The markets continue to recover some lost ground. Tensions concerning the evolving credit crunch seem to be easing. But what may be brewing beneath the surface is any body's guess. I expect to retest and then make new lows in September-October. The worst of the housing crises is about to unfold over the next 6 to 8 months.
With derivatives stacked to the moon, there is much to be concerned about going forward. There are now some $500 TRILLION in derivatives verses about $60 trillion in value including all the worldwide stock markets. How this plays out is for speculative players. But it could get entirely ugly very quickly. The resulting unwinding of this magnitude of leverage would be mind boggling. I think a world-wide economic depression would be the easiest outcome. Something even worse could evolve and I hazard to think of what it might be.
I think it is safe to play a little bit of this upside with a foot in the exit. We could get some further strength before the markets head south big time. Short term (in the extreme) calls are ok. Longer term, for the months ahead, puts are the way to go. Energies could continue to bounce back over the next week or so. Unless there is some kind of hurricane to disrupt gas and oil prices, I think energy (oil prices) will fall below $68 before they surpass $ 80.
No doubt, we are in for a fun time over the next several months. Volatility should settle down a bit more before exploding upward again. Some spectacular trades should be in the offing, especially to the downside. From now into the first quarter of next year will be the time to take $5,000 or $10,000 and trade it into a million dollars. No bull! There will be that kind of opportunity for the alert trader. If you are a solid bull only, forget it. However, if you are willing to trade both sides of the market, you can expect to make a bundle with some exacting trades.
Take it one trade at a time. Be willing to take a quick loss if you are wrong and look to the next trade. Be willing to concentrate on today's trade only and not look too far ahead. So much is possible if you have a plan and believe it can be executed. Follow your plan and ideals and reap great rewards. The trades will be there, for sure.
Saturday, August 25, 2007
Sunday, August 12, 2007
Experts Will Be Dead Wrong Again
Remember this when in a year or two the markets are much lower. Right now, many so-called experts are telling people to buy the dips, maintain the course and hold on for dear life. Wrong advice from where I sit. I am NOT an expert and do not make that claim. However, with the recent volatility and movement in the stock markets, things are in the process of changing. This is no longer a straight ahead, no limits, bull market. If it were, we would not be having 387 point sell-offs as a matter of normal trading.
Face the facts. This bull market has lasted nearly 5 years. Longer than most in our history. Also, there is perfect reason to be concerned about the housing/mortgage debacle. With all the excess derivatives compounded upon each other, it is impossible to know the extent of how valuable or not something is. Companies are buying back shares furiously in an attempt to buoy earnings in the coming quarters. If things were so great, they would be plowing most of this money into new equipment, upgrades and expansion. Buying back shares does nothing to create new business or new jobs.
Consider that energy prices and inflation are still high. Forget skewed government statistics to the contrary. What matters is how much you are actually paying for goods and services in your own personal life. What the government proclaims is of no value to the average consumer. The government and the FED are out of touch with reality. And they usually are when things begin to change. Do we need a rate cut? NO. A few rate cuts will not stave off the coming turn down in the economy. And several rate cuts will force inflation even higher as well as re-liquefy the markets. Part of this problem is that there is a worldwide liquidity bubble. It is in the early stages of bursting. What kind of destruction this causes is relatively unknown. You can only guess as to how far the damage will spread.
I think the markets are headed lower after this recent rally. They might temporarily hold as a retest of the recent lows and try to rally again. The Bulls are a stubborn lot and will only give up at major bottoms. This is an established fact. Face it folks. We are headed much lower despite what the feel-good experts say. They don't want to sell when prices are falling. They do want to exit when the unsuspecting trader/investor is buying the dips and hoping for a renewed rally to new highs. Fat chance. The pros will always hype up a falling market so that they can get better prices for their sales. Who ends up holding the bag? The players who refuse to believe they are being taken to the cleaners. Look at the charts over the last 130 years. You see this happen all the time.
We are heading into September-October and the fireworks should be explosive. Last year, we plowed ahead during these months. This time, they will return to form and leave many a trader/investor exasperated and confused; to say nothing of being upset and angry. The investment rate, Gann analysis and the year ending in 07 all weigh heavily against the market. My bet is on a possible crash in the near future where we see the Dow down some 600-700 points in a day. Not to be negative or a super bear, but as you have seen over the last month or so, reality is catching up to the sleepy Bulls who have been lulled to sleep once again. You have to go where the easiest money is to be made. And right now and for the foreseeable future, that is to the downside. Buy call options for quick reversal rallies, and buy puts for super quick downside sell-offs that take your heart away. Let the games begin and may the last Bull not loose everything.
Face the facts. This bull market has lasted nearly 5 years. Longer than most in our history. Also, there is perfect reason to be concerned about the housing/mortgage debacle. With all the excess derivatives compounded upon each other, it is impossible to know the extent of how valuable or not something is. Companies are buying back shares furiously in an attempt to buoy earnings in the coming quarters. If things were so great, they would be plowing most of this money into new equipment, upgrades and expansion. Buying back shares does nothing to create new business or new jobs.
Consider that energy prices and inflation are still high. Forget skewed government statistics to the contrary. What matters is how much you are actually paying for goods and services in your own personal life. What the government proclaims is of no value to the average consumer. The government and the FED are out of touch with reality. And they usually are when things begin to change. Do we need a rate cut? NO. A few rate cuts will not stave off the coming turn down in the economy. And several rate cuts will force inflation even higher as well as re-liquefy the markets. Part of this problem is that there is a worldwide liquidity bubble. It is in the early stages of bursting. What kind of destruction this causes is relatively unknown. You can only guess as to how far the damage will spread.
I think the markets are headed lower after this recent rally. They might temporarily hold as a retest of the recent lows and try to rally again. The Bulls are a stubborn lot and will only give up at major bottoms. This is an established fact. Face it folks. We are headed much lower despite what the feel-good experts say. They don't want to sell when prices are falling. They do want to exit when the unsuspecting trader/investor is buying the dips and hoping for a renewed rally to new highs. Fat chance. The pros will always hype up a falling market so that they can get better prices for their sales. Who ends up holding the bag? The players who refuse to believe they are being taken to the cleaners. Look at the charts over the last 130 years. You see this happen all the time.
We are heading into September-October and the fireworks should be explosive. Last year, we plowed ahead during these months. This time, they will return to form and leave many a trader/investor exasperated and confused; to say nothing of being upset and angry. The investment rate, Gann analysis and the year ending in 07 all weigh heavily against the market. My bet is on a possible crash in the near future where we see the Dow down some 600-700 points in a day. Not to be negative or a super bear, but as you have seen over the last month or so, reality is catching up to the sleepy Bulls who have been lulled to sleep once again. You have to go where the easiest money is to be made. And right now and for the foreseeable future, that is to the downside. Buy call options for quick reversal rallies, and buy puts for super quick downside sell-offs that take your heart away. Let the games begin and may the last Bull not loose everything.
Sunday, August 5, 2007
It's All An Illusion
The fireworks continue on Wall Street. Bullish complacency has been replaced by near panic swings of greed. Of course, we all know that there is really no such thing as a market sell-off because everyone is taught to be a constant buyer and holder of stocks. So, in retrospect, the selling you see on your screen (i.e. the flashing red numbers) is really only temporary. Soon, there will be massive amounts of "dip buying' as bulls know that there will not be any more selling after a certain point. The market simply cannot be sent spiraling down for any length of time. Whew, that is a relief.
With the housing and credit markets imploding and headed toward even more dire conditions, it is full speed ahead for the reviving economy. The government stats tell us that all is well. Inflation is, well ah, non-existent and the GDP is humming along at a nice pace of about 3% growth. All is well and more jobs are being created. And even though the stockbroker firm of Bear Stearns came out and said that credit conditions are the worse in 22 years, there is still much to cheer about. Heck, what is 22 years? Nothing really. The Feds are about to come to the rescue and lower rates. Yahoo! That means that we can re-inflate the ever expanding credit bubble and put off the probable meltdown for as long as we want. Heck, this is the kind of stuff we have seen on Star Trek for the last 40 years. Spock (meaning the Fed chairman Mr Barnacle or whatever his name is) will cross circuit to "B" and the planet will be saved once again. Love it!
I think we could see some feeble attempt at a rally in the coming week or so. Whether or not it gains any steam will be determined by how much short covering is to be done. But make no mistake. So far, this sell-off looks like any other we have experienced in the last 4 1/2 years. That is what the Bulls contend. They are correct in that assessment. No serious damage has yet been done. But after this next rally attempt, we will be entering September and conditions will be ripe for a massive downturn. The Bulls will get trampled this time as they fall prey to the whims of the bullies on Wall Street. Can you spell crash? Be on the lookout for this distinct possibility. The warning shots have been fired. Look at the sell-off on Friday in the last hour--hour and a half. SCARY! The bears pulled the lever and all bullish support melted like and ice cream cone in the Sahara.
You do not get these kind of serious sell-offs time and time again without it leading to something much more decisive. Really, the props in this market have been the following: easy credit, foreign money, buyout fever, share repurchase (which by the way only makes earnings look better and adds nothing to the growth of a company), the China syndrome, energy stocks going bonkers, and people borrowing money against home equity. Are all of these or most of them going to continue to fuel the rising market into eternity? If you are a Bull, they certainly will. Good luck.
As I recall, back in the late 70's and early 80's, we saw energy stocks rise furiously. It was like many cheap energy stocks (penny type stocks) were going up 10, 20 or 30 times in value or even 50 times. Charter Oil was an example of a stock that went from $1 to $50 in a rather short time. There was massive speculation in oil companies. Everything tied to oil was blasting higher, much more so than the rally in energy over the last 5 years. There have been a few stellar performers, but it simply isn't the same as it once was. Perhaps the best is yet to come over the next 5, 10 or 15 years. Food for thought.
I have made a few trades since the last posting. But I have not been able to keep full attention on the markets to initiate many entries. And of course, I have missed some tremendous sell-offs in many of the stocks I watch. This is the prime example of when you are not looking, the best opportunities will come and go. You have to have the time and energy to concentrate on what is transpiring. This is especially true in a market that can move up or down by hundreds of points in a matter of hours. Still, there is always opportunities to make a buck. I will be looking for a bottom in some stocks like MA and some of the energies. Buy puts on BSC should it rally and even a lower priced stock like LEND is extremely vulnerable to another sharp leg down, perhaps below $1.00.
Sorry Bulls, but without the full support of the brokers, banks and financial companies, this market is TOAST and I mean the black and burnt kind. Incineration is more like it. There is not enough strength in the technology stocks to turn this baby around. And I expect the oils and energy related stocks to rally and then come back to retest recent lows. Then again, I could be totally wrong and we could still be involved in the mother of all bull markets as we head to the moon over the next five or ten years. Do I hear DOW 36,000?
With the housing and credit markets imploding and headed toward even more dire conditions, it is full speed ahead for the reviving economy. The government stats tell us that all is well. Inflation is, well ah, non-existent and the GDP is humming along at a nice pace of about 3% growth. All is well and more jobs are being created. And even though the stockbroker firm of Bear Stearns came out and said that credit conditions are the worse in 22 years, there is still much to cheer about. Heck, what is 22 years? Nothing really. The Feds are about to come to the rescue and lower rates. Yahoo! That means that we can re-inflate the ever expanding credit bubble and put off the probable meltdown for as long as we want. Heck, this is the kind of stuff we have seen on Star Trek for the last 40 years. Spock (meaning the Fed chairman Mr Barnacle or whatever his name is) will cross circuit to "B" and the planet will be saved once again. Love it!
I think we could see some feeble attempt at a rally in the coming week or so. Whether or not it gains any steam will be determined by how much short covering is to be done. But make no mistake. So far, this sell-off looks like any other we have experienced in the last 4 1/2 years. That is what the Bulls contend. They are correct in that assessment. No serious damage has yet been done. But after this next rally attempt, we will be entering September and conditions will be ripe for a massive downturn. The Bulls will get trampled this time as they fall prey to the whims of the bullies on Wall Street. Can you spell crash? Be on the lookout for this distinct possibility. The warning shots have been fired. Look at the sell-off on Friday in the last hour--hour and a half. SCARY! The bears pulled the lever and all bullish support melted like and ice cream cone in the Sahara.
You do not get these kind of serious sell-offs time and time again without it leading to something much more decisive. Really, the props in this market have been the following: easy credit, foreign money, buyout fever, share repurchase (which by the way only makes earnings look better and adds nothing to the growth of a company), the China syndrome, energy stocks going bonkers, and people borrowing money against home equity. Are all of these or most of them going to continue to fuel the rising market into eternity? If you are a Bull, they certainly will. Good luck.
As I recall, back in the late 70's and early 80's, we saw energy stocks rise furiously. It was like many cheap energy stocks (penny type stocks) were going up 10, 20 or 30 times in value or even 50 times. Charter Oil was an example of a stock that went from $1 to $50 in a rather short time. There was massive speculation in oil companies. Everything tied to oil was blasting higher, much more so than the rally in energy over the last 5 years. There have been a few stellar performers, but it simply isn't the same as it once was. Perhaps the best is yet to come over the next 5, 10 or 15 years. Food for thought.
I have made a few trades since the last posting. But I have not been able to keep full attention on the markets to initiate many entries. And of course, I have missed some tremendous sell-offs in many of the stocks I watch. This is the prime example of when you are not looking, the best opportunities will come and go. You have to have the time and energy to concentrate on what is transpiring. This is especially true in a market that can move up or down by hundreds of points in a matter of hours. Still, there is always opportunities to make a buck. I will be looking for a bottom in some stocks like MA and some of the energies. Buy puts on BSC should it rally and even a lower priced stock like LEND is extremely vulnerable to another sharp leg down, perhaps below $1.00.
Sorry Bulls, but without the full support of the brokers, banks and financial companies, this market is TOAST and I mean the black and burnt kind. Incineration is more like it. There is not enough strength in the technology stocks to turn this baby around. And I expect the oils and energy related stocks to rally and then come back to retest recent lows. Then again, I could be totally wrong and we could still be involved in the mother of all bull markets as we head to the moon over the next five or ten years. Do I hear DOW 36,000?
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