Friday, March 23, 2007
Grind It Out, Part DeuxPhotocopy yesterday's entry and make it today's. Not satisfied with that? Sigh. I feel a sense of duty to put up a post for today, in spite of little new to say.
Here, I've got a chart to show you. Something to get us away from the tick-by-tick obsession of this market (which, granted, sucked for bears - every single day this week was positive for the Dow).
This graph shows a huge, secular bull market followed by a bear market, and then a push to new highs. Let's call it Graph #1.
The next graph is very similar. Again, a huge bull market........then a bear market .....and then a push to new highs. We'll call this Graph #2.
What is interesting to me is this......what happened to Graph #1 in the years that followed? This is shown below. Year after year of a market that ground away, going nowhere. Actually, if you take inflation into account, it could be argued this was a sixteen-year long bear market. Suffice it to say equities wasn't a good place to be.
My theory is that Graph #2 - which spans from the early 1980s right up to the present day - could be a repeat of the same behavior. That is, yes, we've made new highs, but we're in the midst of a very long "grind it out" market which, in retrospect, will be a debacle for the market in general.
Here's another way of making the same point: below is a chart of the S&P 500. I've highlighted the most recent dip (2000-2002) and rise (2002-present).
Here is a close-up of the same area. And my point is this: bull markets are not launched from charts that look like this. There's no base. No jumping off spot. No massive consolidation that is about to explode to the upside. I can't state it any more simply: bull markets do not commence with graphs that look like this.
On a shorter-term note, it was interesting to me that the NASDAQ 100 actually inched down today. We are near the top of the Bollinger Bands, and the RSI is trending down.
The NASDAQ Composite is a similar story. In both cases, I think the retracement is completely, and we spend the past couple of days marking time. I've highlighted the "2/27 gap". It hasn't even closed that gap.
One last graph before I send you off on your weekend: The Amex Major Market Index ($XMI). I've simplified this by showing just the 78.6% retracement. I will be stunned, amazed (and a lot poorer) if the market pushes higher next week. It simply shouldn't happen. But then again, the market doesn't consult with me before doing its own thing! Good night, and good luck..........
at
3/23/200724 insightful comments Links to this postThursday, March 22, 2007
Grind It OutI know a lot of you spend a lot of time worrying about a gift to buy me, particularly since no one was able to come through with a
C3PO tape dispenser. I will welcome this surprisingly frank Batman water pistol in its stead.
And for your daily Unlikely Juxtaposition of Books, I offer this snapshot I took in my local Borders bookstore. It's not crystal-clear, I realize, but on the right of this New Non Fiction selection is Hillary Clinton's "It Takes a Village" retread, and on the left is a book about sexual pleasure for women. I'm surprised one of these books did not leap to the floor under its own power.
Oh, yeah. Charts. I almost forgot. Today was one of those grind-it-out bore-fests where the markets.......how do the rah-rahs say it?........oh, yes, "digest" their gains. This still falls in line with what I was looking to unfold: specifically, the end of a full retracement before the fall resumes.
The daily candle yields a similar picture. Notice the spinning top today. I've marked another recent spinning top, which happened to be at the very peak of the market.
All the charts that follow tell the same story, so I'll just net it out for you here: (1) plunge after 2/27 (2) consolidation (3) turbocharged retracement to approximately 2/27 levels. My speculation, and where I'm putting my cash at this point, is that the markets will resume their fall. The rest of today's entry will be little more than tickers and graphs. Here's the gold and silver index (XAU):
AHM (part of the sub-prime world):
BAC (a huge bank, but a beautiful chart nonetheless):
Bear Stearns (BSC):
Continental (CAL), mentioned countless times here, having completely a lovely head and shoulders retracement to the neckline.
Brazil iShares (EWZ):
Goldman "nut" Sachs (GS):
PSB, part of the commercial real estate crowd:
Oh, speaking of Hillary......your video of the day. This is what all the fuss is about regarding the repurposed "1984" commercial. Hearing her nasal voice patronizingly talk about "conversation" this and "chat" that is truly nauseating. Anyhoo........enjoy:
at
3/22/200715 insightful comments Links to this postLabels:
bsc,
cal,
ewz,
gs,
psbWednesday, March 21, 2007
Give the Past a Slip!Today's entry will be relatively short.
Although you may not believe this, I saw today coming. Sort of. For those who might hurl claims of permabear, let me cite my recent quotes over the past few days...
From my
March 14th posting:
I think it's time to back off for a while...That isn't to say that the drop from 12,700 to 12,000 consitutes the Giant Bear Market I've been talking about. Not at all. I'm just saying that, barring an important new catalyst, I can see the bulls taking the reigns again for a bit.
From
March 19th....
The principle risk the bears are facing right now is if the markets show much more strength, they are going to push into a relatively "all clear" zone where the bulls and frolic for a few weeks. I've tinted this in green. The NASDAQ is even a prettier picture for the bulls, since it seems a short term double bottom may have been hammered out, and there's plenty of open sky above current levels.
And from yesterday,
March 20th...
Index after index shows the same thing - - that we are at the upper levels of the trading range established after the 2/27 break. As I said yesterday, if we push above this trading range, the bulls are going to feel rightfully emboldened. If we don't see weakness tomorrow, it's going to only amplify the discouragement, disappointment, and frustration of the bears who had thought their fortunes had finally turned with the recent market break.
What surprised me was the speed that the market has retraced virtually its entire drop from February 27th. You can see how quick the effect of the Fed's statement was today:
You would have though the Fed statement read, in its entirely, "The U.S. Government hereby guarantees a positive month-after-month return on U.S. equities in perpetuity." Instead, here it is:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.
Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Surprising that the above statement generated so much excitement. But here's where Tim the bear comes out: I was gobbling up puts left and right at the peak of the market today, because I feel 2/27 was the tip-off to a new kind of market, and everything we've seen since then has just been a retracement which will be obliterated in short order.
Just look at the $VIX. Every morsel of volatility from 2/27 forward has been destroyed. We're back to "the before time."
The key for the Dow 30 is the trendline I've drawn. I've circled the key break date.
The Russell 2000, being particularly strong of late, is just about to kiss the underbelly of its broken trendline. This, to me, is the ideal time to buy puts (or otherwise short the market). Because for all those that missed 2/27, here is your second chance.
Same story with the S&P 500.
I find the $XMI graph intriguing, although shorting this index isn't as easy. The full-blown bear play would be to short it here and watch it smash that horizontal line (which represented the former bullish break-out).
Don't get me wrong - - today sucked for the bears. But, as my earlier postings suggested, we had to suffer through this retracement. You can see from the comments section of yesterday's post how re-invigorated the bulls are now. Memories are very short, my friends!
at
3/21/200719 insightful comments Links to this postNewer PostsOlder PostsHome
