Birchtree's Account Talk

[Birchtree]

Re: Birchtree's account talk

The weekly NY composite A/D MCSUM is currently at +1390 and below its' 13 week EMA - but not for long. It was at +1500 for several weeks before it rolled over. The +1500 level for this indicator has been an initiation thrust zone and we can expect much higher prices over the months ahead due to the strength in this tool - so says my good and close friend Sugar. Check out the bear cave for today.

 

[Birchtree]

Re: Birchtree's account talk

Hedge funds are short-selling the S&P index futures by the most in three years - this should be viewed as a contrary indicator and readings continue to be bullish for stocks. Tomorrow may show us even more short covering - it's good when blood runs on the street. According to Standard - Poor's, stock buybacks among S&P 500 companies accelerated in the first quarter to a record $117.1 billion, a 17.5% increase over the same period a year ago. I wonder how much green I collected today - never mind, it's tomorrow when the real money will be earned.

 

[Birchtree]

Re: Birchtree's account talk

Read with due caution because these are the lurid musings of an ole Bull and his hoof romping buddy Ferdinand.

The center of Primary wave 3 is on the distant horizon - the bigger the raw points we'll see in relation to the percentage moves as we move closer and closer to the epicenter and we'll see multiple days of large point gains. If we are accelerating into Primary 3 up there will be lots of time, anf many points, to catch in this move. As I remember wave 3's have several characteristics that accompany them - the two basic components are that you will always see the best breadth and volume ratios during 3rd wave structures and that sentiment is the fuel that pushes third waves in their direction. Both the raw and ratio adjusted NYAD lines are at all time highs. Wave 3's always break a key technical price structure in its wake. 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. And just in case you think I'm kidding there were 20 days in 2002 of wave 1 when the Dow was up more than 200 points, 6 days in 2003 - but this does not include all those days when the Dow points were up over 100 points but less than 200 points. The periods of 2004, 2005, and 2006 were primarily wave 2 base building years and the longer the base the higher the bull move will go. Noe I know nobody believes a word of this but it matters not because I do and my money is where my mouth is - thanx.

On July 13th both the DJIA and DJTA closed at, yet again, all time highs, and in doing so the bullish Primary Trend was reconfirmed once again. So according to Dow Theory, the Primary Trend will remain bullish until both averages move below their previous Secondary Low points. The surprise for the rest of this year may be a rising dollar - as the market starts to discount lower economic growth in the Euro zone and the major commodity economies. Already France is unhappy with Germany because the strong euro is hurting their exports. Be happy I say and simply buy American products that are cheap - and buy some cheap stock while you are at it. After all we are still in the first quadrant of a new 4-year cycle that is not due to bottom until October 2010. Don't be in a rush - learn before you churn.

A key question for 2007 may be whether P/E expansion occurs because the "P" goes up or the "E" goes down. Higher quality stocks have outperformed during every period of P/E expansion in the past 20 years. A properly allocated portfolio doesn't need to be regiggered every time the weather changes. I may have said this before but it bears repeating. When the ratio adjusted NYAD line went to new all time highs the wave 3 up changed to Primary degree instead of intermediate degree. So who cares - Primary degree would gives us upside price objectives that would make some shake their heads in amazement - prescient?

In bull markets, consolidations like we saw in Feb and June are referred to as digesting the previous gains. It's a way for the market to take a breather. Every time we get a decline the TRIN moves higher and everytime we get a rally the TRIN moves higher as well - this is the perfect signature of strong advances where we are continously correcting excess on the fly - we don't need to move lower, all we need to do is make people anxious and shake up the cluckers. We've had multiple small point changes in all indexes. The small point change rule never tells us exactly in which direction the price pattern might move to once triggered only that there is near term compression as it would apply to the balance of buyers and sellers. If we get more than 2 days in a row, the likelihood of a daily large move reduces but actually becomes more of a multiday to weekly move. The market will not stop here. We still have a couple years of a healthy market left in this bull run.

 

[Birchtree]

Re: Birchtree's account talk

Continue with more caution because these are more lurid musing...

The bull run since 2003 has occurred even though individual investors have not been big buyers of U.S. equity funds. When the public finally starts buying, and a 283 point gain sends out a message, it will be in a stock market with a smaller supply of stocks, causing an equity supply shock. That will be good for the longer term buy and holder. The yield curve over the last year has been saying economic slowdown while the stock market's P/E continues to express relatively unqualified exuberance. And as a certain peculiar member monitors the VIX it must be remembered that a fatuous process yield, necessarily, fatuous results. A top is not yet confirmed by the VIX for the S&P.

Now that we have taken out the highs on the SPX there is a high percentage chance that a new (and continuing) advancing price trend is underway. Buy and more buying has been the easiest trade during this sequence. Right now only breadth plurality matters - price is secondary - as breadth leads price and price can take its time in catching up to what breadth is telling us with the NYAD line at new all-time highs again. And the longer it takes to do so, the quicker and more dramatic the move we eventually see. So at this point higher prices will more than likely continue to be seen with the benefit of breadth confirmation. We are now in the middle of the 3rd year in the 4 year Presidential Cycle and, on average, the strongest by a wide margin. Since 1928 the SPX has been up every 3rd year except 1931 and 1939. The average gain has been 15.5%. Since 1955 the average 3rd year cycle performance has been 18.4%. A 1670 SPX is only 120 points away. Common technical knowledge states that the longer the channel formation the more powerful the final move is - like 283 points or 28 points on the SPX.

The current composite NYSE weekly A/D MCSUM configuration greatly reduces the probability of any major price damage over the next several weeks and the probility of further price gains over the next couple of months is favorable for the bullish case - so says Ferdinand. The NYSE weekly composite A/D MCSUM is currently over +1400 and is still rising. Weekly composite NYSE A/D MCSUM values this high are not common every day events. Significant price declines do not commence when the weekly A/D MCSUM is rising and comfortably above +1200. Before a serious price decline begins, the weekly A/D MCSUM is already declining. The odds of remaining long and profitable for the three months following a +1400 A/D MCSUM breach are historically favorable. Liquidity continues to be the main driver of new highs. The speculative money from the public will enter the market - it is just a matter of time. Once the 12.47 billion short shares are burned off, only then will the market possibly top out.

And for those not familiar with my bravado and style here is my holy grail. The wealthier you are, the more you will be able to focus on making long-term incestments and withstand short-term shocks in the equity markets. Words of wisdom: in oreder to really learn anything in this game you have to take it on the chin from time to time or be flat run over by the train. There will always be another day. Herds, as a rule, make for poor investors. You can't find refuge in the herd. And you must resist the urge to join the crowd. Perspective and patience are rewarded.

 

[Birchtree]

Re: Birchtree's account talk

I did leave a mess of manure. But the sweet smell of superlative manure wafting over the board is so fine. The Fed's PCE dropped to 1.9% in May, below the 2% ceiling of some Fed officials's comfort zone. But including food and energy, inflation was still 2.3%. Don't most of us remember 1982? So the question becomes, how will that gap be closed. It could be more likely that the gap would be closed by core inflation moving toward headline inflation. I'm taking the opposite view - headline slowly moves toward core and interest rates remain stable. Watch Uncle Ben this week and see if he wiggles. I say on to Dow 15,600 we go.

 

[Birchtree]

Re: Birchtree's account talk

"What is interesting is that these chaps (small investors) are taking money out of mutual funds that invest in U.S. stocks and deploying into international funds. The small chapo is always late to the party, international markets have been on a tear for months on end and the small chap decides to join the party now. In comparison to many of the world wide indices the Dow appears to be pretty cheap; it's number 65 in the list of top performing markets and we suspect that many world wide traders will slowly start to sell their positions as the small players flock in."

http://www.[[financialsense.com/fsu/editorials/ti/2007/0715.html

 

[Birchtree]

Re: Birchtree's account talk

I found out today that one of my larger stock positions is being bought out. That will give me the cash I've been needing to do more buying - you see I'm trying to buy myself into happiness. I peeled off some LYO (what a sacrifice) and bought: ALY, GBX, RRI, WAB, B, BBG, AE, EXM, FOE, GPX, HHS, HEI, KMBG, KRO, LG, LBY, LII, LDL, MLAB, ODC. I'll be buying on a regular basis for the next few weeks - not waiting for any correction to develope. I certainly don't mind buying on the way up. I will more than likely use up my 400 trades by the end of the year - that feels so good. I mean we may be looking at another 1400 Dow points in the blink of an eye. European investors are headed our way and are buying stock - some impressive numbers released today from Trim Tabs. Ferdinand says his seismograph is picking up some serious hoof vibrations and they aren't coming from Japan. Get ready for some serious rocket fire.

 

[Birchtree]

Re: Birchtree's account talk

Went in this afternoon when the Dow was down substantially and peeled off some more LYO and bought: PFE, MSB, NBR, NGS, NHY, SEN, SLI, AOS, SUP, SYY, TLM, UDRL, WLL, INT, APL, and PVR.

Hey Ocean,

Have you been watching CSX - it was a blow out day for trains. I believe I made more green manure today than the last two days even with the market down. Very picky market at the present time. I've got twenty more buys on my list and then I will have to start over. Tomorrow should be a wide rebound day now that Uncle Ben really has nothing new to say.

 

[GGal]

Re: Birchtree's account talk

Taking notes....Thx.

GGAL

 

[anthony]

Re: Birchtree's account talk

My portfolio redeemer over the years has been the concept of dollar cost averaging - especially during the down times where one can really pick up some great pricing and even more shares.

Birchtree, thank you for the insight. I have a question about the part of your reply above. I can understand DCA working with a trickle of money, such as some of the automated purchases that offer to buy into the market every week, such as sharebuilder advantage accounts. But it seems like it would be challenging to accomplish with monthly purchases like TSP, which always buys in on one of the first market days of the month, or occasionally the last. It would seem that you wouldn't be buying in often enough to establish good averaging, since you'd be buying in only 12 times a year, vice 52.

It is an interesting proposition though. I have been considering the following variation of it: I currently have all my contributions going direct into the G Fund, with the rest of my money already invested. So in a modified DCA approach, I could determine the entry point for my "new money" out of the G Fund, or I could trickle the new money in over the course of the month with micro-IFTs. Or, if I didn't get a good entry point, I could just pick up GFund pennies until the right opportunity.

Any thoughts?

 

[Birchtree]

Re: Birchtree's account talk

anthony,

I prefer to leave the DCAing to fate - sometimes you will pay more and sometimes you will pay less. Being deployed you can drop some big dollars into your TSP if so inclined - the max is $44,000/year - much better than the civilian population. And when you do those night missions take a shot for me. Currently your life is controled by fate and often times fate will be good to you. Take care and stay safe.

Dennis - permabull #1

 

[Birchtree]

Re: Birchtree's account talk

There was a chap on Kudlow this evening talking the Dow is going to 18,000 in the next eighteen months. My goal has been for a Dow 17,000 since the bottom in 10/'02 after which point in time I turn into toast. If we do 18,000 I'll be a burnt crisp. The next 4 year cycle will nest in October 2010 so I'll have plenty of time to plan my strategy - what will I do with several million dollars? This from a guy that hates, absolutely hates to cut and run. Ah, never to late to change a few spots. There is nothing saying a trend is developing to the downside, especially after today. The market is always trying its best to make the majority think opposite to what is truly important. Many who had believed that the market would top for several years now are now looking to participate in the uptrend - the market doesn't like this and will do everything it can to keep these same folks from participating. I'll be doing some more buying tomorrow no matter what.

 

[12%ayear]

Re: Birchtree's account talk

There was a chap on Kudlow this evening talking the Dow is going to 18,000 in the next eighteen months. My goal has been for a Dow 17,000 since the bottom in 10/'02 after which point in time I turn into toast. If we do 18,000 I'll be a burnt crisp. The next 4 year cycle will nest in October 2010 so I'll have plenty of time to plan my strategy - what will I do with several million dollars? This from a guy that hates, absolutely hates to cut and run. Ah, never to late to change a few spots. There is nothing saying a trend is developing to the downside, especially after today. The market is always trying its best to make the majority think opposite to what is truly important. Many who had believed that the market would top for several years now are now looking to participate in the uptrend - the market doesn't like this and will do everything it can to keep these same folks from participating. I'll be doing some more buying tomorrow no matter what.

I think will bounce of these after hour lows because of MSFT,SNDK,and AMD, plus banking stocks

 

[Bullitt]

Re: Birchtree's account talk

The market is always trying its best to make the majority think opposite to what is truly important. Many who had believed that the market would top for several years now are now looking to participate in the uptrend - the market doesn't like this and will do everything it can to keep these same folks from participating.

But us Bulls need that wall of worry to climb, otherwise it wouldn't be fun anymore. So many folks are just itching to participate and when they do show up, are only going to help drive the prices up higher.

Just look at that 50 DMA. Uphill since the China Syndrome Selloff. Now that we got that psychological 14K resistance line out of our heads, it's time to move on.

 

[Birchtree]

Re: Birchtree's account talk

On a day like today I have to remind myself that no pain means no gain. I went into the market at around 1130 and peeled off some more LYO to do some buying. I've decided to leave about 2,000 shares on the table in case a bidding war starts up - my sacrifice. Today I bought via DCA: NFX, CLC, CNX, MCS, POL, AP, DRC, DW, DY, EP, ELN, ELX, EBF, FDP, GRA, GWR, HXL, SXC, DELL, CNH, SVU, CSX, WAB, AZZ, DHT and SHW. I think for the next few weeks I'll cool my jets and just cherry pick - unless I'm forced into the market with a nice sell off. 18,000 Dow in 18 months - Jimmy Cricketts. I actually have six more that I may buy tomorrow - I'm addicted to accumulation.

 

[anthony]

Re: Birchtree's account talk

anthony,

I prefer to leave the DCAing to fate - sometimes you will pay more and sometimes you will pay less. Being deployed you can drop some big dollars into your TSP if so inclined - the max is $44,000/year - much better than the civilian population. And when you do those night missions take a shot for me. Currently your life is controled by fate and often times fate will be good to you. Take care and stay safe.

Dennis - permabull #1

Thanks Birch-man. Its pretty light on this go around compared to the previous two. I’ll make up for it on the next tour if I can get myself a company.

I have two goals on TSP. One is for an investment (all CZTE) of at least $20k this year, possibly $25-30k. The second goal ties into the fact that I will be retirement eligible in 3 years (at age 37, baby!). So my approach is to try and maximize all investments into TSP while I can. I figure my next career (maybe teaching) will have plenty of opportunity for stocks and Roths and everything else, but I won’t be able to add to TSP after I retire. I have also maxed out SDP for the guaranteed 12.5% over five quarters on $10k. My wife’s and my 2007 Roths will come from that because I won’t take it out until 90 days post-deployment, but still prior to the 15 April cut-off.

Here’s a good question: How many days of a given year do I have to be deployed in order to have $45k as my max, instead of $15k?

I also have one other TSP/investing goal during deployment: Sign up as many young people as possible, especially those who are reenlisting for some decent bonus pay. When you show an 18-20 year old the power of compound interest sometimes you can see the light come on like a flash. It’s pretty neat. I wish someone had done that for me. Better late than never though!

 

[GUCHI]

Re: Birchtree's account talk

anthony
your on point with the compound interest. i have finally convinced my older son 19 year old about that and his mutual fund. he just bought his first house with some of the money. i keep telling him that TIME is on his side.

 

[Birchtree]

Re: Birchtree's account talk

anthony,

To answer your question - I would think you would have to remain deployed long enough to earn $45K. It's still earned income even though you are in a tax free zone.

 

[Remo]

Re: Birchtree's account talk

The second goal ties into the fact that I will be retirement eligible in 3 years (at age 37, baby!). So my approach is to try and maximize all investments into TSP while I can. I figure my next career (maybe teaching) will have plenty of opportunity for stocks and Roths and everything else, but I won’t be able to add to TSP after I retire.

Anthony,
Have you thought of "Double-dipping" by working for the government? You could easily hire on with the Border Patrol (Or any other entity) and be making 2-3 times as much as a teacher within a year, you could get another pension, aaaaand you still get to invest in the TSP.:nuts:
Just a thought.
Remo

 

[Birchtree]

Re: Birchtree's account talk

What a day for a day dream - dreaming about my bundle of joy. I liquidated my final LYO position early this morning and went into the market when the Dow was down 195 points. How great can that be for an accumulator - buying when no one else dares. I now have remaining cash to cherry pick the rest of the week - thanks to my holy grail. My tugboat will fend for itself and perhaps I'll get another under $17.00 purchase price. Today I DCA'd into the oceanic account buying: AES, ATW, CX, CHG, CXG, GW, SVU, CPO, LUB, NFX, CNX, HPC, AA, RT, HAL, WMK, BAC, HD, SO, SE, CEM. And I have eight remaining on my list for later this week. It would be nice if I had some dividends rolling in this week - I'm not even going to look. This is just another one of our corrections in an on going raging secular bull market. My goal is to reach the $2M level before this year ends. And I'm looking for 15,600 on the Dow during December and eventually 18,000 on the Dow by the end of 2008 - that should add a couple more $M to my bundle of joy.