Bullitt's Account Talk

[Birchtree]

Thanks for helping me be a better investor - I got some figgy pudding for you.

Sovereign wealth funds continue to be a growing source of demand for equities while new stock buybacks remain robust, decreasing the supply of shares. This supports the view that the post-July trading range is a base rather than a top. The market has had periods of consolidation since the bull market trend was established in 2002. This current trading range is simply another consolidation. If I can get one more good week I'll be back to my peak prior to the first 10% correction. The double-bottom 10% blink and you missed it corrections have set us up for a nice 2008. That was a nice velocity move we had Friday and I expect more to come as we move above resistance levels. I'm geared for a significant breakout. I'm impressed that the VIX is breaking down.

 

[Bullitt]

Since a few of us noticed a while back that the SPX was rangebound in a pennant formation, we have to assume that the smart money has known of this for a while. Today's selling really had nothing to with higher oil, November sales, or even the debacle in Pakistan. In this light volume environment it's relatively easy for a few hedge funds to bully the market and move it in their intended direction.

The question of whether this market can bounce and move ahead in '08 will be decided by which way SPX breaks out of the pennant. Right now the big money buy programs are at the uptrend and sells are at the downtrend. I can see the catalyst for the breaking move in either direction taking place on Jan 15th when Citi reports earnings. If they come out and say they haven't as many writedowns as GS says, we go up. If they report as many or more writedowns than GS says, we're going down.

 

[Birchtree]

I'm thinking of braving the Citi Group as a lifetime purchase for my daughter - I'll probably be the only one left standing at the window - even if they reduce the dividend by 25% in the near term they can always increase it later. I've got a few banks lined up for purchase because I remember the days of the last banking crisis when they were even lower than now - savings and loan debacle and Citi was in single digits. I enjoy shopping in the cemetery - it's a learned experience, nothing natural at all.

 

[Bullitt]

Bring it. I'm a Citi shareholder looking forward to reinvesting the next dividend distribution.

Currently scouting the Home Building Boneyard for long term buys in '08. There's a 10 bagger waiting somewhere amongst those ruins.

 

[Bullitt]

Just set up the autotracker. Staying with previous allocation of 45C 20S 35I going into the new year. The case for globally exposed large caps continues to strengthen as we get into the later innings with small caps.

 

[Bullitt]

The analysts are advising that we should expect a wild ride in 2008 as volatility continues on. Volatility is good for the investor who adds shares in a non biased method such as bi weekly contributions. In a sustained uptrend, you're just not going to get the opportunity of the lower prices that come around in more volatile times. I know there's been some debate as to whether the bi weekly contri's are a method of DCA'ing or not, but one thing is for sure. Bi weekly contri's in times of volatility have a better chance of lowering the cost basis for the long term investor than times of a non volatile uptrend.

I'm looking forward to wild ride in '08 because my investing goal is to be one of those who can both be right and sit tight at the same time. There are actually quite a few on this board who pride themselves on this method already. It's kind of like the realm of fitness. If it doesn't hurt every now and then you're probably not getting the most out of it.

 

[Bullitt]

Fed says more cuts likely and that's not even considering today's poor economic report.

Get ready. Nothing forces a squeeze more than the term 'further rate cuts'.

 

[Bullitt]

Bullish setup for tomorrow's jobs report. The break of the short term uptrend in the pennant formation should have attracted plenty more short sellers to the party. Also I'm sure there's plenty of it today as well as hedge funds are placing bets on a bad report tomorrow on cheaper put prices than yesterday. I say should because there's no way of actually knowing the amount of short positions on a day to day basis. As the market pushes back up into that trading range, it's going to be harder and harder for the weaker hands to hang on. A strong report on Friday should cause a good short squeeze. That will hopefully ignite a more powerful rally out of this technical cage the market is currently held to.

 

[Guest2]

Bullish setup for tomorrow's jobs report. The break of the short term uptrend in the pennant formation should have attracted plenty more short sellers to the party. Also I'm sure there's plenty of it today as well as hedge funds are placing bets on a bad report tomorrow on cheaper put prices than yesterday. I say should because there's no way of actually knowing the amount of short positions on a day to day basis. As the market pushes back up into that trading range, it's going to be harder and harder for the weaker hands to hang on. A strong report on Friday should cause a good short squeeze. That will hopefully ignite a more powerful rally out of this technical cage the market is currently held to.

From your mouth to the markets ear, may we all benefit !

 

[Corepuncher]

I just don't see very much upside, even if the jobs data friday is slightly better than expected. 1480-1500 range tops?? The way things are going, any rally early or mid day may be sold off by the close.

Speaking for myself, I'm not going to short cover until 1400-1420 range. Judging from what I have been hearing others say, a test of those levels and perhaps sub-1400 is anticipated...so why would anyone who is out get back in at 1450+?? I think there will be continued lack of buying interest until we gradually edge down below 1435, just my opinion.

In the FED minutes they also mentioned a scenario where they would have to repeal rate cuts.

"Members also recognized that financial market conditions

might improve more rapidly than members expected,
in which case a reversal of some of the rate cuts​

might become appropriate."

MACD below zero and crossing signal line, 50 day ma below 200 day ma, and uncertaintly still exists as a background worry. Oil is 100 dollars...say it out loud...100 dollars a barrel!!! I'm not smart enough to know exactly how all the mechanisms work in the economy, but I can say that in general, there is a lot of uncertainty out there, and just pure probability an chaos theory suggest there will be a much better buying opportunity in the next few months. Another bad sign is Intel and AMD were down HUGE last couple days...uh, last I knew, Tech was LEADING the market?? New lows much higher than new highs on a daily basis. We are now below the mid-point of the 52 week range in the S&P.

My "best guess" scenario: Between now and the next FED meeting, we hit a low between 1400-1415. That is when everyone jumps back in, causing a short term rally to 1450-1460, then the FED does something "white knight-ish" and boosts the market further, eventually stalling 1480-1520.

DISCLAIMER: my prediction is unlikely to verify, use with caution and as always, consult your own financial advisor!

 

[Bullitt]

Speaking for myself, I'm not going to short cover until 1400-1420 range. Judging from what I have been hearing others say... there is a lot of uncertainty out there, and just pure probability an chaos theory suggest there will be a much better buying opportunity in the next few months.

In hindsight I guess my post was a bit premature. Things were looking different towards the end of the trading day than at 12:30. It wouldn't have mattered much anyway.

I hear about the uncertainty of this world every now and then myself, but let's face it, the world's gone mad. Never said this was a buying opportunity, but merely a chance for a final push that could have sparked a big move up. I've been bearish on tech and small caps for months now. Personally, I haven't been doing any buying other than reinvesting dividends lately because as you say, lower prices will come soon enough. They may even get good enough for me to take a shot at something in that runaway agriculture sector.

Good luck playing the short side of things.

 

[Bullitt]

I haven't been doing any buying other than reinvesting dividends

But today is very tempting.

 

[Bullitt]

I must say that I'm enjoying the doom and gloom talk that seems to come around with any big market drop. It's the same problems every time. High oil, inflation, economic slowdown, etc. Along with the same solutions. Buy gold, cash is king, buy commodities, sell the dollar. I like when people come out of the woodwork with all the answers.

This is the point where we hit the fork in the road for the current bull market. Looking back on the charts, the chartists will pump the doom and gloom in an attempt to attract additional subscribers because they were the only ones who saw this coming. Of course, hind sight is always 20/20.

Those that choose to trade this mess could be rewarded greatly because there will periodically be some big up days within this mass downtrend. The only problem is that it's a fools game trying to pick which day it will be. An oversold market can stay oversold for as long as it wants to. I won't be surprised to see another hedge fund go under in the months ahead either. There's probably a run on a few that are in distress right now. How else can one explain INTC getting slammed as hard as it did in only a few days?

In a strange way I welcome capitulation. It seems that the market has been hanging in the balance between bull and bear for the past 9 months. It's been too long and I'm ready to take a step in either direction even if it's down. Here's where time horizon is a factor in the game of investing. Depending on when you need the money (or just how much pain you can take), it's either capital preservation or share accumulation time. Without a doubt, I'm choosing the latter.

 

[Bullitt]

Looking for advice on how to handle this rough market? This guy's wittier than any CNBC talker. One of the greatest.

http://www.youtube.com/watch?v=9FPv2toi5og

 

[Tempest]

A long time ago
A million years BC
The best things in life
Were absolutely free.

But no one appreciated
A sky that was always blue.
And no one congratulated
A moon that was always new.

So it was planned that they would vanish now and then
And you must pay before you get them back again.
That's what storms were made for
And you shouldn't be afraid for -

Every time it rains it rains
Pennies from heaven.
Don't you know each cloud contains
Pennies from heaven.
You'll find yor fortune falling
All over town.
Be sure that your umbrella is upside down.
Trade them for a package of sunshine and flowers.
If you want the things you love
You must have showers.
So when you hear it thunder
Don't run under a tree.
There'll be pennies from heaven for you and me

 

[Bullitt]

I think alot of short sellers began covering at 1378 since they never let the SPX get down to 1375 today. I'm sure there are alot of short sellers who got spooked over AA reporting after hours and the possiblity of a Fed market interdiction becoming a reality with every blasting the market takes. Almost the same kind of pattern and volume as we had on mid-August 2007's reveral day.

I like what I saw today, but not sure what to make of it. Regardless of the noise, volume supports the thesis that this is day one of the rally.

 

[Bullitt]

Another day of fear induced buying. Some of the biggest moves upward tend to come during a market downtrend. As the bearish sentiment rises and investors rush in to sell shares short, the slightest hint of fresh air has the tendency to rattle the weaker hands. With some key earnings next week along options expiration coming up next friday, I'm sure alot of folks aren't as confident as they were on their bearish bets.

It's a good sign that the market gapped down today and found positive territory. The ending wasn't as good as a bull would like to see, but the good showing of volume means that we probably managed to wash out a bunch more traders who might have been on the fence. I'm sure the big investment houses made good use of their program trading today. The Fed's got the power and may have just pulled out another trick from their sleeve. I wouldn't be surprised if they are partially behind the BAC/CFC thing.

It's going to be interesting to see what happens next week. There are plenty of eager investors impatiently waiting to hear just how bad the writedowns are going to be from the big banks. Good times to just sit tight.

The market is always right. Today was day two of the rally attempt.

 

[Tempest]

2 weeks don't make a year but I think 2008 will be the year I'll just accumulate more shares and not worry about 'profits'.
No sense worrying about what I can't control.

 

[Birchtree]

Now those are refreshing thoughts. It does take money to make money and recklessly accumulating shares is one way to get there.

 

[Bullitt]

recklessly accumulating shares is one way to get there.

That was a good display you gave us in walking the talk today, 'hard charger'.

Volatile times are the best times to accumulate shares. Wall Street trips over their own feet piling in to companies that announce share buybacks, hence unjustifiably driving up the price. The company is then forced to buy back shares at higher prices. This is hardly the case right now. We should go against the herd and announce our own share buyback plan.