It's possible to change your name. Your appearance. Where you reside. Your job. What can't you change (other than the past)? Watch the film and find out.
Is there anything central bankers can do to change market direction? We'll soon find out.
"Is there anything central bankers can do to change market direction?"
How do we know what central bankers really want? I still think we're caught in this jobless recovery, in which consternation over demand for products, hence corporate profits, is the root force steering market prices.
Demand destruction - Too few people chasing too many products? Uncertainty over future causing flight to safety? Potential employers hesitant to expand due to uncertainty of demand for, or cost to produce goods?
The big question in my mind is, which direction are employment figures headed going forward and if current levels of employment are sufficient for maintaining current levels of demand for goods and services?
Given the right circumstances, currency debasement could be an important tool in providing incentive to invest in growth. Either debasement efforts are insufficient and we need more of the same, or there remains a missing component that must also be addressed.
For instance, when energy prices fall below a certain threshold, investment in energy infrastructure becomes an unprofitable exercise. Numerous other factors inclusive of employee wages also correlate with this rule.
Everything relies on return of capital vs return on capital. Unprofitable ventures tend to have negative investment prospect characteristics.
I think the only thing central banks care about is keeping the global banking system solvent. The amount of bad/noncollectable debt outstanding is still at "catastrophic" levels and all these guys are trying to do is buy time in hopes that animal spirits return and we are able to grow our way out of this mess.
"We've seen some extreme downside action. But Jim Stack of InvesTech Research reports that on the August 8th panic the ratio of declining stocks to advancing stocks was 77 to 1, a ratio never seen before in the past 80 years. The closest incidents were the May 1940 ratio when France fell to Germany; that ratio was 60 to 1. The second incident was on Black Monday during October 1987 when the ratio was 49 to 1. In both cases, those hugely high ratios marked a near-bottom, and within one month of those ratios the market was 10% higher.”
Anyone ever take a look at CSC (Computer Sciences Corp)? I worked with them 10 years ago and they seemed like a solid company then and they are down at at a 5 P/E on a recent earnings miss. Seems too cheap. Plus they started paying dividends last year for the first time in their 50 year history and are buying back stock.
Do a lot of work for the government which could be seen as a bad thing as governments cut budgets, but also means more outsrourcing contracts available for bid.
BB- The Sears column is more like it. No one 'feels' like buying right now? Perfect! Still awaiting confirmation in the form of some sentiment survey, be it Hulbert, II, or AAII.
Brandt he is so sure of himself 35 years trading: "In either case I have NO interest in putting on my bottom feeder uniform. I only have an interest in the short side. WE HAVE AN HISTORIC TOP IN PLACE. I am not sure how the fundamentals will change, but they will change. And only when the street becomes extremely bearish and capitulates will the first major multi-week bounce begin. But even then, the bounce will just be a bounce (even if it is 150 S&P points or so).Again, and I hate to repeat myself on this one, I am flabbergasted that people who call themselves chartists have so utterly discounted the H&S top. Right here and now I am challenging you “chartists” to examine yourselves. Are you really chartists, or are you using charts as a prop? If you are a counter-trend RSI indicator-based trader, then call yourself that. But don’t present yourself as a chartist. Real chartists were screaming “bear” from the roof tops about the H&S top in the stock market rather than trying to buy for the bounce. Shame on you — and you know who you are and I know who you are!
A little while ago BB asked what my method is. I simply stated that I prefer buying pullbacks in 45 degree angles as they rise and that my approach is eclectic.
I like to to see positive price structure in the market. When the price structure breaks I go mostly flat. The other choice is to short, but I prefer being long or flat and wait for the storm to pass, but short or hedge sometimes.
Clearly the market has broke. So how to play it going forward? Rather than me explain just read Stan Weinstein's Secrets for Profiting in Bull and Bear Markets and BB you will know exactly how I view the current climate.
The great thing is that if history repeats, and it does, we just need time before we have opp in the long side for now the preferred plan is cash or short the rallies.
Of course for those who bought gold well stay the course. It is tough adding here but probably right.
I'm re-reading Stan's book now, he has great clarity.
S&P 500 reporting season is largely complete, with 97% of the index having reported Q2 results. Overall results have been strong, with 71% beating on earnings and 74% beating on revenues. According to Thomson Reuters, the consensus estimate of index earnings growth in Q2 is 12% (21% excluding financials), unchanged from a week ago but up from an initial estimate of 7% (14% excluding financials). The consensus estimate of revenue growth is 12%, unchanged from last week but up from the initial estimate of 10%.
I believe the reality is American workers aren't wage-competitive in the global markets, there are too many hungry people in third world countries willing to live in company dorms and work for minimum pay.
You drop humanitarian sanctions and open global markets, real wages in developed countries will fall and they will increase in developing countries. Until some form of equilibrium is reached, that's the macro picture, then factor in the micro factors such as transportation costs, which also exist.
"I wrote in the blog that I would write something about Silvercorp (SVM), a silverminer I hold. The price on the NYSE is currently $8.42, which is 0.91x NAV of $9.22. The silverminer peer group typically trades at 1.3x NAV and SVM at 1.8x NAV.
Silvercorp’s high grade Ying mine in China is one of the finest in the world. After accounting for revenues from other metals produced along with the silver, the cash cost per ounce of silver is a minus -$6.12/oz. Silver is now trading at about $42.90/oz and the company will likely produce 5.6 million oz in Fiscal 2012. I think the average selling price for 2012 will be $50/oz and revenue will be $280 million in 2012 and $300 million in 2013 vs $176 million in 2011.
The company is a cash cow. Cash at the end of the past quarter was $230.5 million. There is no debt. The cost structure is the lowest in the industry.
There are just under 175.0 million shares outstanding, so earnings are expected to be $1.00/sh this year, lifting to $1.60/sh in 2012 and say $1.72 in 2013. I’ll repeat: the price on the NYSE is currently $8.42, so my PE calculations are 8.4x (2011), 5.3x (2012) and 4.9x (2013).
Did I say there is a 1.0% dividend yield? There is, and the payout is likely to be raised. For sure there is a share buy-back program in place as BOB 47 pointed out at 12:02pm ET today in the blog.
Silvercorp repurchased 776,458 shares and retires them, average price is C$8.185. http://tinyurl.com/3chktzq
Show me a single other company on the NYSE of this quality (financial strength, financial performance and operating metrics) at such a price, and I’ll buy it. Yes, I hold a lot of SVM and have set a 12-month price target of $18. I project the stock will trade at $14 before year end. The average PT of the analysts on Wall Street seems to be $15.29, but that is before they re-rate the silver miners based on higher silver prices. "
I still want to see the XLF firm up here, maybe it's "old thinking" but I worry that equities cannot go higher w/o the financials taking the lead (or at least not sucking so bad).
see how funny that is - we move 2 handles away from poc, then bam, right back to it....might as well crack open the brews guys, nothing much to see here I don't think
Again, looking at historical monthly bars of this magnitude, I think the only chance of a multi-week bounce (before rolling over) is to close at or very close to the low of the month. Be that 1100 or 1000.
Looking at the yearly SOX for instance, it looks like a typical waterfall chart in the 6th or 7th inning. Unfortunately, most of the losses take place in the 8th and 9th.
Fortunately, waterfall declines usually mark intermediate term bottoms. Perhaps a 1-3 month long trading opportunity after.
A waterfall target for the SOX might be 250 w/in the next few weeks. Believe it or not, another 20% or so from here.
Guys, I think this is very important since semis lead the market:
Current polysilcon prices: $50/kg
Credit Suisse Equity Research 8/21/11
"An Impossible Equation for Poly Prices
Bottom line – poly price pressure imminent. poly makers are ramping production from 2H10 to 1H11 by at least 2GW, and again into 2H11 by another 2.5GW. Our analysis suggests there was at least 8+ GW of excess solar product inventories in the supply chain at the end of 2Q11. Our analysis strongly suggests that it is impossible to maintain the current situation of “stable” poly prices AND 100% utilizations for production of poly simultaneously. We reiterate our view that poly prices will reach $25/kg by year end.
Why do we focus so much on poly price?
Until poly prices reach trough levels, pricing for panels will not stabilize; and until pricing is under pressure, stocks may continue to have downside risk and remain volatile. Therefore we watch the supply/demand trends for poly carefully. QTD results clearly suggest an impossible equation for poly prices and poly production. Every polysilicon maker is reporting full utilization and production, whereas several wafer and cell makers are reporting or guiding to negative or single digit gross margins
Where is all the solar product sitting?
The industry supply chain must be brimming with excess poly inventory either in raw poly form, or in the form of WIP like wafers/cells and finished panels. We believe there is over 10GW of “unexplained” poly or semi or fully processed solar products sitting in the supply chain. This is an impossible equation for poly to sustain current prices. We reiterate our non-consensus view that poly prices will fall to cash cost or near about for Tier 1 makers (~$25/kg) by year end 2011.
Our industry checks suggest a major solar equipment provider located in California supplying wiresaws and screen printers is bracing for steep cost cuts and headcount reductions in its solar division.
And new poly aspirations continue.
Despite the disconnect between poly production and consumption and demand trends, poly makers continue to place orders with equipment makers for ADDING even more capacity, let alone pausing current expansion plans. As recently as last week, GTAT reported receiving new poly orders. Last week, we spoke with a disruptive poly maker, Mascotte in Taiwan, which is still on track to ramp 3500MT poly capacity by early 2012. Our China utility analysts have reported that the Xinjiang autonomous region is “serious” about building new poly capacity. And we continue to hear positive confirmation that Honhai is seriously considering entering the poly business. We have new plants like Samsung Fine/MEMC JV that are on the drawing boards. The new players will continue to expand capacity as long as they believe that poly prices can be sustained at the $50/kg levels like poly makers claim – if they see poly nearing Tier 1 cash costs, then they could perhaps push out expansion plans. Thus poly price declines can even help the incumbents to prevent new entrants from entering the business."
Hi All -- last night I came back from another 2-night family camping trip, and so I am just now reading through all the articles I look forward to reading during the weekend (Mauldin's and Hussman's essays), and glancing at the S&P futures chart occasionally. The chart shows that this morning's spike in futures made a lower high relative to the spike on Friday, and after this morning's spike was sold, the futures since then have retraced 1/2 of the decline. If futures turn around NOW, then we will not only have a classic failure at the 1/2 resistance level, but we'll also have a nice H&S pattern starting from Sunday night's open. If, however, the futures don't reverse and rise above this morning's spike, then I am closing my S&P puts. So I am waiting to see what happens and catching up on my reading in the meantime...
Just to stir up some trouble once again, I'll continue the discussion with TOF about the price of gold from where we left off on Friday afternoon. :)
“David the basic fact is you still can't really measure the value of it...its based on intangible things in my mind. Can it go higher? Absolutely. But I still wont be able to tell if its undervalued...”
TOF, gold is the mirror image of US dollar (since it is priced in dollars). How do you tell whether the US dollar is undervalued or not? In the long term, its value is determined based on the predicted future ratio of the number of dollars outstanding to the amount of useful goods and services one can buy with them. Which is exactly how gold is valued, except that the inverse of this ratio is used. Pretty simple.
Also note, folks: the futures are making higher lows since Sunday's open, but this morning's rally made a lower high relative to Friday's high. This looks like a wedge pattern, and when it breaks, the move will be large (either to 1200 or to 1030 -- the lows of summer 2010).
Below are the concluding remarks from John Mauldin's essay (he started his essay by showing different composite economic indicators that predicted all recessions since 1960s and pointing out that all of them suggest that we are entering a recession now):
*****
If we are headed into recession, and I think we are, then the stock market has a long way to go to reach its next bottom, as do many risk assets. Income is going to be king, as well as cash (and cash is a position, as I often remind readers).
If we go into recession, we’ll know several things. Recessions are by definition deflationary. Yields on bonds will go down, much further than the market thinks today. And while the Fed may decide to invoke QE3 to fight a deflation scare, the problem is not one of liquidity; it is a debt problem.
It is not unusual for a recession to last a year, which means it could well take us into next summer and election season. And while the NBER (the people who are the “official” recession scorecard keepers) will tell us when the recession started, about nine months after it has, it is unlikely they will give an all-clear before the election.
There is little stomach for more fiscal stimulus. The drive is to cut spending. Fed policy is impotent. Unemployment will rise yet again and tax receipts will fall and expenses related to unemployment benefits will rise, putting further pressure on the deficit. Already, 40 million of our citizens are on food stamps. Wal-Mart notes that shoppers come into their stores late at night on the last day of the month and wait until midnight, when their new allotment of food stamps is activated.
It is hard to see at this moment what pulls us out, other than the blood, sweat, and tears of American entrepreneurs. Fisher is right; the US government should create certainty, create policies to foster new business, and get out of the way.
So, I guess I am going out on a limb, without any help from an inverted yield curve, and saying that we will be in recession within 12 months, if we are not already in one. This will be unlike any recession we have seen, as there is not much that can be done, other than to just get through it as best we can. Sit down and think about your own situation and prepare.
We should be looking at Europe to lead regarding a possible bottom. Check out these charts. Possible powerful reversal pattern if lows hold. I'm almost to the point now that I think if Europe's Friday close holds, we get a powerful rally. If not, we go much lower. I'm getting long w/ a stop just below.
This is why I stick to following trends. No one knows what will happen, no one.
I do know this doesn't feel like fear, panic or capitulation. It feels and looks like an oversold bounce.
I don't think we go anywhere until Friday when Ben either capitulates or doesn't.
If he capitulates we may see a bounce and gold should go even higher (or sell on the news, and then it will be a buy) if he does nothing we will see lower lows.
Even if we are going into a recession in 2012, this says nothing about the stock market direction over the next couple of months. We had an amazing "sucker's rally" before the 2008 recession, when it was clear that housing is collapsing and we ARE going into a recession. So it is entirely possible that Bernanke says something at the Jackson Hole meeting on Friday that sparks a powerful last "sucker's rally." Thus, I'll stick to following the charts in making my trading decisions. The bearish nature of the S&P futures chart will be sealed if S&P doesn't rise above the height of its recent rebound, which was at $1135 on the cash index. If it does rise above that, then I am closing my S&P puts -- no need to wait until this morning's high is taken out...
I can't remember the broker, but a couple days ago, they said that TZOO's deal conversions spiked the first half of August. Saying they would handily beat estimates.
I also am reading that CEO Bartel purchased 50,000 shares on the 11th and 12th around $45 ish. Do you see a link to this? I can't find it in SEC filings although it appears that Bartel confirms this.
My bet is that 2nd focuses on today's 200 point selloff from the open as support for capitulation and further evidence for tomorrow's 500 point gap up.
Hussman started his weekend essay by touching on the discussing of whether or not the stocks are cheap now (a few people here like to say that they are, so I figured it would be helpful to once again review what the real statistics indicates):
*** As of last week, the S&P 500 has declined to the point where we now expect 10-year total returns averaging about 5.7% annually on the index. This is certainly higher than the 3.4% prospective return we observed earlier this year, but is still a prospective return more characteristic of market peaks than of long-term buying opportunities.
Wall Street analysts continue to characterize stocks as cheap on the basis of completely specious approaches like "forward operating earnings times arbitrary P/E multiple," or worse, "forward operating earnings yield divided by 10-year Treasury yield." Unfortunately, despite a few anecdotal successes, there is no correlation between "valuation" on these measures and actual subsequent market returns.
There are numerous reasons why these toy models based on forward operating earnings are misguided, but the four most important ones today are 1) forward operating earnings presently carry the embedded assumption that profit margins will achieve and indefinitely sustain the highest profit margins observed in U.S. history; 2) the duration of a 10-year Treasury bond is only about 8 years, while the duration of the S&P 500 is about 42, meaning that any given yield increase implies 5 times more loss for stocks than it does for bonds, and there is no reason in the world why investors should treat those risks as equivalent; 3) the current conformation of evidence strongly suggests the likelihood of an oncoming U.S. recession, and forward earnings expectations tend to be stunningly off-base in those instances, and; 4) the norms typically applied to forward operating earnings are artifacts of the recent period of bubble valuations, and use norms for "trailing net" as if they are equally applicable to "forward operating." In fact, the correlation between forward operating P/Es and other normalized P/Es having far longer history suggests that a forward multiple of even 12 is quite rich. ***
Attention, folks! The 1-minute S&P futures chart, starting from this morning's high, show lower highs and higher lows, and the two lines have intersected NOW! This wedge pattern will break now, and the move might be large. Tighten your stops!
So the future is going to be based on a daily bar after 16 down bars? What happened to the trend is your friend?
I just keep my hands clear of falling knives. If we get a transitional pattern and the MA's cross up then I will be paying attention, but there is no need for me to be a hero, surely not based on one day of intraday prices.
"As it happens, forward operating earnings, when used properly, can actually be very informative about prospective market returns (see "Valuing the S&P 500 Using Forward Operating Earnings" ). However, the phrase "used properly" can't be emphasized enough. Here and now, our forward operating earnings model delivers nearly identical prospective return estimates for the S&P 500 as our standard methodology. Stocks are emphatically not undervalued here on any reasonably long-term horizon."
Those who are interested in reading Hussman's timeless piece analyzing the accuracy of different valuation models, can find it here:
Let me repeat a quote from Hussman's essay this weekend:
"As of last week, the S&P 500 has declined to the point where we now expect 10-year total returns averaging about 5.7% annually on the index. This is certainly higher than the 3.4% prospective return we observed earlier this year"
It shows that Hussman's investment results can be accurately evaluated only on a 10-year time horizon! He cares very little about momentum, local panics, etc. -- he simply looks at the price, and as the price goes down, he rightfully expects a higher return over the next 10 years and correspondingly increases his equity exposure. That's what the sophisticated buy-and-hold investors should do -- invest 1/2 to 2/3 of their port into buy-and-hold, and then keep buying if prices decline. That's what I have been doing with ECU lately -- I don't care about where the stock will be in 6 months, I care where it will be in 2 years when they build the new 2000 tpd mill.
Continuing my previous post, here is how Hussman responding to the recent market crash:
*** For our part, on Friday's weakness, we covered about 20% of our hedges in Strategic Growth, but retained a very strong line of defense a few percent below current levels using index put options. We also covered about 20% of our hedges in Strategic International Equity, but are again keeping a fairly tight leash on our willingness to accept market risk.
Suffice it to say that we continue to anticipate an oncoming recession and the potential for substantially deeper market losses over the next 12-18 months. At the same time, however, the ensemble of evidence on a variety of fronts has shifted our return/risk expectations, probably temporarily, above the zero line, allowing us to accept a small amount of market exposure, as we've briefly done on a handful of occasions this year. ****
More from Hussman's article (it is so good that I suggest that all of you read it entirely: http://www.hussmanfunds.com/wmc/wmc110822.htm)
**** Ideally, present conditions will be associated with what we've observed historically - a few weeks of moderate advance to clear the deeply oversold condition of the market, most likely followed by a fresh shift to a defensive stance. Given that the expected return/risk profile has just peeked above zero, we would prefer not to immediately experience the market's version of "Whack-A-Mole," but are prepared for that possibility as well. A break below the area around 1050 on the S&P 500 would put us in a situation much like 2008, where nearly every expectation of short-term stabilization was promptly dashed. For now, we don't see the sort of uniform breakdown that we observed then. A break to fresh lows by numerous indices, an explosion of new lows in individual issues, and steep weakness in utilities or corporate bonds would quickly change that assessment, and we will respond accordingly.
Are we bullish or bearish here? We really don't think in those terms. Our investment approach is to align our investment exposure in proportion to the return/risk profile that we expect at any point in time, given observable market conditions and the distribution of market outcomes that has historically accompanied that set of conditions. Based on our present methods, the expected market return/risk profile has been generally negative since about April 2010 with a few exceptions, including a slight traversal into positive ground this week. Our muted response is proportional to that. ****
*** At what level of the S&P 500 will we get a buy signal? Again, we don't think in those terms. Our investment positions are based on a whole ensemble of evidence, so the same valuation level might be accompanied by different investment positions, depending on the surrounding conditions. Valuations are a continuum - today's are slightly better than they were a few months ago, much better than they were at the 2000 bubble peak, not as good as they were at the 2009 low, not even close to where they were in the early 1990's when the Los Angeles Times characterized me as "one lonely raging bull," and a lifetime away from the 20% prospective returns we saw in 1982 when I first began working in the financial markets. I don't believe we have to revisit 1950, 1974 or 1982 type extremes in the present cycle (though I'm fairly certain we'll see them at some point again). But even to achieve a prospective return of 8% a year or two from now, quite a bit of further damage would have to be endured. We prefer not to rule out any particular outcome. ***
**** The combination of overvalued, overbought, overbullish conditions that we persistently observed during QE2 was associated with a dangerously skewed return distribution, so we stayed defensive, which was difficult but necessary. As I noted at the time, whatever gains the market might achieve had a high probability of being abruptly wiped out in a handful of sessions. What we've seen in recent weeks is about par for the course. ****
BAC is insolvent. http://www.ritholtz.com/blog/2011/08/wall-st-borrowed-1-2trillion/ "We knew that Citigroup (C), who borrowed $99.5 billion, and Bank of America (BAC), who took loans of $91.4 billion, were in trouble. I’ve been saying for the better part of 3 years now that they were, and likely still are mostly insolvent."
If Bernanke IS to unveil something good at Jackson Hole and this news leaks to the Big Boys, then it would only be natural for them to drop S&P below 1100 first to shake out all weak hands, and then to ride alone to 1250-1300 in the final "sucker's rally" before the recession in 2012...
That wedge pattern on the 1-minute S&P chart since this morning's high was indeed pretty powerful... I find that reading the continuously-traded futures charts gives me a MUCH better feel for the market direction than just looking at the charts of indices during US trading times...
Jesse - I'm being impatient again...I know I should be waiting for a drop below the 1,120 level which will most likely be a headfake lower that results in a throw back rally of 10% or so...the market has had so many headfakes since the beginning of the year that it's only natural this would happen. however, if the market is making a double bottom here then i figure the risk is low enough for a try at longs here. So I figured I'd go with the most beaten down stocks right here that I like longer term and thing could bounce 30% or so if the market does find a short term bottom.
This is a biggie guys. 20 day put/call ratio averages about .92.
Spike to 1.08 exactly marked the bottoms in May '10 and June '11.
Spike to 1.17 marked the bottom in Oct. '08.
Spike to 1.20 marked the bottom in Aug. '07.
Spike to 1.21 marked the bottom in Mar. '08.
On Friday, we closed at.....1.19. I don't have the info. regarding today's close. My guess is it is 1.20-1.21. We are at levels seen at bottoms during the great crash of 2008. We are probably at or within a few days of an intermediate term bottom.
RUT RSI(14) 29.11. Last time it touched 30 was March of 2009.
Soccer-
ReplyDelete"Well, it turns out my little guy will be the star of his team."
You will be assimilated! Resistance is futile!
Find out where ODP training is now!
http://www.youtube.com/watch?v=ziJCm9JhvoM
Umm im completely lost 2 nd
ReplyDeleteEyes are a window into the soul. This can never be altered.
ReplyDeleteWhat options do central bankers have?
ReplyDelete(a) Lower ST rates.
(b) Apply downward pressure on longer term rates.
(c) Increase money supply.
These would have all have the effect of increasing demand for stocks.
However, if investors decide they want nothing to do with the stock market, it won't matter. They just stop buying, and the indexes will drop.
"Is there anything central bankers can do to change market direction?"
ReplyDeleteHow do we know what central bankers really want? I still think we're caught in this jobless recovery, in which consternation over demand for products, hence corporate profits, is the root force steering market prices.
Demand destruction - Too few people chasing too many products? Uncertainty over future causing flight to safety? Potential employers hesitant to expand due to uncertainty of demand for, or cost to produce goods?
The big question in my mind is, which direction are employment figures headed going forward and if current levels of employment are sufficient for maintaining current levels of demand for goods and services?
Given the right circumstances, currency debasement could be an important tool in providing incentive to invest in growth. Either debasement efforts are insufficient and we need more of the same, or there remains a missing component that must also be addressed.
For instance, when energy prices fall below a certain threshold, investment in energy infrastructure becomes an unprofitable exercise. Numerous other factors inclusive of employee wages also correlate with this rule.
Everything relies on return of capital vs return on capital. Unprofitable ventures tend to have negative investment prospect characteristics.
I think the only thing central banks care about is keeping the global banking system solvent. The amount of bad/noncollectable debt outstanding is still at "catastrophic" levels and all these guys are trying to do is buy time in hopes that animal spirits return and we are able to grow our way out of this mess.
ReplyDeleteExactly. They're trying to raise the animal spirits.
ReplyDeleteDon't underestimate the central banks. Nor human nature.
The Fed doesn't control longer term interest rates, just short term. The almighty market controls LT rates.
ReplyDeleteJB - Well said! Perhaps an alternative would be to write off these bad debts, but wouldn't that privatize the losses?
ReplyDeleteany of you guys follow ASIA (AsiaInfo)? Looks like a hedge fund short attack but that company is legit and is doing quite well.
ReplyDeleteillini- The Fed has no DIRECT control over LT rates. But it's able to apply downward pressure via purchase of LT bonds.
ReplyDelete"We've seen some extreme downside action. But Jim Stack of InvesTech Research reports that on the August 8th panic the ratio of declining stocks to advancing stocks was 77 to 1, a ratio never seen before in the past 80 years. The closest incidents were the May 1940 ratio when France fell to Germany; that ratio was 60 to 1. The second incident was on Black Monday during October 1987 when the ratio was 49 to 1. In both cases, those hugely high ratios marked a near-bottom, and within one month of those ratios the market was 10% higher.”
ReplyDeleteDJIA futes -100.
ReplyDeleteNow -56.
ReplyDeleteFrom Barrons - Be More Like Buffett: Buy Fear
ReplyDeletehttp://online.barrons.com/article/SB50001424052702304658004576510391289609646.html?mod=BOL_columnist_popview
Anyone ever take a look at CSC (Computer Sciences Corp)? I worked with them 10 years ago and they seemed like a solid company then and they are down at at a 5 P/E on a recent earnings miss. Seems too cheap. Plus they started paying dividends last year for the first time in their 50 year history and are buying back stock.
ReplyDeleteDo a lot of work for the government which could be seen as a bad thing as governments cut budgets, but also means more outsrourcing contracts available for bid.
BB- The Sears column is more like it. No one 'feels' like buying right now? Perfect! Still awaiting confirmation in the form of some sentiment survey, be it Hulbert, II, or AAII.
ReplyDeleteI keep wondering about MS. Just read an article that they were also the largest borrowers from the Fed. $108B.
ReplyDeleteThey also kicked GS ass last quarter, obviously increasing their risk as GS pulled back.
And look at the stock after the earnings pop.
Also have the most costly CDS.
Hmmm....
Those bankers are such black boxes, maybe MS has more euro-zone risk than GS?
ReplyDeleteOne thing we can be confident of is they'll be first in line for the next "bailout".
ReplyDeleteCP- Yep, could be. There's something there. When the heck are you coming out to the west coast?!
ReplyDeleteI, of course, can only travel to and from soccer tournys.
West coast - Good question! I need to get away from it all, that's for sure.
ReplyDeleteERX - Looks like a decent entry...
ReplyDeleteBrandt he is so sure of himself 35 years trading:
ReplyDelete"In either case I have NO interest in putting on my bottom feeder uniform. I only have an interest in the short side. WE HAVE AN HISTORIC TOP IN PLACE. I am not sure how the fundamentals will change, but they will change. And only when the street becomes extremely bearish and capitulates will the first major multi-week bounce begin. But even then, the bounce will just be a bounce (even if it is 150 S&P points or so).Again, and I hate to repeat myself on this one, I am flabbergasted that people who call themselves chartists have so utterly discounted the H&S top. Right here and now I am challenging you “chartists” to examine yourselves. Are you really chartists, or are you using charts as a prop? If you are a counter-trend RSI indicator-based trader, then call yourself that. But don’t present yourself as a chartist. Real chartists were screaming “bear” from the roof tops about the H&S top in the stock market rather than trying to buy for the bounce. Shame on you — and you know who you are and I know who you are!
http://www.ft.com/intl/cms/s/0/1f8fa74e-cbf8-11e0-9176-00144feabdc0.html#axzz1Viwli6o8
ReplyDeleteMerkel playing hardball with bond markets...I wonder what the outcome of this is...
http://yrah53.wordpress.com/2011/08/21/jacksonshole/
ReplyDeleteCara's intro has a completely opposite take of the above missive.
ReplyDeleteIt will be interesting to see how it plays out, Biil was wrong in 08 and the low RSI failed there.
It is never easy, where is the easy button?
A little while ago BB asked what my method is. I simply stated that I prefer buying pullbacks in 45 degree angles as they rise and that my approach is eclectic.
ReplyDeleteI like to to see positive price structure in the market. When the price structure breaks I go mostly flat. The other choice is to short, but I prefer being long or flat and wait for the storm to pass, but short or hedge sometimes.
Clearly the market has broke. So how to play it going forward? Rather than me explain just read Stan Weinstein's Secrets for Profiting in Bull and Bear Markets and BB you will know exactly how I view the current climate.
The great thing is that if history repeats, and it does, we just need time before we have opp in the long side for now the preferred plan is cash or short the rallies.
Of course for those who bought gold well stay the course. It is tough adding here but probably right.
I'm re-reading Stan's book now, he has great clarity.
Nice chart of 1929-1933 timeframe posted by tbar on CC site...
ReplyDeletehttp://panzner.typepad.com/.a/6a00d83451591e69e201053566f21b970b-pi
Q2 - another solid earnings season.
ReplyDelete====================================
S&P 500 reporting season is largely complete, with 97% of the index having reported
Q2 results. Overall results have been strong, with 71% beating on earnings and 74% beating
on revenues. According to Thomson Reuters, the consensus estimate of index earnings
growth in Q2 is 12% (21% excluding financials), unchanged from a week ago but up from
an initial estimate of 7% (14% excluding financials). The consensus estimate of revenue
growth is 12%, unchanged from last week but up from the initial estimate of 10%.
"QE2 Was a failure, I know things would’ve been much worse."
ReplyDeleteAn oxymoron?
I believe the reality is American workers aren't wage-competitive in the global markets, there are too many hungry people in third world countries willing to live in company dorms and work for minimum pay.
ReplyDeleteYou drop humanitarian sanctions and open global markets, real wages in developed countries will fall and they will increase in developing countries. Until some form of equilibrium is reached, that's the macro picture, then factor in the micro factors such as transportation costs, which also exist.
SLB/HAL - When do these move in to clean up the oilfield mess in Libya?
ReplyDeleteXLE/SPY. Not a single green 3Min bar since the open.
ReplyDeleteIt's the close that matters.
ReplyDeleteSVM - BC wrote this:
ReplyDelete"I wrote in the blog that I would write something about Silvercorp (SVM), a silverminer I hold. The price on the NYSE is currently $8.42, which is 0.91x NAV of $9.22. The silverminer peer group typically trades at 1.3x NAV and SVM at 1.8x NAV.
Silvercorp’s high grade Ying mine in China is one of the finest in the world. After accounting for revenues from other metals produced along with the silver, the cash cost per ounce of silver is a minus -$6.12/oz. Silver is now trading at about $42.90/oz and the company will likely produce 5.6 million oz in Fiscal 2012. I think the average selling price for 2012 will be $50/oz and revenue will be $280 million in 2012 and $300 million in 2013 vs $176 million in 2011.
The company is a cash cow. Cash at the end of the past quarter was $230.5 million. There is no debt. The cost structure is the lowest in the industry.
There are just under 175.0 million shares outstanding, so earnings are expected to be $1.00/sh this year, lifting to $1.60/sh in 2012 and say $1.72 in 2013. I’ll repeat: the price on the NYSE is currently $8.42, so my PE calculations are 8.4x (2011), 5.3x (2012) and 4.9x (2013).
Did I say there is a 1.0% dividend yield? There is, and the payout is likely to be raised. For sure there is a share buy-back program in place as BOB 47 pointed out at 12:02pm ET today in the blog.
Silvercorp repurchased 776,458 shares and retires them, average price is C$8.185. http://tinyurl.com/3chktzq
Show me a single other company on the NYSE of this quality (financial strength, financial performance and operating metrics) at such a price, and I’ll buy it. Yes, I hold a lot of SVM and have set a 12-month price target of $18. I project the stock will trade at $14 before year end. The average PT of the analysts on Wall Street seems to be $15.29, but that is before they re-rate the silver miners based on higher silver prices. "
Seems to me F is getting sold on good news.
ReplyDeletethis just made me lmao:
ReplyDeletehttp://www.jamesaltucher.com/2011/08/how-to-be-a-human/
Sell, sell, sell, sell, sell.
ReplyDeletethe action, so far, in the ES has been very poor. we need to turn this around prior to 3/4 gap fill
ReplyDeleteJB- Yeppers. Weak, weak, weak, weak, weak....
ReplyDeleteIdeal scenario (for bulls)-
ReplyDelete(a) Buy-the-dip and/or buy-and-hold fatigue sets in for wannabe LT investors.
(b) Gap up close on high volume.
(c) Flat meandering across bleak terrain for the next few days.
(d) Second gap up open/close to seal the trap.
es is sitting right on poc, all the action could be in for the day and we just drift 3-4 points either side
ReplyDeleteI still want to see the XLF firm up here, maybe it's "old thinking" but I worry that equities cannot go higher w/o the financials taking the lead (or at least not sucking so bad).
ReplyDeletesee how funny that is - we move 2 handles away from poc, then bam, right back to it....might as well crack open the brews guys, nothing much to see here I don't think
ReplyDeleteGood morning Boys!
ReplyDeletegood morning!
ReplyDeletefinally miners are outperforming the GLD. Hope the trend continues.
ReplyDeletebac $6.66
ReplyDeletePRK - There's a bank stock for ya.
ReplyDeleteFood prices set to rise on poor corn harvest.
ReplyDeleteSVM - Gapped up, that has to close. The sooner, the better.
ReplyDeleteAnd yes, I'm still anticipating a washout in my trading plans.
steering clear...for now
ReplyDeleteGold going parabolic and will pop w/in 1-2 weeks. What does that mean for equities/U.S. dollar?
ReplyDeleteJesse - If we see gold crash and the market not go up, then we're in a 2008 style drop...
ReplyDelete"8/22/11 08:33:00: JP Morgan Says Bank of America Sell-Off and Overreaction; Q2 Mortgage Issues Will Not Create New Problems"
ReplyDeletephew....that's a relief...a bank recommends buying banks.
TZOO/SVM on my watchlist.
ReplyDeleteAgain, looking at historical monthly bars of this magnitude, I think the only chance of a multi-week bounce (before rolling over) is to close at or very close to the low of the month. Be that 1100 or 1000.
tof - yeah, what a f*cking joke. I still think the bulls are in trouble if the XLF doesn't kick it into gear
ReplyDeleteLong story short, the last 9 days of this month could seem like an eternity.
ReplyDeleteLooking at the yearly SOX for instance, it looks like a typical waterfall chart in the 6th or 7th inning. Unfortunately, most of the losses take place in the 8th and 9th.
ReplyDeleteFortunately, waterfall declines usually mark intermediate term bottoms. Perhaps a 1-3 month long trading opportunity after.
A waterfall target for the SOX might be 250 w/in the next few weeks. Believe it or not, another 20% or so from here.
Again, Sep. 11th target???
Eternity - Last year this time GMO bottomed at ~$3, that seemed like an eternity.
ReplyDeleteConsidering the circumstances, I'd be surprised if GMO doesn't at least revisit last year's level.
BAC to 2009 lows as well, for that matter. Why not?
Germany sets their neighbors up for failure, pleads insanity and complete WWII amnesia.
Whodathunkit...ADES holding up well
ReplyDeleteSometimes it pays to get ADES
BNO (Brent) down, WTIC firm, I bet WNR is weak.
ReplyDeleteADES - I hope to never get that one again.
ReplyDeleteGuys, I think this is very important since semis lead the market:
ReplyDeleteCurrent polysilcon prices: $50/kg
Credit Suisse Equity Research 8/21/11
"An Impossible Equation for Poly Prices
Bottom line – poly price pressure imminent. poly makers are
ramping production from 2H10 to 1H11 by at least 2GW, and again into 2H11
by another 2.5GW. Our analysis suggests there was at least 8+ GW of excess
solar product inventories in the supply chain at the end of 2Q11. Our analysis
strongly suggests that it is impossible to maintain the current situation of “stable”
poly prices AND 100% utilizations for production of poly simultaneously. We
reiterate our view that poly prices will reach $25/kg by year end.
Why do we focus so much on poly price?
Until poly prices reach trough
levels, pricing for panels will not stabilize; and until pricing is under pressure,
stocks may continue to have downside risk and remain volatile. Therefore we
watch the supply/demand trends for poly carefully. QTD results clearly suggest
an impossible equation for poly prices and poly production. Every polysilicon
maker is reporting full utilization and production, whereas several wafer and cell
makers are reporting or guiding to negative or single digit gross margins
Where is all the solar product sitting?
The industry supply chain must be
brimming with excess poly inventory either in raw poly form, or in the form of
WIP like wafers/cells and finished panels. We believe there is over 10GW of
“unexplained” poly or semi or fully processed solar products sitting in the supply
chain. This is an impossible equation for poly to sustain current prices. We
reiterate our non-consensus view that poly prices will fall to cash cost or near
about for Tier 1 makers (~$25/kg) by year end 2011.
Our industry checks suggest a major solar equipment provider
located in California supplying wiresaws and screen printers is bracing for steep cost cuts
and headcount reductions in its solar division.
And new poly aspirations continue.
Despite the disconnect between poly production
and consumption and demand trends, poly makers continue to place orders with
equipment makers for ADDING even more capacity, let alone pausing current expansion
plans. As recently as last week, GTAT reported receiving new poly orders. Last week, we
spoke with a disruptive poly maker, Mascotte in Taiwan, which is still on track to ramp
3500MT poly capacity by early 2012. Our China utility analysts have reported that the
Xinjiang autonomous region is “serious” about building new poly capacity. And we
continue to hear positive confirmation that Honhai is seriously considering entering the
poly business. We have new plants like Samsung Fine/MEMC JV that are on the drawing
boards. The new players will continue to expand capacity as long as they believe that poly
prices can be sustained at the $50/kg levels like poly makers claim – if they see poly
nearing Tier 1 cash costs, then they could perhaps push out expansion plans. Thus poly
price declines can even help the incumbents to prevent new entrants from entering the
business."
Picked up a little SVM 8.77
ReplyDeletePicking up TZOO low 34's
ReplyDeleteLong TZOO at $34.27
ReplyDeleteLittle more TZOO at $34.1
ReplyDeleteHi All -- last night I came back from another 2-night family camping trip, and so I am just now reading through all the articles I look forward to reading during the weekend (Mauldin's and Hussman's essays), and glancing at the S&P futures chart occasionally. The chart shows that this morning's spike in futures made a lower high relative to the spike on Friday, and after this morning's spike was sold, the futures since then have retraced 1/2 of the decline. If futures turn around NOW, then we will not only have a classic failure at the 1/2 resistance level, but we'll also have a nice H&S pattern starting from Sunday night's open. If, however, the futures don't reverse and rise above this morning's spike, then I am closing my S&P puts. So I am waiting to see what happens and catching up on my reading in the meantime...
ReplyDeleteJust to stir up some trouble once again, I'll continue the discussion with TOF about the price of gold from where we left off on Friday afternoon. :)
ReplyDelete“David the basic fact is you still can't really measure the value of it...its based on intangible things in my mind. Can it go higher? Absolutely. But I still wont be able to tell if its undervalued...”
TOF, gold is the mirror image of US dollar (since it is priced in dollars). How do you tell whether the US dollar is undervalued or not? In the long term, its value is determined based on the predicted future ratio of the number of dollars outstanding to the amount of useful goods and services one can buy with them. Which is exactly how gold is valued, except that the inverse of this ratio is used. Pretty simple.
oh-oh: looks like the rebound rally in the futures is over, and it stopped spot on at the 1/2 retracement level of this morning's decline...
ReplyDeleteDavid - Sorry man but I won't be a buyer of gold...I know paper money is shit but I can't value it....I'm too dull for that trade I guess..
ReplyDeleteAlso note, folks: the futures are making higher lows since Sunday's open, but this morning's rally made a lower high relative to Friday's high. This looks like a wedge pattern, and when it breaks, the move will be large (either to 1200 or to 1030 -- the lows of summer 2010).
ReplyDeleteThat means you are like Buffett, TOF -- you prefer finding treasure investments among businesses... To each his own style...
ReplyDeleteThey're doing a great job of inducing fatigue, IMO.
ReplyDeleteBelow are the concluding remarks from John Mauldin's essay (he started his essay by showing different composite economic indicators that predicted all recessions since 1960s and pointing out that all of them suggest that we are entering a recession now):
ReplyDelete*****
If we are headed into recession, and I think we are, then the stock market has a long way to go to reach its next bottom, as do many risk assets. Income is going to be king, as well as cash (and cash is a position, as I often remind readers).
If we go into recession, we’ll know several things. Recessions are by definition deflationary. Yields on bonds will go down, much further than the market thinks today. And while the Fed may decide to invoke QE3 to fight a deflation scare, the problem is not one of liquidity; it is a debt problem.
It is not unusual for a recession to last a year, which means it could well take us into next summer and election season. And while the NBER (the people who are the “official” recession scorecard keepers) will tell us when the recession started, about nine months after it has, it is unlikely they will give an all-clear before the election.
There is little stomach for more fiscal stimulus. The drive is to cut spending. Fed policy is impotent. Unemployment will rise yet again and tax receipts will fall and expenses related to unemployment benefits will rise, putting further pressure on the deficit. Already, 40 million of our citizens are on food stamps. Wal-Mart notes that shoppers come into their stores late at night on the last day of the month and wait until midnight, when their new allotment of food stamps is activated.
It is hard to see at this moment what pulls us out, other than the blood, sweat, and tears of American entrepreneurs. Fisher is right; the US government should create certainty, create policies to foster new business, and get out of the way.
So, I guess I am going out on a limb, without any help from an inverted yield curve, and saying that we will be in recession within 12 months, if we are not already in one. This will be unlike any recession we have seen, as there is not much that can be done, other than to just get through it as best we can. Sit down and think about your own situation and prepare.
They?
ReplyDeleteIf there is a "they" it's the market makers message to the Bernank....
http://www.youtube.com/watch?v=Z_JOGmXpe5I
We MAY be seeing a fear blowout today guys. Forward months are spiking above previous highs. See VXX and TVIX. Possible fear capitulation.
ReplyDeleteWe should be looking at Europe to lead regarding a possible bottom. Check out these charts. Possible powerful reversal pattern if lows hold. I'm almost to the point now that I think if Europe's Friday close holds, we get a powerful rally. If not, we go much lower. I'm getting long w/ a stop just below.
ReplyDeleteEWI, EWO, VGK, EWG
Capitulation on an up day?
ReplyDeleteThis is why I stick to following trends.
No one knows what will happen, no one.
I do know this doesn't feel like fear, panic or capitulation. It feels and looks like an oversold bounce.
I don't think we go anywhere until Friday when Ben either capitulates or doesn't.
If he capitulates we may see a bounce and gold should go even higher (or sell on the news, and then it will be a buy) if he does nothing we will see lower lows.
Even if we are going into a recession in 2012, this says nothing about the stock market direction over the next couple of months. We had an amazing "sucker's rally" before the 2008 recession, when it was clear that housing is collapsing and we ARE going into a recession. So it is entirely possible that Bernanke says something at the Jackson Hole meeting on Friday that sparks a powerful last "sucker's rally." Thus, I'll stick to following the charts in making my trading decisions. The bearish nature of the S&P futures chart will be sealed if S&P doesn't rise above the height of its recent rebound, which was at $1135 on the cash index. If it does rise above that, then I am closing my S&P puts -- no need to wait until this morning's high is taken out...
ReplyDeleteOrder Sushi?
ReplyDeleteCan we go higher without financials?
http://www.ritholtz.com/blog/2011/08/wall-st-borrowed-1-2trillion/
TOF-
ReplyDeleteI can't remember the broker, but a couple days ago, they said that TZOO's deal conversions spiked the first half of August. Saying they would handily beat estimates.
I also am reading that CEO Bartel purchased 50,000 shares on the 11th and 12th around $45 ish. Do you see a link to this? I can't find it in SEC filings although it appears that Bartel confirms this.
TZOO CEO on Cramer tonight. Uh oh:)
"Capitulation on an up day?"
ReplyDeleteMy bet is that 2nd focuses on today's 200 point selloff from the open as support for capitulation and further evidence for tomorrow's 500 point gap up.
Hussman started his weekend essay by touching on the discussing of whether or not the stocks are cheap now (a few people here like to say that they are, so I figured it would be helpful to once again review what the real statistics indicates):
ReplyDelete***
As of last week, the S&P 500 has declined to the point where we now expect 10-year total returns averaging about 5.7% annually on the index. This is certainly higher than the 3.4% prospective return we observed earlier this year, but is still a prospective return more characteristic of market peaks than of long-term buying opportunities.
Wall Street analysts continue to characterize stocks as cheap on the basis of completely specious approaches like "forward operating earnings times arbitrary P/E multiple," or worse, "forward operating earnings yield divided by 10-year Treasury yield." Unfortunately, despite a few anecdotal successes, there is no correlation between "valuation" on these measures and actual subsequent market returns.
There are numerous reasons why these toy models based on forward operating earnings are misguided, but the four most important ones today are 1) forward operating earnings presently carry the embedded assumption that profit margins will achieve and indefinitely sustain the highest profit margins observed in U.S. history; 2) the duration of a 10-year Treasury bond is only about 8 years, while the duration of the S&P 500 is about 42, meaning that any given yield increase implies 5 times more loss for stocks than it does for bonds, and there is no reason in the world why investors should treat those risks as equivalent; 3) the current conformation of evidence strongly suggests the likelihood of an oncoming U.S. recession, and forward earnings expectations tend to be stunningly off-base in those instances, and; 4) the norms typically applied to forward operating earnings are artifacts of the recent period of bubble valuations, and use norms for "trailing net" as if they are equally applicable to "forward operating." In fact, the correlation between forward operating P/Es and other normalized P/Es having far longer history suggests that a forward multiple of even 12 is quite rich.
***
Attention, folks! The 1-minute S&P futures chart, starting from this morning's high, show lower highs and higher lows, and the two lines have intersected NOW! This wedge pattern will break now, and the move might be large. Tighten your stops!
ReplyDeletehttp://www.forexpros.com/indices/us-spx-500-futures-advanced-chart
So the future is going to be based on a daily bar after 16 down bars? What happened to the trend is your friend?
ReplyDeleteI just keep my hands clear of falling knives.
If we get a transitional pattern and the MA's cross up then I will be paying attention, but there is no need for me to be a hero, surely not based on one day of intraday prices.
Out SVM for slight gain. Freeing up capital for the close.
ReplyDeleteMore from Hussman:
ReplyDelete"As it happens, forward operating earnings, when used properly, can actually be very informative about prospective market returns (see "Valuing the S&P 500 Using Forward Operating Earnings" ). However, the phrase "used properly" can't be emphasized enough. Here and now, our forward operating earnings model delivers nearly identical prospective return estimates for the S&P 500 as our standard methodology. Stocks are emphatically not undervalued here on any reasonably long-term horizon."
Those who are interested in reading Hussman's timeless piece analyzing the accuracy of different valuation models, can find it here:
http://www.hussmanfunds.com/wmc/wmc100802.htm
Let me repeat a quote from Hussman's essay this weekend:
ReplyDelete"As of last week, the S&P 500 has declined to the point where we now expect 10-year total returns averaging about 5.7% annually on the index. This is certainly higher than the 3.4% prospective return we observed earlier this year"
It shows that Hussman's investment results can be accurately evaluated only on a 10-year time horizon! He cares very little about momentum, local panics, etc. -- he simply looks at the price, and as the price goes down, he rightfully expects a higher return over the next 10 years and correspondingly increases his equity exposure. That's what the sophisticated buy-and-hold investors should do -- invest 1/2 to 2/3 of their port into buy-and-hold, and then keep buying if prices decline. That's what I have been doing with ECU lately -- I don't care about where the stock will be in 6 months, I care where it will be in 2 years when they build the new 2000 tpd mill.
Continuing my previous post, here is how Hussman responding to the recent market crash:
ReplyDelete***
For our part, on Friday's weakness, we covered about 20% of our hedges in Strategic Growth, but retained a very strong line of defense a few percent below current levels using index put options. We also covered about 20% of our hedges in Strategic International Equity, but are again keeping a fairly tight leash on our willingness to accept market risk.
Suffice it to say that we continue to anticipate an oncoming recession and the potential for substantially deeper market losses over the next 12-18 months. At the same time, however, the ensemble of evidence on a variety of fronts has shifted our return/risk expectations, probably temporarily, above the zero line, allowing us to accept a small amount of market exposure, as we've briefly done on a handful of occasions this year.
****
3K trading shares of MITK @ 7.80. I'm guessing the pressure is related to the banks doing poorly. IE, they won't be looking to spend any money.
ReplyDeleteMore from Hussman's article (it is so good that I suggest that all of you read it entirely: http://www.hussmanfunds.com/wmc/wmc110822.htm)
ReplyDelete****
Ideally, present conditions will be associated with what we've observed historically - a few weeks of moderate advance to clear the deeply oversold condition of the market, most likely followed by a fresh shift to a defensive stance. Given that the expected return/risk profile has just peeked above zero, we would prefer not to immediately experience the market's version of "Whack-A-Mole," but are prepared for that possibility as well. A break below the area around 1050 on the S&P 500 would put us in a situation much like 2008, where nearly every expectation of short-term stabilization was promptly dashed. For now, we don't see the sort of uniform breakdown that we observed then. A break to fresh lows by numerous indices, an explosion of new lows in individual issues, and steep weakness in utilities or corporate bonds would quickly change that assessment, and we will respond accordingly.
Are we bullish or bearish here? We really don't think in those terms. Our investment approach is to align our investment exposure in proportion to the return/risk profile that we expect at any point in time, given observable market conditions and the distribution of market outcomes that has historically accompanied that set of conditions. Based on our present methods, the expected market return/risk profile has been generally negative since about April 2010 with a few exceptions, including a slight traversal into positive ground this week. Our muted response is proportional to that.
****
In the meantime, looks like the wedge pattern on the 1-minute S&P futures chart was broken to the downside -- hold onto your seats, boys!
ReplyDeleteMore from Hussman:
ReplyDelete***
At what level of the S&P 500 will we get a buy signal? Again, we don't think in those terms. Our investment positions are based on a whole ensemble of evidence, so the same valuation level might be accompanied by different investment positions, depending on the surrounding conditions. Valuations are a continuum - today's are slightly better than they were a few months ago, much better than they were at the 2000 bubble peak, not as good as they were at the 2009 low, not even close to where they were in the early 1990's when the Los Angeles Times characterized me as "one lonely raging bull," and a lifetime away from the 20% prospective returns we saw in 1982 when I first began working in the financial markets. I don't believe we have to revisit 1950, 1974 or 1982 type extremes in the present cycle (though I'm fairly certain we'll see them at some point again). But even to achieve a prospective return of 8% a year or two from now, quite a bit of further damage would have to be endured. We prefer not to rule out any particular outcome.
***
****
ReplyDeleteThe combination of overvalued, overbought, overbullish conditions that we persistently observed during QE2 was associated with a dangerously skewed return distribution, so we stayed defensive, which was difficult but necessary. As I noted at the time, whatever gains the market might achieve had a high probability of being abruptly wiped out in a handful of sessions. What we've seen in recent weeks is about par for the course.
****
Looks like the 1-minute futures chart made a 4th lower high since this morning's spike...
ReplyDeleteBidding 2000 BAC @ 6.50.
ReplyDeletePulled.
ReplyDeleteBAC is insolvent.
ReplyDeletehttp://www.ritholtz.com/blog/2011/08/wall-st-borrowed-1-2trillion/
"We knew that Citigroup (C), who borrowed $99.5 billion, and Bank of America (BAC), who took loans of $91.4 billion, were in trouble. I’ve been saying for the better part of 3 years now that they were, and likely still are mostly insolvent."
More BAC trouble:
ReplyDeletehttp://www.bloomberg.com/news/2011-08-22/bank-of-america-drops-most-in-s-p-500-on-status-of-china-construction-sale.html
S&P futures break the lows of the day...
ReplyDeleteIf Bernanke IS to unveil something good at Jackson Hole and this news leaks to the Big Boys, then it would only be natural for them to drop S&P below 1100 first to shake out all weak hands, and then to ride alone to 1250-1300 in the final "sucker's rally" before the recession in 2012...
ReplyDeleteThat wedge pattern on the 1-minute S&P chart since this morning's high was indeed pretty powerful... I find that reading the continuously-traded futures charts gives me a MUCH better feel for the market direction than just looking at the charts of indices during US trading times...
ReplyDeleteperhaps the end is near: the lloyd hired a criminal defense atty. string him up!!
ReplyDeleteJesse - I'm being impatient again...I know I should be waiting for a drop below the 1,120 level which will most likely be a headfake lower that results in a throw back rally of 10% or so...the market has had so many headfakes since the beginning of the year that it's only natural this would happen. however, if the market is making a double bottom here then i figure the risk is low enough for a try at longs here. So I figured I'd go with the most beaten down stocks right here that I like longer term and thing could bounce 30% or so if the market does find a short term bottom.
ReplyDeleteSo long TZOO at $34.1 avg and BTU at $41.8 avg.
my leash on these longs will be short...if we fall below 1,120 and don't bounce within a few days then I'm going to bail.
ReplyDeleteIsn't ZIP right around it's offer price now?
ReplyDeletewow yeah Mark...ZIP is right there.
ReplyDeleteManaged to grab some DECK after hours in a random bid at $74.21. Another one with good earnings and bad timing...great long term growth story...
ReplyDeleteFor what its worth, leading indicators IWM, QQQ, Nasdaq, SMH hit new closing lows for the year yesterday and/or today and haven't fallen off a cliff.
ReplyDeleteERX - I guess nobody wanted it, except maybe for an hour or so...
ReplyDeleteConsidering the tax man makes a special visit to job creators in an effort to inflict immediate pain, we shouldn't be wondering where the jobs are.
ReplyDeleteThis is a biggie guys. 20 day put/call ratio averages about .92.
ReplyDeleteSpike to 1.08 exactly marked the bottoms in May '10 and June '11.
Spike to 1.17 marked the bottom in Oct. '08.
Spike to 1.20 marked the bottom in Aug. '07.
Spike to 1.21 marked the bottom in Mar. '08.
On Friday, we closed at.....1.19. I don't have the info. regarding today's close. My guess is it is 1.20-1.21. We are at levels seen at bottoms during the great crash of 2008. We are probably at or within a few days of an intermediate term bottom.
RUT RSI(14) 29.11. Last time it touched 30 was March of 2009.
Sorry-
ReplyDeleteHere is chart of 20 dma of put call:
http://stockcharts.com/c-sc/sc?s=$CPC&p=D&yr=4&mn=4&dy=0&i=p75061692405&a=161053055&r=255
Time to buy NFLX
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=NFLX&p=D&yr=1&mn=3&dy=0&i=p38283809268&a=226821948&r=825