Monday, December 13, 2010

12/13/10 Easy To Be Down



Here's my take on 'overbought.' Traders all know the indexes are 'overbought.' So they take profits, expecting to reenter on the inevitable pullback.

But is that how the 'market' works? Not in my opinion. The market confounds the expectations of the majority. In this case, traders are neatly coaxed out of their positions just before the indexes gap up further to new highs.

I think that's how bull markets work-

(a) Disbelief that a new bull market has started.

(b) If a bull market has started, then it must necessarily take a more 'reasonable' path than the one we're currently on.

(c) Widespread belief that a pullback of x% must first occur.

If anyone has access to the information, it would be interesting to see how many times the SPX was 'overbought' between 1982 and 2000, and how the overbought conditions were 'resolved?'

111 comments:

  1. Wouldn't it be a gas to see the market head straight up for the next 4-5 years? When we hit the equivalent of the next 'Y2K,' we're able to retire years ahead of schedule. Move the ports into T-bonds paying 9-10%...while the bear market we're all waiting for finally arrives.

    Just dreamin...

    ReplyDelete
  2. Sure it can, but only in nominal terms with an collapse of the value of the dollar.

    As a matter of fact, that's becoming the EXPECTATION....

    ReplyDelete
  3. I am hopeful one can retire in 4-5 years but not in the traditional way.

    Global media revolution underway. New Age Media - wiki leaks - Journalism

    http://www.youtube.com/watch?v=1rT4Onar7mk&feature=player_embedded#!

    ReplyDelete
  4. Re: Hussman gives warning/ Easy To Be Down newSubmitted by 2nd_ave (5033 comments) on Mon, 12/13/2010 - 11:41 #75914 (in reply to #75907)
    jim- OK. To be honest, I believe that there has always been widespread corruption and fraud in the markets, and always will be. Simply due to the fact that markets are comprised of/run by strange aliens governed by inexplicable impulses, aka 'human nature.'

    ReplyDelete
  5. I lucked out this morning. I decided to buy 7 x GOOG $590 Dec Calls on Friday at around $7.60 to make the opening exciting and give my portfolio some juice if we continue on the path higher. While I believe the stock will run up to its YTD highs very soon, I'm putting a sell order in for 1/3 of the options at a 100% gain, which would be somewhere around $604-605 for the stock.

    ReplyDelete
  6. tof- As they say, I'll take luck over 'skill' any day.

    ReplyDelete
  7. Re: Positive Attitude newSubmitted by 2nd_ave (5035 comments) on Mon, 12/13/2010 - 12:41 #75922 (in reply to #75918)
    There are things "we" cannot change — we can only learn to adjust to them.

    Grym- Come on. Try running that by Washington, Lincoln, Roosevelt, Hoover, JFK, LBJ, Martin Luther King and yes- even Obama. 'People with real problems?' I think many saw their lives change under both the inspiration of leaders with hope and vision, as well as their own efforts.

    ReplyDelete
  8. Re: Hussman gives warning/ Easy To Be Down
    Submitted by 2nd_ave (5035 comments) on Mon, 12/13/2010 - 12:33 #75921 (in reply to #75917)
    jim- Not trying to beat a dead horse, but the definition of 'long term' can include 'a long, long, long, long time.' And sometimes, over that long a period of time, things can change. What you're referring to might apply, for instance, to YHOO, or even TASR. As we all know, both YHOO and TASR finally came back down to earth- but a trader could have reaped life-changing gains on the way up, even if the only fuel for a price rise was a short squeeze (in the case of TASR). In the case of the DJIA today, by the time 'fundamentals and earnings' take the place of 'discounting an uncertain future' or even 'speculation' in media reports, we could be in the midst of a roaring bull, fully supported by real earnings. But at that point, will you be ready to buy? And in terms of lost opportunity, at what cost?

    ReplyDelete
  9. hell yeah, I'd take lucky over good any day (since I've got no chance of ever getting good!).

    went short es 40.50, looking for a quick scalp.

    ReplyDelete
  10. hmm, a couple of CC post are making very good cases for DBA or the like. Hmmm. Does anyone think China will raise rates? Per Fast Monye on Friday is sounds like Gartman doesn't think so.

    port2013

    ReplyDelete
  11. Re: Hussman gives warning/ Easy To Be Down newSubmitted by 2nd_ave (5036 comments) on Mon, 12/13/2010 - 13:19 #75924 (in reply to #75923)
    Yes, I see bumps in the road. And as we encounter them, I'll likely move my positions into cash and/or shorts. I'm certainly no permabull- as recently as August I was in cash. In fact, I'm a believer in being able to change one's stance on a dime. One reason I've moved away from changing my 'opinions' on a daily or even hourly basis is that I now feel 'buy-and-hold' has a chance at outperforming day trading. But that perspective could also change on a dime.

    ReplyDelete
  12. "If anyone has access to the information, it would be interesting to see how many times the SPX was 'overbought' between 1982 and 2000, and how the overbought conditions were 'resolved?'"

    2nd_ave -- I posted last night an excerpt from Hussman, where he gives exactly that kind of information. The current condition has been observed about 10 times since 1950, and EVERY SINGLE TIME a significant market correction had occurred in a short order.

    ReplyDelete
  13. Just now, while eating breakfast, I did the following adjustments:

    Bought 2 February $78 puts at $3.20

    Sold short 100 more shares of SLV at $28.72, so as to reduce my exposure to SLV even more

    Bought 400 shares of UNG at $6.03

    Placed a buy limit order for 4 January DB $50 puts at $0.95

    ReplyDelete
  14. GBCI - An easy 10% gain now if you'd bought near the recent low. Hitting resistance here.

    ReplyDelete
  15. Re: Hussman gives warning/ Easy To Be Down/ Rethink newSubmitted by 2nd_ave (5038 comments) on Mon, 12/13/2010 - 15:01 #75935 (in reply to #75932)
    Let me also thank 'jim' for bringing Hussman's take to the table, and 'DavidV' for quietly suggesting I actually read Hussman's weekly comment for an answer to my questions.

    What's the decision point here?

    (a) Long portfolios have performed quite well for several weeks now.
    (b) We are entering what has historically been a good time to be long.
    (c) The trend is clearly up.
    (d) Note that the losses Hussman has pointed out did not occur overnight- they unfolded over a period of weeks to months.
    (e) I can't argue with Hussman's observations, nor with his decision to sound a warning here.
    (f) In Hussman's own words, 'Overvalued, overbought, overbullish, rising-yield conditions are unfavorable in and of themselves. The present instance may turn out differently, but that expectation would be a clear outlier.'
    (g) Another Hussman quote: 'Clearing the overbought and overbullish components of the present environment, without a significant breakdown in overall market internals, would be the quickest way to prompt a more constructive stance, even in what we view as an overvalued market. All of that said, we are hard defensive here.'

    My take-

    (a) Trading is never easy. So to have arrived at a difficult 'decision point,' where both opinions and trading strategies differ markedly, is no surprise.
    (b) Hussman, IMO, is one of the more intelligent strategists out there. The market has and will continue to punish 'intelligence,' but it also has a way of rewarding intelligence in a big way when least expected.
    (c) It would be easy to get 'left behind' on an exit here if the market were in fact to 'clear the overbought and overbullish conditions without a significant breakdown in market internals.'
    (d) The bottom line- right now I'm inclined to make a defensive move. It may take the form of hedging with puts, or it may take the form of moving part/all of current positions to cash.

    Does anyone else have a take?

    ReplyDelete
  16. holy moly, bought back es at 39.25, way long to be risking that much capital for a 1.25pt winner.

    wow, some serious vol on a couple of those intc trades, may take a stab here at 21.48...thx for pointing that out 2nd

    ReplyDelete
  17. GS on INTC and other desktop makers that tablets are cutting into sales

    ReplyDelete
  18. jb- I'm not recommending buying INTC right now. I'm looking hard at moving into cash at the moment...

    ReplyDelete
  19. Moving to Cash newSubmitted by 2nd_ave (5039 comments) on Mon, 12/13/2010 - 15:42 #75940 (in reply to #75937)
    'No offense but you're no John Hussman.'

    pauldkk- Agreed! Alright. I've offed the AA/BAC/CSCO/GE/(what's up with)INTC/MSFT/XOM, and will be offing the OAKBX at the close.

    'Nuff said.

    ReplyDelete
  20. Re: Positive Attitude
    Submitted by Grym (2874 comments) on Mon, 12/13/2010 - 17:02 #75947 (in reply to #75922)
    2nd,

    Yes, we saw our lives change under these:

    "Roosevelt, Hoover, JFK, LBJ, Martin Luther King and yes- even Obama."

    They are not "we". The point I was debating is that you and I (we) have zero control. Positive thinking will not change our major problems only help deal with the effects.

    I was of voting age during the time of these guys — JFK, LBJ, and Obama and had no influence, nor could I prevent any of these from gaining the WH — since I voted against each of them.

    reply Bookmark this Ignore thread Ignore user
    Re: Positive Attitude newSubmitted by 2nd_ave (5040 comments) on Mon, 12/13/2010 - 17:49 #75948 (in reply to #75947)
    Grym- Absent a belief that we are able to effect change, little to no action would be taken. I really believe that. Where would that leave us?

    ReplyDelete
  21. The port is up 12% since August 31.

    ReplyDelete
  22. Re: Moving to Cash newSubmitted by 2nd_ave (5041 comments) on Mon, 12/13/2010 - 18:42 #75952 (in reply to #75940)
    Closing numbers are out for OAKBX. The portfolio is up +4% since mid-November, and +12% since the end of August 31 (respectively the last two times I was holding 100% cash). Not saying if either number is good or bad, but I'm happy with them. Nor am I saying it had more to do with skill than luck. My only goal is/(has always been) to navigate the portfolio to a total that will permit a comfortable retirement. So once again I'm switching off the auto-pilot and back to worrying about reentry points.

    ReplyDelete
  23. I'm actually disappointed to be back to 'watching' the markets. It was pretty nice being able to log on at will.

    ReplyDelete
  24. However, it 'feels' right to be bounced out of the Barca-lounger about now.

    ReplyDelete
  25. If I had to guess: we spike higher (if only to spite me) before any pullback. ie, it also feels right that I get slapped for moving to cash.

    ReplyDelete
  26. OK, I'm DONE!!

    Took a 1.26% hit to the port today. Oh well, had to happen. I've been beating the SPY by about 1/2% each day for about 3 weeks now. Looking back at the tape, I MIGHT have taken some off, but doubt it.

    My computer did add PHM @ 7.00. I checked it out after you commented on it TOF.

    ReplyDelete
  27. INTC fu

    http://www.thestockmasters.com/gs-msft-12132010

    ReplyDelete
  28. Both, no fu

    "Analysts at Goldman Sachs say Microsoft and Intel stand to take the biggest hit as consumers embrace slates powered by alternative software and hardware. "

    ReplyDelete
  29. Every time I've moved to cash I've been slapped, therefore I keep cash available in case I get slapped for being long.

    ReplyDelete
  30. Among the thoughts that crossed my mind as I was trying to decide whether to cash out: Hussman's been 'wrong' for several weeks. No one's wrong all the time.

    ReplyDelete
  31. ATNI - Could be temporary strength based upon today's divy confirmation announcement.

    Not a solid enough display of strength to compel an add.

    ReplyDelete
  32. CSCO - I still say this one's cheap. Not that it can't get cheaper, but I kinda doubt it will.

    ReplyDelete
  33. Getting slapped - And yes, I've been getting slapped lately for being long but not slapped hard enough to compel a response.

    ReplyDelete
  34. I agree- CSCO's a buy. I've just never been good at clearing the table while leaving 1-2 positions untouched. When I'm out, I'm out.

    ReplyDelete
  35. Hussman - How does he know which stocks you're holding?

    At some point the tight correlations should begin to loosen and equities become valued based on their own merit?

    ReplyDelete
  36. Just finished reading the posts. I see you departed the train 2nd. Was it the add you were reading about a new brew pub at the next stop? :)

    I'm going to be a a little more patient. Hope it doesn't cost me to much coin!

    ReplyDelete
  37. I fully expect more weakness going into EOY, especially for equities which are below their 200SMA.

    But, most of these are currently bargains, and so could bounce up with a sharp gain at a moments notice.

    I'm hoping to be slapped smartly? ;)

    ReplyDelete
  38. CCME - Maybe they do have pump-top news?

    ReplyDelete
  39. TOF- RAS...We had that one in the cross hairs.

    ReplyDelete
  40. CADC - I'm having a warm fuzzy feeling on this one. The problem I've had is I know it's worth more than $5 and I have a hard time letting it go for less.

    ReplyDelete
  41. "Hussman's been 'wrong' for several weeks. No one's wrong all the time."

    2nd_ave -- Hussman has been saying that the market is "overbought, overvalued, overbullish and faces increasing yield pressures for since late November 2009, and the market collapsed only in early January 2010. Of course, the bottom point of that correction was way below the level at which Hussman first started to sound his alarm, but the waiting period until the correction had actually started was excruciatingly long for me.

    ReplyDelete
  42. 2nd_ave, I also think it will be really worth your time to read the latest John Mauldin's piece that I cited on Sunday night.

    ReplyDelete
  43. Freaking RAS man. WTF!

    ReplyDelete
  44. Missed most of the trading today...if we are going higher then we need to gap higher and get the rest of the nervous nellies like 2nd (no offense) off board The Unstoppable. Next Destination: The Moon.

    ReplyDelete
  45. Re: BBY down in pre-market newSubmitted by 2nd_ave (5043 comments) on Tue, 12/14/2010 - 09:31 #75971 (in reply to #75967)
    So BBY follows CSCO in selling off hard on less-than-compelling comments about the future. This has to give company directors pause when considering what to say during conference calls.

    ReplyDelete
  46. Back in my OPEN January $70 puts position. the past two days action to me is bearish...wish i was watching it all day yesterday but i was out.

    Sold my GOOG calls at a 15% profit. Should have sold yesterday but oh well.

    Sold my PHM at $7.05. Sold my JPM Calls at breakeven.

    ReplyDelete
  47. BBY
    anyone thinking of buying on possible over reaction?

    ReplyDelete
  48. I gotta say the highfliers are now officially crashing. Look at CRM, CMG, NFLX...OPEN is the next. This can't be bullish action.

    ReplyDelete
  49. Only longs I have now are MMYT and IBKC. My trigger finger on the former is quick.

    ReplyDelete
  50. BBY- Interesting. One the same day it filled a huge gap, it created another. Yes, I will try to get in. My 3 day rule will apply.

    ReplyDelete
  51. First 2nd, and now TOF has one foot off the train. WTF, did someone fart in the caboose?

    ReplyDelete
  52. CREE getting pounded on the BBY comments?

    ReplyDelete
  53. Mark - I'm still about 30% long with a small (i.e., less than $5k) put position so I'm not necessarily off the train. Just don't like the smell emanating from these highfliers. It smells to me like too much froth pushed up too few stocks too far, which is usually a sign of at least a short term pullback being near.

    ReplyDelete
  54. I don't have any charts or statistics to back this up...just a hunch and a nose that can smell.

    ReplyDelete
  55. Bought 10 Dec 31 $126 SPY Puts at $2.56

    ReplyDelete
  56. Just bought January $50 put on CRM for $15. Placed a sell stop limit order on it at $10/$9

    ReplyDelete
  57. Placed a buy limit order for 300 shares of UNG at $5.83, just to make sure that I won't let the current pullback go to waste if it becomes a little more pronounced. (I already purchased 400 shares at $6.03 yesterday, so a 20c step seems reasonable to me).

    ReplyDelete
  58. 1252 - This looks like the make or break level, if we can retake and hold then we're definitely in bull territory.

    ReplyDelete
  59. Just bought 2 January $55 puts on DB for $2.90 each.

    ReplyDelete
  60. FED - Recovery is too slow to curb unemployment.

    ReplyDelete
  61. sold MMYT at $25.88 that I bought at $24.75 a few days ago. Only long IBKC, which I consider to be a long term holding. Puts on OPEN and SPY right now.

    ReplyDelete
  62. I think this little spike down just now is a shake out round about fake out :)

    ReplyDelete
  63. Long TYP for a trade at $24.60. Just heard that Cramer piece on OPEN. I'm pretty sure he said to sell it and buy it. Great call!

    ReplyDelete
  64. I'll take the 10%...BORN off @ 11.00.

    ReplyDelete
  65. Taking BORN $'s and picking up C @ 4.72.

    ReplyDelete
  66. TGB - Still rollin' right along, are the big boys in yet?

    ReplyDelete
  67. So my BORN for TBT played out nicely :)

    ReplyDelete
  68. Given how heavily shorted OPEN is, I decided to sell 2/3 of my position just now for a 30% profit from this morning.

    ReplyDelete
  69. TOF- Even though I still think it's a stinker, I'd have done the same. If something crazy spooks those shorts, yikes.

    ReplyDelete
  70. BREAKING NEWS

    Submitted by teamonfuego (2323 comments) on Tue, 12/14/2010 - 15:20 #75985

    NEW YORK, Dec. 14 (Reuters Life!) - Whatever you think about using grating words, at the end of the day it's actually better not to say whatever, if you know what I mean.

    For the second consecutive year "whatever' topped a Marist poll as the most annoying word or phrase in the English language.

    Nearly 39 percent of 1,020 Americans questioned in the survey deemed it the most irritating word, followed by "like" with 28 percent and the phrase "you know what I mean' at 15 percent.

    "Perhaps these words are introduced through popular culture, for example movies ... so they catch on," said Mary Azzoli, of Marist. "It has a lot to do with how accepted and how popular they become in every day speech."

    Azzoli said words like "whatever" can be quite dismissive depending on how they are used.

    "It's the way they are delivered and inherent in that delivery is a meaning.
    The phrase "to tell you the truth" and "actually" were also unnerving to many people. But for younger Americans, aged 18 to 29, "like" was the word that annoyed them most.

    ReplyDelete
  71. Added to my SPY puts position when it was around $124.80...now have 20 x SPY $126 Dec 31 Puts at $2.61 avg.

    Added to my TYP at $24.6 a little while ago as well. Now only holding IBKC and have a lot of shorts/puts.

    ReplyDelete
  72. Holy shit...look at MUB and the muni bonds.

    ReplyDelete
  73. MUB - That yield isn't enough to entice my $, wouldn't even compensate normal inflation + risk.

    ReplyDelete
  74. Gross just bought about 40M worth of Ca. muni funds for his own account.

    ReplyDelete
  75. Damn, like it's still cold as hell here! Gonna stay that way for at least another week too.

    Whatever!

    ReplyDelete
  76. Only imbalance I can find is BAC-BUY.

    ReplyDelete
  77. ATNI - That was a hellof'a pop out of nowhere, wonder if it'll stick and rally?

    I can't add until I see some follow through...

    ReplyDelete
  78. cleared out my SPY puts at about a 8% gain.

    ReplyDelete
  79. Wouldn't a Moody's US debt be bullish for equities?

    ReplyDelete
  80. We better get a gap and go pretty soon.

    ANTI- At least you know someone is watching it.

    BORN saved my fanny today. Frankly I'm glad to be out of it for a good return. Too much beta even for me.

    ReplyDelete
  81. Actually, I, like, you know, to tell you the truth, or whateverrrr.

    Followed closely by uhhhh, ummmm, what up, ya know what I mean?

    Don't even get me started on Sarah Palin. How's that thingy workin' for ya?
    We are seemingly forced to deal with Oakland, the San Fernando Valley or Fargo.

    FF

    ReplyDelete
  82. Chicken > Downgrade of US Debt? No way in hell that's good for equities. That's part of my worry here. With the passage of the tax deal, we might see a short spike up at which point I will possibly go all in on the short side because I think the debt issue is becoming too much.

    ReplyDelete
  83. Took $3800 profit off the table daytrading DGP and RBY. Reloaded some on sell off after Fed results. All well into green now and holding.

    ReplyDelete
  84. Today was the first day in weeks that I have been watching OPEN that it didn't show strong support. It just got sold all day long. It's one in a long string of weak high fliers.

    ReplyDelete
  85. TOF - I was thinking a US downgrade might cause a migration from "safety" to risk...?

    ReplyDelete
  86. Ca muni's - So what happened, is Gross now deep under water?

    ReplyDelete
  87. CP- Here's a link to the article...

    http://www.investmentnews.com/article/20101214/FREE/101219977

    ReplyDelete
  88. Ans: Looks like maybe Gross is currently underwater...

    "Bill Gross, the co-chief investment officer of Pacific Investment Management Co., spent $4.4 million of his own money this month to purchase shares of five municipal-bond funds run by his firm after tax-exempt debt tumbled."

    ReplyDelete
  89. CEO of HEK is coming up right now on bloomberg

    ReplyDelete
  90. Oh no, I guess Gross isn't under water, the press announcement seems to have turned the tide in his favor.

    ReplyDelete
  91. PMX - Now that's still a nice dividend, I wouldn't be surprised if this price holds...

    The drawback about a fund as opposed to owning the bonds directly is you won't lose money by holding the bond to maturity(discounting inflation) like you could lose by being in the fund.

    ReplyDelete
  92. CADC - Well, I certainly didn't expect today's weakness. Expect the unexpected?

    ReplyDelete
  93. JB- I tried to find the video on line. Can you?

    ReplyDelete