandon my skepticism about the ongoing surplus,'' when forecasts showed a deteriorating budget outlook, wrote Greenspan, who retired in January 2006 after 18 years at the helm.

Bernanke may get drawn into discussing the appropriate size of a stimulus or whether it should be weighted toward tax cuts or spending projects, said David M. Jones, a former Fed economist who has written books on the central bank.

``He might be drawn into the general outlines of the package,'' Jones said from Fort Myers, Florida. ``It will be more than he intended, but less than Greenspan would have done.''

Story: Scott Lanman in Washington at [email protected]

[berloga]

Bigsully1: thanks for the IBD links. I have had an internal battle with my own doubts for quite a while now. Holding stocks through big runs, like ASTI's, for example is surely OK if one considers 1-3 years holding, but the gains are not guaranteed in the long run, due to many factors. At the same time, reducing the risks by selling at the top, epecially with the general market this shaky is prudent. One cane always continue watching the good stock closely and then enter again. When market is positive, then perhaps a better way would be to just hold through ups and downs. Just look how many peaks we've missed so far that could have compensated for some big shortfalls, like TBSI.

I agree with David stop loss is not a good strategy, but respecting both fundamentals and technicals may be the best strategy.

[BigSully1]

Bigsully1: thanks for the IBD links. I have had an internal battle with my own doubts for quite a while now. Holding stocks through big runs, like ASTI's, for example is surely OK if one considers 1-3 years holding, but the gains are not guaranteed in the long run, due to many factors. At the same time, reducing the risks by selling at the top, epecially with the general market this shaky is prudent. One cane always continue watching the good stock closely and then enter again. When market is positive, then perhaps a better way would be to just hold through ups and downs. Just look how many peaks we've missed so far that could have compensated for some big shortfalls, like TBSI.

I agree with David stop loss is not a good strategy, but respecting both fundamentals and technicals may be the best strategy.

Your welcome Berloga. I don't mind posting them here, but I think you can access them yourself for free and I'm probbly pissing David off. Oh well, I'm sure I 've done that before. Here's another daily stock analysis, this time on STP. From there you should also see a link for the 2nd in the video series "20 Rules for Investment Success", rules 3 & 4, avoid cheap stocks and how to use charts.

http://www.investors.com/MediaCenter/?MediaID=842&t=V

[BigSully1]

"Bernanke backs fiscal stimulus if quick"

http://www.reuters.com/article/marketsNews/idUKN1

[BigSully1]

Bigsully1: thanks for the IBD links. I have had an internal battle with my own doubts for quite a while now. Holding stocks through big runs, like ASTI's, for example is surely OK if one considers 1-3 years holding, but the gains are not guaranteed in the long run, due to many factors. At the same time, reducing the risks by selling at the top, epecially with the general market this shaky is prudent. One cane always continue watching the good stock closely and then enter again. When market is positive, then perhaps a better way would be to just hold through ups and downs. Just look how many peaks we've missed so far that could have compensated for some big shortfalls, like TBSI.

I agree with David stop loss is not a good strategy, but respecting both fundamentals and technicals may be the best strategy.

Your welcome Berloga. I don't mind posting them here, but I think you can access them yourself for free and I'm probbly pissing David off. Oh well, I'm sure I 've done that before. Here's another daily stock analysis, this time on STP. From there you should also see a link for the 2nd in the video series "20 Rules for Investment Success", rules 3 & 4, avoid cheap stocks and how to use charts.

http://www.investors.com/MediaCenter/?MediaID=842&t=V

Takes a long time to load the latter video, give it a good minute.

[BigSully1]

market wrap Thursday

http://www.investors.com/MediaCenter/?MediaID=844&t=V

[capricho]

David, why on earth are you not wanting to hedge this hellish market with a couple of short ETF'S like what you did 10 months ago? If the trend is your friend then why bet against it?

[kslifka]

market wrap Thursday

http://www.investors.com/MediaCenter/?MediaID=844&t=V

Thanks for posting these videos BigSully...very interesting.

Fear has taken over the market. 

Yes...the American consumer is "screwed".  But this has been known for years...because of the personal debt level.  Yes...Americans are spoiled...and have lost all sense of fiscal responsibility.  You go anywhere and everyone purchases with credit cards.  Checks and "Cash" are virtually obsolete.  Personally this consumer trend has concerned me for the last 10 years.  I guess the U.S. consumer reflects the U.S. government of spending on debt. Hmm.  Well the U.S. government...even with all the debt...continues on. 

I think David said it best recently when he said.
"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."

I've analyzed long-term DOW, S&P, and Nasdaq charts over and over again.  Every time the next strong bullish move occurs...the over-all market breaks its technical trend.  This is really the time we should be licking our chops on the "buy" side.  I want a complete one-day bloodbath (nasdaq -100/S&P -50/Dow -500)...Unfortunately I don't see that happening really soon...I could be wrong.  I think the financials...which is the stable of the U.S. markets..just have too much uncertainties now. 

Right now the market is way too focused on the American Consumer.  Global markets...especially Asia... are slowly diverging from the American markets. 

Just like David has emphasized...The emerging consumers will eventually  be realized.  It's amazing to me how inefficient the markets are...maybe this on on purpose.  The best money made is when fear is the highest.

[capricho]

Bigsully1-sorry to say this but that IBD guy on your links has got the most dreadful monotone voice imaginable. He's nearly unbearable to listen to.

[la-onda]

what an ugly week/day     

Old Fool Notes- 01/17/08

Guys, I have to be very quick tonight – lawyers screaming for a report.  We had a terrible day.  The bulls are just sitting on their hands waiting for the selling to abate.  The volume was high at 2.8 billion with a ratio of 3.9 to 1 in favor of the bears.  About average efficiency for 48 points.  There is almost no buying – so we wait.

The daily and hourly charts tell their own tale – nasty.

The ratio chart has fallen below the red line and is flashing a buy signal.

Weekly chart looks very weak but is in buy zone.

The Wilshire and P&F charts got smashed – there is no redeeming grace here.

No trades in the TP today.  I did dribble in some money to mutual funds and XLF at the close today.  Very close to a bottom signal (yea, I know I am beginning to sound like one of those bears).  As long as the charts look this bad, I will continue to dribble.

Charts link below,

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

[David Randolph]

The sooner we break down below $137, the better.

We broke $137 allright. I didn't thought it was "great" though

I expect that in the $135 area we'll get many bearish articles from all sources, many saying there's nothing the FED can do at this point. They'll go even deeper and write that the current economic situation is all the FED's fault, because it didn't make its supervision job right, because rates were too high or because rates were too low.

Yesterday's course of events was perfect to produce the low point of the market, according to my contrary opinion theory. We've had the FED Chairman, Ben Bernanke, saying all the right things before the Congress and yet ... the market sold off to new lows. This is the point where there shouldn't be anymore hope about what the FED can do to "save" the US economy. The point of disbelief.

I read some articles yesterday criticizing the FED, but I guess we'll have most of them today.

In the $135 area, you'll have almost an unanimous consensus that the US economy is headed for a recession or is in one already.

This is true, isn't it?

Also in the $135 area, market timers will tell that this market will have another 20-30% fall and all technical analysts will be bearish.

This is a reality now. Chart readers turned decisively bearish, even the most experienced ones:

A long-time bull throws in the towel
Commentary: Dan Sullivan's model stock portfolio is now 100% in cash

The last time he "threw in the towel" it was April 2003, right after the beginning of a new bull market:

«The last time he was in an all-cash position was in early April 2003, nearly five years ago.»

Doesn't mean the old man is wrong again this time and I've been wrong more often than he was for sure.

It will be amazing what a mere $2, or about 1.5%, will do to market sentiment.

It wasn't just 1.5%, but more like a 2.5% break. Even a long term bull like myself almost panicked yesterday when the market broke down below $134 ... well, I did panic, but since I don't make any intraday decisions, there was nothing I could do (fortunately).

That will be the bottom and we'll close the year above $170, that is, up 26% from that bottom.

This is my view of future events, I can be wrong.

I'm not so sure we're really at the bottom as I felt so nervous yesterday. The chart looks extremely bearish (perfectly bearish I would say) and anyone saying we're at the lows looks like a lunatic now.

The more time goes by, the more I dislike thinking about the general market movements. You see, the greatest investors of all time, like Warren Buffet and Peter Lynch, completely ignore the general market average, as they invest in businesses and stick to them through good and bad times, provided that they're good businesses. They look like fools every time the market breaks hard (or rallies a lot, like Buffet looked like a fool because he didn't buy any internet stocks), but over the long term they were the greatest and the market timers ... were not.

When we've had the 1987 stock market crash, Peter Lynch stayed full invested while others were dumping shares and one year later he was making money while most other people thought the market was "overbought", still on the sidelines.

This is why Peter Lynch says, when asked about the general market: "Please, don't ask".

I'm 31 years old and therefore I have a lot to learn. But I'm committed to learning, I don't want to spend my whole life making the same mistakes all over again (even though sometimes I repeat them often, it's ridiculous).

Coming back to the general market (I know, I don't want to talk about it - I'll start Monday ignoring it for good, unless it completely breaks down - if that happens I'll do a mea culpa). Coming back to the SPY, it is trading at exactly $135 in the pre-market, which is my case for the central point of the low range.

For me to be right about the general market direction, the SPY would have to be back up above $137 in the next couple of weeks. We can stay below it for a few days, but can't keep going lower, say, break $130 to the downside ... that would show that I was wrong, and that's always a possibility.

For now everything is happening as I anticipated and I expect to be right and the SPY goes up throughout the rest of the year to a 10% plus return in 2008!

As for the Main, it continues to underperform, but I'm absolutely confident that it will outperform by a margin of more than 2-1 if my bullish case proves correct. Even if I'm wrong and we enter a Bear Market, I'm confident that I have at least a couple of tenbaggers in this portfolio that will not only save it, but will provide it a nice return.

Nobody knows what the future holds and certainly I'm no different. But I know what I'm doing and why I'm doing it. I know why I have the stocks that I have as you can read in the respective threads.

And I'll keep holding all of the Main's holdings with strong hands.

[terainvestment]

Simply excellent post.

Great David!