Bullitt's Account Talk

[TRAFFIC_DOG]

Morgan Stanley just became the first investment bank to predict that a recession is looming. Morgan, Merrill, Bear and Lehman shouldn't even be allowed to downgrade or speak negatively about any aspect of investing until they clean up their own act. If they are looking for something to downgrade they should start with themselves.
:laugh:

So very true.

 

[Bullitt]

This might not matter to those seeking a fortune this week but days like today are a fund manager's dream. Quant funds drove the prices down instantly as they were hoping for a 50 point cut. Nothing else that was said mattered. This was a complete cry baby selloff. As soon as the announcement came out, managers dropped their periscope's and dove. Just because the market tanked doesn't mean money wasn't flowing into it on the buyside of things though.

A common example: AAPL was at an intraday all time high today until it collapsed with the fed. (Unbelievable volume spike too by the way.) Do you really think that the fed only cutting 25 points is going to prevent AAPL from making a run at 200 by year end?

I know there's plenty of folks out there doling around about the fed not cutting the discount or this and that but seriously. What do you know that Bernanke and co. doesn't? Quote of the day was by Guy Adami. Someone asked him why the fed didn't cut more. He responded by saying that the FOMC are the smartest guys in the room. They know more about what's going on than any of us and are going to do what's best for the economy as a whole.

Whether Small Caps or Large Caps get us there doesn't really matter. We all want the same in the end. I'm still sticking with Large Caps to take us to the sunset as long as Big money keeps pouring their money into Utilities and Consumer Staples.

 

[Bullitt]

Let's see if the same players that plunged the open are going to put on the squeeze towards the close. Volume is suggesting big institional involvement today.

Try as they may to put on the poker face, Bernanke and Co. can't hide their cards good enough. Additional cuts and bailouts are coming down the pike. I wonder what bank will be the next target of foreign nationals.

 

[fedgolfer]

LEH has earnings/conf call tomorrow... Finerman has been saying they're gonna come clean and write down a sh*tload. Everyone's expecting it though and like you said, central banks, foreign investors and the gov't seem to be bailing out the big boys that didn't hire risk managers worth the pay.

On a sidenote, MACD on XLF 6-month chart indicate some downward pressure.

 

[Bullitt]

Fedgolfer,

There will be a few days of big up days in the bank sector, but the biggest up days tend to come on the downside as folks get squeezed out on any good news. Everyone thought it was safe when BAC invested in CFC. Then Buffet put a stake in BAC and WFC. Analysts were touting USB, UBS and BAC as being safe from the subprime exposure. I guess they were all a bit wrong. They are almost all in as bad of shape as Citi below the surface. On a positive note, it just gives me more opportunity to accumulate shares from dividends in the financials if the tailspin continues. I've got a few banks pulling for me in the long haul.

Unfortunately though, the market needs banks to contribute in order to make another big run. Financials comprise some 20% of the S&P 500. I see big money continuing to get defensive going forward. Financials are a nightmare, Oil conglomerates should be bought on drops (not dips, drops). It appears that the big money types are piling into consumer goods and utilities while selling all rallies in tech.

I'm still waiting for CIBC, MS, LEH and GS to call a spade a spade by slapping a sell rating on themselves.

 

[Bullitt]

I'm still waiting for CIBC, MS, LEH and GS to call a spade a spade by slapping a sell rating on themselves.

Why does anyone listen to Greenspan anymore? A Recession is coming? Bring it.

Greenspan=Strong Sell

 

[Bullitt]

1470 failed, or did it?

I think this is just a bear trap setup by the same people that threw the tantrum a few days ago. Volume doesn't seem to suggest this move down as anything more than a few plungers dipping their toes below the support line. This move below support should inevitably drive more retail investors out of the market so the smart money can start getting back in.

Financials are still a nightmare, but the banks might be showing signs of a bottom by way of a Reverse H&S. At least, I hope...

 

[Birchtree]

Someone is buying for the holidays. It's becoming increasingly clear that the low U.S. dollar has become the primary force in domestic M&A right now. According to data compiled by Thompson Financial, none of the 10 largest merger-related bids here in the past four months had a U.S. acquirer, and in only two of the top 10 acquisitions overseas is a U.S. company the buyer.

 

[Bullitt]

I'm expecting a plethora of international equity deals to come thru the wire in '08 similar to the one at C. It's turing out that this subprime thing isn't as bad as initially thought. Markets are already factoring in bank dividend cuts and the slowing of economic growth. Banks have begun to throw the kitchen sink right out the window by taking responsibility for SIV's and including them on their balance sheets.

I was expecting a big Q4 a few months ago. The bullish case still remains for Q4 as long as analysts continue to believe the economy will slow. Just keep lowering the bar for the bull to hop over.

They say all the bad news comes out at the bottom. Why have analysts become overly bearish on financials? They are already down some 20-40% this year. Richard Bove was really on the money when he downgraded financials around August. He's now calling them a good buy even if they need to cut dividends as other analysts are issuing sell ratings. Analysts are always reluctant to slap that sell signal on a stock.

On the contrary, all the good news comes out at the top. Think 'House Flipping for Dummies' and IPO's such as FIG and BX.

I've been watching XLF since August for signs of strength in this market.

 

[Bullitt]

I think Tom's summary hit the nail on the head today. What I feel this market needs is a complete capitulation flush. We haven't seen that yet. Give me a few consecutive 200-300 point down days on the DJIA, or just give me a -500 point day. Hammer everyone into the ground in order to wash out some more hege funds and short term arbitragers. What we've seen in the past 3 months is a wall street rescue mission as Goldman Sachs types racing to unload their holdings while the Fed plays the role of the Pied Piper. (Of course, it really doesn't matter because Big Money makes money no matter which way the market is moving.)

I'd really like to see a few more hedge funds crash along with some of these fly by night mortgage lenders. It's been a while since I've read about a good hedge fund collapse. Bring some panic into the market with a tailspin towards 1400 to see who can hold on. This should clear out some of the overhead resistance in a hurry. My bullish case for stocks in 2008. Let's start 2008 on a clean slate. I'll be holding on until Euphoria decides to join the party.

 

[robo]

I think Tom's summary hit the nail on the head today. What I feel this market needs is a complete capitulation flush. We haven't seen that yet. Give me a few consecutive 200-300 point down days on the DJIA, or just give me a -500 point day. Hammer everyone into the ground in order to wash out some more hege funds and short term arbitragers. What we've seen in the past 3 months is a wall street rescue mission as Goldman Sachs types racing to unload their holdings while the Fed plays the role of the Pied Piper. (Of course, it really doesn't matter because Big Money makes money no matter which way the market is moving.)

I'd really like to see a few more hedge funds crash along with some of these fly by night mortgage lenders. It's been a while since I've read about a good hedge fund collapse. Bring some panic into the market with a tailspin towards 1400 to see who can hold on. This should clear out some of the overhead resistance in a hurry. My bullish case for stocks in 2008. Let's start 2008 on a clean slate. I'll be holding on until Euphoria decides to join the party.

Henry also waits. A test of 1410 would do it for Henry, but Carl would settle for 1425 and we are very close at these prices. Bob thinks 1410 is a gift horse buying op! I wonder if Birchtree agrees with Bob.


Retest In Progress
by Carl Swenlin

Two weeks ago I stated that the rally off the November lows signaled that a bottoming process had begun, and that, after the short-term rally topped, we should expect a retest of the November lows. Last week the rally was still in progress, and I told Ike Iossif during our interview that I still expected a retest, but that I also feared that the rally would extend j-u-u-u-s-t far enough to trigger a Thrust/Trend Model buy signal before prices reversed downward. As you can see on the chart below, sure enough, the rally topped on Monday (generating a T/TM buy signal), and prices reversed on Tuesday, initiating what ought to be a retest.

I say "ought" to be a retest because so far, in spite of a lot of volatility, it isn't much of a retest in terms of magnitude. I would like to see prices drop to the area of 1425 -- at that point I would consider that sufficient technical work has been done to provide a good base for the next rally. Of course we don't always get what we want from the market.

http://www.decisionpoint.com/ChartSpotliteFiles/071214_retest.html

 

[Bullitt]

What I feel this market needs is a complete capitulation flush. We haven't seen that yet. Give me a few consecutive 200-300 point down days on the DJIA, or just give me a -500 point day.

Gap down today in SPX. Gap down tommorrow could be start of capitulation as panic rushes for the exits. Noticed some blocks going thru SGP today at $27 and decided to add some additional shares to my stake.

 

[Bullitt]

A test of 1410 would do it for Henry, but Carl would settle for 1425 and we are very close at these prices.

I wonder what they think of 1435?

 

[hessian]

I wonder what they think of 1435?

It does seem that 1435 is holding as intraday resistance, so far, which is the top of the gap from the mid-Nov low. Other Funds seem to be finding some resistance too - the "I" (well EFA anyway) seemed to confirm at the mid-Nov low. "S" today, so far intraday, came within 5 points of that same mid-Nov low.
Still, 2 hours to go yet - the way market's been lately, feels like an eternity, doesn't it?

 

[robo]

I wonder what they think of 1435?

Henry remains short and Carl is long on most ETF's. Look at the bottom of the page to see buy dates from Carl. Keep in mind these are IT positions and many of us are trading ST positions.

http://www.decisionpoint.com/ChartSpotliteFiles/071214_retest.html

Good day for the small guys. Now how much will we give back tomorrow? I usually don't leave this much money on the table, but that's what trailing stops are for. It would be nice to get back to 1500 before the end of the year. Currently 50% G 30% C and 20% S looking to add. Most of the folks I follow are neutral or short which is usually Bullish when so many are on the same side of the boat. We shall see! The charts still look very ugly and that makes it very hard to be a buyer here. Keep your seatbelt on folks, but remember you are fighting the Fed and his boys... They still have a few tricks to pull out so don't get to Bearish or to Bullish. I'm going to watch Kudlow tonight in case BirchTree shows up. I have know idea what the next few weeks will bring, but I'm playing it on the long side.

Good Trading/Investing to all!


http://finance.yahoo.com/q?s=UWM

http://finance.yahoo.com/q?s=saa


( ST = 1 to 5 days for most ) ( IT for me is around 1 to 3 months )

 

[Birchtree]

I think with the intra-day low today the capitulation pattern is complete. All the unwilling sellers have left the market. It's time for the bulls to step up.

 

[fedgolfer]

Nas 100 and the Russell look like they had nice reversal candlesticks coming off some ugly low areas. I'm short term bullish on tech and small caps... GO S fund.

 

[Bullitt]

S might be a good trade, but from an investors standpoint, Russell 2000 has broken it's 5 year uptrend. There have been a few times in 07 that it's dipped below this trendline before only to rise back above. A double bottom could be in progess. Time will tell. If the double bottom works, then small caps could carry on in the tradition of leading the way in the next leg of the bull market.

The case for Large caps going forward continues to strengthen, but how much longer can it continue to fend off the 'death cross'?
http://www.usatoday.com/money/markets/2007-12-20-small-stocks_N.htm

 

[fedgolfer]

I wrote the Russell stuff on the 19th, on the turn in $dwcp. I kinda look at those two simultaneously. the $rut.x has a upper trendline descending from 10/11 to 12/11 if we break thru that i'm staying small cap in tsp and tech in my trading accounts. If we can't, then what appears to be a mid-term double bottom, probably isn't. I think we'll break thru though.

Got your PM, RIMM, aapl, bidu and goog... way overweight tech and nervous about it. But they looked like bargains. Guess I got lucky.

 

[Bullitt]

Sorry Fedgolfer, I didn't mean to trump your post by any means. I've been busy lately and didn't read your post on the smalls until you mentioned it. If I'd seen your post I would have just added to your thread.

I'm all for the small caps leading the way, but I IFT'd 5% of my S and into C by COB Friday. Usually when I DCA it's only with 1-2% at a time. I figured short sellers would continue to get squeezed out as the day went on (options X) and decided to sell a bit more into strength. I now sit comfortably at 45C 20S 35I going into the new year.

Hopefully the buyers will enter the market in the beginning of '08. I'll continue to be Bullish even as the analysts lower earnings estimates. IMO the money has already been made on the shortside of things, including financials. For the most part dividend cuts and the like have already being factored into the financials. In retrospect, the market has actually held up quite well regardless of the financial mess.

I'm still keeping one eye on the SPX and the other on XLF for an indication of market strength. I'd like for 1440 to be the extent of the retest. SPX could break above it's pennant pattern as soon as Janunary and if it does, who knows how high the double bottom could take us.

Luck to market longs. Merry Christmas.