DEADShort term sentimentsDEAD

[vin]

New here – mostly swing trading. I’ve been searching for a serious site and believe I have found it here. Mr. To’s commentaries are excellent. Let’s cut to it - I for one am spooked short term (1-3 weeks). Here are my reasons:
First, the current rally just doesn’t seem to have teeth. The move up on June 29 seemed exaggerated. It was just a big ‘Hurrah, the Fed did what we expected.’ Many read a future pause into Bernanke’s statement but who knows? It’s almost as if the market ‘willed’ a rally.
Second, after this delayed follow through day the major indexes responded with a pullback on increased volume (modest in percentage loss).
Third, two days prior (June 27th) all three indices had what I call a ‘heave day.’ They climbed over the previous day’s high only to close lower than the previous day’s low – all on increased volume.
Fourth, there was no doubt some end of the quarter window dressing and short covering.
What has happened since? Some call it consolidation; I call it distribution and selling into bounces. The accumulation volume has been anemic. Although the holiday week clouds things the leading events remain.
Lastly, the most important thing is the gut. Something makes me feel very uneasy (see below). Maybe it was the synthesis of what I mentioned above; maybe I am worried about locking in gains on this recent move up. Nevertheless, I liquidated everything except LEN as I don’t think homebuilders can get beat up much more (gee, wonder where I got that idea?).
North Korea lobbing missiles into the sea doesn’t help. I think there will be one more shakeout before we test old highs again. I don’t know if we’ll sink to (or below) the mid-June lows, but it could be painful. Predictions are pretty much worthless until events transpire. I’m only building an arguable case. The market doesn’t care or need reasons to steamroll every naysayer out there. Let the tape decide.

Side note: I was reading my Bible before the market opened and came across these verses:

“With her enticing speech she caused him to yield, with her flattering lips she seduced him. Immediately he went after her, as an ox goes to the slaughter, or as a fool to the correction of the stocks…” Proverbs 7:21-22

I don’t claim to have divine intervention on my side, and starting my day with this verse might have been what spooked me. Take it for what it’s worth, but the wording in this verse is uncanny in its application to bulls running up a blind (r)alley. The Bible remains the best book on investing ever written (not to mention the invaluable spiritual content). If you don’t have one, get one.

[nodoodahs]

I'm about 75% long and 25% cash, having been stopped out of a couple of positions. NUE may be dropped as of tomorrow morning, big gain and long-term but it's sitting just below its trendline.

Waiting for resolution of the triangle on the S&P.

Take note, there are bullish divergences on the S&P 500 for RSI and PPO(MACD). Chart it out from June to July peak to peak.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[vin]

OK, I can't sit tight. In on MTU 15 minutes before the buzzer. She's been beaten up too much and should bounce as well. My exposure here is pretty steep (about 75% of current capital, exaggerated by recent cash withdrawl).

[vin]

My head is swimming. When I started the day I thought, "OK, bounce ahead, sell into it." Easy enough, strategy ready to roll. But something ate at me. I could sell now and have a respectable gain for the day and be even for the month (nothing to brag about but it beats an index fund!). Then the voices came. "This is it," they coo, "the market is turning, we are headed for the moon! Buy more!" Then there's, "No this is just a head fake! Get while the gettin's good!" OK, so I'm schizophrenic. And so then is the market. There is just too much info out there to process right now. War, earnings, inflation, Japan, North Korea, Iran,... the India train bombings seem like months ago already and Iraq is just a given. Everthing seems accelerated, even last weeks market slide.

So where do I go for clarity? I know. I look inside myself and also listen to the wisdom of the past. My past advice ("bounce ahead") and of traders long gone ("It was never my thinking that made big money for me. It was always my sitting. Got that? My sitting tight!" - J. Livermore). This bounce, if it indeed is a bounce, will not be a one day head fake but it will be sharp.

I must focus on this bounce and my postions and nothing else. Sit tight.

That's better. Sorry if this has deteriorated into a personal blog of sorts. Hopefully at least some readers are entertained.

Now then, for clarity. Sitting on AETH, MCD, CTRP. Not even looking at any others (well not obviously). Any robust enthusiasm will be sold into - which isn't today (not even for MCD, not yet). Even as I write this in the last hour of trading the markets are floating around the unchanged line with low volume reflecting my indecision.

[rffrydr]

[dash]

Volume is picking up, and no bullish divergences are forming. No sign the June lows will provide support. Sell-off looks to be gaining momentum.

[rffrydr]

SHOP TIL WE DROP

Last I heard we're looking for 9% this quarter, first single digit increase in 17 or so doubles--usually surprising doubles. SP downgraded year-end taget from 1385 to 1320...well within the perview of an Aussie t-bill.

HOmes are holding value (minimal declines masked by builder "incentives"), the consumer (absence) has yet to be appreciated and will take away more than expected.

The combined power of doubles on homes and stocks, cheaper goods from China et. al., a spendthift generation and coporate cash hoarding has made for some very heady times indeed. Everyone's rich. And by definition....

We got that wicked up move on options expiration last but the bull is bleeding. Could set up strong reversal on CPI. Or, rally come monday, watch out. Broadly speaking we never got the "requisite" 10% down two years in. It was all "rolling rotation." The "excesses" are not out. I'm with Goodfella, 1185.

The "news," a MidEast decaying before our eyes means nothing--until it means everything. True, we've become used to a rocky world scene (India Sensex rallied off the bombings last week) At some point however shopping our way out will not be a solution. Getting Real.
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Today is the Tomorrow you worried about Yesterday!

[vin]

"No, just screaming." Good one rffrydr.

Nevertheless, here are my Top 10 reasons for a bounce the first half of next week:

1. VIX rapid rise
2. Dow bouncing off mid June low (more or less)
3. Quick and deep down turn seems exaggerated
4. Persistantly elevated put/call ratio
5. Quarterly contributions to db pension plans due
6. Decreasing chance of Fed rate rise
7. Israel conflict unlikely to escalate and investors will be numb to this event
8. We need a breather before we trudge down deeper
9. Scared shorts

OK almost 10. I know some are VERY subjective, but they count in my book. Henry gets credit for #5 and had a few more good ones in his latest mail. Of course the market needs zero reasons not to bounce.

I will be selling hard and fast into this bounce as I believe it will be very sharp. I am strongly considering full liquidation.

[dash]

Conflict in the Middle East is more of an excuse than a reason to push the market lower. We need a reason for a selling climax, and political uncertainty always delivers. Oil was already high, and headed higher, even before things began to escalate, and the possibility of a full-scale conflict involving Syria and Iran, is beginning to be priced in.

Ultimately all this will have little to no effect on corporate profits in the US, which continue to rise a double-digit rates, taking us back to valuations last seen in '94, which also coincided with a peak in Fed hikes.

I never imagined that the investment opportunities offered then would happen again just 12 years later.

[nodoodahs]

Higher lows on $spx and $indu, lower lows on $compq.

I think $spx has more room for a bounce than $indu, and the $compq looks like toast. Never a downturn as swift as this one on the $compq 3-year chart.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[rffrydr]

No, just screaming.

I saw a fan get "intimate" with a rider at 35mph a few years back. If ever there's a reason for "domestiques" in a sport, this is it.

Floyd is riding the most grueling sports event in the world on a hip going to be replaced after the finish. French in their unquenchable attack on Armstrong have unintentionally knocked out all the favored European cyclists, setting up---you guessed it, the americans! God Bless.

Goodfella, where are you hiding?

[vin]

VIX steeply ramping up. Market screaming bounce! - early next week. In on CTRP which has held up well overall but weakens in sympathy only to rebound strongly and could even rebound independently.

[HenryTo]

Vin,

I think you may have hit the nail right on the head with your late July target of a capitulation bottom. All the ingredients are there - as long as the latest Middle Eastern conflict doesn't turn into full-scale war (in which case we will also get capitulation, but probably much later such as the end of this year).

Best regards,

Henry

[vin]

The Tour de France has a new leader - American, Floyd Landis. For those of you who not familiar with the bicycle race it occurs every summer and lasts 23days (including 2 days rest). Many of the stages are over 100 miles through huge mountains. During the most difficult climbs the fans are allowed unlimited acces to the riders, running along side them, cheering (or spitting) at them, and slapping them on the back. Nowhere in professional sports do the fans interact so closely with the athletes. If you get a chance, catch a stage in the coming days. The race has moved into the tough mountain stages. Men have died in those mountains. They can reach up to 65mph on their descents. The next couple weeks will be grueling - and exciting. Kinda sounds like our market.

As Henry mentioned these are times of discipline. A swing/mo trader must justify each and every one of his holdings each and every day - even more so in this environment where cash is king.

AETH - incredibly tough. During the market's May descent it ran flat. In June it rocketed through the June swoon. It has shown incredible strength under enormous pressure. Yesterday it had a 'reverse-heave' day where it saw lows lower than the preceding day's low but ended up closing higher (or just at) the previous day's high - all on increased volume, all during a market slide. This event has preceded strong moves up in the past. They say that the bear eventually comes to get them all, but a few escape. This one might see some dings soon, but it has weathered the storm. Even in bull conditions it would be a star. VERDICT: hold.

MCD - this one I'm less confident on. Being defensive if there is any buying soon it could see a quick ramp up. With any strong move down though it will be cut loose fast as the market might enter into a panic phase. VERDICT: hold but watch closely.

I don't use stops as I cut a POS promptly if I see the writing on the wall. If anything I probably sell faster than any stops I might put in place. Everbody needs insurance. Stops, options, dollar cost averaging - whatever. My insurance is the discipline to sell - even if early on a winner. That way my gain is secured and I can than move on to the next POS that is earlier in its momentum and has greater potential.

[HenryTo]

Our stop at DJIA 10,805 for our 100% long position in our DJIA Timing System remains intact. Note that this position will be liquidated if the DJIA breaks below 10,805 on an INTRADAY basis.

Discipline needs to be enforced - and now is one of those times.

Best of luck,

Henry

[rffrydr]

B. Miller likes HD because: ‘It’s gone from a 30 multiple at the beginning of 2000 to a 10 multiple now. The earnings have doubled in five years.’ His risk is that he's on the wrong end of a long, long cycle: Real Estate. HD doesn't make a product. It serves the great HOUSING GOD. As love turns to hate, homes will (re)turn to houses. And at $85 for a 20ft 1inch copper pipe HD may just be a long, long time before it's a "product" again.

They've been moving into convenience stores by-the-way.

The key stat of the day, IMHO, $XOI: punked relative to oil. This secondary rally in Base Materials turned only today. NUE's gonna give me my money back: shorted on Schnitzer's earnings (double revenue and NO MORE profit.)

Sorry guys, gotta break ranks here.