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Bullitt's Account Talk
- Thread starter Bullitt
- Start date
Bullitt
Well-known member
Crushing day just goes to show how easy it is to get burned while chasing momentum stocks. I saw this coming to the tech sector a while back. Just way too much bullishness on the tech, bulk shippers, and oil services. We're witnessing a bubble in the oil prices which can not be blamed on the falling dollar. The dollar has only falled ~4% YTD while oil has risen ~20% YTD. Can't wait for the correction in oil prices because that's going to work wonders for the market. Like I said in August, I'll be back into Oil services in November. Maybe that's when the buying opportunity in that sector will come along.
Bullitt
Well-known member
I don't know if this was posted anywhere else on the board. Robo tends to be pretty up to date with these analyst reports. Good article on sector rotation. IE: Smart money selling their shares to the retail investor. I remember Cramer pumping tech around Feb 07 while it was still stagnant. Sorry, don't have the link, it was emailed to me.
Richard Rhodes | The Rhodes Report
TECHNOLOGY REIGN COMING TO AN END?
Over the past 18-months, the technology sector has outperformed the S&P 500 by a rather handy amount; however, we believe this trend towards technology out-performance is very close to ending. This has major implications in terms of "rotation" to be undertaken by mutual and hedge funds as they are currently very very overweight technology; hence a period of "de-leveraging" themselves may create an opportunity to be short the sector as the "doorway narrows" as everyone attempts to get out at the very same time.
Technically speaking, we use the ratio between the S&P 500 "Spyders" and the NASDAQ 100 "Q's" (SPY:QQQQ). As the chart illustrates, a larger trading range has formed over the past 5-years, with prices now hard upon support at the 2.85 level - which also happens to be right at Fibonacci 38.2% retracement level. This important and critical support level in our opinion shall "hold" and provide for a rally back towards both the short-term 60-day moving average as well as longer-term 250-day moving average... if not higher. Quite simply, prices are oversold when one looks at the 28-day RSI level of 30.91, which is attempting to form a positive divergence with prices.
The most recent experience with an oversold RSI positive divergence occurred in early-2000 - which of course was "the top" of the technology bubble, and right before the onset of a recession. While we don't necessarily believe an exact "redux" is likely - the risk-reward dynamic does indicate that the risk is towards higher ratio prices rather than a continuation towards lower prices. Hence, we 'smell' an opportunity to be short a number of technology names in the days and weeks ahead.
Richard Rhodes | The Rhodes Report
TECHNOLOGY REIGN COMING TO AN END?
Over the past 18-months, the technology sector has outperformed the S&P 500 by a rather handy amount; however, we believe this trend towards technology out-performance is very close to ending. This has major implications in terms of "rotation" to be undertaken by mutual and hedge funds as they are currently very very overweight technology; hence a period of "de-leveraging" themselves may create an opportunity to be short the sector as the "doorway narrows" as everyone attempts to get out at the very same time.
Technically speaking, we use the ratio between the S&P 500 "Spyders" and the NASDAQ 100 "Q's" (SPY:QQQQ). As the chart illustrates, a larger trading range has formed over the past 5-years, with prices now hard upon support at the 2.85 level - which also happens to be right at Fibonacci 38.2% retracement level. This important and critical support level in our opinion shall "hold" and provide for a rally back towards both the short-term 60-day moving average as well as longer-term 250-day moving average... if not higher. Quite simply, prices are oversold when one looks at the 28-day RSI level of 30.91, which is attempting to form a positive divergence with prices.
The most recent experience with an oversold RSI positive divergence occurred in early-2000 - which of course was "the top" of the technology bubble, and right before the onset of a recession. While we don't necessarily believe an exact "redux" is likely - the risk-reward dynamic does indicate that the risk is towards higher ratio prices rather than a continuation towards lower prices. Hence, we 'smell' an opportunity to be short a number of technology names in the days and weeks ahead.
Bullitt
Well-known member
'All gaps get filled'. Hopefully that's all Friday's selloff in the Nasdaq was doing. I'm glad I was away and didn't check up on the market until after the noon deadline because otherwise I might have gone to the G Fund and locked in the loss. I know, we closed below that sell signal of 1520 but I'm a risk taker in this game. I'm confident that this oil bubble is going to blow and as a result the stock market will move forward to new highs. I figured this market has been kinda wacky recently and I'm not about to miss on any gains while we're still in an uptrend. I DCA'd my way thru the last mess and I'm willing to do it again if need be.
Good earnings on AAPL today but AMZN or MER could easily erase any positive strength if they fall on their face. Another good sign is that the 1490 level held today and that the drop below the 50 DMA might have flushed out some more of the weaker bulls. The CTX earnings call should be interesting.
Good earnings on AAPL today but AMZN or MER could easily erase any positive strength if they fall on their face. Another good sign is that the 1490 level held today and that the drop below the 50 DMA might have flushed out some more of the weaker bulls. The CTX earnings call should be interesting.
Bullitt
Well-known member
Still fully invested overweight C, and while looking ahead, I see two catalysts that will move the market upwards.
1. The Oil bubble will burst. That's good news for everyone.
2. The fed will cut rates again. (Apparently the last cut was already priced in also before it happened.)
Big money has been buying at the 1490-1500 level for the past few days in order to get themselves positioned for the continuation. Plenty of weaker bulls have been shaken out along with the momentum chasers in the Tech sector on the week's volatility.
1. The Oil bubble will burst. That's good news for everyone.
2. The fed will cut rates again. (Apparently the last cut was already priced in also before it happened.)
Big money has been buying at the 1490-1500 level for the past few days in order to get themselves positioned for the continuation. Plenty of weaker bulls have been shaken out along with the momentum chasers in the Tech sector on the week's volatility.
weatherweenie
Well-known member
Do you think it will burst on the order of the tech bubble? Two totally different animals. Hopefully oil will come down, but I'd be surprised if we see $30-40/barrel given the worldwide demand.
Bullitt
Well-known member
I don't think we'll ever see another tech bubble. PE's will never hit the 120's again. People are too smart for that. However, we really have no idea how much oil there is out there. We have no idea how much we use besides the weekly inventory reports which fluctuate like the weather.
This caught my eye a week back when I was beginning to wonder if anyone else thought Oil was overbought. I mean... it's 5 steps forward 1 step back every other trading day! The dollar hasn't dropped that much. Most of this price move has been brought on by people thinking we're going to war with Turkey or Iran.
Check this link: http://tickersense.typepad.com/ticker_sense/2007/10/crude-oil-price.html
posted on 10/18 so imagine how stretched it is today.
Crude Oil Price Chart: 6.5% Overbought
Crude's recent rally since 10/8 has pushed the commodity to a new high, but more notably the change was so rapid that it is now 6.5% overbought (at its peak today it was more than 7% overbought). (Or 6.5% above the upper boundary of its trading envelope.) In fact, at its current level of $87.40 per barrel, crude is two standard deviations above its 50-day moving average. We looked back at similar spikes this year, where crude was two standard deviations above its moving average and also at least 5% overbought. In 66% of the cases (highlighted in red on the chart) crude traded down over the following week for an average decline of 1.79%.
This caught my eye a week back when I was beginning to wonder if anyone else thought Oil was overbought. I mean... it's 5 steps forward 1 step back every other trading day! The dollar hasn't dropped that much. Most of this price move has been brought on by people thinking we're going to war with Turkey or Iran.
Check this link: http://tickersense.typepad.com/ticker_sense/2007/10/crude-oil-price.html
posted on 10/18 so imagine how stretched it is today.
Crude Oil Price Chart: 6.5% Overbought
Crude's recent rally since 10/8 has pushed the commodity to a new high, but more notably the change was so rapid that it is now 6.5% overbought (at its peak today it was more than 7% overbought). (Or 6.5% above the upper boundary of its trading envelope.) In fact, at its current level of $87.40 per barrel, crude is two standard deviations above its 50-day moving average. We looked back at similar spikes this year, where crude was two standard deviations above its moving average and also at least 5% overbought. In 66% of the cases (highlighted in red on the chart) crude traded down over the following week for an average decline of 1.79%.
fedgolfer
Well-known member
Bullit, awesome oil chart thanks!!!! great buy and sell points for refiner stocks... look at TSO today. If I owned it, i'd be selling it today. I'll be ready to pounce next time. What's a good real time chart/ticker for that? I don't know of free real time access to commodity charts.
Bullitt
Well-known member
For Crude try $WTIC in stockcharts. I don't know of any real time tickers. I'm sure they're out there though.
Oldcoin
Member
Click on the scale thingy (at least that’s what it looks like to me) in the upper right hand corner of the post. Hope this helps.
fedgolfer
Well-known member
Bullitt,
You sound like you're a pretty good tape reader when you refer to spotting large volume upticks on the bid vs. ask price.
What are you big do's and don't rules for tape reading/bookviewing? I'm trying to become a better tape reader... right now, when viewing key buy/sell/support/resistance levels, I'm just eyeing the tape to see if I have confirmation of some large institutional moves around the time I'm making my moves. But on large volume stocks... sometimes its just all a blur.
You sound like you're a pretty good tape reader when you refer to spotting large volume upticks on the bid vs. ask price.
What are you big do's and don't rules for tape reading/bookviewing? I'm trying to become a better tape reader... right now, when viewing key buy/sell/support/resistance levels, I'm just eyeing the tape to see if I have confirmation of some large institutional moves around the time I'm making my moves. But on large volume stocks... sometimes its just all a blur.
Bullitt
Well-known member
FedGolfer, thank you. I appreciate your market insight as well. I'm not concerned with where the herd is going on this board. For me, the account talk page is more valuable than the account allocation. I have a few people this board that I read daily because they provide more insight than Bob Pisani on what's really going on.
I believe that the market is moved ONLY by institutional investors. aka, Smart Money. If we can assume that day traders/scalpers are a constant in the market, then we can only assume that smart money is what provides the big volume moves or bulk market buying and selling.
I know people say that Hedge Funds and Mutual Funds are risky, but for the most part, Smart Money is the most conservative investor out there. Most Mutual Fund all stars, such as Bill Miller, have long time horizons of 5-10 years or more. These guys loaded up on Tech over the years and have been unloading it to the retail investor recently. Anyway.... The retail investor wants to hit it big right now and they can only wait until tomorrow at the latest.
One way of finding whether a stock may be 'undervalued or overvalued' by looking at the chart is it's relation to it's 200 DMA. If we can assume that the 200 DMA is the closest thing we have to a stock's 'norm' then we have to assume that everything eventually comes back to the norm. (Unless of course if you're Barry Bonds.) Watch the stock's price/volume action in relation to the 200 DMA. Is it time for it to revert to the norm; is it time to correct; will it continue to run? These are all questions you need to ask. Again, an oversimplification but think about it. Be skeptical of a stock that's up on 500% daily volume. (Think DNDN a while ago). You don't see Warren Buffet buying tech now, but instead he's buying BNI.
It's hard to say who influences me the most because I've put together my own style from the 60+ and counting books that I've read on making money thru Indexing-Day Trading-Value Investing.
Here's a link for you to start with in charts. Remember that by time you see it, it's ancient history. Be careful out there... There are sharks swimming in these waters.
Six Tips to Assess the Significance of Price Patterns.
http://blog.afraidtotrade.com/six-tips-to-assess-the-significance-of-price-patterns/
I believe that the market is moved ONLY by institutional investors. aka, Smart Money. If we can assume that day traders/scalpers are a constant in the market, then we can only assume that smart money is what provides the big volume moves or bulk market buying and selling.
I know people say that Hedge Funds and Mutual Funds are risky, but for the most part, Smart Money is the most conservative investor out there. Most Mutual Fund all stars, such as Bill Miller, have long time horizons of 5-10 years or more. These guys loaded up on Tech over the years and have been unloading it to the retail investor recently. Anyway.... The retail investor wants to hit it big right now and they can only wait until tomorrow at the latest.
One way of finding whether a stock may be 'undervalued or overvalued' by looking at the chart is it's relation to it's 200 DMA. If we can assume that the 200 DMA is the closest thing we have to a stock's 'norm' then we have to assume that everything eventually comes back to the norm. (Unless of course if you're Barry Bonds.) Watch the stock's price/volume action in relation to the 200 DMA. Is it time for it to revert to the norm; is it time to correct; will it continue to run? These are all questions you need to ask. Again, an oversimplification but think about it. Be skeptical of a stock that's up on 500% daily volume. (Think DNDN a while ago). You don't see Warren Buffet buying tech now, but instead he's buying BNI.
It's hard to say who influences me the most because I've put together my own style from the 60+ and counting books that I've read on making money thru Indexing-Day Trading-Value Investing.
Here's a link for you to start with in charts. Remember that by time you see it, it's ancient history. Be careful out there... There are sharks swimming in these waters.
Six Tips to Assess the Significance of Price Patterns.
http://blog.afraidtotrade.com/six-tips-to-assess-the-significance-of-price-patterns/
fedgolfer
Well-known member
I hear your warning calls on tech. I've never been a buy and holder, especially in tech where the game changes so fast. Even the institutional money trades tech briskly... versus guys like Buffett who doesn't even touch it. Worden Bros software has a feature where you can only select your bookviewer to show buy/sell orders of 10,000 shares or more... this really helps me pick out shorter term accumulation and distribution. Personally, I love tech, and I love that retail money follows momentum into tech like cats to catnip... we all see the upside in those swings. And the downside is always swifter then the ride up. I agree the QQQQ on the whole have shown signs of distribution... however, I still haven't seen it on some of the select names.
Bullitt
Well-known member
I dug this up out of one of my books I keep on the shelf and thought I'd share it. Something to think about before one should go about chasing performance within any aspect of investing. Pay special attention to the 3rd paragraph.
The Double Standard of Mutual Funds
"If investors are counseled to wisely buy and hold, why do managers frenetically buy and sell stocks each year? ....the internal dynamics of the fund industry make it almost impossible for fund managers to look beyond the short term. Why? Because the business of mutual funds has turned into a senseless short-term game of who has the best performance measured totally by price."
"Today there is a substantial pressure on portfolio managers to generate eye-catching short term performance numbers. These numbers attract a lot of attention. Every three months, the Wall Street Journal and Barrons publish quarterly rankings of mutual funds. The funds that have done the best in the past 3 months move up on the list, are praised by financial commentators on tv and newspaper, rush to put outself congratulatory advertising and promotion, and attract a flurry of new deposits. Investors, who have been waiting to see who has the 'hot hand', pounce on these rankings."
"This fixation on short term price performance... dominates thinking in our industry. We are no longer in an environment where managers are measured over the long term. Even people who function as their own manager, as many of you may do, are infected by the unhealthy nuances of this environment. In many ways, we have become enslaved to a marketing machine that all but guarantees underperformance."
Hagstrom, Robert G., The Warren Buffet Portfolio (New York: John Wiley and Sons, Inc., 1999), 67-68.
The Double Standard of Mutual Funds
"If investors are counseled to wisely buy and hold, why do managers frenetically buy and sell stocks each year? ....the internal dynamics of the fund industry make it almost impossible for fund managers to look beyond the short term. Why? Because the business of mutual funds has turned into a senseless short-term game of who has the best performance measured totally by price."
"Today there is a substantial pressure on portfolio managers to generate eye-catching short term performance numbers. These numbers attract a lot of attention. Every three months, the Wall Street Journal and Barrons publish quarterly rankings of mutual funds. The funds that have done the best in the past 3 months move up on the list, are praised by financial commentators on tv and newspaper, rush to put outself congratulatory advertising and promotion, and attract a flurry of new deposits. Investors, who have been waiting to see who has the 'hot hand', pounce on these rankings."
"This fixation on short term price performance... dominates thinking in our industry. We are no longer in an environment where managers are measured over the long term. Even people who function as their own manager, as many of you may do, are infected by the unhealthy nuances of this environment. In many ways, we have become enslaved to a marketing machine that all but guarantees underperformance."
Hagstrom, Robert G., The Warren Buffet Portfolio (New York: John Wiley and Sons, Inc., 1999), 67-68.
budnipper1
Active member
Good read. Here's a link to read it online.
http://books.google.com/books?id=ie...imrK9&sig=ucjr7EBZ91RzoYM1NUbQhv8e6kw#PPP1,M1
http://books.google.com/books?id=ie...imrK9&sig=ucjr7EBZ91RzoYM1NUbQhv8e6kw#PPP1,M1
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