7 replies to this topic

[arbman]

If the bullishness was not this high, I would think the market would make new highs next week. But I think every dip buyer bought early in the week and then doubled up or leveraged in the second dip...

The equity bulls vs the index bears are in a tie as of this week at $22B (each) in total placements. But the bears paid a bit deeper in the money and more confident. If I had to pick a side, I would think another wash this week will finally mark the bottom. It can be another 7-8% lower though similar to April 2005 final sell off when everything appeared to be turning in late March 2005. It is clear that the new lows are not really decreasing, the market structure is quite weak and the central banks did all they could last week to contain the downside (crash), yet the indices are still at the lows...

The Fed has to choose in between (1) the inflation and low growth and more housing deflation vs (2) some deflation and a strong(er) market bottom and better support for the housing. I would think the second scenario funnymentally bodes better for the corporations in 2008 since even if they inflate here, the corporate bottom line will not improve due to the low growth vs high inflation...

If this week finishes flat, I think the market is going to dive sub-1400 next week. If the market manages to stage a substantial rally on Monday, then there will be a huge wealth transfer from the bears to the bulls and it can hang in here for another week maybe before testing the lows one more time. It will be hard to stage a big (sustainable) rally with so much leveraging...

Few charts, the amount of money speculated or used as a hedge is just insane...

- kisa

Edited by kisacik, 11 August 2007 - 04:12 PM.

[ogm]

Just another article.. some interesting stats though...
I just posted this in another thread, but here are some select parts.
As a side note, I'm not surprized by recorc options volumes. Seems like everything trades on record volumes past couple weeks. Talk about lack of liquidity

"Amateur Hour
How much do retail investors hate American stocks? Let me count the ways. In July alone, U.S. equity mutual funds saw $11.6 billion pour out of the door, the highest one-month outflow since September 2002, according to the California research firm TrimTabs. In the past three months, outflow from U.S. equity funds has totaled $24.7 billion, the greatest draining of market capitalization since the third quarter of 2002. Most of it is not going under the mattress: $9.7 billion piled up in global equity funds last month, while $7.76 billion went to bond funds.

....

The investors who make these kinds of decisions -- moms and dads, teachers and doctors -- may be great people, but they have proven themselves in cycle after cycle to be horrible market-timers. So the stunning skew in their decision making, away from U.S. stocks and toward foreign stocks and domestic bonds, could be an indication that U.S. stocks are on the verge of a period of serious outperformance.

If this sounds to you like deja vu, you are right on the mark. TrimTabs points out that when the U.S. stock market topped out in 2000, mutual fund investors had just completed a 12-month period in which they poured a record $260 billion into U.S. equity funds while yanking $50 billion out of bond funds -- loading up on exactly the wrong asset class as shares were about to plunge.

And then by the time the U.S. market hit bottom in October 2002, retail investors had gone fully in reverse, draining $25 billion from U.S. equity mutual funds and dumping $141 billion into bond funds. Whoops.

Companies and corporate insiders appear to be doing just the opposite right now. Federal regulatory data show that insider selling totaled only $240 million daily from July 20 through late last week, down almost 50% from the annual average. This means that people who actually run companies and know how well they're doing are not betting that the market is on the verge of a wipeout.

Corporate buyback activity and mergers show the same, as the market's capitalization was reduced by $567 billion in the first seven months of 2007, according to TrimTabs data, and you can add another staggering $81 billion in announced buybacks so far in August.

That includes the massive $15 billion reported by Procter & Gamble (PG - Cramer's Take - Stockpickr - Rating) last week. In other words, companies are much more enthusiastic about U.S. stocks than the public, and they are buying at a record pace that could total $1 trillion by the time the year is out."


http://www.thestreet...10373399_3.html

Edited by ogm, 11 August 2007 - 04:34 PM.

[arbman]

OK, but then what about the popping credit bubble?!? I am thinking they might sell them now at the bottom, but perhaps it is not the bottom yet. One of these days, it will be the bottom and we will know quickly since everything confirms a bottom except for the prices...



- kisa

[atlasshrugged]

KIsa, thats some great work that you provide, muchas gracias for your altruistic nature in sharing with the board!

[arbman]

thats some great work that you provide, muchas gracias for your altruistic nature in sharing with the board!

We all share something, you are welcome...

[arbman]

The trend is neutral at the moment, but bullish after what happened to this point, but I repeat the trend is still neutral. The market will struggle to move forward because of the leveraged positions sitting right above. However, if it pushes early next week higher well, then the breadth momentum will turn, the next low might become a buy...

I counted about 42 higher highs and 52 higher lows on OEX components. I really doubt that any rally will be a broad based event even though the RUT was decimated and its components should sit on the strong supports. I do not think there is enough money at the moment to diffuse to the entire stock market and create that kind of rally...

Perhaps in a few weeks, but I really doubt that this will go further than another oversold rally for now, well if it happens actually. On the other hand, if the market wants to decline from here, it can easily do so since there is enough counter party in the options to easily pay the leveraged bears...

Another issue, I see is that whenever the similar bounces happened in the earlier rallies, the breadth was substantially in better shape, right now it is still deteriorating or not showing much signs of participation, this is also due to the lack of liquidity, imho. I think the outperformance of the RUT is the biggest gimmick at this point since the index internals are not great at all, it needs one more sell off to create the divergence for the internal momentum turn...

Here's another website for IWM:

I am looking for the credit growth vs stock market to decouple from late Oct, if (1) the Fed cuts, (2) the credit growth starts to turn slowly by the end of Sep and (3) the growth stocks continue to show some strength. This market needs to see the new liquidity in the future, they did get some signals from the Fed, but the Fed has been faking them out for over a year now...

As I said, it would be a better outcome for the longer term than trying to rally higher from this crowded setup. Not suggesting that it will go there, but the Fed did enough to find the lows a tad lower than 1400. In fact, AB=CD target would be 1375-1380 and wipe out the leveraged plays, then I am pretty sure everyone will fight the trend all the way to the next bull market top with or without the rate cuts. Something to think about...

With all due respect to Airedale, another shoot lower would not change much in the broad right translated cyclical picture, but it would set the lows for sure with a 10+ % correction. I am getting the most self correlation in the cyclical picture now around the 50-52 days, the market is slowing down and the reduced activity is less energetic, this is usually not a good indication for a bottom here. If the market shoots lower it still does not break the 40 wk FLD decisively around 1380. We'll see, if it actually does...

http://stockcharts.com/c-sc/sc?s=$SPX&p=D&b=5&g=0&i=p86970087537&r=3960&.png

Nov has been up even during the 2001 bear market, I think the market can stay in a wide range until then...

- kisa

Edited by kisacik, 11 August 2007 - 11:47 PM.

[arbman]

The sectors that outperformed the decline were actually the defensive stuff along with some growth stocks, so everything was looking somewhat bullish until the growth components broke the lows on the retest. It might be a fake out, if they recover quickly on Monday, otherwise we have the new downside leaders...

- kisa

[arbman]

Buddy! It is all there you just have to look!

- kisa