My Thoughts IV

HenryTo · Posted: Thu Jun 30, 2005 7:18 pm Post subject: My Thoughts IV

Okay, new thread, folks. The DJIA declined below its recent lows today but the Dow Transports did not confirm on the downside - in fact, it is still 90 points away from confirming on the downside.

That being said, a lot of the indicators that I keep track of are still overbought. The equity put-call (P/C) ratio actually closed at 0.51 - one of the lowest readings this year. The market should continue to correct here. I believe the Dow Transports confirming on the downside is now inevitable, and like I said in my earlier email, I also believe the Dow Industrials will definitely close below 10,000 at some point during the next two to three months.

Best,

Henry

Gizmo · Posted: Mon Jul 18, 2005 1:14 am Post subject:

AAII Sentiment

http://tal.marketgauge.com/dvmgPro/charts/CAAIISR.GIF Shocked

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HenryTo · Posted: Sun Jul 17, 2005 4:05 pm Post subject: oil

Gizmo,

And the bad thing is - I am looking at sentiment data for crude oil right now and it is not as bullish as I thought it was (therefore, from a contrarian standpoint, not as bearish). Could the upcoming decline be partially triggered by still higher oil prices? It is certainly very plausible...

Take care,

Henry

Gizmo · Posted: Sun Jul 17, 2005 6:35 am Post subject:

Follow up to Henry's contention bullish sentiment to high from Carl Swenlin. Cool

http://www.decisionpoint.com/ChartSpotliteFiles/050715_ii.html

New Highs seem to have peaked even as the indexes continue to climb...a negative divergence.

http://stockcharts.com/def/servlet/SC.web?c=$NYHGH,uu[w,a]daclyyay[dd][p][vc60][i]&pref=G

http://stockcharts.com/def/servlet/SC.web?c=$NaHGH,uu[w,a]daclyyay[dd][p][vc60][i]&pref=G Rolling Eyes

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Gizmo

Gizmo · Posted: Sat Jul 16, 2005 11:58 am Post subject:

Spx/Gold ratio, an idea I got from Steve Saville. S&P is probably near a top if the relationship is intact.

Weekly. Tight range since 03 bottom.
http://stockcharts.com/def/servlet/SC.web?c=$SPX:$GOLD,uu[w,a]wallyyay[pa2.94!a2.60][vc60][iLd20!Lb14]&pref=G

Daily closeup

http://stockcharts.com/def/servlet/SC.web?c=$SPX:$GOLD,uu[w,a]dallyyay[df][p][vc60][iLd20!Lb14]&pref=G
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Gizmo

HenryTo · Posted: Thu Jul 14, 2005 4:43 pm Post subject: negative divergences

Gizmo,

WSB.com as dead as I've seen in awhile.

Dow Utilities down 1.06% today. S&P 400 down 0.34% and S&P 600 down 0.60%. The Dow Transports has surpassed my 3,649 point threshold but I am not budging from my position just yet.

I will write more later tonight.

Best,

Henry

Gizmo · Posted: Thu Jul 14, 2005 4:21 pm Post subject:

Message board sentiment (not this one) is as frothy as I've seen it. God forbid someone should point out a negative divergence. LOL

Advance/Declines were negative today. 14 July

Advances & Declines
NYSE Nasdaq
Advances 1496 (43%) 1345 (42%)
Declines 1786 (52%) 1676 (52%)
Unchanged 151 (4%) 176 (5%)

http://www.ttrader.com/mycharts/display.php?p=35295&u=gizmo&a=Gizmo%27s%20Charts&id=1154

http://www.ttrader.com/mycharts/display.php?p=35296&u=gizmo&a=Gizmo%27s%20Charts&id=1154
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Gizmo

nodoodahs · Moderator Joined: 06 May 2005 Posts: 2408

One argument for "buy and hold" is the total return of individual stocks, vs. the index.

Check the charts for NUE or COP vs the S&P500 over the time S&P500 went from 1500 to 775. Don't forget they pay dividends, too. Neither of those were exactly on anyone's broker's "hype list" in early 2000.

It's looking at stuff like that, which convinced me I needed to invest in (1) value and (2) individual stocks, not the market.
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Gizmo · Posted: Tue Jul 12, 2005 11:08 pm Post subject:

The total put to call includes index options which skew the implications of a high or low reading since index options are often used to hedge an existing portfolio. Equity options are more likely to be either a purely bullish or bearish bet.

Well, I'm definately guilty of being a short term trader as I use the Rydex Dynamic funds which are leveraged 2X the target index. Buy and hold was over for me when I watched the Spx go from 1500 to 775 and the Naz from 5000 to 1200.

Frankly, I expect those lows to be retested sometime.
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Gizmo

nodoodahs · Moderator Joined: 06 May 2005 Posts: 2408

Gizmo -
http://finance.yahoo.com/q/ta?s=%5ENYA&t=2y&l=off&z=l&q=l&p=&a=&c=
I'm not seeing a great correlation between NYSE return and the NYSE "new highs" chart. Yes there are some reversals at that level but several areas where NYSE took off at that point.

Henry and Gizmo -
Please explain or point me to a source on the full implications of the Put/Call Ratio.

I dislike: perma-bears, perma-bulls, and perma-frost. I am in the habit of deleting lots of email from sites pushing gold, etc., and my wife and I were just discussing this morning the persons who are still waiting for the "huge stock market crash" - not to mention all the persons on the safehaven email thread who are anticipating mass starvations throughout the developed world as we hit "peak oil." Was it Jesse Livermore that said there was a bull side, a bear side, and a right side to the market?

I'm mildly puzzled by permanent contrarians as well. I tend to be contrarian but not intentionally so, my thinking is just "different" and I have different time frames and values, so instead of researching GOOG or YHOO I'm planning to research Votorantim Cellulose and Highveld Steel & Vanadium - not because no one's interested but because I see potential from the first screening. Bottom line, a permanent contrarian would starve to death in high school, having never followed the crowd to the cafeteria ... being contrarian for contrarianism's sake is as blind as following the crowd ... well, almost.

I tend to initiate positions as soon as I find a stock that I believe is undervalued enough, with solid financials, to have a good margin of safety. Since I am playing with money I won't need in the next couple of years and I plan to hold the stocks until the valuations are just silly (either from a change in financials or a change in price) or the company gives me too many red flags for comfort, I don't mind if I have to ride down to ride up. I dislike stop losses for the same reason, as Peter Lynch says, a 10% stop loss is a guarantee you'll lose 10% on that trade. Case in point is NEU. Perhaps if I had seen the massive short action coming I could have bought at the low point ... but I held on through the low and now am ahead again.

Maybe I'd benefit by being more of a trader?

I agree if DJI falls below 10K in the next couple of months, the cautious bears will bail. Now, I'm just as likely to be wrong as the next guy but I don't think that will happen. Even if it does, it wouldn't make me change my current long positions.
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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.

HenryTo · Posted: Tue Jul 12, 2005 8:57 pm Post subject:

Bill,

I think too many of us are only focusing on the ST - and that is definitely my fault as I have been more of a trader than a buy-and-holder ever since we started this commentary. At some point, I will want to be more of the latter - but for now, the market isn't letting me yet!

While I am not going long right now, I am not in the perma-bears camp either (in fact, Gold Eagle has refused to publish our latest weekly commentary on our website). I don't see this cyclical bull market ending yet, even though I am relatively cautious on the ST. For me, I've always liked to initiate positions while the market is oversold - more often than not seeing immediate profits instead of having to wait a while. I think buying here would definitely lessen your chances of making money in the next several months.

I am looking for a dip to DJIA 10,000 (or slightly lower) in the next several months. This won't be the end of the world but for the cautious bulls who are long when the DJIA hits 10,000, things may get too emotional for them to hold on (and I have been guilty of this in the past) - especially if the perma-bears are calling for a crash again. Also, DJIA 10,000 is just my neutral and a moving target. And I tend to be better at calling bottoms when I have no long positions whatsoever in the stock market.

The complacency in the equity put/call ratio is just amazing. 0.42 on Friday, 0.50 yesterday, and 0.46 at the close today. The 10-day moving average is now at 0.52 - the lowest since January 2004 (not 2005)!

Gizmo · Posted: Tue Jul 12, 2005 8:25 pm Post subject:

Bill

I have not gone long yet...perhaps on a pullback. In fact I am short Spx from 1212. Seeing signs of excessive bullishness but it may continue as investor willingness to take risk is high and increasing.

Negative divergences starting on S and P

http://www.ttrader.com/mycharts/display.php?p=35242&u=gizmo&a=Gizmo%27s%20Charts&id=1154

Nyse new highs are at an area of previous reversals

http://www.ttrader.com/mycharts/display.php?p=35243&u=gizmo&a=Gizmo%27s%20Charts&id=1154

Naa50r

http://www.ttrader.com/mycharts/display.php?p=35244&u=gizmo&a=Gizmo%27s%20Charts&id=1154

Equity put to call too low=excessive bullishness especially the blue line 21 day moving average.

http://stockcharts.com/def/servlet/SC.web?c=$CPCE,uu[h,a]dacayyay[de][pb21!a.40][vc60][i]&pref=G

I need to see some easing of frothiness before I go long.
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Gizmo

nodoodahs · Moderator Joined: 06 May 2005 Posts: 2408

I have no plans to go long untill the 10EMA crosses back above the 34EMA.

http://stockcharts.com/def/servlet/SC.web?c=$NDX,uu[h,a]dallyyay[dd][pc10!c34][vc60][iUb14!La12,26,9]&pref=G

Gizmo - are you long now?

Henry - do you think the blow off top is happening without the correction? Or do you think this is for real? I know the transports haven't hit your "may reconsider" target as of yet ... How big a correction do you anticipate? As mentioned here http://www.marketthoughts.com/forum/viewtopic.php?t=584, I don't really see a lot of instability at the moment and I'd wager (actually, I am wagering) that we won't see any major dips in the S&P this quarter.

http://stockcharts.com/def/servlet/SC.web?c=$spX,uu[h,a]dallyyay[dd][pc10!c34][vc60][iUb14!La12,26,9]&pref=G

I'm not a chart guy but the above S&P 500 chart looks mildly bullish to me.
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HenryTo · Posted: Sun Jul 03, 2005 1:25 pm Post subject:

Gizmo,

I saw that too - I didn't know if it was free or not so I didn't post it - Carl Swenlin has been right on the money recently. Thanks for posting it.

But subscribers should know that this is very much a longer-term indicator and so this shouldn't negate the "blow off" scenario. In fact, a "blow off" scenario is only possible under a much more narrow stock market - and so this will actually fit in with my blow off scenario.

Hopefully that made sense. Confused

Henry

Nice choice of pictures!

Gizmo · Posted: Sun Jul 03, 2005 1:14 pm Post subject:

Small-Cap Participation Narrowing
by Carl Swenlin

http://www.decisionpoint.com/ChartSpotliteFiles/050701_SmCp.html
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Gizmo

Gizmo · Posted: Sun Jul 03, 2005 1:04 pm Post subject: