Bull Pen - June 2006

[Griffin]

Yesterday I finally got out of the hole and managed to reconnect, only to find that I was exactly where I left off @13.91 (I was in the C-fund - but IFT to the S-fund yesterday).

Quick chart analysis on the DWCP shows that we are in a decending triangle - which is typically regarded as a continuation pattern for a bearish trend. Stockcharts.com suggests that when a breakdown occurs (the DWCP drops below 540) that it will continue to the same length as the highest point of the top of the triangle - which in this case takes us to 490

So why did I move to the S? the uptrend should takes us to the top line (around 570). This is my target sell point. I actually agree with Tech, that the F-fund is probably the place to be for a while - at least until the world finally realizes that there will never be peace in the Middle East and decides to get over it.

 

[Griffin]

I have to make a change to my approach, I didn't think this all the way through (I have not done this in a month - not a valid excuse, but then again the opinion is free )

With the SPX sitting in the top of the channel, today should have been the time to bail, and the EFA ain't looking too pretty either.

I'll take my beating today and get out tomorrow.

 

[FundSurfer]

It is a pretty weak channel and if you look at the intraday chop it looks even worse. The late dive in the markets may end up making tommorrow a better day after all. I should have stuck with my instincts and just gone long with a diversified spread till September. Oh well....

 

[Griffin]

It is a pretty weak channel and if you look at the intraday chop it looks even worse. The late dive in the markets may end up making tommorrow a better day after all. I should have stuck with my instincts and just gone long with a diversified spread till September. Oh well....

I have not been able to monitor what has been happening during the intraday for the past month, but I am hearing that it has been wild. Yesterday's late day plummet, does make a capital preservation move today virtually pointless - especially if the downward action continues through this morning.

Timing a narrowing channel is going to be difficult, so I don't have much confidence in any course of action at this point. I hate to be the master of the obvious, but the market does not seem to be going anywhere fast, so the urgency is low, the potential gain is minimal so the eaisiest way to manage the risk is to hold.

I have to admit, I'm tired of not making any gains.

 

[nnuut]

Exactly, I can't make money in WEATHER LIKE THIS!!!:nuts:

 

[Dave M]

Look To The East

TS Chris is likely to be born over the weekend. So next week we will have genuine weather-worries.

Dave

 

[nnuut]

Is Chris a Tropical Storm or are you going to have a son?? Congrats!

 

[Griffin]

Despite the profit taking that occurred, yesterday’s action was very tame. Was it enough consolidation to set the market up for it’s next push higher and climb a wall of worry? I don’t think there is any clear answers but the DWCP is sitting in the middle of it’s channel when every other fund is riding the top of their respective channels.

Are domestic small and mid caps undervalued? I think they are. The nice thing about the S-Fund right now, is if the index funds drop to the bottom of their channels the S-Fund does not have far to go, conversely if there is a push up, the S-Fund has a lot of room for growth. The RSI, MACD and Slow Sto seem to support this view. Even if the S&P muddle around the 1280 line for a couple of days, the DWCP could continue to see growth.

The difference between the price of the S and I is now back to the same level as it was in May, when the dollar was at it’s weakest. Recently the dollar has been weakening which has made the I the place to be (unfortunately for me, I was still trying to recover from my absence when that happened :cheesy: ). However, the dollar appears to have stabilized and is ready for a push higher. The foreign central banks do not appear to have the gusto the Fed has at protecting currency values and controlling inflation.

In all, I see the S-fund as being the best place to be for the immediate future. The risk of loss is relatively small compared to the risk of missing the next big rally.

Thoughts, opinions and arguments are welcome

 

[FundSurfer]

I see the S-fund as being the best place to be for the immediate future. The risk of loss is relatively small compared to the risk of missing the next big rally.

Agreed. However, this week has quite a bit of economic data being released and if recent past is any indication could be a volitile week. I'm sitting on the sidelines waiting for a good buying opportunity. I don't see a rocket move occurring with the Middle East fighting going on. I'm waiting on a red day to buy back in.

 

[Griffin]

I'm waiting on a red day to buy back in.

Today could be your day, or do you think the markets heading back to the bottom?

 

[sugarandspice]

I too am eyeballing the S fund, but I think with todays early morning drop will come one more tomorrow so I think I will wait to move then.

 

[FundSurfer]

Funds that appear to be close to the top of a trading channel having one down day does not seem like the best time to buy. I'd prefer to see a little resistance to the fall or at least another 1 percent down before jumping in. The way the market has been acting lately, we could see another 1 percent down in the S taking us to -2+% and then a rebound before the end of the day. It has been that tough to call lately. It is tempting, but I'll likely wait another day.

 

[Wheels]

Funds that appear to be close to the top of a trading channel having one down day does not seem like the best time to buy.

I guess Griffin's point is that the S is not close to the top of it's trading channel.

I'm a little gun shy on the S myself. I just got out for today (thankfully) but I was in it for almost a month and I lost about 2.3%. It was wildly volatile during that time. The up days were huge (a recent up day for the S was 2.2%) but the down days were brutal (like today where the S is down almost twice the C). I want to get back into stocks quickly, but I'd like to see a little more to the downside first, and when I do jump, I think I am going to spread it around a little this time (sure sign that I don't know what I am doing).

Dave
<><

 

[Dave M]

Griff, recall your pertinent word -- gusto. We should bet on another rate hike next week. The conventional wisdom holds that small caps are more vulnerable to higher rates. This points to the C-fund or I-fund. Yet the international scene has additional negatives. This points us to the C-fund again.

Will there be another fabulous week? I feel a sort of weariness when I think about it. Perhaps sentiment is growing jaded? Friday morning may be a good time to take a short vacation.

Dave M

 

[Birchtree]

Companies in the S&P 500 index are now trading at around 16 times the past year's earnings. That's the lowest point in more than 10 years. With profits rising and stock prices barely moving, ratios of stock prices to earnings, a standard measure of value, have plummeted. In the first quarter, pretax profits for U. S. companies came to 12.1% of gross domestic product - the highest level in 40 years. Can you feel it building - the blast off.

 

[FundSurfer]

In Wizard-like fashion, I'll provide the bear side of the coin:

Casual-dining restaurant shares fell after Burger King Holdings Inc. (NYSE:BKC - News) reported a quarterly loss in its first report as a stand-alone public company. Burger King shares plunged 13.2 percent to $13.24 on the NYSE.

"Restaurant companies are essentially the canary in the financial coal mine," said Hans Olsen, chief investment officer at Bingham Legg Advisers in Boston. "The first thing consumers do when they start to get pinched is stop going out to eat."

Other restaurant shares slipping were Brinker International Inc. (NYSE:EAT - News), down 2.1 percent at $31.72 and Applebee's International Inc. (NASDAQ:APPB - News) down 2.3 percent at $17.35.

......

U.S. consumer spending in June grew at its slowest pace this year while a measure of inflation reached its highest mark in nearly four years, a government report released on Tuesday showed.

......

The U.S. saving rate has been in negative territory for 15 straight months.

........

Hope you enjoyed this bear moment..... It is the dog days of summer, prime bear season.... I'll be glad when October gets here.

 

[Wheels]

Hope you enjoyed this bear moment..... It is the dog days of summer, prime bear season.... I'll be glad when October gets here.

Very Wizardesque of you. Now let me try.

It seems like everyone is waiting for October so we can move higher again (a' la last year). Tom certainly thinks so judging from market comments. Birchtree always thinks so. But I'm concerned that 3rd and 4th quarter earnings will be lower, the economy will be slower, inflation will be higher, oil could well be higher, war could be escalated. I certainly hope we get a nice run like we did last year but I'm just not so confident we are going to get it.

Dave
<><

 

[tsptalk]

This data sure tells us to wait until October...

S&P 500 average performance during year 2 of presidential term. (the blue line is 2006 thru June)

Source: Birinyi Associates, Inc.

 

[mlk_man]

Companies in the S&P 500 index are now trading at around 16 times the past year's earnings. That's the lowest point in more than 10 years. With profits rising and stock prices barely moving, ratios of stock prices to earnings, a standard measure of value, have plummeted. In the first quarter, pretax profits for U. S. companies came to 12.1% of gross domestic product - the highest level in 40 years. Can you feel it building - the blast off.

Birchy, I think that if one is buy and holder, such as yourself, then the C fund is your best bet at this time. However, if you are a trader or market timer, I think the S will ALWAYS be the better bet because it will fall harder but rise quicker also. That's if you can hit it at the right time..............:nuts:

 

[Griffin]

Griff, recall your pertinent word -- gusto. We should bet on another rate hike next week. The conventional wisdom holds that small caps are more vulnerable to higher rates. This points to the C-fund or I-fund. Yet the international scene has additional negatives. This points us to the C-fund again.

Dave,

Well put...conventional wisdom seems the way to go.

I think I'm going to use today's opportunity to get on the sidelines. That is where most folks are, and the majority tends to be right. The last time I bucked the crowd it cost me 4% and my top spot (not that I give a sh*!). I'm behind the I-fund again, that has me annoyed. Anyway, I would like to walk away from the summer with something too show. I still think the S-fund is a good buy, from a long standpoint, but until the S&P breaks 1280, I'm backing out to catch the next wave.