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Registered User
Joined: 12/19/2004
Posts: 457
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Bulls aren't going to like my analysis, but FWIW, this is what I'm seeing in the market. It is quite possible that we have seen the highs in the SP-500 for quite some time, although I'd postpone that POV for at least until the start of next week.
1. Oil sector stocks appear to be at the start of major tops, as does the price of oil. A weekly chart of XOI shows a clear decline in momentum, and I suspect we have seen the highs for quite awhile.
Oil and commodities have been leading the markets. I just don't see any other sector that will take its place to lead the market higher.
Bulls may think this is a good thing for stocks, but I take it as a symptom of declining demand. Take a look at individual stocks in the sector--HAL, VLO, SLB--all appear to be at tops.
2. Speculative stocks look like good shorts. In spite of the run ups in AAPL and GOOG, the all look to be in good short sale set ups on the weekly charts--AAPL more than GOOG. GOOG appears it could make it up to at least 400 if the market remains firm, otherwise the July low should be broken.
AAPL could be at the start of a severe downtrend. Hard to believe with the bullishness, but should the economy slow, I'd expect AAPL sales to slow as well. Let us not forget they remain delinquent in their filings, and have the options backdating scandal in front of them. My Elliott analysis suggests we could see a decline on the order of 40% or so.
AMD also looks like it is in a perfect short spot, based on the weekly charts. All of the semis look terrible.
3. The perception of risk appears to be increasing. Compare the relative action in the SP from the May top with the action in the Russell 2000, which had been the market leader. The SP made a very strong attempt at challenging the highs, while the Russell 2000 put in a comparatively anemic performance. That doesn't necessarily need to be bearish, as I will explain in the next observation.
4. Until the recent rally, defensive sectors have been market leaders.
Using the Hemcott industry groups, since 5/5/06, a majority of the sectors outperforming the market could be termed defensive in nature
Out of the top 20 best performing sectors since May
6 are from the health sector
3 are from the tobacco/cigarettes sector
3 are from the farm/food sector
0 are from the financial sector
11 are from an odd lot of late stage categories (energy, utilities) or don't fit into any business sector classification (ie. telecom, CATV ,etc)
5. The worst performing sectors are all capital goods producers, or require intensive capital investment--semiconductors, oil drillers, machinery, etc.
6. Look at the components of the DJ-20 transports. All look like good shorts, except for OSG, which is the only exception.
The market is still (wrongly in my view) preoccupied by what the Fed will do. I have little doubt that the Fed is done with their rate hikes. I'm worried about the slowing economy going forward. Bloomberg reported that analysts still expect 13% earnings growth in the face of a slowing economic environment. I'm confident taking the POV that this estimate is way too high, and is likely to be continually revised downward in comming quarters, leading to declines in stock prices.
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 Gold Customer
Joined: 11/13/2004
Posts: 102
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Indeed - S&P100 made higher highs than the May high yet its MS is lagging big time. Charts do not look good.
soc
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Registered User
Joined: 10/7/2004
Posts: 73
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Oil and the markets appear poised to move down together.
The market has a historic precendent of topping when the Fed stops rate HIKES. This time will be no different.
The coming selling pressure should be spectacular and "shocking" to most.
<:o)
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Registered User
Joined: 12/19/2004
Posts: 415
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I believe your short term projections are correct, although I still have a bullish count after the current correction is complete, lower than the Jun low sometime in the next couple of months. The move off that low should determine whether the bull or bear case is correct.
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Registered User
Joined: 7/8/2006
Posts: 20
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I am not quite sure about the direction markets are going to.
Averall I think that once we will see volume back to "normality" markets will regain pace with strengh.
Why I see this?
Looking at daily charts and comparing the last year performance respectivily between DJI FTSE100 and DJT we all can see that the worst might be well over.
We sow a 10% tumble in indeces prices between may and july and although the last 15 days incertanty we all survived from bank s tightening in japan and china, US and UK, middle east war fears, and so on.
The only contraddiction so far is the DJT performance which still does not want to recover from the summer "double bottoms" and it is struggling to back on track.
But as we quote an old saying "Sell in May and go away..." I am positive that from the mid-late september on things will definetely looks far far better
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Registered User
Joined: 3/7/2006
Posts: 244
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I've been pretty consistent in disagreeing with the bears, and I've been right up until now.
However, I think you may be right this time. We are getting too close to the 06 / 99 highs and we ARE NOT likely to break out through them. I think odds are strongly against making new highs.
I don't think the bloodshed will start for a few days so cash is looking good right now.
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Registered User
Joined: 12/7/2004
Posts: 393
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All this bearish agreement looks suspect in this interesting 2006 market. 
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Registered User
Joined: 3/7/2006
Posts: 244
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QUOTE (laphill) All this bearish agreement looks suspect in this interesting 2006 market. <img src="/training/images/emoticons/smile024.gif"/>
I don't disagree with that. But do you really think there is enough momentum to push through the 2000 / 2006 highs?
Some very good economic news lately. Falling oil, falling interest rates make it hard to be a bear, and weakens my own personal bearish view.
IF it does break through the highs with confirmation, I will be the first to jump in the water with both feet.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Quote:"I don't disagree with that. But do you really think there is enough momentum to push through the 2000 / 2006 highs?"
In 2006:
AKAM UP 117.26 percent
AEOS UP 83.38 percent
GM ( yes the car maker ) UP 71.11 percent
BIG UP 64.28 percent
Q UP 56.99 percent
SP-500 UP 5.19 percent
Seems like there is plenty of opportunity without
worrying what the SP-500 does.
thanks
diceman
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Registered User
Joined: 12/8/2004
Posts: 1,301
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Every piece of economic information points to the market moving lower. I'm staying long and have been long for the last month and a half. My only short is TIE at this time and I have been short on this stock since it reached 30.30.
To me you have to go with the flow until the flow goes against you. The flow is still being long. Stay long and watch your stocks closely.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Quote:"Every piece of economic information points to the market moving lower. "
Not so sure I agree with this statement.
GDP Strong
Global yield curves healthy
Stocks cheap relative to cash
Interest rates low
Sentiment bearish
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Quote:"To me you have to go with the flow until the flow goes against you. The flow is still being long. Stay long and watch your stocks closely."
This I agree with 100%.
This is what things like stops and money management are for.
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Realize HNC its not that I think the market cant go down.
I just find words like "every" and "never" scary when it comes to
stock market talk.
It would seem to me if the mother of all bears is on the way.
There will be time to take advantage of it.
(unless it happens in one day)
thanks
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Registered User
Joined: 12/8/2004
Posts: 1,301
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It would seem to me if the mother of all bears is on the way.
There will be time to take advantage of it.
(unless it happens in one day)
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I agree, and even if it happens in one day there is time to at least get out of all of your stocks without too much damage. Mutual funds are another story, however, and a one day crash will kill anyone with no chance of getting out until the next day.
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