Cute. SS Kevin booted himself off the thread. Now he is in a CSGI war which is unfortunate. He is too valuable a T/A analyst (in my view) to deal with that.
Sure I'll follow the stats. I'm short puts from late Friday which I hope to close out near the Monday close. Whether I am correct or not is just a gamble.
Here is a commentary from Gene Inger, if you care to spend the time reading it.
~~~~~~~~~~~
Boy, if that's the first week of January, I can hardly wait for the month!
Weekly loss of Dow was 385...
Don't get excited, that's usually when you go into a turn temporarily the other way, as
we'll describe later, though no doubt our view for some time that most everyone was
seriously underestimating the direct and indirect impacts from Asia (recall my remarks
about linear rather than abstract thinking) have proven more than correct. The Fed
might ease rates any time now; which itself could be the excuse for a bear-market
rally. Several eases won't stop the pattern; just as the rate cuts in Japan didn't awhile
back. The difference will be that this bear market will be likely cyclical, as forecast
from July, and will subsequently result in very much higher prices than would have
been the case, as a result of American primacy. Even if we don't see 10,000 on the
Dow for years, it doesn't matter. As the Letter will detail a bit this weekend, we see the
Dow doing at least 50-200% up from the forthcoming trough to peak not earlier than
2002. However, our entire stock strategy has been to make sure ample powder is
kept dry to be in a calm comfortable position to take advantage of the bear. Still, we
hear analysts debating whether we are in a bull or bear market. Ha. What do they
own? By the time they can announce that it's confirmed, we'll definitely be scouting for
longs, not for shorts. In fact even now we wouldn't short into the hole; that's insane
with all this warning.
Note we are now under the 200-day Moving Average.
(chart courtesy Telescan)
As far as the S&P; all the lines on the charts were dutifully paused at and broken.
Tonight will show charts of the next lower and primary supports. Time doesn't permit
details now, but suffice to say the 960 uptrend from the October low held only briefly
as expected, then we cut all the way through the more gradual (ex-spikes) trendline
we've watched for so long, as prices got our high 940's-low 950's and then some.
Next key for the S&P is 912; under that nothing other than 852 or so, but we'd be in
such a crash it wouldn't stop there. I do not think we are going that low in a straight
line. I do think we are going to get there, and far beneath, however, in the fullness of
time during the first half of the year. Of course all can just melt, and if so we'll just stay
with the approach. Serious cheers to the New Year!
(chart courtesy Telescan)
Economic news & releases scheduled:
MONDAY:
No scheduled releases.
TUESDAY:
December consumer price index,
real earnings,
Atlanta Fed (FRB) index,
Richmond FRB index.
WEDNESDAY:
December retail sales,
export/import prices.
THURSDAY:
November business sales and inventories;
January Philadelphia FED (FRB) index.
FRIDAY:
December industrial production;
early January consumer sentiment.
Bits & Bytes. . . after the close today, General Motors (GM) announced an
approximate 50% increase (to 3-4 billion dollars) in charges to close-down plants. A
year ago this might have been received bullishly, inline with the kind of thinking that
implied anything that lowers costs is good, as long as you don't enhance productivity
to the point of going out of business of course. Today it will be interesting to see if
they try to buy the selloff on this news, fail and turn down. There might be spillover
effect to other large stocks. As a Dow component, a big drop in GM still is capable, in
the modern world, of skewing the market. Our recent reports have, more than once,
pointed out the profit-squeeze GM will face, along with Ford (F) and also Chrysler
(C), from the coming rash of cheap imports, particularly of Korean origin. So, if this is
what we're hearing even before the major price cutting pressure, what's next?
If you happened to catch CNNfn last night, you might have heard Samsung's U.S.
manager point out how they could price their forthcoming 55" and other HDTV (High
Definition TV's) sets a "couple thousand dollars below" comparable offerings from
Sony, Mitsubishi or RCA. Clearly this means the entry-level pricing of the new
products won't hold, and that margins will quickly come under pressure. Just another
example of profit squeezing expanding in '98.
As far as other stocks, of course everyone's watching Intel (INTC), where worries
permeate regarding Tuesday's earnings. Ironically I hope Intel doesn't try to fight this,
and reports poor numbers, but since they are very savvy traders themselves
(including currencies), I wouldn't be sure about that. But again, I think the big-caps,
oils and particularly banks, have more to do with the near-term outcome than the
techs, good or bad earnings. Elsewhere, basically everything is down, a sea of red on
the screen. No time to go through most, though I'm very pleased that Merrill Lynch
(MER) is really starting to crank on the downside. It for us, will do as a representative
financial short (that's our approach, as I'm not going to follow dozens in a sector).
Whether it's major banks, or Solomon or Travelers, we've covered the outlook amply
I suspect. And while I'm a bit disappointed that American Airlines (AMR) didn't make
it by a hair into the sell-zone, any who heard my remarks last night knew I thought
traders should move on it if they were thus inclined, and today it was down almost six
(an example of me giving ideas with traders using their own good logic to pick a
market turn and stocks; to wit their was no way it was going to hit an ideal 138 the way
Dow Transports were turning down). The Transport loss of 96 Friday was the largest
ever. We even warned about Dell (DELL) the other day. For the year the Dow is
down nearly 5% or well over 300 points. And the March S&P is down about 4,000
points, with our gains in excess of that.
So, investors (more so I suspect money managers in denial) are grudgingly beginning
to either grasp, or simply accept, the fact that robust growth characterizing the
"perfect world" environment presumed to exist in recent years (it did more in
perceived theory than it ever did in reality, but it sure was great to play while it lasted)
has finally ended. Their capitulation will enhance the arrival soon of a short-term
(bearish) rally within an overall downward trend virtually exactly as we've patterned
this, with daily and hotline adjustments to timing as best possible to compensate for
the fact that no forecast weeks or months in advance (as is the case) can be nailed to
the hour or the minute, at least until you get very very close.
(chart courtesy AOL's Decision Point)
For sure, I think we've proven market timing can very much assist success in markets,
and that most people saying it can't be done, say so because they can't come close
to doing it. We will presumably make mistakes sporadically during the year, I'm sure,
so I urge new and loyal readers alike, to please continue being happy if we take
meaningful chunks out of most moves, recognizing that while we do anticipate many
moves, this remains (and always will be no matter who claims they've figured out a
magic answer to the markets) somewhat shy of an exact science. What I will assure
everyone of, is my continued tendency to put market opinion in a secondary position
to market action, or trend development. In the case of 1996 and most of 1997, this
has very much aided our trading, which of course required that we recognize critical
technical spots, which I think mostly we do.
In any event, I couldn't be happier with the first week of 1998 (and hope you feel the
same), or the upside trade preceding it, and if all this is an indication of another good
trading year, well, nothing could please us more, I'm sure. I was thinking about a
round-the-world cruise on the QE2 (or better yet the Sea Goddess) after these
trades, but then I couldn't share my thoughts with you every night easily without real
choppiness, so I'll stay ashore :-}. However, I do think the market will have continued
bouts of seasickness until hot-money latecomers are washed ashore, something I've
felt for months now would be necessary. About the time you start hearing friends (who
presuming don't tune in to these thoughts) say they never will buy stocks again, it will
be time to put that dry powder to work; with leverage galore. No hurry.
(chart courtesy AOL's Decision Point)
For now, the reasonable forecast is for a short-term washout that leads to some sort
of rally, temporary in scope, but impossible to nail until we see how low things go. If we
bottom in the vicinity of 910-920 in the March S&P, then a rally all the way back to
something like 950-960 isn't out of the question, but let's wait and see. Fundamentals
will control this; as if during a prospective rebound effort we should get a failure of
any significant impacted Asian country to reach agreement with the IMF (where
befuddled or otherwise), such a rally would be dead on arrival. If not, then it bounces
a while on Band-Aid relief, if not cure. Of course no one is going to bail out Indonesia;
some aren't even sure it's a legitimate government. And we all know the IMF money is
a drop in the bucket if confidence isn't restored as we've said before.
The difference is permabears would look at the probable monetary end-game and
stay short as so many have done for years waiting for this. In my opinion that's not
how you trade, if you're trying to make money, not simply engaged in a crusade to
prove something. Opinion has held debt implosion risk for the U.S., not just Asia, as
was well documented on CNBC last week. This may very well be triggered by a
foreign repatriation of U.S. Treasuries by the way. But, we don't know for sure things
will happen like that, while we do know how to trade and respond to things. In this
case they were back-burner risks for ages while we traded the vast majority of stocks
on the long side; that's the difference between trading a bias, or the market. Now that
everyone seems to finally grasp what's afoot (Big Foot), as is noted by the cracks in
the big-cap stocks, normal trading methodology around here would have us getting
on-guard for a soon-to-unfold reversal from down-to-up, albeit probably very
short-lived. Will that mean I've turned bullish? Not at all. It means that,
more-times-than-not, about the time we get a "confirmation of bearishness", the next
thing to happen is a washout, a turn-up to see how much buying interest remains
alive, and presuming not much, they kill 'em again.
The new "scan" indicator. . .
That's trading the market, rather than simply getting enthused about a successful call
or trade, and think you'll do better by cheering a move along. We all say hooray, then
try to find the next best place to reverse. In this case, since there is crash risk as
noted the other day, we will probably just tighten stops of the short-sale (most recent
is 970, slightly lower or thereabouts) in the March S&P. An absolute additional
homerun again, it appreciated by a terrific 3170 points today, regardless of the spot
any of us are short from (I never came out of a short-bias from the first one Tuesday).
More or less, if you're trading the S&P, you may have gains on this trade ranging from
3400-4000 points, most of which will be preserved by what I plan next week, providing
we don't have a huge gap-up Monday. Since the IMF'ers aren't intended to be doing
more than "politically correct" statements until then, ideally this market won't open up.
Given the 131 Premium at the close, which of course suggests a very bearish trader
bias for the Monday opening, you have to keep in mind that anything with just a
modestly optimistic tinge could put premium back on; so S&P traders really on top of
this will watch Sunday night's Globex session closely. If I have the opportunity, I may
post early Asian market results, and the S&P action, here. Clearly, if the big-cap crack
is just the start of Armageddon, we'll simply put in tighter stops in the early Monday
going. For now we are short with no stop on the trade, pending the opening bell
hotline. As noted, we were ready for this to run into a brick wall of resistance while
leaving the option open for it to hold a bit longer, fully knowing that was possibly too
optimistic. So we got short despite sharp pain in my ribs within minutes (literally), and
that's that. Maybe my rib indicator foretold that stocks would indeed crack. As noted
yesterday, it didn't take an "X-ray" to "scan" what was afoot.
As goes January goes the year. As goes the first week of January goes the month
and often the year. Kewl. The series of trades commencing with the exit of the
year-end long at 980 (or better) and after a little nominal churning a key short from
980 (or maybe even better) have been a real joy to play. Now I'll write the Inger
Letter, which will be posted sometime late Sunday. Meanwhile, have a lot of fun;
you've earned it!
~~~~~~~~~~~~
So it looks like Gene says I can bet Denver. |
