DEADShort term sentimentsDEAD

vin · Posted: Thu Jul 06, 2006 8:35 pm Post subject: DEADShort term sentimentsDEAD

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.

vin · Posted: Thu Jul 13, 2006 2:27 pm Post subject:

The capitulation phase has shifted into high gear. The Dow and NASDAQ comp are down hard on increasing volume (my StockCharts charts and Ameritrade charts are not agreeing on this though). The S&P volume is not out yet but I suspect it will follow suit. The NASDAQ has found a new low for the year. Any shred of bad news will not be taken well. I will be very leery of any bounce as it could be sharp like the one 2days ago that fleeced me. The semis which led that head fake were hurt today finding a new low. Despite the temptation I sat tight and continue to hold AETH (what a trooper!) and MCD only. I'm eyeing BBBB, MTU, CTRP, and yes, even HD.

HenryTo · Posted: Thu Jul 13, 2006 10:09 am Post subject:

Vin,

Thanks for your take on all this and thanks for keeping us up-to-date with what you're doing in your portfolio.

At this point, I think it is too early for me to stick my head out and make a short-term call - given GE's earnings tomorrow and given the wave of earnings reports coming through next week. The SOX is doing well today, but the relative strength of the RTH is horrible. That being said, the relative strength of the RTH just made another new low and is very oversold. I believe that WMT and HD may be a buy here. Bill Miller and Warren Buffett have been buying both of these stocks at higher prices (but of course, these folks would have different timeframes than you).

I believe the scare in the semis is overdone - given strong valuations and strong cash flows from these companies. Give Intel another six months and it will once again be a company that can print money hands over fist (given is superior technology over AMD and given the release of MS Vista).

Newsflash: The intraday NYSE ARMS Index actually hit 2.05 earlier this morning. Equity P/C ratios for the last two days have both been high - with both readings over 0.80.

Best of luck,

Henry

vin · Posted: Thu Jul 13, 2006 8:29 am Post subject:

Dumped KLAC as well - maybe too soon, we'll see.
In on MCD on strong pullback in sympathy but I think this defensive stock will bounce back fast.
This makes my only 2 positions AETH and MCD giving me 33% exposure overall. I'll try to sit tight here.

vin · Posted: Thu Jul 13, 2006 7:11 am Post subject:

Despite any signs of frivolity that I display here I take my trading very seriously. I am self taught, having studied Graham, Lynch, O'Neil, Livermore and others. I tried to start out with a Buffet style type of investing but found out that it doesn't suit my personality. Slowly I evolved and embraced swing/mo trading. Despite its less than favorable reputation in some circles (tarnished by the tech bubble day traders) it is indeed a science and can lead to tremendous wealth production (e.g. Livermore).

In some ways Fair-D type regulations give the short term trader an advantage. Because of regulations much of the trading populace is fed the same story. The trick is deciding which story is the best in terms of quarterly reports, sector activity, chart appearance, economic/market trends, and geopolitical environment. The other trick is to have the discipline to sell and not look back.

Is the Buffet style of investing dead? Of course not, but unless you are like Buffet with true inside information the challenges are more daunting than ever given the speed of information available to everyone. Even those with great business analysis skills can be 'buffeted' about by an overreacting, overinformed populace.

The Buffet-style investors would wince at my trading philosophy and say that I am merely a speculator at best and a gambler at worst. But isn't the bottom line about making money? Those that take pride in being a part owner of a business can hardly be comforted by the fact that true owners know everthing about their business and call the shots. The average shareholder does not have these privledges.

So it comes down to making money does it not? Yes and no. The true investor should be interested in life improvement. If one ends up enormously wealthy but bitter and isolated then what purpose has his wealth served? Yes, we would all love to be rich and happy but just happy would suffice for most. So in the end it is part of a spiritual journey.

In any spiritual journey you must as Socrates said, "Know thyself." While numbers and business drive the markets, emotion drives them too far in one direction or the other. It is panic and frenzy that enables traders to capitalize on gains at spectrum extremes - as long as they are in control of their own fears and greed.

Now while I agree that the market economically is overdue for a true rally, even to multiyear highs, I feel that overdue will now become long overdue, and oversold will become way oversold. Blame it on geopolitics, peaking oil, the Fed, short sellers, blame it on whoever you want but again, I see a new bottom for all the major indices later this month. (I would short the market but I don't short as it takes enough of my time and brain power to practice my current trading strategy). Of course I can't predict the future but my case is not without merit. The charts speak for themselves and the individual leaders are sorely lacking.

At this point I need to return to my roots and will be out my long postions of HD and LEN today. While these are fine stocks and I'm sure I would be happy to own them a year or five from now (especially at these prices), they just don't fit my trading philosophy. And above all I must be true to myself - not to a stock. If I get to the same point by swing trading my way back up what's the difference? So I'm out now and increasing my cash position to nearly 60%. I will also strongly consider going 100% cash depending on how today pans out.

rffrydr · Posted: Wed Jul 12, 2006 11:32 pm Post subject:

And if this loose hose keeps whipping back and forth like this for another month we'll all slowly forget the horrors that have transpired.

Meanwhile Apple needs 40% to get even. We debate, but, for some, it's already over. You smelled that one, Bill.

I saw the Ipod plug-in purse yesterday. Can this product's development go any farther!?

vin · Posted: Wed Jul 12, 2006 3:28 pm Post subject:

Man, this market is just whipping around like a loose fire hose. The downtrends remain intact. The Q's have punched through and closed at a new 1-year low. Mercifully volume was down in the majors, but the depth of the descent is worrisome. While the S&P and Dow have a way to go the NASDAQ comp could reach a new low for 2006 this week. Perhaps the divergence that rffrydr spoke of is real - or maybe the NASDAQ is leading the charge down.

Frankly, this trader is feeling the squeeze - especially from some of my long positions. AETH continues to boost my mood and although down today I can't believe it hasn't been the victim of any significant profit taking. I am tempted to cut some of my long positions loose to free up cash. Again BBBB is excruciatingly tempting. The market is either seeking another bottom or lurching violently to rally. Again, I see the former taking shape.

My swing on KLAC might be short lived and the surf that was up might end up becoming a strong undertow. Maybe I should have stuck to plan and waited for the end of the week to catch a wave.

With my KLAC buy I am now about 80% exposed (magnified by a recent cash withdrawl - gotta eat ya' know?). I'm starting to feel that for a short term trader like me - this is way too much.

nodoodahs · Moderator Joined: 06 May 2005 Posts: 1862 Location: TX

I think today is a good day to buy. I'm placing some orders right now. Two trenders and one value that seemed to have placed a bottom and made a channel breakout.
_________________
He was wearing my Harvard tie. Can you believe it? My Harvard tie. Like oh, sure, HE went to Harvard.

vin · Posted: Wed Jul 12, 2006 7:41 am Post subject:

Surf's up! Yesterday's late rally might have set up a bear trap especially in the semis. It looks like some good swing trading could be here a bit earlier than I expected. Will this be just another wedge up or are we on the cusp of a tsunami? The volume yesterday makes a case for the bulls.

It's funny that just when there was some mention about the worrisome semis here that they perked up and reversed on a dime. How often do we see at the moment of maximum discomfort (or elation) that the market turns? Will this be the catalyst that leads the market upwards? I'm skeptical but I am not blind to the fact that there might be a wave to ride here (especially with panicking shorts and sidedline players itching to see their money work).

As far as my 'bold call' goes it really isn't. Mostly just a lot of hot air as I am not putting my money where my mouth is. If I was I would be 100% cash now instead of being long 50% for the last week or so. I'm already betting against myself. As a side bet I would bet it all against my prediction. Please don't get me wrong, this is merely an exercise in gauging the market as best I can as an individual. I am challenging the market to prove me wrong, so to speak, in so that I can better understand and profit from it. If my call turns out to be wrong and mid-June was the bottom then I'm about 5.5 weeks late (and who knows by what huge percentage it might be). In the real world though I am much more conservative having put some pieces on the board already (or is it my 50% cash that makes me conservative?). Anyways, I will do my best to preserve some cash for July 26th.

Just bought some KLAC on my other screen. Surf's up!

rffrydr · Posted: Tue Jul 11, 2006 5:06 pm Post subject:

Pre-CPI and Benanke testimony on 19th: that's a bold call.

dash · Veteran Poster Joined: 12 Apr 2005 Posts: 473

Henry writes:

vin · Posted: Tue Jul 11, 2006 12:22 pm Post subject:

The NASDAQ 100 has pierced the mid-June low (we'll see where it closes). The tragedy in India was obviously unforseen but very untimely adding more grease to the slide. The major indices are trending down and the NASDAQ comp is making a bee-line towards its mid-June low. I'm struggling very much not to jump in here too soon. BBBB, a great company is getting hit hard here. The temptation is excruciating. But I have to wait as I'm already early on HD and LEN. I'm trying to drill down for myself exactly when the next bounce (and hopefully rally) will start. I realize that I'll probably be a bit late (and maybe already am). The strength of AETH continues to amaze me.

On July 6th I wrote that I was worried about the next 1-3 weeks - that takes me out to the 27th. So sometime the last week of July I'm going to try to nail down this dip (and maybe some swing trades later this week/early next on a weak bounce). This makes some sense as late July is the end of earnings season and the Fed show is on 8/8. I think things will heat up earlier this time (1st week of August) because people will be afraid to miss the boat. Just for the fun of it I'm going to call July 26th as the date the market bottoms.

To anybody out there new to trading: please, DON'T FOLLOW MY PLAN. My plan might end up horribly wrong and could change tomorrow. Take what you find useful and build your own plan. Plus I am not a professional - just an average guy.

HenryTo · Posted: Tue Jul 11, 2006 9:37 am Post subject:

Thanks, Vin, for your detailed take.

The SOX and RTH underperforming in recent weeks have been making me edgy - but both the fundamentals and supply & demand dynamics (cash buybacks and cash acquistions) in the large caps is convincing me that any further downdraft here should be short-lived - especially given that the Fed should pause at or right after its August 8th meeting.

The moment of truth is getting close. With the exception of GE, this week's earnings reports don't carry too much weight. With the exception of the big guns, I am particularly interested in the earnings reports of both the retailers and the homebuilders.

Things are going to get interesting.

Best of luck,

Henry

vin · Posted: Mon Jul 10, 2006 8:54 pm Post subject:

Before I comment on the market I want to give some background. I mostly swing/momentum trade (day trading is too stressful) and carry some occasional 'long' positions. I won't post past performance numbers - who would trust them? I am outperforming the market significantly. I don't believe this is luck as I trade frequently (37 orders filled in June). I'm the little guy. The private citizen, armed with a PC trading only for myself. I'm the mosquito buzzing around elephants scooping up dollars left in their wake. Being small gives me an incredible advantage. Its an X-wing vs. Death Star kind of thing. Once in a while the little guy sees things that the big guys miss.

The major indices have revealed a stalled bounce. Again, taking out the June 29th overexuberance you are left with some pretty weak charts. The NASDAQ comp looks downright ominous and the falling knife just might indeed poke through the mid-June lows. Alcoa came in at a penny under guidance and is getting hammered after-hours. As Henry stressed in his recent commentaries these reports probably carry more weight than they deserve and could do some serious damage. Again, I see some short term pain ahead of us (and behind us if you're the Q's). Will the NASDAQ pull the Dow/S&P down with it? Who knows but I'm staying 50% cash for now.

The question then arises when is it safe to get back in the water? My guess is anytime in the next 3-4 weeks. It is madness to try to time the bottom perfectly. You will either be a little early or a little late. Or both. That's why I'm long HD, LEN and even AETH(opened position today - the chart is just too strong to be ignored) and holding cash for when it's fashionably late. Maybe I'll get lucky and hit one rock bottom.

I cannot stress enough though that my smallness gives me an unfair advantage. For example, calling market moves. Unlike a professional, who has to go out on a limb much earlier in the game, I can afford to sit back and wait. I don't have to contact anybody when I make my moves and nobody notices my moves anyway. I'm too small to matter. The weatherman has to predict if it will rain tomorrow. I can sit on my porch though and scurry in just as the first drops begin to fall. I listen very carefully to the smart guys and then tweak their message just a bit to augment my gains.

In summary, my best *guess* for the next 1-2 weeks is a quick and possibly deep move down to true capitulation then the bull move that everyone will be afraid of until it is well on its way up. I'm preparing to straddle the chasm - I just hope I don't need to be too flexible.

vin · Posted: Fri Jul 07, 2006 11:16 am Post subject:

First of all I'd like to thank you guys for responding to my post. Being new does make one shy. Some other signs that worry me are oil prices remaining high(er) and the lack of much leadership in this bounce (I won't call it a rally yet). Where are the big leaders on big volume?
Another take is earnings season. I see it as catch-22. If they come in on the upside then everyone worries about the Fed raising rates. If low then the slowing economy/Fed overdoing it scares them. Maybe in-line would be the least of all evils - or lead to more nervous uncertainty.
I still sense (<---key word here) that further capitulation is needed to have a strong move up.
Nevertheless, a good investor always hedges his bets. I'm long today on HD (a large part due to H.T.'s remarks) in case we are on the brink of a decent move up/leadership reversal; downside minimal too. I think the analysis on the overall market is spot on but maybe a bit early as rffrydr stated. Keeping plenty of dry powder on hand either way.

Again, Henry et. al., thanks for doing the homework.

"He who has a slack hand becomes poor, But the hand of the diligent makes rich." Proverbs 10:4

HenryTo · Posted: Fri Jul 07, 2006 11:15 am Post subject:

rffrydr,

Hey, I am as nervous as the next guy. Smile

Let's see what next week has in store for us!

Henry