Bullitt's Account Talk

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I have a feeling any fed decision is going to be sold off... Hard. There are just way too many bulls around this market. Besides the fools who constantly preach the buying of Gold, I haven't heard enough negativity towards this market to keep me bullish. Everyone knows the Fed is going to cut rates. Even the guy at work who doesn't even bother contributing to the TSP knows a rate cut is coming.

On one hand, the NYAD, McClellan, and Summation indexes are close, if not giving a buy signal as they are about to cross the zero line. On the other hand, I've been seeing heavy selling since mid Oct and this bounce is looking pretty unconvincing in terms of staying power. I'm guessing most of the hoopla has been brought on by the usual suspects such as AAPL.

As Oil prices continue to rise, dumb money will think it's time to buy VLO, XOM, COP and the Smart Money will be more than willing to sell it to them due to the increase in refining margins. This run in oil is going to hurt everyone going forward. When will it ever end? I mean, every time I look at the headlines it's "Oil all time High", "Oil $92", "Oil to $100." When is this thing going to burst? Like Jeremy Siegel says, "Never short a bubble". Short sellers are getting crushed in the Oil pits.
 
It's a scary time MARKET WISE - uncertainties abound.

As for when the Oil Highs will end; there has been a lot of research on this matter from the Oil Experts and National Geographic had a good write up about a year prior. The prices are likely to get progressively higher and in a few years we will all be thinking about the good ole days when gas was only "5 dollars" a gallon. For those who have little, things will be very hard.
 
Just the article I've been waiting for.

Crude oil prices continued their march higher, closing above $90 per barrel for the first time. Earlier in the week, crude oil pulled back and held just above a layer of chart support in the $84 zone. Prices are back above a bullish channel that has been in place since March, and are very extended from a momentum standpoint. However, we believe crude could run up to the $93-$95 area based on Fibonacci extension of the pullback this summer, and the major correction during last year. We have not gotten any glaring signals from the Commitment of Traders data of late, and this suggests that further upside is possible. However, we believe the rally is getting a little long in the tooth. There has been a negative divergence on the 14-day RSI, a first for the advance. In addition, the 14-week RSI is up to 79, the most overbought that this indicator has gotten during the entire bull run that started in 2001.

http://www.businessweek.com/investor/content/oct2007/pi20071029_201917_page_2.htm
 
Paraphrased from today's WSJ article by ES Browning, Signs Point to Pressure on Stocks As Fed Weighs Another Rate Cut....

Since the bull market began in 2002, the Russell 2000 gain has outpaced the gain large cap stocks 151% to 89%. This spring the two have begun to switch places. The Dow is up 1.3% since end of May while the 2000 has fallen 3% in the same period. As a bull market gets older the bigger, stronger companies will continue to push the Dow higher. A decline in the Dow signals an end to the bull market as the larger companies can no longer carry the weight.

www.wsj.com
 
Well, didn't a bunch of us agree that the Fed Cut was already priced into the market before it even happened? Don't blame shorts for this market drop. Thank them for providing 'support'. Market gaps down initially and everyone else piles on in hopes that they aren't the last to get on the lifeboat. C getting pulverized and XOM missing didn't help either. XOM is another moment of dumb money piling onto another bad idea and paying the price. Long story short, refining margins will kill profits at all oil related companies. C and BAC getting hammered should just be looked at as a long term investing opportunity. No way was everyone in financials selling today. Think about it.

On to TSP. Still no major technical damage done at this point to indicate a reversal even though we seemed to have pierced the 50DMA. 1490 was key before but we never got that far today. Bullish case would be a bear trap and a bearish case could be evident in the coming days if things get worse. The 'short sell on downtick' rule could cause a few suckers to jump into the market tomorrow with some nice leveraged positions on the short side of things. I'd hate to be the one holding the bag in hopes of a drop while this market rallies higher.

I'm still in bull mode and willing to tolerate a few of the bad days in order to catch the big wave. Oil is still due for a correction. Birch said it and I read it... Hedge Funds have biggest short interest position in years. This market has had too much bullish sentiment with too many people talking about the rate cut, too many piling into commodities and tech, and too many cheering on the ride to new highs. I'll be happy to have dumped some of the excess ballast today.
 
I put on CNBC for some unknown reason and I shut it off after 2 minutes of Erin babbling about a Financial Meltdown. Reminds me of a memorable movie scene with Donald Sutherland.....

"Why don't you knock it off with them negative waves? Why don't you dig how beautiful it is out here? Why don't you say something righteous and hopeful for a change?" Oddball, Kelly's Heroes (1970)
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Bullitt said:
I put on CNBC for some unknown reason and I shut it off after 2 minutes of Erin babbling about a Financial Meltdown. Reminds me of a memorable movie scene with Donald Sutherland.....

"Why don't you knock it off with them negative waves? Why don't you dig how beautiful it is out here? Why don't you say something righteous and hopeful for a change?" Oddball, Kelly's Heroes (1970)
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Bullitt,
I love his character in that same movie too - and its so funny that you brought this up, because, I also think often of his scenes in that movie, when I hear so many of those same talking heads on news media! Its such a turn off (which I do)!

I want honesty, but when appropriate, wish we'd hear more; "LIke, wow man, with so many positive waves, maybe we can't loose! - I'm in!"
:D
VR
 
I see that the Oil surge continues onward. There is no way on earth this thing is about supply and demand. This is a manic, bubble buying euphoria. Traders just keep piling on and driving up the price.

I'm no economic wizard, nor do I strive to be but I just can't help but to put this whole thing in perspective. The dollar is dropping yes, but has it dropped enough to warrant this move in oil? Have worldly conditions changed so much in the past 5 months that oil supply has diminished like never before?

Clarity in this financial mess and a drop in oil will do wonders for the stock market. Until then, traders should have their fun. Volatility and uncertainty is where speculators make their bones.

I have a feeling this market will have trouble in the coming weeks as we will see mass sector rotation. Looking at charts, the past 2 days and today have been churning days. Big money managers in general are fleeing financial stocks by the droves and putting their money elsewhere. One reason is to sell losers in order to write off losses on taxes at the end of the year. Financials are overweight in the S&P 500 and will continue to drag on the overall picture until there is some sign of stability. Stability in the financial sector may take a while, so you'd better grab a Snickers bar while you wait.
 
FUTURESTRADER said:
like bullit quotes...'don't let your highs get too high or your lows too low'
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Thanks FuturesT. That is the best advice I have ever been given in my life and I look back on it whenever I feel the need to 'check myself'. I found myself struggling for the first time in my life at the plate as a freshman on that division 1 baseball team. The Coach, who was an unbelievable leader, took me aside one day and told me that quote. Easier said than done of course but you've only gotta succeed 3 out of 10 times and you're going places in the game of baseball. It really put things in perspective and has been my mantra ever since.

I don't follow a system but it's easy to tell when one of them is doing good or bad by the sentiment of it's followers. When there's plenty of high fivin', and calling for a new Warren Buffet, it probably made a good call. When there's excess panic and sobbing, it feels like we're going thru another 1987.

If you've only gotta bat .300 in baseball to be a star, could you imagine where you'd be if you hit .200 year over year in investing? Well, in baseball that's called hitting the mendoza line, but investing that's what they call 'making it rain'.

Investing for the long term is the only way to go. Yes you can time the market and Buying low/Selling high is possible. If that's the only thing Joe 'six pack of' Pabst where to learn about stocks then here's something to think about.... If buying low and selling high is the way to play the game, then the concept of buying low must be a contrarian strategy. I was a little to eager to jump on a few financials when the going started to get tough and could've/should've waited a bit longer before buying. I bought well off the highs but am still holding on. What can you do, 'Hind sight is always 20/20'. Right now, I'm watching the Housing Sector for any indication of a floor. One of my indicators? Just waiting for a few of these companies to go completely under/bankrupt/chapter 11.

Either way, I'll be in this game for a long time to come and so will many of you. Keep all of the great market comments and analysis coming.

Luck to longs. Bullitt
 
Haven't had much time this week but there was an interesting article from breakingviews on Thursday and republished in WSJ titled, "10 Reasons Why Oil is Overpriced at $100." Pay sites, so I'll paraphrase. Take it for what it's worth. I particularly like #9 and #10.

1. Abundant supply above ground.
2. Abundant supply below ground.
3. Production set to increase.
4. Production cost is much less than $100 a barrel at $9.
5. Iran unlikely to cut exports.
6. High prices have actually cut back demand.
7. High prices have forced foreign govt's to ration gasoline.
8. Oil price is overextended in relation to Natural Gas.
9. Weak dollar is a poor excuse. (I've said it before, only down 8% while Oil up 40% since late Aug.)
10. Speculators only need $4 per barrel as margin to bet in the futures market.

www.wsj.com
www.breakingviews.com
 
We all know that Financial type stocks have been getting pummelled lately. The big money has done the most of their selling in that sector at this point. Momentum stocks have begun to give. Partial thanks to John Chambers from CSCO for insinuating that a recession is on the brink. :sick:.

The bellweathers... GOOG, AAPL, RIMM, CSCO, BIDU are in the process of being unloaded by institutional investors. When an institution sells, it's more likely to get rid of the weeds so it can let the flowers bloom to big profits. The retail investor is just the opposite. They are more apt to sell the winners while praying that the losers come back enough to break even.

Institutions that were playing the game of betting that this financial thing would roll over in a few months were establishing positions in July but have already dumped their millions of shares for a loss. We know the stocks they've been playing as MER, BSC, GS, MS, etc. Once those are sold off they look at their winners and say, "We've gotta make up for this loss by selling some stocks we're up in. If we don't, then nobody will want to invest with us next quarter." One of the few things pulling capital gains the past 3 months have been tech stocks such as the above bellweathers.

How much selling is left, I have no idea. It doesn't look like the downside is over with though in the tech sector with the selling volume that the sector has seen the past 3 days.

Of course, the long term investor can't be worried about these gyrations though because market drops are buying opportunities. CSCO at 27-28 and AAPL at 135 would be nice.

A drop in oil and a dollar bottoming will save the Bull. This OPEC meeting might turn into Circus Maximus with Chavez as the ringleader but who knows, maybe they'll say something to trigger some additional selling. I've been sitting here patiently waiting for the drop in oil for a while now.
 
Tech came down hard as it had been the only real show of strength lately. I'm pretty sure it's the big money profit taking finally coming to a head. There has been profit taking for a few weeks now in tech, but recently the selling has crested and caused the sector to turn over. I don't expect this buying into names such as GOOG and BIDU to be much more than the retail investor buying into what they may perceive to be a bargain.

There are plungers working this market.They are kind of like a pilot making the aircraft dip every now and then to see how many people he can shake off or get airsick. Short interest is on the rise and a 'surpise' rate cut would cause a good squeeze. No matter what the FOMC decides, I'm enjoying the suspense.
 
I think foreign money was buying today. If we get follow through tomorrow it could well be explosive as our bear friends get skinned. The SPX is prepared to blast into new all-time highs in short order. It was up 41.86 today to 1481.04. All we need is some noise from the Fed speak to mention they support the dollar. I see some members getting out on this rally - that is a mistake. The consumer continues to spend at a 3% annual rate during the third quarter from 1.4% in the second quarter, oil prices are finally breaking, gold prices are breaking and the shorts will break. Snort.
 
I hope you're right Birch. I'd rather make money going long on RIMM and GS than the ProShares ETF shorts. At least there are tools to make the trades both ways, right? Only if TSP had more choices. You'd think they'd want more FERS employees to retire wealthier and lessen the burden on SS and Medicare. I was at a faternity reunion this weekend and one buddy works at MER another at TROW, and another has started his own financial planning company. All of them agreed the longer term bull trend was dangling like a loose tooth. I asked if they're advising their clients on a sideways trading range, bear market or a bull melt up past the previous highs. They each had different opinions and are just as varying in opinion as us TSP members. Suprisingly, nobody said anything about a bull melt up... which has now turned into the appetizing contrarian play. US growth doesn't indicate it though and that last 3.9 GDP was high because of global exports not based on the internal strength of the US economy, earnings will have moderated global growth even from some tech leaders that have actually said so. I'd like to agree with you, but I'm having trouble finding the fuel to the fire.
 
I think this "bull melt-up" will hit a hard wall at the S&P 1490-1500 area. Until we can break 1500 and hold it, I am calling this a neutral market.
 
There are going to be 450,000 Canadians visiting Florida this winter - they like to wine and dine. Foreign money is here and is buying assets on the cheap and they will buy even more if the dollar has finally bottomed. Then there are the soverign wealth funds and more involuntary selection into new 401K plans. There is plenty of money around. And an increasing stock market makes us all feel a little more wealthy.
 
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