9 replies to this topic

[NAV]

A swing sell remains on my system which kicked in yesterday morning, as i posted on the board. It remains on a solid sell at this point. One day of decline turning 30-min all the way to 120-min trend is not typical. They are all invariably panic moves. With panic moves, one can lose a lot of money pretty quickly. I had taken a 100% long position in some ETFs yerterday at SPX 1520 levels. I dumped everything ATH after looking at some of the charts for a .8% loss. No biggie.

Firstly the internals were horrendous. The fast nature of the drop in reaction to bad news, without any warning or topping behaviour is a typical bull market correction. Once this correction is over, we should move to SPX 1600+.

I don't like holding swing positions long or short when volatility gets this high. That's why i dumped my position. I will move to daytrading, until the bottoming action completes. Once the bottoming is complete, i will post the next swing buy signal whenever it comes. Flat and happy for now.

One thing that has not changed in the last 4 years is the certainity among the bulls that a major top is complete as soon as we see these 3-4% drops. Not just this board, but on many other sites, it's the typical behaviour. A proclamation of a major top happens and when the price moves against them, they dissapear. As soon as these minor corrections occur, they all re-surface with full force. I must agree with da_cheif that i have never seen so many people so wrong for so long, amateurs and gurus alike. Yet the bearish convictions only gets stronger and stronger with every new recovery highs. I think we have a long way to go before this bearish caucus capitulates. Again this observation has got nothing to do with VST to ST, but for the big picture.

The problem is simple. I posted in this in my long term thoughts last year. Back in 2003, everyone and his brother wanted to buy the market when the P/E hit the low single digits, which had marked major bear market bottoms in the past. In other words, there were a generation of wannabe Warren Bufftes looking to buy the blood on the streets. The market threw a curve ball and started moving higher, leaving all behind. Now all these wannbe bulls (clothed as bears) want a major disaster not just to generate a buy of their lifetime, but also for the grand vindication of their mega-wrong stance. Guess what, the big boyz are tactical players, who want very few on the back, until their mission is complete. So this bull will continue to move higher, generating more and more bearish anger.

Well some day, the bears will catch "THEE" top. One of my favourites on catching tops/ bottoms (from Jack Shwager's Market Wizards)

It makes a better story to say "Paul Tudor Jones buys the T-bond market 2 ticks from the low" rather than "On his fifth try, Paul Jones buys the T-bond market 2 ticks from it low".

Good luck everyone.

Edited by NAV, 02 November 2007 - 01:52 AM.

[dcengr]

You can be bearish and still be long. You can be bullish and still be short. You can call tops 10000 times, as long as you exit in a profit. You may have been lead to believe that market tops come in some frenzy of bullish orgasmic delight. Let me remind you that most traders here have only experienced a 27 year bull market starting from 1980. There's not many here who's trading career spans earlier than that. Trying to compare apples and pears when all you've seen is a raging bull for much of that 27 years is hard to do. Thats what causes cycles.. people who have experienced the good times as well as bad times die off and don't effectively communicate that info to the next generation. All FWIW.

[denleo]

Good analysis NAV as always. And there is nothing wrong in taking a little loss (they come with a territory). But let me say something that will piss most people off: IT IS DIFFERENT THIS TIME!!! How different? This correction should not be compared to anything that happened after 2003 bottom. This is my strongest advise, which I mentioned several times already over the last couple of weeks. Just like when I say "NO RISK" and people think I am stupid, I will tell them IT IS DIFFERENT THIS TIME right now. And you know why people don't like statements like these? It is simple. It is because they believe in sentiment. They believe that if someone is too confident, he must be wrong. But why? Somebody tell me why? And one other thing: with all the overconfident statements I made over the last few years, when was the last time I was wrong? Just remember one thing: THE MAJORITY IS RIGHT. 65% of US population has been invested in the stock market. 0.01% is short the market on average on any given day. This is ratio of 6500 to 1. So who is right? Da-Chief, I am asking you? Hello, are you there? Hello. NYSE made all time highs yesterday. Lets give someting to that 0.01% for a little while. And then the 65% will take over again. Majority Rules!!! What is another name for it? Oh Yes: Democracy!!! Denleo

Edited by denleo, 02 November 2007 - 02:19 AM.

[NAV]

Good analysis NAV as always. And there is nothing wrong in taking a little loss (they come with a territory).

But let me say something that will piss most people off: IT IS DIFFERENT THIS TIME!!!

How different? This correction should not be compared to anything that happened after 2003 bottom. This is my strongest advise, which I mentioned several times already over the last couple of weeks.

Just like when I say "NO RISK" and people think I am stupid, I will tell them IT IS DIFFERENT THIS TIME right now.

And you know why people don't like statements like these? It is simple. It is because they believe in sentiment. They believe that if someone is too confident, he must be wrong. But why? Somebody tell me why?

And one other thing: with all the overconfident statements I made over the last few years, when was the last time I was wrong?

Denleo

Denleo,

I know you don't post things without much thought and i always respect your opinion. But my works still remains bullish. That makes it all the more intriguing. I love this game.

Lets give someting to that 0.01% for a little while. And then the 65% will take over again.

Are you talking about those red circles ?

[Remo]

I completely agree with you Nav and appreciate your posts.

I've been following some bears for many years now and they always seem to find reasons to stay bearish. If one bearish case loses it's ground, they turn to the next one. As you said, first they claimed that P/Es will go down back to single digits, then among others there has been the inverted yield curve which should have predicted the recession, inflation scare, rising interest rates (which at the time was bearish according to them), now declining interest rates, booming oil, crashing dollar, subprime crisis and what else!?

These investors are never happy with the market, and I presume not even if the P/Es would be 9, dividend yield 6 and Price-to-book ratio below 1 ... Instead, that kind of condition would be considered by many as a "Death of equities" ...

It is often mentioned here that fundamentals are worthless for market analysis... I don't think so, it is just that the majority keep their focus on things that are irrelevant on the bigger picture. The exactly same thing goes with technical analysts. If you want a good assessment of the fundamentals, I suggest you follow Fisher's columns. And start with the newest.

The bigger picture, which has been apparent for three years, is that corporate earnings are very strong in comparison with stock prices and the aftertax cost of borrowed money. This phenomenon is fueling takeovers, leveraged buyouts and share buybacks. Bears don't see any good in this. They posit that corporate profit margins are abnormally high--therefore destined to revert to a lower level--and that the cost of borrowed capital will soar in the coming credit crunch.

Wait a minute. What credit crunch? Since June interest rates are down, not up. Not just short-term rates, not just government rates, but long-term corporate rates.

Compare the earnings yield on stocks (the inverse of the price/earnings ratio) with the yield on ten-year corporate bonds rated BBB. That credit rating is at the lower end of what bond traders call "investment grade." At the moment the ten-year BBB yield is 6.2%, or 3.7% aftertax if you assume a corporate federal-state income tax rate of 40%. Compare that cost of money with the earnings yield on the S&P 500. The index should earn $95 a unit this year, before nonrecurring items. That's 6.2% of the index's price of 1531. In other words, corporations can earn more money on borrowed capital than the money costs them. Despite what you hear, recent buybacks and takeovers weren't primarily funded by junk. By December buybacks and takeovers will both be back and stocks will be soaring.

http://www.fi.com/forbes/default.aspx

P/Es have been declining since the bull market began. Forward earnings have surpassed all-time-highs ages ago even though indices are below them and interest rates are still low on historical comparison. What else can these "fundamentalist bears" want?!

It has been a great bull market and still is even if spx and djia would go all the way back to last summer's lows... Which I don't believe in. I think Ken. Fisher said it well a couple of years ago when this bull market had just began.

Buy and hold until you hear that beautiful hum--of bears either turning tail or being humiliated. None of them has gotten really ridiculed, yet. This is not to say that they won't stand their ground and may be vindicated years later. But until the public turns against them, this most enjoyable bull market has legs.

The Great Humiliator by Kenneth Fisher (01.12.04)

http://www.forbes.co...4/0112/204.html

Edited by Remo, 02 November 2007 - 02:56 AM.

[greenie]

I fully agree with you NAV - the bears are no good. They keep changing their arguments to stay bearish, while we bulls steal all their money, today being a rare exception. Let's just buy this pullback with full leverage and then wait patiently till 1800 comes. After 1800, we will be able to mock those pathetic bears even more.

[NAV]

These investors are never happy with the market, and I presume not even if the P/Es would be 9, dividend yield 6 and Price-to-book ratio below 1 ... Instead, that kind of condition would be considered by many as a "Death of equities" ...

When that happens, the economy will be in the toilet and they won't have jobs and money to invest. The predominant concern then would be providing bread to the family and not investment.

[Remo]

These investors are never happy with the market, and I presume not even if the P/Es would be 9, dividend yield 6 and Price-to-book ratio below 1 ... Instead, that kind of condition would be considered by many as a "Death of equities" ...

When that happens, the economy will be in the toilet and they won't have jobs and money to invest. The predominant concern then would be providing bread to the family and not investment.

Exactly! Those bears should be caraful on what they wish for

[youkim]

Hi, Nav. I just want to ask you. What makes you so sure that we are still in the bull market? All the bad news we have lately seem to suggest the bull run is over.

[NAV]

Hi, Nav.

I just want to ask you.
What makes you so sure that we are still in the bull market?
All the bad news we have lately seem to suggest the bull run is over.

The weekly and monthly trends are up. We are trading still above the Intermediate term pivot at 1480. So buying dips will be more easy than timing tops. News don't create trends. They just create ripples in the trend. Once the news gets stale, the trend continues.....