crws's Account Talk

[crws]

The tea leaves...
Don't bet on it

Commentary: No statistical basis for Summer Rally

http://www.marketwatch.com/story/no-statistical-basis-for-summer-rally-2010-06-08

By Mark Hulbert, MarketWatch
ANNANDALE, Va. (MarketWatch) - Monday's stock market action was particularly discouraging, with the Dow closing below its May 6 intra-day low of 9,870 -- the day of the infamous Flash Crash.

With that level now broken, investors face the prospect of the stock market decline picking up steam. The correction, which in Dow terms has already taken 12.4% off the market's level, is within shouting distance of becoming an official bear market--which would happen once the decline reaches at least 20%.
But wait! What about the Summer Rally?
Won't that save the day?
The answer from many of the investor advisers I track is a resounding "yes." Last week, for example, following the markets' Memorial Day holiday and the ceremonial beginning of summer, I began counting the number of times I saw reference to a "Summer Rally." There were so many I quickly lost track.
So for this column I decided to investigate what statistical support exists for the Summer Rally.
I have some bad news: There isn't any.
To be sure, there is no consensus among the Summer Rally's true believers about how precisely to define it. For purposes of my investigation, I looked at the market's gain from the end of May to its highest close during the subsequent three months -- through August 31.
I measured this gain using the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 9,816, -115.48, -1.16%) back to its creation in 1896. What I found might initially impress you: On average over the last 114 years, the Dow gained 5.3% from the end of May through its highest close over the next three months.
A three-month gain of that magnitude compounds out to an annualized equivalent of around 23%.
But there is less here than meets the eye. Measured this way, every season of the calendar can boast a rally of similar magnitude.
To show this, for each month of the calendar in addition to May, I calculated what the gain would be from the Dow's value at the end of that month to its highest close over the subsequent three months. It turns out that the average of those other months' gains is 5.3% -- just what it was for the so-called Summer Rally.
Another old wives' tale bites the dust.
How did investors and advisers come to believe in a Summer Rally in the first place? I have no idea, but I suspect that it might have had something to do with the extraordinary rally that occurred in the summer of 1932, in the depths of the Great Depression. The Dow nearly doubled during that year's summer's rally.
Without outlier years like that one, the Summer Rally loses even more statistical support.
Since 1940, for example, the average Dow gain from the end of May to its highest close over the next three months is just 4.0%. Eight of the other 11 months of the calendar sport higher average gains than this.
This discussion doesn't mean that the stock market won't rally at some point over the next three months, of course. No doubt it will. But its odds of doing so are not any greater just because the next three months come during the summer.

 

[crws]

A vote of confidence

Commentary: Insiders increasingly favor buying over selling


http://www.marketwatch.com/story/in...ruary-low-2010-06-04?siteid=rss&utm_source=tf

By Mark Hulbert, MarketWatch
ANNANDALE, Va. (MarketWatch) -- Corporate insiders are betting that recent market weakness is only a correction within a longer-term uptrend.
That's good news for the stock market, since historically they've been right more often than wrong.
Corporate insiders, of course, are a firm's officers, directors and largest shareholders. We are able to closely follow their behavior because the law requires them to more or less immediately report to the Securities and Exchange Commission whenever they buy or sell their companies' shares.
One company that gathers and analyzes the SEC data is Argus Research, whose findings are published in the Vickers Weekly Insider Report. Each week, Vickers calculates a ratio of the number of shares that insiders have sold over the previous week to the number that they have purchased.

Last week, according to the latest issue of Vickers' service, insiders on balance sold just 1.26 shares of their companies' stock for every one that they bought. That's about half of the long-term average of between 2-to-1 and 2.5-to-1.
To put this current sell-to-buy ratio in context, consider that in mid April the comparable ratio got as high as 7.83-to-1. That was clearly bearish, as I reported at the time. ( Read my April 14 column.)
In fact, the current sell-to-buy ratio is even lower than where it fell to at the February market low, when it only got as low as 1.96-to-1.
Another perspective on insiders' recent bullishness is provided by Jonathan Moreland, editor of Insider Insight. He calculates a ratio of, on the one hand, the number of companies over the last week in which insiders have made open-market purchases of their companies' shares to, on the other hand, the number of firms with open-market insider sells.
This ratio rarely is above 1, because there are more open-market sales from insiders than purchases (owing to the number of shares they acquire through non-open-market means). Nevertheless, over the latest week, according to Moreland, this ratio jumped above 1 -- to 1.03-to-1, in fact.
The last time the ratio was above 1, according to Moreland, "was in early April 2009, which corresponded with the beginning of the monster rally over the past year."
Of course, as I often have warned when writing about corporate insiders, they aren't always right. As a group, they were far too confident during much of the 2007-2009 bear market, for example, and consequently suffered large losses. But on average over the last several decades, they have been right more often than they've been wrong.
Another qualification: Even when the insiders are right about the direction of the market, they often are early.
All of which means that the stock market is not guaranteed to go up immediately, if at all.
Still, it's good news that insiders in recent weeks have cut back on their selling and increased the pace of their buying.

 

[Birchtree]

Thanx for all that good information it's appreciated.

 

[nasa1974]

Any news is good if it will get back into positive territory. :laugh:

 

[crws]

Good stuff
http://www.businessinsider.com/category/chart-of-the-day

 

[Birchtree]

The Right Stuff - oops wrong thread.

 

[crws]

This is a good sign

http://www.marketwatch.com/story/buybacks-tell-a-bullish-story-2010-06-11
Ghost busters

Commentary: Corporations appear not to be scared of another credit crunch


ANNANDALE, Va. (MarketWatch) -- Ghost of 2008?
That ghost still lives, even after Thursday's impressive buying stampede. That's because the stock market's plunge last month -- the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,173, +273.28, +2.76%) had its worst May since 1940 -- prompted many investors to worry that the European debt mess will lead to a replay of the credit crunch of 2008.
Corporate finance officers, however, don't appear to be scared of any such ghost. And they're not just saying so. They're backing up their words with money -- particularly by initiating new share-repurchase programs.
If corporate financial officers did think another credit crunch like 2008's were imminent, they would be hoarding their cash. After all, if a liquidity crisis that severe were to take place, most corporations would lose access to outside funding. Those without sufficient cash would not survive.
But, far from hoarding their cash, corporations are choosing to return a lot of their cash to shareholders through repurchases. Several large share-repurchase programs have been announced this week alone. ( Read full story on stock buybacks.)
When I last wrote about share buybacks in mid February, I pointed out that, for the first six weeks of 2010, they were already well ahead of 2009's pace. I reported that, if this faster pace were maintained for the remainder of 2010, share repurchases for the year would total $198 billion, nearly double 2009's total. ( Read my Feb. 15 column.)

​

In fact, the pace of share-buyback program announcements has been even faster than what I extrapolated in mid February. For the year to date through June 10, according to Thomson-Reuters, a total of $122 billion in repurchases has been announced -- equivalent to a full-year total of $276 billion. That would be nearly triple 2009's total.
Note carefully that the increased pace of share-repurchase activity is not simply a function of corporations having more cash. David Ikenberry, a finance professor at the University of Illinois at Urbana-Champaign, who has extensively studied corporate buybacks, points out that corporations had lots of cash a year ago too.
The difference, he said in an interview, is that corporate officers are increasingly confident that a recurrence of the 2008-2009 credit crisis is not imminent.
Ikenberry added that he believes this trend will not only continue, but accelerate: "The potential exists that, in coming months, there will be an avalanche of share-repurchase announcements," he said. That's because "share buybacks are one of the primary ways in which companies can deploy their cash, since other possible uses -- such as increasing the dividend -- require a longer-term commitment than a one-time share repurchase program."
By the way, buybacks are not only a bullish omen for the economy and market as a whole. They are also bullish for the individual companies that announce a buyback program.
Consider the performance of the Buyback Letter, edited by David Fried, an advisory service that recommends stocks based on buyback activity. Since the beginning of 1997, which is when the Hulbert Financial Digest began tracking this service, it has produced a 10.7% annualized gain, compared to 5.1% for the overall stock market (as measured by the Wilshire 5000 index). Among all the services the Hulbert Financial Digest has tracked since 1997, the Buyback Letter is in third place (second when ranked on a risk-adjusted basis).

 

[crws]

Housing starts on next weeks calendar:

http://biz.yahoo.com/c/ec/201024.html

http://www.npr.org/templates/story/story.php?storyId=127474204&ft=1&f=1001

7 economic indicators

The indicator

The reading

Next update

GDP Revised lower to 3%.June 25

Consumer Confidence Highest level since before recession.June 29

Home Sales Buyers rush to claim tax credit.June 29

Inflation (CPI) Runnning at 2.2%.June 17

Retail Sales Sales climb 0.4%.June 11

Job Growth Best gain in four years.June 4

Manufacturing (ISM) 'Signs are positive for continued growth.'June 1

http://money.cnn.com/2010/06/01/news/economy/economic_indicator.fortune/index.htm

The yield curve is "the mac daddy of economic indicators" says Ritholtz, who says he was astonished when, in 2007, an inverted yield curve wasn't widely taken as a sign that the U.S. was headed for a recession. Hembre says that instead, many thought rates on long-term Treasurys were being kept artificially low because of purchases by the Chinese central bank. "The yield curve is a no-brainer," Ritholtz says. "Ignore it at your own risk." Now, he says, the yield curve is steep, which is consistent with the fact that the financial sector has had a good run.

 

[Birchtree]

That was an excellent article you posted from Wells Capital Management - thanx for participating. The more information available the better.

 

[crws]

glad to!
I agree wholeheartedly- comprehensive and fact based. I kept that one.
Sometimes the comments hold more info than the articles.
PS- I just noticed Netflix has joined the ranks of the stock buyback club.

 

[crws]

Bewitching week continues.
The IPO of the Chicago Board of Options Exchange (CBOE) is priced on the high side @ 29/share, seems reports say 38% of IPO's have been a little pricey and have fallen later in activity. However, I did read somewhere, will find later that trading related stocks retained their value or grew.
Hopefully this will add some excitement to the market and get the ball rolling today.

Now for the positive spin!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aT9jSCe00338&pos=1
“I think today’s move is largely technical,” said London- based David Morrison, a market strategist at GFT. “U.S. traders will try and take the S&P 500 up through the 200-day moving average at 1,108. It feels like equities will try to push higher regardless” of the outcome of today’s economic reports.

 

[Uptrend]

Now for the positive spin!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aT9jSCe00338&pos=1
“I think today’s move is largely technical,” said London- based David Morrison, a market strategist at GFT. “U.S. traders will try and take the S&P 500 up through the 200-day moving average at 1,108. It feels like equities will try to push higher regardless” of the outcome of today’s economic reports.

First attempt was yesterday, and was turned back at 1106. Today or tomorrow should be the second try.

 

[crws]

CBOE http://finance.yahoo.com/q;_ylt=Avl...o3BHBvcwMxBHNlYwNxdW90ZXMEc2xrA2Nib2U-?s=CBOE looking good at +13%

 

[crws]

CA-CHING!

 

[crws]

China...yawn!
Pre G20 bs, from what I read- to keep China currency manipulation from being the main subject of the G20.
Google affirms the China public backlash holds the final card.
IMHO this is a hopeful, but bogus rally with no underpinnings or factual basis- based on trusting China.
Fishy...

In other news...
Ever see the movie Food, Inc?
Monsanto Chapter 2
http://www.nytimes.com/2010/06/22/business/22bizcourt.html?ref=business
First Soybeans , now Alfalfa

 

[nasa1974]

In other news...
Ever see the movie Food, Inc?
Monsanto Chapter 2
http://www.nytimes.com/2010/06/22/business/22bizcourt.html?ref=business
First Soybeans , now Alfalfa

How about "Soylent Green"?

 

[jdphx]

Hey crws... you still expecting a possible down for the week?

I jumped out with all the talk of downs following "witching week".
Looking pretty strong so far today though.

 

[crws]

I've been so inconsistent where I post links to info I find relevant- Let me look around and I'll post them back here.
I am content to sit on the sidelines until my next round of IFT's in July.
We are at a serious disadvantage to market transitions with our trading guidelines, and I'd rather get out the way up than guess when to bail on the way down. No matter the bull talk, if you notice, the MSM is all bullish when the market is up, then bearish when it goes down. The chatter I paid attention to was something to the effect the market was in limbo given a weak volume witching week/Friday.
China speaks & the market rallies? Is Alan Greenspan giving them guidance now? lol.
I see no major difference in growth patterns over the next 6 weeks out that the market would be leading to.
With Gold at an all time high and the F Fund (AGG) near a high, housing getting reposssed, (or not, mortgages just not paid for and banks not in hot pursuit) Oil heading to $80, something's got to give.
-Just my opinion...

Hey crws... you still expecting a possible down for the week?

I jumped out with all the talk of downs following "witching week".
Looking pretty strong so far today though.

 

[crws]

Ha Ha- Had to think about that one!!
How true!
Can't wait for the GMO Money Trees!

How about "Soylent Green"?

 

[crws]

My current philosophy- unless something dramatic changes, looks like Aug 15 (at the very, very, earliest) for me to consider going long, split between C, S, & I/F.
I may entertain an I fund run in July, we'll see.
http://www.tsptalk.com/mb/showthread.php?p=276161#post276161
There is an overwhelming amount of info available on investing out on the web, as well as here at TSPTalk. The majority of my opinions come from bits & pieces of what I pick up on the web, as well as from posts here. I am not too much the gambler, but will take odds when there is some sort of documented history of performance that I can justify fits with my perception of current events.
IMHO It all comes down to how much risk you can tolerate vs. how long you are able to contribute TSP funds before retiring.
I'm giving 12% & hoping to check out in 10-12 max, so I still get a little aggro now and then.

Hey crws... you still expecting a possible down for the week?

I jumped out with all the talk of downs following "witching week".
Looking pretty strong so far today though.