Bullitt's Account Talk

[Bullitt]

Even after yesterday's laser guided bomb was dropped on the market precisely at 1515 hours, the rally attempt that began on the 23rd is still intact. Until the SPX closes below the 1275 level, the rally should remain intact. I'm just going to keep climbing the wall of worry while patiently waiting for the Follow Thru Day to occur.

 

[hessian]

Even after yesterday's laser guided bomb was dropped on the market precisely at 1515 hours, the rally attempt that began on the 23rd is still intact. Until the SPX closes below the 1275 level, the rally should remain intact. I'm just going to keep climbing the wall of worry while patiently waiting for the Follow Thru Day to occur.

Hey Bullitt,
I like your perspectives (and optimism). Hoping the rate cut is just taking some time to "sink-in", and we go up now. I added to my position today - to now about in 2/3. Still nervous, but link below shows instutional selling is now waning (re: may be turning to instititonal buying now/soon)?
http://stocktiming.com/Tuesday-DailyMarketUpdate.htm
Do you know any other indications that may confirm this?

 

[Bullitt]

Do you know any other indications that may confirm this?

Nothing quite like the indicator you linked. Those kind of charts are tough for us individual investors to come by. Just remenber that most Mutual Funds and Hedge Funds move like whales, but they usually have a longer time horizon than most individual investors could fathom.

Just keep watching XLF. As the Fed cuts, it's going to be easier for these banks to maintain their Tier One Capital ratio's going forward. The Tier One Capital Ratio is what worries these stiff's on Wall Street the most and if it's easier for a bank to maintain that 8% level, everyone is happy. That's why today, ABK alleviated the street by stating they won't have trouble maintaining their cash levels. How about all the folks who thought it'd be slick to decide to short the stock at 1515 hours yesterday. Today they all got steamrolled and found out the hard way that there's no such thing as a sure thing.

We're not really going to know if this is the bottom until we reach new highs. Additional cogs in the market have begun to turn (HD for example). Financials will continue to be the ones who will lead us off the cliff or ride us off into the sunset.

Keep the faith, the market didn't become 'The Great Humiliator' overnight. Look at how close the 'Wall of Worry' came to producing a Follow Thru Day today.

 

[hessian]

Thanks Bullitt,
Its those last 45 min. (15 min today), that worry me. From what I read on this MB, its the shorts - but today's seemed to have been shorter/less than other days. Think the shorts have lost steam?
Wondering if the bulls, especially institutuional buying, is back, or is there more pain to come next week?
Faith is good, and I think I will follow that, and my instincts, but sure would like something more concrete (knowing nothing is a sure thing).

I just hope tomorrow isn't a "sell-off Friday" [again]! -Maybe it will go contrary to last couple Fridays. What do you think?
VR

PS -just read your post #2615 to Birch -made me feel more at ease. Thanks
PPS Just hearing - Google is making big bounce now!

 

[Bullitt]

Its those last 45 min. (15 min today), that worry me. From what I read on this MB, its the shorts

Just hearing - Google is making big bounce now!

Well look at it this way.
1. We've made some progress in a short time and
2. seeing how important tomorrow's report will be and
3. market was sitting up around resistance at the close

Big money said screw it in the last half hour. Take the profits, bail and worry about tomorrow later on. Is it short selling? Who knows. The pros are always working complex straddles and hedges that are too in depth for this post. They also figured that the catalyst to make a push thru resistance won't be happening until tomorrow anyway, so what's the point in falling on the sword for the market in the last half hour?

Hessian, don't pay attention to after hours or premarket trades. Big plunges happen in after hours because big speculators take big positions weeks ahead of an earnings call. They have specific numbers they are looking for in the announcement and if they aren't as good as they planned... you get an AMZN situation. Analsyts will spend all night analyzing GOOG's earnings guidance. I'll leave that to the analysts, I'm more concerned about Johan Santana and the Roger Clemens saga.

As for Friday, I'm a believer of the 'random walk theory' and wouldn't go making any decisions based on the behavior of the last few Fridays. When the whole trading world sees something as a 'pattern', it's no longer a pattern.

Luck to longs.

 

[hessian]

Much Thanks Bullitt,
You're pretty wise. And cool-headed too.
I think this is first that I realized just how much!
Thanks again!
VR

 

[Bullitt]

Look at how close the 'Wall of Worry' came to producing a Follow Thru Day today.

Well, according to some websites that I frequent, (all of which the authors are smarter than me) some are calling yesterday, 1/31 the Follow Thru Day. Sometimes a follow thru can bring some profit takers for a day or two. Once the selling causes the market to pull back some, additional buyers step in looking to participate. I've posted in the past the impact a FTD has on a rally. No matter what, I'm not going to disagree with William O'Neill because he's even smarter than the website bloggers that I subscribe to.

Rome wasn't built in a day. We won't know this market hit an official bottom until it hits higher highs. BTW, there's still going to be that worry in the market when we're pinning the new highs. Just how I enjoy telling my co-workers who constantly complain about the job... "It's only going to get worse."

 

[Bullitt]

some are calling yesterday, 1/31 the Follow Thru Day.

Unfortunately, it's slim pickings out there today if you subscribe to this method; probably no thanks to GOOG.

 

[Bullitt]

I'm not going to be surprised some day when look back and realize that the 'capitulation' day really did take place on the 22nd. The market is still in correction mode and never reached bear market territory. If this was indeed a bear market, the forces that move the market would have taken it there already.

No matter what side of the fence you stand on (or even if you're just sitting on the fence), you've gotta take notice of the steady moves up on higher volume. Chartists especially are going to see that the close above 1390 on today came on good volume as they're drawing their lines this weekend. As more and more levels of resistance get punched thru, additional buyers will flood to enter the market while short sellers rush to throw in the towel.

VIX struggling at support, Semi's and Small Caps keep leading the way. All things said, I'm still a believer in the Random Walk most of the time. The reason I say most is because the market behaves irrationally at times, presenting very short windows of opportunity to be exploited. With that said, I really don't think that the important money cares about the current January Jinx Indicator or Super Bowl Indicator when they decide to execute buy blocks of 100,000 shares.

 

[Bullitt]

The chart below pretty much speaks for itself. Insiders are having a heyday out there. Note the lack of smart money buying in September and October. I'm sure most out there are thinking, "I'm in the red and I need to sell today to break-even because this market is going lower for sure." Maybe it is, maybe it isn't. If you're going to play that game, just make sure you're Selling High and Buying Low.

Right now everyone wants a retest to 'get back in a lower price.' I can guarantee that if that retest comes, it won't be exactly where support sits. It might drop thru the support or it might even bounce before. Either way there's still going to be that gut check as thoughts of a 'bounce' turn into renewed fears of a 'crash' on the elevator ride down.

 

[Bullitt]

Like Paladin posted, the current trend is still intact. If the volume was there with it, I'd consider today a prelude to a retest of the lows. Instead, it has turned into a good day for those looking to buy on the dip. Retests of a Follow Thru are common, and I'm sure that there was plenty of program buying tody at around the 1335-1340 level in the SPX.

 

[Minnow]

You got a good site for volume indicators? Yahoo volumes used to be fairly decent but their charts have been stinking lately... either not up, or just plain wrong. Must be all the Microsoft is buying us so who cares stuff.

Thanks in advance for any link you can provide.

... wouldn't be asking if I didn't enjoy your posts... quality stuff... keep it up!

 

[Bullitt]

Minnow,

Go to www.stockcharts.com and try some of these symbols. Just another tool to have on your belt.

$NYTV: NYSE Total Volume
$NATV: Nasdaq Total Volume

I guess if you put enough fear into people's heads that a retest is coming, they'll listen. Volume today came in about average, so it was a far cry from the panic most likely being talked about on TV right now.

 

[Minnow]

Thank you very much. Good tools indeed. Gave them a quick check and that's more like it!!!

hope I can return the favor one day.

 

[Oldcoin]

Thank you very much. Good tools indeed. Gave them a quick check and that's more like it!!!

hope I can return the favor one day.

Try also

$spx - C Fund
$emw - S Fund and
$iee - I Fund

Great web site!

 

[robo]

Per Briefing.com:

Quote:
According to Thomson Financial, fourth quarter 2007 earnings are expected to decline by 20.7%. The main reason for the decline is the financial sector's whopping 105% decrease in earnings. If the sector was removed, earnings would grow by 11.0%. Homebuilders are also a drag. For example, the consumer discretionary sector's earnings would grow by 7%, instead of declining by 15%, if homebuilders were removed from the calculation.

 

[Bullitt]

Wow. 105% decrease. That's means total loss and then some.

The S&P 500 is currently weighted at around 20% in financials while Energy only accounts for 11%. In 2006 Financials comprised some 22% of the Index. I'm not surprised that this subprime disaster may have already resulted in a gradual rebalancing of the sector weightings in the 500 Index.

 

[Birchtree]

It is extremely likely that the price/earnings ratio of the S&P 500 will drop to 10 or lower some point over the next several years, but this fall in the P/E ratio could be driven more by a rise in earnings than a fall in price. The S&P 500 currently has a forward P/E of 13.7. And if you think it is unlikely that the S&P 500's earnings will rise by much over the next several years, consider that the composition of the senior stock indices will change. In particular, if commodities are in a secular bull market then 10 years from now oil and other commodity - related stocks - the stocks of companies that are likely to experience very strong earnings growth for many years to come - will probably make up 30% to 40% of the market-cap weighted S&P 500 index.

 

[Silverbird]

Try also

$spx - C Fund
$emw - S Fund and
$iee - I Fund

Great web site!

WFBIX - F Fund (?)

 

[Bullitt]

oil and other commodity - related stocks - will probably make up 30% to 40% of the market-cap weighted S&P 500 index.

I think they are going to be the ones to overtake financials for 1st in the 500 in the years to come. They currently comprise only ~11%, which is right on par with Health Care and Industrials. However, as the guy who coined the term 'secular bull market' proved, overweighting a sector within an index doesn't necessarily mean it's destined for outperformance. Even though, exposure to energy in a long term portfolio should be a more a matter of common sense than numbers.

Some food for thought... Energy weightings YOY since 2003 in the 500 Index have been on the rise.

5.8% 2003
7.2% 2004
9.3% 2005
9.8% 2006
11.1% 2007