This is why trading gets the best of investors....

Discussion in 'Trading' started by S2007S, Oct 10, 2011.

  1. S2007S


    After the close of today I noticed that cnbc had two articles:



    Below I posted both articles to give everyone a general idea.....

    Oct 10 2011, 06:39:31 PM ET
    CNBC Top Stories

    Stocks May Have Seen Their Lows For The Year
    Why This Stock Rally Isn't Signaling a Market Turnaround


    Stocks May Have Seen Their Lows For The Year | October 10, 2011 | 04:59 PM EDT

    Despite the wide swings, stocks may now have seen their lows for the year, some strategists say.

    However, if the market has set the year's lows, that still doesn't mean smooth sailing for investors. It also does not mean the market will break above its current range, which tops out at about 1250, until more of the uncertainty surrounding Europe and the economy are resolved.

    "We do think we've seen the low for the year but can't be as confident it's the low for the next 12 months," Brown Brothers Harriman strategist Andrew Burkly said in a quick note. "The can looks to be kicked at least past year end and earnings should be good."

    Harris Private Bank chief investment officer Jack Ablin said he too thinks the market hit bottom last Tuesday, when the S&P 500 plunged to 1074 on an intraday basis. Ablin pared back on his stock holdings in early August and has been looking for a reentry point.

    The S&P 500 finished Monday at 1194, a 3.4 percent gain over Friday's close.

    "We picked 1050 as our entry point. We never got to that point, but we also said if we got some favorable momentum or the dust settled in Europe, we could use it as an entry point...I don't know if today's action signifies a solving of Europe, but it's certainly a step in the right direction. So, I think earnings could also propel the market higher," said Ablin. Ablin said he meets with his investment committee Tuesday morning to consider whether to change his position on stocks.

    Better news from Europe has been helping drive the market higher, and the weekend's commitment from the leaders of France and Germany to recapitalize banks if needed helped drive the euro, and stocks and commodities higher. Stocks soared despite the lack of details on what a European plan might look like. German Chancellor Angela Merkel and French President Nicolas Sarkozy said they would agree on a plan for the banks and accelerating economic coordination in time for the G-20 meeting in Cannes in early November.

    "I'm encouraged that we got a lot of decent news. I also felt like the employment report was a lot more important than a lot of people gave it credit for," Ablin said. "What it says essentially is we're likely to avoid a recession and the market has priced in a 50 percent chance of recession. One of the things I mentioned to our financial advisers when I spoke to them Tuesday was a lot of the negativity and all these indicators pointing to a recession...A lot of it was market related or sentiment related. There was no economic data to suggest we were going into a recession."

    September's employment report, released Friday, showed an increase of 103,000 jobs, nearly double what many economists had expected.

    The third quarter earnings season kicks off with Alcoa's [ AA 10.09 +0.38 (+3.91%) ] after-the-bell report Tuesday, and some analysts have been apprehensive about company comments that may show that future earnings estimates are too high.

    "I think they'll be better than what investors believe. Investors have written off analysts expectations and have written in a 20 percent decline in earnings for the next four quarters," Ablin said.

    Carter Worth, Oppenheimer Asset Management chief market technician, said the the S&P 500's steep slide last Tuesday to 1074 and its quick snap back was an important test of the summer's lows of 1101, and the market passed the test.

    He said, in a note, that the market action reaffirms his view that the market has been stabilizing since the Aug. 9 intraday low of 1101 and that the right play is to be long, not short. Worth said stocks find support every time the S&P trades below 1130.

    "As all will know, support is not a plywood board or a concrete floor, but rather - it is a mattress top. And once down to support, the process of sinking into support is a normal part of finding support," he wrote.

    Second article


    Why This Stock Rally Isn't Signaling a Market Turnaround | October 10, 2011 | 04:18 PM EDT

    Not many traders believe that the more than 10 percent rally since Oct. 3 is really predicting a bigger and better European recapitalization plan or a reacceleration in the U.S. economy. Many believe it is simply a move within a new trading range that will last until the end of the year.

    The S&P 500 bounced within a six percent range for about seven months to start the year. Investors made money if they bought the S&P 500 at about 1260 and sold the benchmark at around 1340.

    After a dramatic August selloff, a new range has been established for traders to play in, they said. Buy the S&P 500 at around 1120 and sell it at 1220.

    “Driving such sideways trading is the up and down economic data that keeps the U.S. teetering between a recession and a recovery and continued uncertainty around the euro-crisis with the Merkel/Sarkozy pledge to stop the banking and sovereign debt crisis in Europe without offering details, providing a perfect example of why uncertainty lingers,” said Abigail Doolittle, a technical analyst with Peak Theories.

    Further undermining the long-term validity of this rally is that the exact same stocks that were sold the most during the recent drop from the top of this new range to the bottom of it are the ones that are up the most in this latest comeback.

    “The 50 stocks that held up the best during the correction have averaged a gain of just 3.76% since 10/3 (the worst of any decile), while the 50 stocks that were crushed the most during the correction are up an average of 17.01% (the best of any decile),” wrote Bespoke Investment Group analysts, in a note to clients. “Clearly investors thought that the sell-off became overdone, and they were happy to buy the stocks that got beat up the most.”

    What’s more, the stocks that had the most investors betting against them, are also leading this latest comeback. A trademark short-covering rally, traders said.

    “The 50 stocks with the smallest amounts of short interest are up an average of 7.88%, while the 50 stocks with the highest short interest are up an average of 12.16%” since Oct. 3, according to Bespoke.

    “The market was due for a rally on merit, however, the velocity of the rally is what we can blame on short covering,” said Jim Iuorio of TJM Institutional Services. “We have merely gone from the lower end of a trading range to the upper end of that range.”
  2. Very good post/thread S2007S!
  3. S2007S


    Thank you TJ.

    We will see what becomes of it in the weeks and months ahead, I personally think a bottom is not in, a bear market doesnt end in a single day, it takes months to unfold, what the markets are going through now is a bear market rally, the DOW is up over 1000 points in less than 5 trading days!
  4. It's all my fault. Guess what I did 6 days ago? :cool: Sold some stock.:eek:

    if you want another rally, let me know I have some left.
  5. S2007S


    I did as well, I let go my USD and UVT last week! Sold my TYH today at $36.65, right now I am still short volatility...will wait for the VIX to drop below 25 to sell, then go long TVIX!
  6. Bernanke is planning to corner the stock market. A couple of good ideas in there.

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  7. Similiar views here. I took profits on a tech fund, and I shorted calls at high of year area. How are you short volty?