Birchtree's Account Talk

[Birchtree]

Re: Birchtree's account talk

Well that darn oceanic account just posted a devaluation as of yesterday of down $182K. The holy grail allows me to absorb this devaluation - my sacrifice for staying long to collect income for dividend reinvestments. I'm back on the comeback trail again - sound familiar? We have now corrected 10%, but historically when this has happened we end up doing at least 14% - we'll see. The internal bottom may already be behind us.

 

[Birchtree]

Re: Birchtree's account talk

Bull markets tend to build extended and often deceptive tops while bear markets tend to build definite and identifiable and faster bottoms. Every bear market in history began as a 10% decline from a bull market high. But this doesn't mean that every 10% decline is the beginning of a bear market. For those investors who worry that the current correction automatically means that worse things are coming, consider the last time the Dow suffered a 10% correction nearly 5 years ago.

Market declines have called 11 of the past 6 recessions. As of last Friday, 483 S&P 500 stocks have reported third quarter earnings numbers. The total share weight year over year earnings growth currently stands at -2.6% maybe actually -3.0%. Financials have been the biggest drag for the S&P 500, with earnings declining 25.6% from the third quarter of 2006. Because Financials make up such a big portion of the index, it's easy to see why overall growth is negative. I think the weighting is around 25%. While 3 sectors have negative Q3 growth, the other 7 have solid gains.

Most bull markets put in a serious fake to the downside before they finally exhaust themselves. We have set the stage for a real blowoff into 2008.

 

[nnuut]

Re: Birchtree's account talk

"Most bull markets put in a serious fake to the downside before they finally exhaust themselves. We have set the stage for a real blowoff into 2008"
Or----repeated fakes to the upside! Look at the charts!

 

[Birchtree]

Re: Birchtree's account talk

Since 1901 (106 years) there have been 33 Novembers when the DJIAs were down. 24 resulted in a December rally, 4 resulted in an unchanged market through December. 5 resulted in a continued decline through December (1914, '20,'30,'31, and '41).

 

[phillyfed]

Re: Birchtree's account talk

Since 1901 (106 years) there have been 33 Novembers when the DJIAs were down. 24 resulted in a December rally, 4 resulted in an unchanged market through December. 5 resulted in a continued decline through December (1914, '20,'30,'31, and '41).

Glad I didnt see 1926-27 in there ......Great info as always. Thanks

 

[fabijo]

Re: Birchtree's account talk

Birch, you need to express some bearish sentiment to really push everyone out. I want to see what percentage of people move to G the day you say the bear has come. C'mon, just do it. I know you can.

 

[Birchtree]

Re: Birchtree's account talk

fabijo,

I'm only negative on the small caps for the intermediate future. Yesterday's recovery left the blue-chip average down 8.5% from its record of 14164.53, set in October. It is up 4% in 2007. The SPX is up 0.7% for the year. It is down 8.7% from its October peak. The Russell 2000 (R2K) at 743.27 remains down 5.6% for the year and 13% below its record, set in July. In most rallies the small caps have been the leaders - but not this time around.

 

[Bullitt]

Re: Birchtree's account talk

The Dow Theory sell was only a signal - one that I am going to ignore.

Just another head fake signal to get us to sell low and then buy high later on. Smart money is buying at the Dow Theory Sell Signal.

 

[Birchtree]

Re: Birchtree's account talk

A large portion of bear market loses occur while investors are still denying the probability of a recession. By the time that a recession is well recognized, significant damage has already been inflicted. The basic feature of bear markets is that they maintain the hope of investors all the way down. I think the correction is over. The last time we had a better than a 10% correction was in 2002. From November 29 th through March 12, 2003 the Dow dropped 15.1%, closing at 7552. The bull market that survived that test went up 3,000 points after that. I rode the S fund until Feb.'04.

From TWSJ by Peter McKay - 11/28
"Wall Street has recently gone from expecting a 12% rise in fourth quarter S&P profits to a modest 1.7% gain. No surprise, the financial sector has suffered the biggest downgrade in expectations, from a 10% gain to a 26% decline, roughly the same as the sector's third-quarter results.

Expectations for the consumer discretionary sector, which includes everything from automakers to home builders to luxury retailers, also have fallen sharply. But analysts are still looking for a hefty 13% rise in fourth quarter profits from the sector. Thompson research director Mike Thompson says the numbers seem to reflect the widely held belief that everyday Americans' purchasing power has remained robust because low unemployment so far has helped cushion the blow from falling home prices.

If the fourth-quarter turns out to be a second straight quarter of declining profits, it would constitute an "earnings recession", according to the same standard that economists use to judge the broader economy when they look for two straight periods of declining output.

The last time there was such a profit downturn, it lasted for more than a year, from the beginning of 2001 to early 2002. During that period, the S&P plummeted more than 13%, and the overall economy briefly tipped into recession as well." History will not repeat.

http://www.online.wsj.com/public/us

 

[Birchtree]

Re: Birchtree's account talk

The Dow is currently up 283.05 and I'd dearly like to see another 220 points added during the last trading hour. Now that would attract some press and more buyers. We are in new territory for the current bull market. The last time the Dow corrected 15% in March 2003 - it rallied up 3,000 points in about ten months from a low of 7552. A 3,000 point run from this current level would take no time at all. I need 2,700 points before the year ends to keep the cream pie off my face. Now that would be electric. Snort.

 

[Tempest]

Re: Birchtree's account talk

The 'I' fund?

 

[Birchtree]

Re: Birchtree's account talk

Just a little nibble - up to perhaps 15% via DCA and then back home.

 

[Birchtree]

Re: Birchtree's account talk

The oceanic is loaded and on the come back trail. The last two days have been very beneficial. Two more only mediocre days and I might achieve my first ever $100K week and a four day week at that. Hedge funds are very light on the long side. The last two corrections have been a sideways movement in an otherwise intact longer-term bull market. Soon it'll be get us in at any price.

 

[Birchtree]

Re: Birchtree's account talk

On Wednesday 1/24/07 the NYSE ratio adjusted A/D (RA-AD) line record high set in early 1959 was broken. Elliott wise, this move to new all time highs on the ratio adjusted NYAD changed the current Dow count from being Intermediate 3 of Primary 5 to Intermediate wave 3 of Primary 3 to the upside. Suffice it to say the Primary 3 waves can last for years. We may be in the final completion stages of finishing Intermediate wave 2 of Primary 3. One historical trait of new highs in the A/D line, is any ensuing price correction is muted. When price and the A/D line top out at the same time, there has never been a price correction significantly exceeding 10%, as measured by the SPX. The current decline has brought the NYAD (RA-AD) back close to but not below the breakout line from 1959. If we continue to bounce from here we are on a bottoms above bottoms pattern. I think we will hold the 48 year test of time. Since 2003 there have now been 5 pullbacks with the SPX losing in excess of 7.5% from top to bottom using intraday numbers. On four of those pullbacks the SPX went on to record bull market highs. Get ready for the next Fed inspired rocket ride to SPX of 1600. All of the investors who have been sitting on their hands waiting for the world to collapse will be disappointed, because it ain't happening. And the folks sitting on their cash are going to rush back into the market. We have not seen the individual investor at all in the bull market since 2003, but we'll see them jump back in at some point during the next 12 months. You're going to see real mergers come in, and it will be for stock, not cash. Snort.

 

[fabijo]

Re: Birchtree's account talk

1600 by year's end.

 

[Birchtree]

Re: Birchtree's account talk

You must be aware and understand the fact that we are going to see frightening retracements the higher up we go. Bull markets do not like company and the higher we go the stiffer the pullbacks will be to make sure that not everyone is participating as we continue to move higher and higher. Anytime the VIX moves below the 89 day SMA Bollinger band, we've had some nice bull moves.

Disaster is nothing but opportunity knocking in disguise. The bottom line is that disaster hurts the majority but provides huge hidden opportunities for the astute investor. In the end that's what investing is all about; the well trodden path the masses take for the hidden path that's almost invicible. A properly allocated portfolio doesn't need to be regiggered everytime the weather changes.

 

[Birchtree]

Re: Birchtree's account talk

Watch the angle of ascent longer term of the NYAD - the more the acute the angle, the more powerful the trend of money flow is. We are at the most acute angle right now where the only real comparison was in the 2003 period the same time in which both the 9 month and 4 year cycles last bottomed together (from March forward). This market is screaming higher and nothing is going to stand in its way.

As we come ever closer to the epicenter of Primary 3 it wouldn't be out of line for the market to generate the power of a parabolic rise that would be expected during such a time. Center of Primary 3 dead ahead - the bigger the raw points we'll see in relation to the percentage moves - as we move closer and closer to the epicenter, and will see multiple days of large point gains. If we are accelerating into Primary 3 up there will be lots of time, and many points, to catch in this move. With the idea that Primary 3 is still in its early stages of unwinding to the upside as it relates to the NYSE group of stocks, we will see many multiple 3 digit Dow up days in a row in the future. The train is again leaving the station and I'll be running up front once again.

 

[Birchtree]

Re: Birchtree's account talk

The Dow Utility index will place a new all-time high at 535.72 - should do it easily next week.

 

[Birchtree]

Re: Birchtree's account talk

http://www.financialsense.com/editorials/swenlin/2007/1130.html

 

[Birchtree]

Re: Birchtree's account talk

Breadth is narrowing as a secular shift evolves to large caps from small caps. Mega cap multinationals are early leadership stocks and are likely to maintain the markets' bullish bias. I would be concerned by a violation of the August intra-day lows followed by a failed rally. So far that hasn't happened. That would be a particular concern if the 50-day moving average of the Dow were to violate the 200-day moving average. A failed rally would position the indexes for a lower low and a lower high, which would define a new downtrend.