Thread: Market Talk / June 18 - 24

Looking at the chart above:

According to Desmond, the powerful upmoves that frequently interrupt major declines are probably not tradable, because it often takes 30 days or more after a cluster of big losing days before a sizable rally follows.

We shall see....

Hi robo,
Agree....don't know what the condition of the cat is? Monday we should recieve a call from the vet.
Hey, if you hear from Birch, I'd like to talk with him.
Take care my friend!....Happy Father's Day!.....Rgds......Spaf

PS: You can't cut grass on FD.

Actually, you can... but ya need to tap the keg early; say 9am.

Originally Posted by Spaf

You can't cut grass on FD.

The date on this article should be 6-6-2006. Notice the date on the charts they are 6-16-06..


Bears Have Hardly Budged
by Carl Swenlin

Despite a massive rally on Thursday, the Rydex Cash Flow Ratio reflects that very few bears have given up. The Rydex Cash Flow Ratio, an exclusive DecisionPoint.com indicator, gives an improved view of sentiment extremes by using cumulative cash flow (CCFL) into Rydex mutual funds rather than using the totals of assets in those funds (which we use for the Rydex Asset Ratio). It is calculated by dividing Money Market plus Bear Funds CCFL by Bull Funds plus Sector Funds CCFL. While the Ratio is not necessarily representative of the entire stock market (it only involves money in Rydex mutual funds), it has proven to be a reliable sentiment indicator.

Our first chart shows that the Ratio is at the low end of its range, meaning that bearish sentiment is at an extreme level. Note that Thursday's rally only effected a small up tick on the Ratio, so very few bears have been shaken loose. This is bullish for the stock market because short-covering bears are like rocket fuel for rallies.


http://www.decisionpoint.com/ChartSp...6_ryratio.html

T Theory Observations for mid June 2006

Since my mid May posting we have seen a market being hammered by the two large Rate Ts aiming for separate projected lows near early August and early November. As I suspected the greatest damage has so far been seen in the Asia and Asia driven sectors, but the US market has also seen its key equity indexes drop below their 200 day/40week moving averages.

In any case the Advance-Decline Ts long term bullish forecast of an eventual high well into 2007 is being "dented" right now which argues for increasing the significance of the Rate T's forecast within T Theory.

You may remember that earlier this year, in my initial study of the Rate Ts posted at TTheoryFoundation.org, it was apparent that advanced knowledge of market low dates, despite their typical few weeks of time projection errors, made Rates T potential more important than conventional Ts. Right now we are seeing a good example of their higher priority so it is a good time for me to summarize some of my thinking before I begin a second generation project this Fall.

In my initial Rate T Theory, summarized at my TTheoryFoundation blog, we saw success at projecting a simple series of future dates at which key market lows might be expected. The second generation of Rate Ts will go on to propose a mechanism for the propagation of the left end rate peak to the eventual time symmetrical negative impact on equities. From that model new predictive information will likely flow and Rate T Theory will become more useful. This research will always be posted at the Foundation site and some reports will be posted this Summer.

In the meantime the simple Rate T projections have already helped me cope with some short term ambiguities that are showing up as we move to the twin projections of an early August and early November low. If you have been keeping the Volume Oscillator you know the rally from late May low unsuccessfully tried to form a bullish T. It was obviously destined to fail simply because the Rate Ts projection of a low within two months obliterated any possible new Short Range T's sustainable rally.

By a similar argument the upcoming projected low in late July/early August time period will be inhibited from making any important sustainable advance this summer because two months later, the second big rate T will be pressing for a late October/early November low. That low will typically see its decline start about 6 weeks earlier, so their won't be much time for a Summer rally.

We also know that the long spanning Rate Ts produce the most severe corrections, and the way this correction is shaping up it appears the twin Rate Ts are acting like some "killer asteroid" bend on destroying all investment life forms over the next few months. Nevertheless they are probably only fulfilling the normal 4 year cycle that has, since 1949, produced important lows at about 4 year intervals. So we should see a good buying opportunity at the Fall low regardless of the severity.

Moving on to Gold, I was disappointed that it appears to be pulling all the way back to its normal bull market support at its 65 week moving average, currently at $525/oz and rising. Because the big Gold T is the longest spanning and potentially the strongest T, I was hoping for better. At some point Gold will need to disconnect from the stock market's trend, so evidence for independent movement from the $525 level or perhaps from the Rate T's late July low would be interesting and welcome.

It would be more bullish for a Gold recovery if it started to firm well before $525 is reached and started to base while the moving average rises up to a higher support level. This base would also be helpful in support the HUI T discussed earlier. You can follow this picture yourself by going to stockcharts.com and calling up a weekly chart of $GOLD with a 65 week exponential Moving Average.

Otherwise we need to just let the Rate Ts play out to their projected dates and determine whether their combined effects on equities are going to be as severe as seems thus far. Terry Laundry

http://www.ttheory.com/

Since both bottoms and tops are rarely V-shaped it is likely that there will be several swings up and down, hopefully making a rising bottoms - rising tops pattern. So what's the deal for this week?


I SAY STRAP IN FOLKS AND GET READY FOR THIS ROLLER COASTER RIDE!

I say it could be a week of Hokey Pokey TSP investing, if it's patterned up & downs. You put your left foot in... you put your left foot out... you put your left foot in... and you shake it all about!
Happy Fathers Day All

Sunday, June 18, 2006

Pause in the Downtrend

The stock bear market got a brief intermission last week as the option sellers pushed the market back up the hill just enough to cause the maximum pain to option buyers. By settling the indices where they did on Friday, option buyers lost the maximum amount of money on both puts and calls, something that happens quite frequently (yet, the buyers just keep coming back for more).

This rally was a fakeout before the next leg down, so we recommend no overall stock market investment exposure at this time because although we do think a trading low is coming soon, it could be quite a while before an investment low can be bought. We do, however, maintain stock and commodity investment holdings in select securities which are in very long term bull trends and welcome these traumatic plunges which present wonderful buying opportunities.

The Japanese central bankers probably didn't know what they were doing when they pulled the rug out from under world markets. They drained $175 Billion from world markets in the last few weeks, forcing massive liquidation in virtually every market on the planet.

Emerging markets around the world crashed back to earth, while more mature markets such as the US Dow Jones Industrials Average, the FTSE-100 Index in London and the Australian All-Ordinaries Index held within normal "garden-variety" correction levels. Big Ben Bernanke may have some words for his Japanese colleagues last week, telling them that crashing the planet into depression might be a big mistake, especially since he himself might get unfairly blamed for it. So, they are probably going to stop here before things go off a cliff. The damage is done and it's possible that a large financial trader may already be in big trouble which we will only hear about when it hits the crisis stage where it could ripple around the world like a massive string of dominoes, taking markets and investors with it.

Make no mistake about it, this is a 4-year cycle-driven bear market and a 20% decline would just be average for that kind of bear market. It could be a lot more (and has been in the past). The good news is that we think the low could come fairly soon. The even better news is that once the bear market is over, the bull market to follow is likely to be even stronger than the one which preceded it due to the emergence of approximately two billion new consumers of goods and services since the last recession ended. We're now seeing the true picture of what the 21st Century will look like as the globalization of the last few decades of the 20th Century come together to create a much more dynamic economy, albeit connected in a way which can present great challenges for investors.

With options expiration out of the way for this month, it's doubtful that there are many buyers left and stocks will move in the major trend direction (down) from here. We do think a tradeable countertrend rally is coming fairly soon, however. Details reserved for subscribers (see Subscriber's Notes below).




http://marketclues.blogspot.com/

End of the Quarter, the big guys will be selling, poor performers and buying good performers, gotta look good on that Quarterly report!

AHEAD OF THE CURVE
Time for a Change


Monday, June 19, 2006
Now that we're at the end of the rate-hike cycle, you should sell what's been working for you.

The following is an "Ahead of the Curve" column published June 16, 2006 on SmartMoney.com, where Luskin is a Contributing Editor.
What can I say but, "Whew!"

For a while it looked like stocks were going to fall — and fall hard — every day until they hit zero. Scary in any event, and especially for me as I have been writing in this column that this would be a buying opportunity. Well, I know that being right too early is like being wrong. But that's a lot better than being wrong too early.

So no crowing here, but I still stand by every bullish word I've written over this last month of stock-market decline. The particular timing and nature of this week's turnaround in stocks convinces me, more than ever, that my basic premise has been correct: The Federal Reserve is going to act decisively enough to quell inflation risks, and in time to do so with interest rates that are not so high as to kill the economy.

Just think about when the stock market recovery started this week. It was following Wednesday morning's announcement that the core Consumer Price Index had grown by 0.3% in May — the third month in a row to register that same very high inflation number. Bad news, right? Hasn't this whole decline of the last month been an inflation panic? Why should that rally stocks?

Simple. Because Wednesday's May CPI put the inflation problem right out in the open where nobody can dispute it. I've been warning about rising inflation risks in this column for more than two years, and I've been a voice in the wilderness. Now we can all be agreed on what's real — and what needs to be done.

And now that we are agreed, we can be sure that what needs to be done will be done. Until a month ago, plenty of reliable inflation indicators were going into the red zone, because there was no confidence that the problem would be recognized and addressed. Gold had soared to quarter-century highs. The U.S. dollar made new cycle lows. And the TIPS spread — the difference between Treasury bonds and their inflation-indexed counterparts — had moved wider.

Now all those indicators have violently reversed. Fed chair Ben Bernanke and other central bank officials have made it clear that inflation-fighting is job one. We're on our way to the inflation problem being over.

And, thankfully, the recognition comes in time so that the cure won't have to be worse than the disease. Considering how far markets like gold, the dollar, and the TIPS spread have retreated from inflation-panic levels, it looks like the Fed won't have to raise interest rates much beyond 5.5% to do the trick. That's two more quarter-point rate hikes at the next two FOMC meetings. And then — voila! — it's over.

Does anyone seriously think that interest rates at 5.5% are going to kill this economy? I suppose there are those who think the economy is going to roll over even at today's rates. But those are the same people who said the economy was heading into recession when rates were still at 1.5% and again when they were 2.5%, again when they were 3.5% and 4.5%. The perma-bears have been perma-wrong. That's not going to change now.

Here's a factoid for you: Since 1984, 5.5% happens to be the average short-term interest rate. Over the same period, real gross domestic product growth has averaged 3.4%. So what, exactly, is so bad about 5.5% interest rates?

It's not going to be all sweetness and light from here, though. We're at the end of a rate-hiking cycle, so we're entering a whole new world. The investment strategies that paid off the biggest over the last three years aren't likely to do so again. In fact, they're likely to do the worst. People are going to get hurt. Investors need to adapt — or die.

Think about what has done the best over the last two to three years of unusually low interest rates and rising inflation. It's the end of the road for the all the investments that depended on those things.

The one everybody already knows about is housing. I'm not forecasting a housing crash, but there's just no way that that housing market isn't going to at least cool off here. I don't think that's the big problem for the economy, but there will surely be a lot of empty condo towers in Miami and Las Vegas — and some former day traders who have recently become real estate agents who are going to be rather disappointed.

The speculation in commodities is over. Gold. Silver. Copper. They were all bets on inflation fears getting worse. Those fears have topped out and are heading lower, and so are the commodities that have fed on those fears.

The nations that produce commodities — mostly emerging markets — have topped out, too. They've benefited both from the rise in commodities prices, and the fall in the value of the dollar. In an important sense, that's saying the same thing two different ways (they're both symptoms of inflation). But for Americans holding emerging-markets investments, it's a double whammy. The commodities prices underpinning the emerging economies will collapse, and the exchange rate between the currencies of the emerging economy and the U.S. dollar will collapse at the same time.

Japan is the most vulnerable emerging economy of all. How can I call a mature country like Japan "emerging?" Simple. Japan has been struggling for years to "emerge" from a devastating decade-long monetary deflation. Its central bank, the Bank of Japan, has declared victory in the war on deflation, and it's now tightening. Big mistake.

That's because it's happening at the same time as the Fed is tightening even more, which is causing the dollar to appreciate vs. the yen. So the Japanese Ministry of Finance no longer has to intervene to weaken the yen to keep it competitive — and that intervention was key to the recovery from deflation. With no more easing and no more intervention, Japan is likely to slip right back into a deflationary recession. Is it too late to sell the Japanese stock market? Maybe. But I sure wouldn't be a buyer.

The end of the road for inflation plays applies to oil and the stocks of companies in the energy industry. Yes, part of the story there all along was global growth, and I expect that to continue. But when the inflation story is taken out of the equation, at least half the energy thesis is stripped away.

My institutional-investor clients are acting very resistant to accepting these new realities. It's always hard to give up on "what's working." But it's time to get real. "What's working" has stopped working. It's time to find the next play, not cling to the last play.

What's the next play going to be? Honestly, at this point I don't know and I don't care. For now the money is going to be made by what you don't invest in, not what you do invest in. Ask yourself: Are your investments dependent on rising inflation? Rising commodity prices? Falling dollar?

If so, then there's only one thing to do. Get out. The world has changed.



http://www.trendmacro.com/a/luskin/2...9luskinSMC.asp

Good Afternoon,


Please find here the link to the latest issue of the Investment Commentary.
Please download the pdf file by clicking on the following link: http://www.hable.ca/downloads/Commentary.pdf
(The link has been checked for viruses and worms, and does not contain any malicious software according to the latest scan)

Enjoy the weekend.

Sincerely,

Dr. Volkmar G. Hable