Market Under Dstribution....

Interestingly there have been 4 waves down already today! One more and we could rally sharply into the close....

 

Wow there's our 5th wave down. Man sure feeling stupid doing all that buying today. We should rally from here. If a 112 loss in the DOW could be halved by the close down 60 or so I would feel real good about things.

 

Don't worry, dip buyers always win. Just stay patient, 100% RISK FREE EZ $$$

 

i've got a pain in my left side. It's sharp. Freakin white clam sauce last night> I hope to God that's what it is...

Could this market have made me pop an appendix-- forget i said that. This doesn't look good of course. The bond market is acting wiggy it's predicting inflation and I'm pretty sure that's coming soon. It's a headlight in the tunnel thing, we see the risk but how greedy will we be going down the track?

I'm nervously holding a lot of up stuff. Just recently I panic sold my WFR only to see it higher now. You always sell you winners if you sell stocks every time interest rate fears pop up> but rate fears can be some of the worst sell offs- worse than earnings based ones- they hit such a wide realm of business areas-- We have to be careful here. But just a few good days away from all time highs, I think we go back up a few times> here's hoping to that any way. One beer how could that hurt my side. I feel like Oscar Madison!

 

Wow what a week. Where to even start. Well, we made a lot of money- so one thing is for sure- that can still be done...

But underneath we see the distribution days on the graph that I started the thread with and you know any new graph this week is probably going to show more of the same.. The Naz thrusting beneath it's 50 day a few times- take it as a warning, a jab to the solar plexes- we're not stepping out of this prizefight
yet because there is still money to be made and regular life can be so boring. But perhaps we go up now and on not so good volume, the new high lists shrinks, we get the usual signs and then some geopolitical event will thrust us into the soup. Warning shot fired sir! Received in good order by the stonedinvestor. Point well taken. Now let's make some f*ing money.

A couple random thought going through my mind. The whole pay education group APOL I was in for a buck and a half but I dumped it> I'm thinking now about the more riskier play CECO. I smell a rally here in this beaten down group sometime in 07'. It's imperative I figure out when. I like the buy today by CECO> a preeminent fashion school in Madrid> If they are bared from opening new schools here why not make some good overseas purchases?

Also the first shots have been fired at us about the China trade. Some politician over there said something scary about stocks- I've blocked it- but it was analogous to Alan Greenspan's " irrational exuberant " comment . Then some bozo came on CNBC and said the best trade this year will be to short China. I jumped up and turned him off. Don't need to hear that. Shanghai had one big down day (%5) a sort of sharp/ break warning-- so there we have to watch carefully> Another annoying thing some jerk overlayed the last few months of China stocks with the Naz as it marched up before the big crash... now why did he have to go and do that?.... But I think when the dust settles and they write down the surprises of 2007 in the stock market, it will include China Again! The 08' Olympics for me acts like a sell beacon. I'll be watching the opening march around with a huge smile on my face and a basket of cash for US stocks at the ready...

SINKING TO SUPPORT AGAIN- Ugly candle (Bearish Engulfing) might suggest the ride is over. But, even though the seasonal party is now officially over, I think we hold for another push up next week. Yesterday, investors were spooked as ugly economic data hit the tape. Existing-home sales slid 0.8% in December to an annualized 6.22 mil units. Home sales plunged 8.4% last year, the worst in 17 years. Also homes sales fell by 7.9% in December, the biggest monthly drop in 2 years, and the 4th decline in 5 months. Median prices were flat vs. a year ago, the best since July. Sentiment overview suggests that, much like early 2006, upside potential could be limited. Last week bullish sentiment hit the highest levels since January 2006 as measured by the AAII Survey and happened during a week when the general market was flat. The AAII Survey measures Retail bullish sentiment - Last week it jumped to 58% Bull's vs. 27% Bears. The big Commercial traders in the NASDAQ Futures - Commitment of Traders stock index Futures traders are now short across the board on all three stock index future markets and that could limit any upside potential. These big commercial players are rarely wrong. Yesterday we saw a super low TICK read of a minus 1090 - suggesting a heavy ultra short term oversold scenario on the NYSE. The VIX index also posted a spike to 10%. Yesterday's McClellan Oscillator was a minus 51, after last Wednesday's plus 58, so we still remain in neutral. This suggests - No "overbought" or "oversold" strains on the stock market. Yesterday's decliners in the NYSE were 2575 vs. 788 for the advancing stocks. Monday's CBOE (Overall) put / call ratios number was 1.20. This all suggests the trendline support that has basically held since mid July and we should likely see some support kick next week.

A market that sells off one day because of some bad housing numbers and the gets spooked the very next day by some strong housing numbers is a market that is looking for bad news- trying to find the bad news. In that sense I think market sentiment has shifted here. Last year we gave back the entire years worth of gains a few times in the first few months and it was REAL depressing, we might be setting up for that again.

For now though we have it clear, it's not about earnings- it's about a heating up economy, the fed and interest rates. and as such each economic number must be scrutinized now and the fed minutes will be important. and generally I think we end up with a flat market.

~stoney

 

It's only 3 days later but things don't feel as good. Nothing that I can quite put my finger on. Worried about inflation can't deny it- especially wage; worried about deflation a little here too folks. There's a deflation price inflater on one of these numbers coming up this week- not going to be good I don't think. The fed could say something about a re accelerating economy & that could get people roiled about rates... then again markets climb walls of worry... Market felt vulnerable at the close.

 

actually you can only say with certainty that there is really only 99.999999999% down room to go.

 

ECB warns on ‘unstable’ financial markets
By Gillian Tett in Davos
Published: January 28 2007 21:35 | Last updated: January 28 2007 22:55
Conditions in global financial markets look potentially “unstable”, suggesting investors need to prepare for a “repricing” of some assets, Jean-Claude Trichet, president of the European Central Bank, said over the weekend in Davos.

The recent explosion of structured financial products and derivatives had made it more difficult for regulators and investors to judge current risks in the financial system, Mr Trichet said. “We are currently seeing elements in global financial markets which are not necessarily stable,” Mr Trichet said, pointing to the “low level of rates, spreads and risk premiums” as factors that could trigger a repricing.

“There is now such creativity of new and very sophisticated financial instruments ...?that we don’t know fully where the risks are located.” He added: “We are trying to understand what is going on but it is a big, big challenge.”

Mr Trichet’s comments reflect a debate in policymaking circles about the implications of the growth in derivatives.

Many investment bankers and some regulators and economists argued at last week’s World Economic Forum in Davos that the growth of the $450,000bn (€350,000bn, £230,000bn) derivatives sector had helped reduce market volatility and made the system more resilient to shocks by spreading credit risk. But other officials fear these instruments may be raising leverage and risk-taking to dangerous levels and keeping the cost of borrowing artificially low, potentially increasing the chance of financial crises.

Senior policymakers admitted it had become hard to track the risks because the sector is opaque, much activity occurs in unregulated hedge funds, and products shift rapidly across markets and between the boundaries of national central banks.

Andrew Crockett, president of JP Morgan international, said: “These new instruments ought to make markets more complete. But there is a lack of transparency ... we don’t know how much leverage there is in hedge funds, for example.”...... tic, tic, tic...

 

One technical indicator that has worked very well over the past couple of years at calling intermediate-term market bottoms as well as intermediate-term market tops is the ratio of Nasdaq weekly volume to NYSE volume. We use a 3-week average of this ratio for our buy and sell signals. This indicator is unusual in that it combines an element of internal data (volume) and transforms it into an indicator that measures market sentiment. Historically, when Nasdaq volume rises vs. NYSE volume, it suggests that risk taking is rising, and that bullish market sentiment is overheating.

During the last three years, whenever Nasdaq volume has exceeded NYSE volume by at least 40%, on a 3-week basis, the overall market has pulled back or corrected. This occurred in January, 2004, January, 2005, April, 2006, and just recently in December, 2006, and January, 2007. Following the last three readings of over 140%, the S&P 500 has pulled back 8.2%, 7.2%, and 7.7%. Not unexpected, the declines on the Nasdaq have been larger with drops of 17.2%, 12.6%, and 14.8%. This indicator tends to give sell signals about one to two months prior to an intermediate-term top.

 

The last two years should have taught us all a lesson about the markets this time of year. I was schooled back in 2005 when I was on vacation and decided to ride some positions out.

It was a great vacation. In the hotel I turned on my computer to see some of my positions imploding. I had researched my positions prior and the charts/fundamentals seemed solid. However, the market had disagreed with my analysis and the tide took everything away.

There is no feeling in the world like a great vacation and knowing that your positions are imploding.

The first two quarters are not for position trading unless its a defensive sector like soda-pop, pharmacies, etc. Oil is sometimes a good bet during this time of year. . .

Im betting that by May the markets will be imploding just like they were in 2005 and 2006. Then in July, something will change and everyone will realize that its really not that bad. . .

I have a list of July stocks that will be on sale like J-Crew, Gap, NILE, Circuit City, HAUP etc. that will be great stocks to position trade in the last 2 quarters. Pick them up in July and sell them late November.