Registered User
Joined: 10/7/2004
Posts: 2,126
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This is not going to happen like a storm, buy more like a series of small showers. This is not the fall of 2000. Nevertheless I strongly speculate that we are in for a substantial retracement. Why?
Well it can be any more clear than a simple look at the NASDAQ ($compx); A leader if not the leader index shows clear and outstriking signs of mayor distribution.
3 consecutives and above average volume days is a sign to really take into consideration in the assesment of market direction. The SP-500 shows almost an exact pattern, and yes the same is not found in the DOW index, but remember that the DOW has been a laggar this year. Now considering the implications of Katrina, and what future economic indicators are going to show, not to mention the threat of rising interest rates I would very indifferent to the idea that this markets are going to take new highs in any near future. Also I watch the market daily, and by the minute and even in up days I have observed constant and systematic dumping by market leaders.
The news media puts it as selling on the news, but come on how stupid do they think we are. I am assuptuous that the big fishes in the street are as well aware as many of as about what is to come. But they do not want you to panic, there is alot of dumping to be done, and they want to make sure to get profits off the table.
So my advice to you is to get your stops as tight as you can in any winning positions you have now, and yes as I said before in a different post get your shorts working.
Remember if you are looking for a clear sign you already have it (this is as clear as is going to get). The the bear will sneak in a bit each day and before you know your winning position will be left with nothing but smoke. Don't be left to pick the ashes. This is the end of a market top
Good luck.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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One more thing, Oil and gasoline prices are not just done and I strongly assume will continue to rise in price. Those prices will continue to hit consumers, and it will not just be the gasoline, but natural gas as well which is expected to go up about 30% this year. There is no quick fix on this. As Donal Trump sais last night in the Jay Leno show. The oil producing countries are laughing their asses all the way to the slaughter house where their are chopping off our heads, in front of a whole bunch of stiff, and worthless politicians.
Now the president calls for the quick fix - build Katrina's devastated areas where they where. I do not want to get personal on this, but from a technical point of view that is simply stupid unless you upgrade levies and sea walls (a project that will take over 20 yrs, and about 20 billion).
I know we need those refineries up an running, but do you want to be doing all of this all over in a few years?
The oil market is right now at a point where they know it will hit the economy hard. The market knows and there is no quick fix.
Infrastructure and new production sources of energy will take years to change. And worth of all the deficit is so high that I have trouble believing that our goverment can weather this.
Put this together with the technical picture of the markets , and I think that 2+2 = 4. Right? or does it not?
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Registered User
Joined: 10/7/2004
Posts: 794
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You make a valid argument that appears obvious. Due to the fact that it appears so obvious I do not believe it to be the obvious scenario.
September/October cycles are notoriously poor performing times of the year yet we are not seeing this thus far. Can it unfold in the next few weeks ? Sure, but IMHO it is again TOO OBVIOUS! When everyone is on the same bandwagon my gut always suggests a contrarian view.
Although I must admit the the increase in the last hours volume Tuesday, Wednesday and Thursday appeared to be institutional distribution. Another bearish point that may validate your argument is the increase in new lows on the NASDAQ.
Alot will be decided, albeit, short-term Tuesday, September 20-FOMC meeting. FWIW I believe that the FOMC will pass this meeting but the language again will be dissected.
Good Luck and Good Trading!
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Registered User
Joined: 12/2/2004
Posts: 37
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Please allow me one more small contribution: The government's own figures reveal that the economy has been floating on consumer spending that has been coming from . . . . yep, the net worth of the consumer. July was the largest drawdown on consumer "savings" in many years. I'm not talking about a decline in the "savings rate". New money into the economy has occurred because consumers have been cashing assets to meet expenses. Include this into your economic equation and it suggests a hefty recession is on the way. And, one last semi-political comment: Forrest Gump had it right . . "Stupid is, as stupid does"
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Registered User
Joined: 3/2/2005
Posts: 1
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I have been concerned about a pull back in the second half of September (Warnings season) due to a combination of factors (Katrina, High Gas prices etc). I have been playing my stop losses tighter and have been taken back to cash in several of my positions.
My guess is Greenspan will hold on Tuesday with no change but remain in tact with the long term plan to keep raising rates. I think the market will be largely directionless (with a slightly negative bias) on Monday and react to Greenspan on Tuesday (if he holds the rates with no change I expect a "suckers rally" followed by some selling which will continue for the next couple of weeks...long term I think the bull market is still in tact but it is time for some of the short term players to cash out and thus the market should come down.
I am not lining up to buy puts but instead doing my research to buy calls near the end of Sept.
If you have never traded options before, you need to...once you get the hang of it you will not trade stocks anymore.
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 Gold Customer
Joined: 1/16/2005
Posts: 10
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Hi BB,
I just chanced on this thread and I admire your sagaciousness. You were right on.
I agree with you. DW has come aboard with his notice of the TSV divergence in the major averages. But this was in effect even as the "trend" was upgraded about a week ago. This goes to show that Dow theory trend analysis is irrelevent and is not worth discussing. DW admits this is about past history. But it is featured in the notes and can therefore mislead many who rely on those notes without delving further.
The TSV indicator is far better. Breadth is another adjunct indicator that revealed the weakness to come. I got a breadth sell signal on August 2, right on the first top. By the second top last week breadth was far weaker so this divergence confirmed the TSV divergence.
Friday's humongous volume expiration was another sign of danger. Up to down volume was 2:1 but breadth was only 1.5:1. This was an indication of resistance.
This decline has further to run. The averages are at or near support levels but there is no sign that the decline is over. TSVs are mking new lows on the move.
If you don't mind ancient history, this market reminds me somewhat of the market after the Arab oil embargo of 1973. The Arab-Israel war began on Oct. 8 and the oil boycott was announced on Oct. 17. Yet the market hung in and actually rose till Oct. 24 just as it did after Katrina hit. But one year later the market was 45 percent lower.
Be very careful not to jump back in too soon. These kinds of moves take their time to play themselves out.
Good luck.
Len
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Registered User
Joined: 10/7/2004
Posts: 2,126
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For those no aware of what is about to come yet, I would describe the actions of the market today as the last call for jumping of the boat. Today's voracious selling activity was a clear sign of the repercusions that Katrina and company will reflect well into this economy.
Something to pay attention to - Oil wasn't an issue today, I do not think it will be much of an issue anymore. I think most folks got it by now. High prices are here to stay, and will go higher. Now the thing to reflect on is the implications that this will have in the near future. It isn't just the consumer driving, but transportation in general, and the cost of production of chemicals, plastics, etc. Clorox is just one of a few to announce a 40% increase in prices of their products for 2006. Yes inflation is just beggining to affect our lives, buy this is just the beginning.
In the tecnical arena, the $compq has visited August low again today and close well below. Next stop is July's low. It will get there. You have to choices, if you short, short. If you don't then stay out. If you are not out by now, you are wasting your resources, and your time.
good luck
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Registered User
Joined: 3/11/2005
Posts: 1
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I think on the fundemental side we have interest rates rising, inflation rising, unemployment rising, lower consumer confidence and the greenspan replacement issue weighing the market down. On the technical side we have broken through the August lows with all indicators pointing lower. My guess would be the may low being tested by late October. Either way I would be very careful with long positions until we test the july low and then make a call.. 
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Registered User
Joined: 12/19/2004
Posts: 457
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I was taking about this stuff with my friend yesterday, before today's bloodletting.
Yesterday, the market was strong on good durable goods numbers. The market started to tank when a FED gov. suggested that this strength suggested inflation.
Really? Hasn't the buisness press been focusing on the rather lackluster durable goods spending for 2+ years? Now it starts to go up, and the Fed suggests this is inflation.
I'm of the opinion that deflation is still a threat. The Fed (U.S. and Japan) had bought some time. But the structural factors are still in place for deflation:
1. Technological innovation produces an oversupply of goods faster than they can be consumed.
2. Improved communication (ie. ebay, Amazon) makes the distribution of used goods easier, also increasing the supply of most goods.
3. The impact of oil is likely to be deflationary, as opposed to inflationary. It will reduce growth, but producers will have trouble passing on price increases.
4. The Japanese and Fed helicopter drop of cash back in 2002 helped lift the market for the past 3 years. This has lead to the illusion of inflation in some parts of the economy (ie. energy inflation).
What was telling about today--the market sold off sharply even as energy declined. This suggests to me that the market is pricing in a contraction in demand for all goods and services, including energy. Late in the cycle, energy tops out last. When it starts to decline with the broad market, that suggests trouble.
I agree with the other poster--the July low is very important. I didn't think it would be violated much before December. But with the FED stubbornly fighting past wars, is likely to drive the global economy into a sharp recession.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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I like your comment rmr. It sure has a different shine.
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Registered User
Joined: 7/1/2005
Posts: 20
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If you watch the FED statements carefully, Alan and et al are more concerned with the Housing bubble. After the 2000 crash, the accommodating interest rate has caused "inflation" on housing price in east and west coasts - another irrational exhuberance.
The sign of "froth" is what FED concerned about, in addition to Oil/Gas induced inflation absorbed by the business currently. DELL announced to stop the free-shipping program. Personal saving rate is now in negative territory. Comsumer spending will be further lowing in coming months. The comsumer confidence took a hard hit recently. The inflation risk is at all time high!
Noticing the trends, the smart money is taking profilt off the market slowly before it is too pbvious to the general public who got a statement quarterly. September's looked good still but will December's?
"More than 3 distribution days" has occured in major indices. Like what BB said keep your leash tight and don't let the bears eat your breakfast, lunch, and dinner.
Good Trading
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Showers keep on coming, it is cloudy and rainy everyday. Hope your umbrella is working well. Rain will not stop until the big storm comes. It may take lots of small rain falls to get to the big storm or perhaphs this will become a Mansoon that will end when it decides to end without storm.
Have fun in the rain and ride down all of those water falls.
good luck
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Registered User
Joined: 10/7/2004
Posts: 2,126
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I couldn't wait for the closing today. I keep thinking throughout the session today - when will the feds shut the hell up? I think they are making the market more confuse that it needs to be. The market needs a major retracement or it is never going to get out of this fastidious range that it has been in for i do not know how long (seems like at least 1 1/2 yr. Almost 3 yrs of more bulls than bears is not substainable in a healthy way.
Today the numbers do not show the story, but in exploring inside it is clear. Indexes show today DOW -62.84, Nasdaq -14.3,and SP500 -11.96 what most people don't see is the internals. The breath today loosided negative with advancers/decliners a little above the ratio of 1 to 2. Also markets closed at the lowest of the day - in fact the lowest low (it seems some people were really jumping off the boat in the last half hour or so. The volume mixed in the dow above average in the Nasdaq below - don't know what to make out of that. My guess is that a lot of folks are on the side lines waiting for a resolution. Which we will never get unless the Fed get it straight. Once thing is clear the volume acelerated much more to the downside today. So lets call it an average rain fall. Forecast for tomorrow is cloudy and rain.
good luck
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