An anatomy of a week from 25th to 28th ( 23 rd post for reasons of long).. Friday still to go..greatest education is backtesting and reading your posts, do they make senses or add up, I do it all the time and they add up most of the time and that is most important for a trader...
This was one of the most memorable week on SI, the amount of pessimism and negativity exceeded beyond wildest of imaginations, Idea was quite we had very few posts, I have decided that I am not going to engage in fruitless task of converting hardened shorts in to longs. I was looking back at how we conducted during last few sessions. In my opinion our opinions and classic identification of flase bond break above 5.36 would remain one of my finest moment on SI..some excerpts..
<<I would be cautious until I am sure that this bond yield surge is only a result of last night huge 4000 call contracts liquidated by a huge fund, when such critical breaks happen like 6.36 has been taken out it it never a spike until we are sure that it was a false move that is a close above 6.36 does not materialize twice>>
The above was in class as good as 8th Oct 98, call when I went big time long seeing the bonds breaking at 135, it was not until 19th Oct 98 Accompora reversed his call, here I took my bets against Accompora again, however since I take a lot of pride in reading markets short term patterns with macro picture I am happy to share with you the last week exchanges we had fewer than 40 posts, but it is fun to read these side by side with what others were doing from 23rd onwards and how did they plan to play this huge number today... all said and done nothing satisfies me more than looking at my calls heavily in money and looking the bond at 6.25..
<<like BKX 792 of yesterday I could have easily written sell and got whipsawed but as I go with my levels that discipline saves me from a lot of bother, for me if downward break is not possible upward thrust will come into play, like many other experts,I rarely forecast big drops in a bull run I do that with my laddered approach to find the bottom and get back up, making some on the way down and some on the way up, but I never get out of my core or long call positions at best as we go down my SPZ options play help pay the losses I suffer on lost premiums on long calls, and when markets roar back up I am in them as money made on short sales appears as a profit, hope that you will find this interesting and of some help, I wish I had this ability to say market goes to 5000, I would not, I would define my range and than play my range by specific index that impacts the market the most, for that identification I look for macro news and global happenings and news on corporate front...>>
To: IQBAL LATIF who started this subject
From: IQBAL LATIF
Saturday, Oct 23 1999 3:15AM ET
Reply # of 29503
Time for Investors to Spread Their Wings?
As profits head for a strong finish, the correction leaves a bigger pool of bargain shares
The market's recent dips and dives have investors in a cold sweat. It's no wonder. Fear of another rate increase, plus Federal Reserve Chairman Alan Greenspan's admonition that investors need to be more aware of stock-market risk, have given the public a bad case of jitters.
Still, it seems the best advice for investors is to hold on and ride out the storm. There's good news ahead that will buoy the market: Inflation pressures are not building, despite the larger-than-anticipated increase in the producer price index for September. Concerns over Y2K computer glitches will be over as we pass into the new millennium. Corporate profits are their strongest in four years, with third- and fourth-quarter estimates a healthy 20% and 19% over last year, according to I/B/E/S/ Inc., the earnings research firm. The correction itself may have eliminated the need for the Fed--which is concerned that the sky-high market is pumping up consumer spending--to raise rates.
Not only that, according to market timers, bull-market season is on its way. Since 1964, the stock market has performed better from November to May, when investors pour money from bonuses and distributions into stocks, while slumping into the doldrums from June to October, according to Sy Harding, publisher of a newsletter about market-timing, Sy Harding's Street Smart Report. Also, a market correction (chart) has made stocks more reasonably priced and attractive to investors.
There's no arguing that a correction has taken place. The Dow Jones industrial average finished the week ending Oct. 15th down 630 points, or 5.9%--the worst percentage performance in a decade. And for two consecutive trading days, Oct. 15th and Oct. 18th, the Dow even dipped below the mystical 10,000 mark. The Standard & Poor's 500-stock index has also fared poorly, down 10% from its year-to-date high. Even the tech-heavy Nasdaq Composite Index has had some wind knocked out of it. It is down 12% from its year high.
STEALTH BEAR MARKET? Perhaps more important, the average New York Stock Exchange stock is some 30% off its 52-week high. This lends credence to the idea that a stealth bear market--a market that appears healthier than it actually is because a handful of stocks have posted stellar performances--has been occurring right under our noses. 'Technically, we've been in a bull market, but the truth is that the average stock has stunk,' says Richard Bernstein, chief quantitative analyst at Merrill Lynch & Co. In fact, from the beginning of the year to the end of September, all of the 4.35% gain in the S&P 500 could be attributed to the eight largest stocks measured by their market value, according to Salomon Smith Barney.
Some strategists say that the correction is merely the price that investors must pay for a sustained bull market in stocks. 'Once we're out of this, which could be in a couple of months, we'll have a better market because it will have better breadth and more reasonable valuations,' says John L. Manley Jr., who is market strategist for Salomon Smith Barney. In fact, Manley says that the sharp decline in the indexes, the S&P 500 in particular, bodes well for the stock market because it will force investors to look elsewhere for gains. 'With a flattened return, there's a tendency to spread their wings and go into other areas like value, small-caps, or international,' Manley says.
That is, as long as investors aren't too spooked by the prospect of rising rates. Most strategists say it is likely that the Fed will raise rates for the third time this year in November. But that's not bad. 'By the middle of the fourth quarter, the Fed will be done with its program, and rate pressures will abate,' says Peter J. Canelo, U.S. equity strategist at Morgan Stanley Dean Witter. 'The only thing the market can't handle is uncertainty.' Canelo says that after the rate increases are over, inflation should return to the 2.5% to 3% level that prevailed prior to the Asian crisis. 'We're pretty confident that productivity remains strong and the American export machine is cranking up again,' he says.
CHEAP FINANCIAL STOCKS. Another reason to be optimistic: Investors will likely continue to view stock market downturns as buying opportunities. 'It has worked in the past. Why should this time be any different?' says Canelo. In fact, this was evident as recently as Oct. 19th, when the consumer price index came in showing slower growth than anticipated. Wall Street rallied, partly thanks to reduced inflation fears, but largely because a number of beaten-up stocks were easy pickings. Still, there's one caveat to this: Investors could be sent into a selling frenzy if the Dow dips and lingers below the psychologically important 10,000 level.
Barring that, an area to consider is beaten-down financial stocks, which are trading at a 40% discount to the market. 'Their relative price-earnings ratios are similar to where they were during the Gulf War, yet their profits are strong,' says Salomon Smith Barney's Manley. Some to look at: J.P. Morgan (JPM), Chase Manhattan Bank (CMB), and Citigroup (C), all of which posted strong earnings this week. Also, in an improving global scenario, cyclical stocks with heavy overseas exposure and low price-earnings ratios such as John Deere & Co. (DE) and Alcoa Inc. (AA) may present good values. Underperforming drug stocks also offer buying opportunities. Shares of Merck & Co. (MRK) and Schering-Plough Corp. (SGP) are 15% and 25% off their yearly highs. And there are always tech stocks. The market darlings are now suffering along with other big stocks. America Online (AOL), for instance, is 30% lower than its year-to-date high, and Intel (INTC) is off 25%.
The market turmoil may not be pretty, but wise investors will bear in mind the end result: a more robust and sustainable market.
Monday, Oct 25 1999 11:25AM ET
Reply # of 29503
I am watching bonds carefully the break of 6.36 is not good and it will certainly impact the market... I am watching BKX 792 support and 2540 on NDX.. for me a break of these supports will make me defensive as well as SPZ 1303 break on closing basis would indicate a fall to lower supports and i would assume that would mean that all the gaps will be filled between 1241 recent run to 1310, I would be cautious until I am sure that this bond yield surge is only a result of last night huge 4000 call contracts liquidated by a huge fund, when such critical breaks happen like 6.36 has been taken out it it never a spike until we are sure that it was a false move that is a close above 6.36 does not materialize twice but I can say that this is a grave break and one needs to cautious here. Watch out for SOX 502, DOT 688 and PSE 603 if we are breaking these supports we will head to lower levels. but I would only act as supports give way or bond yields keep moving higher..1331 remains an important resistance but weak BKX will not let that happen, if 730 and SOX 530 are taken out we may see bond retreating and BKX closing above 800-803 resistance... the missing momentum from Techs and gaining momentum in financials was one of the main reasons for rally Friday but if BKX is weak and techs do not rally we will see that bonds will bring this market lower..
Thanks...
Tuesday, Oct 26 1999 5:19AM ET
Reply # of 29503
OJ=================
Will look forward to meet you, nice to hear everything is going as per plan... regards.. Ike
The bonds did not close above 5.36 break out and that is a good indicator, I think if we are able to hold this resistance of 5.36% the market will like that, although market is going to be jittery in relation to Thursday action. Like a toss of coin anticipation, people who watch the ticker on daily basis has to accept to live with new volatility albeit at very higher level for simple reason the economic data will sometime be construed as positive and others negative so until we have streamlined data the volatility is guaranteed, yesterday fall in housing is good however it is ECI on which a lot will depend as well as GDP figure..
Tuesday, Oct 26 1999 10:39AM ET
Reply # of 29503
Rumors in the market that a major brokerage house has been caught on proprietary trading of gold will keep me cautious, unconfirmed rumors suggest that although some of this major brokerage house clients are in deep losses, this brokerage house which was recently floated has a reputation of huge proprietary trading, they were borrowing gold cheap and selling options making good money anticipating that gold will hit 200 $,, like LTCM the market has caught them wrong footed, these huge liquidation of bonds and jittery markets are indicative of some trouble I think that 2490 break for me is a definite defense along with BKX 792, this support yesterday held beautifully we touched and were up, keep watching key brokerage houses shares if they start selling you know that BKX will not hold. I have always tried my level best of give you news the moment i hear them without my bias, however I will like always wait for market to show me the direction... so far 1330 and 1241 are the outer points of the range within this huge range I define the finer move with my other indexes and I will like to keep watch on my BKX.. PSE NDX
Their inclusion of MSFT INTC Home Depot in DOW is going to make DOW very representative of US economy. Good fun now we will see normal 300 point swings easy and we need to redefine our lack of interest in DOW, I have traditionally ignored DOW for its unrepresentative character now it is going to be a more active part of my pse ndx sox bkx comp inter relationship..
Tuesday, Oct 26 1999 12:29PM ET
Reply # of 29503
I hope always that as I keep writing these posts I keep changing my emphasis on a specific sector, just before this huge rally on BKX I was at 712 relating that as a support and issuing some buying at that level for JPM C WFC, the fool that I am, I was trying to pick a bottom but to avoid a whipsaw highlighting the fact that we can see 680 before we move higher... Now in my daily work I have many of these indexes that form the core of my invesmtent strategy like CSCO calls of yesterday or my EMC call or CPWR after IBM dip or IBM 100 calls on a gamble, I try to get involve in a overextended selling or buying spree and try to see which of the indicator is giving me the advance signal, in last three years I do not have a single fixed prioritized lit but my views are based on amalgamation of macro- micro- rumor and fact with commentary on limited universe of stocks I play.
I wish I can be more forthcoming but these levels just come as I sit every day on my desk, I rarely stick to my desk for me trading is about certain points.
I leave them on this thread and during the day rarely find need to fine tune them any further, like BKX 792 of yesterday I could have easily written sell and got whipsawed but as I go with my levels that discipline saves me from a lot of bother, for me if downward break is not possible upward thrust will come into play, like many other experts,I rarely forecast big drops in a bull run I do that with my laddered approach to find the bottom and get back up, making some on the way down and some on the way up, but I never get out of my core or long call positions at best as we go down my SPZ options play help pay the losses I suffer on lost premiums on long calls, and when markets roar back up I am in them as money made on short sales appears as a profit, hope that you will find this interesting and of some help, I wish I had this ability to say market goes to 5000, I would not, I would define my range and than play my range by specific index that impacts the market the most, for that identification I look for macro news and global happenings and news on corporate front...
Tuesday, Oct 26 1999 12:34PM ET
Reply # of 29503
Resistance and lot of pessimism but market jitters are based on something else these movements in bonds don't overlook them , for me 1330 is the major resistance and 792 A BIG SUPPORT ON bkx, likewise SOX 502 DOT 698 and PSE 615 now are important levels like NDX 2500 if we have two closes above that.... so on one hand we have resistance every where on the other we have potential to break it also on the anvil.. if DOW flies from here as I suspect on back of new additions as dead wood goes out that may become quite bullish however I will like ECI to be in line and GDP number to be subdued that will set us for good move. In absence we think that 1241 is solid and we can trade it anytime if 2445 is taken out on NDX.. we can see some steep selling to 1282 and than 1241 if we do not hold but the key would be 2445 NDX and 502 sox and PSE 615... or DOT 698
Wednesday, Oct 27 1999 9:01AM ET
Reply # of 29503
The economic release shows <<September Durable Orders Fall 1.3 Percent
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Updated 8:44 AM ET October 27, 1999
WASHINGTON (Reuters) - Orders for costly durable goods fell for the first time in five months in September, dragged lower by weak demand for new cars and aircraft, the Commerce Department said Wednesday.
The value of new orders dropped by 1.3 percent to a seasonally adjusted $204.9 billion. That was a steeper decline than the 0.4 percent drop expected by Wall Street economists and the first dip in the series since a 2.4 percent contraction in April.
Commerce said orders for transportation equipment, particularly new cars and aircraft, posted the sharpest decline, falling 3.9 percent to $47.1 billion after a 3.6 percent gain the previous month.
Transportation products account for nearly one quarter of total durable goods, so swings in the sector have a significant effect on monthly orders. Excluding transportation, durables fell by 0.5 percent after a 0.2 percent gain in August.
Orders for primary metals slipped 0.8 percent to a seasonally adjusted $15.5 billion after a 0.5 percent decline in August. Orders for industrial machinery and equipment rose by 0.4 percent to $39.6 billion after a 2.1 percent decline in August.
Demand for electronics and electrical equipment gained 0.4 percent to $38.7 billion after a 1.5 percent gain the previous month. Shipments of finished goods fell 1.9 percent in September while unfilled orders rose by 0.6 percent. >> Reading in line with housing and consumer confidence this is a good release that economy is not on its way to become over heated...
Wednesday, Oct 27 1999 9:12AM ET
Reply # of 29503
Once 2500 broke we had a good move down which was tradable yesterday, I thought `1282 to hold and that was the point where we had our stop after close on close..
<<Tuesday, Oct 26 1999 12:34PM ET
Reply # of 29482
Resistance and lot of pessimism but market jitters are based on something else these movements in bonds don't overlook them , for me 1330 is the major resistance and 792 A BIG SUPPORT ON bkx, likewise SOX 502 DOT 698 and PSE 615 now are important levels like NDX 2500 if we have two closes above that.... so on one hand we have resistance every where on the other we have potential to break it is also on the anvil.. if DOW flies from here as I suspect on back of new additions as dead wood goes out that may become quite bullish. However, I will like ECI to be in line and GDP number to be subdued that will set us up for good move. In absence we think that 1241 is solid and we can trade it anytime if 2445 is taken out on NDX.. we can see some steep selling to 1282 and than 1241 if we do not hold but the key would be 2445 NDX and 502 sox and PSE 615... or DOT 698>>
My yesterday support levels are good but 1295 will be the area to watch if we bounce from here if we take it out 1300.7 will provide solid resistance but it is possible that in wake of today?s continuously good numbers rather neutral numbers on economics we may see some short covering... the real action will be tomorrow but orders are going down we may see meeting expectations not exceeding them..
Thursday, Oct 28 1999 1:42PM ET
Reply # of 29503
I will let every thing run until 1322 is out or 850 on BKX... enjoy it...the shorts were caught wrong footed like I highlighted yesterday.. that economic numbers can be the trigger of long run up.. now 1352 and next 1365 is the major resistance.. |
