Thread: Market Talk / May 20th - 26th

When I'm in a snorting, raging bull market I don't care if I buy high or buy low, I just want to buy. The only problem is I don't have any money. I need a takeover to take me out of a position to garner some spill money. Waiting for a 10% gap opening on the Dow to signal the epicenter of Primary wave 3 - and I know it's coming. A Dow of 15,600 and beyond. Ferdinand says all you chickadees should go ahead and take the summer off to relax - don't worry about a few dollars not being made.

Many people consider the Elliott Wave (made popular again in the 80's by Bob Prechter) an excellent tool for evaluating markets in a long term context. The shorter term waves are far more subjective and more difficult to figure out. People are constantly changing the shorter wave counts.

In my opinion Elliot Wave is much too subjective. Look at five E-Wave guys and they'll have five different "counts".
I trade with a heavy emphasis on technicals for entry/exit timing, and I find E-Wave to be a load of manure, personally.

I used to follow pretcher for a while then I realized that with the complex fib patterns, the more complex, it was, the easier to explain away missed calls.

For a further example, if he (Prechter) could actually make profitable calls he would have run a hedge fund for a few years like Jeff Vinik and then retired to manage his own portfolio. Writers of letters are admitting they cannot trade, or even call the market. I learned that by losing money as a Prechter subscriber when I was inexperienced and stupid and thought gurus were real and walked the earth. In retrospect his letters were hilarious as they would say essentially that the market was poised to go up or down and then in later letters he would excerpt the parts that had been correct! What a joke! But the laugh was on me as he got my money and I paid market tuition for my folly. Some people may be able to make money with EW, but not me. I say do the work and figure out what works for you. If you can't make money in the market by yourself, buy Vanguard funds and rebalance or find the next Warren Buffett and load up. If any of this were easy we would all be rich.

white

Another look


The Dow continues to make new all time highs however when you look at the 30 stocks that compose the Dow you would never believe it's currently 1800 points above the previous all time that occurred on January 14th of 2000 which was at 11723. A table of the 30 stocks that make up the Dow is shown below with their closing prices on 1/14/00 versus their recent prices on May 18th of 2007. Notice only 13 out of the 30 stocks that make up the Dow are higher today than on 1/14/00. Also basically only 5 stocks (BA, CAT, MO, UTX and XOM) have made substantial gains during the past 7 years with a return of 100% or more. MO has been the leader with a gain of 283% since 1/14/00 followed by CAT which has gained 188% since 1/14/00. It's pretty amazing that only 5 stocks in the Dow are considerably higher now from their closing prices on January 14th of 2000 even though the Dow is currently 1800 points higher than its previous all time high made 7 years ago. Thus it's obvious when an index only consists of a small group of stocks it can be moved higher by just a few stocks versus a large index such as the Nasdaq or S&P 500 which consists of hundreds of stocks.

Check out the charts:

http://www.amateur-investor.net/Week..._May_19_07.htm

Although the Dow has been making new highs for several weeks the S&P 500 is now only 4 points away from its all time closing daily high of 1527 which occurred on March 23 of 2000. Meanwhile when we look at the longer term monthly chart of the S&P 500 it broke out of an Inverted Head and Shoulders pattern in 2004 and has been in a steady up trend every since. Also notice that the S&P 500 has been holding support at or above its 20 Monthly EMA (points A) each time a pullback has occurred. Thus until the S&P 500 closes below its 20 Monthly EMA (blue line) then its longer term up trend from the late 2002 low will remain intact.

Although the Dow has been making new highs for several weeks the S&P 500 is now only 4 points away from its all time closing daily high of 1527 which occurred on March 23 of 2000. Meanwhile when we look at the longer term monthly chart of the S&P 500 it broke out of an Inverted Head and Shoulders pattern in 2004 and has been in a steady up trend every since. Also notice that the S&P 500 has been holding support at or above its 20 Monthly EMA (points A) each time a pullback has occurred. Thus until the S&P 500 closes below its 20 Monthly EMA (blue line) then its longer term up trend from the late 2002 low will remain intact.

white

Those are some nice graphs. Bob Prechter I believe is still predicting a gloom and doom scenario with a Dow of 800. I've never listened to him but I think the nomenclature is correct. I read a few of his letters back in the late 70s but could not understand them.

Originally Posted by Birchtree

Waiting for a 10% gap opening on the Dow to signal the epicenter of Primary wave 3 - and I know it's coming.

YIKES! 10% in a day??

http://www.briefing.com/GeneralConte...1TheBigPicture

We aren't complaining that the stock market isn't responding rationally to the fundamentals. This happens all the time.
We also aren't saying that a bubble similar to the late 1990s is forming. At worst, this is a process of moderate overvaluation.
Yet, the S&P 500 index has run up 22% since the lows of mid-July last year. It is up 6.2% so far this year, equivalent to a 16.5% annual rate of increase. This has occurred amidst a stable interest rate environment and a worsening earnings outlook. The market is clearly outrunning the fundamentals.
Investors need to understand that they aren't getting bargains on stocks right now. They also need to understand that sentiment shifts occur. If one occurs now, the downside risk is increased by the fact that stocks have gotten ahead of the fundamentals.
For now, we are retaining our Moderately Bullish view on the stock market. We are also maintaining our extremely cautious stance with a sharp eye towards anything that could undermine the current momentum.
The longer the stock market outruns the fundamentals, the more the risks increase.

Would 10% make your head spin to much - there is something big coming to kill the shorts - I think a thousand point gap would do it. The higher we go the large point numbers are easier to get. Remain vigilent and prepared to ride the coming bull - I can here the hoofs in the distance even without putting my ear to the rails.

Dennis - permabull #1

Briefing.com
08:30 am : S&P futures vs fair value: +1.2. Nasdaq futures vs fair value: +5.0. Still shaping up for Friday's gains to carry over into today's opening bell. Meanwhile, since the economic outlook is merely stable and not a particularly bullish factor for the stock market, the absence of any scheduled economic data this morning is placing even more emphasis on the liquidity factor that continues to provide a floor of support for this market.
On the earnings front, Lowe's Companies (LOW) missed forecasts and cut its full-year guidance while Saks (SKS) merely matched expectations with an 86% drop in Q1 profits. Neither report, though, is likely to have much of an impact outside of their respective retail segments since the latest earnings season is basically over.

The cheerleading on CNBC is in full force. This morning Mark Haines kept repeating that the S&P is 3 or 4 points away from a new all-time high. What he should have been saying is from an all-time closing high. The old high is actually over 20 points away. I think Bob Pisani tried to correct him but why let details get in the way? Still, the market continues to push higher.

Mark Haines is a buffoon. The questions he asks his guests are on the verge of a 3rd grader (no disrepect intended for 3rd graders ). But hey you can't complain Tom it seems following Trader Fred is so far working out for you.

Looking at sentiment again dumb versus smart from Liz Ann Sonders:



The Dumb Money Confidence (DMC) index is a contrarian indicator while the Smart Money Confidence (SMC) index is noncontrarian. Note how optimistic small investors were in early 2007 and how equally pessimistic large traders were … just on the eve of the big market swoon on February 27. Quick as lightning, the dumb money "reacted" to the market drop and lost all their confidence, while the smart money saw the drop as an opportunity to increase its confidence level. The crossing again of the two readings as the market has rallied bears watching, though neither is anywhere near the danger zone.

The table below shows how, in the past 20 years, the S&P 500 performed 90 days after "buy signals" (when SMC was above 60% at the same time DMC was below 40%) and "sell signals" (when SMC is below 40% at the same time DMC is above 60%):

Buy Signals___Sell Signals

% of time S&P 500 positive: 75%________40%

average return: +11%_______-8%

white

I'm not sure if Liz uses the same data as Jason at sentimentrader.com, but he now has the smart money down to 33% but the dumb money hasn't quite made it over the 60% level. Currently 57%. So no official sell signal yet for Jason but it may be close enough for me to hide again.