Market Talk / August 6 - 12

[SkyPilot]

The I fund is affected by the relative value of the USD, as well as the EAFE index. You did see some affect similar to the C and S funds, but it did better due to the decline of the USD as well as a strong NIKKEI and AORD which closed way up earlier in the day. The I fund is kinda tricky...

 

[Wheels]

Plenty of pretty smart folks think the support levels will hold and the lows for the year are in

That scares the bajeebers out of me.

Dave
<><

 

[tsptalk]

What are the dumb folks thinking? Anyone?

 

[robo]

Light At End Of Tunnel For Ishares Russell 2000 (AMEX: IWM)?
August 9, 2006

Shares of exchange-traded fund Ishares Russell 2000 (AMEX: IWM) have suffered along with the rest of the stock market in recent months. But the charts of this volatile ETF are suggesting a rally may be around the corner.

Ishares Russell 2000 seeks to duplicate the performance of the Russell 2000 Small Cap Index. Current top holdings are, Plains Exploration & Production Company (NYSE: PXP), Joy Global Inc (NASDAQ: JOYG) and Crown Holdings (NYSE: CCK).

Ishares Russell 2000 corrected hard in mid-June and again in mid-July. Both declines were stopped at about $66.65, which creates support only 2.5% below Tuesday’s close. At the same time Ishares Russell 2000 has a declining resistance line, currently at about $70.00 a share. A decisive close above $70.00 could very well signal the direction of Ishares Russell 2000 for the coming weeks.

http://timing.typepad.com/timer/

 

[Spaf]

What are the dumb folks thinking? Anyone?

Thinking how dumb we were to miss the short signal!......

Every time I brought up the MACD Histogram my dog would start barking! I kept telling him to shut-up, there was no one at the front door!......:notrust:

4 days, 3 advances that fizzled. The good news is that the four red days have not had steep drops. My alert stop at 1% was broken, the trailing stop of 2% is still in tact. The bad news is the energy/economic problem we got our selves in to! We need some good rumors (news) on the energy front!

 

[robo]

Wednesday, August 09, 2006

Looming Recession Sends Stock Market Tumbling
After being in denial about the prospect of a recession for several months, the stock market finally saw that possibility as very real and sold off on Wednesday, a day after the Fed had essentially declared the risks to the economy were too great to hike rates one more time. The Dow was off triple-digits before recovering slightly at the close as bargain-hunters stepped up to the plate to accumulate relatively cheap shares.

Actually, the Fed's inaction yesterday, combined with the bond market's racheting lower of long term interest rates (by which action the previous Fed rate hike was declared by the market "null and void") makes a recession less probable -- and rate cuts more probable in coming weeks. Combined with the fact that China is back to exporting deflation (they had been exporting inflation until just a few months ago) and you have a stock market that's looking the wrong way for direction: in the rear view mirror. And, that means that stocks are being sold for the wrong reasons. The Fed may very well surprise the market with emergency rate cuts in coming weeks as they wish to avoid a repeat of the 2000-2003 recession. Another recession coming so close on the heels of the prior one could be devastating to the economy given the severe slump in housing and the explosive rise in gasoline prices putting a huge crimp in consumer disposable income in recent months. Thus, the very real possibility of rate cuts from the Fed is very high before the end of the year.

That doesn't mean that we're going to see the market bottom right away and rally. But, it does mean that the market is taking an overly-bearish view toward the future and, at some point, will realize the error of its ways.

In fact, the big money players, after selling the rally earlier in the year, have already started buying back stocks again -- an accumulation program -- on the dip. These players cannot move in and out of the market like day-trade jackrabbits. They have to move more like whales -- slow and easy to avoid creating great waves in the ocean called the market. In order to sell their positions, they have to be able to find buyers. The best time to find buyers is when the market is moving up, as it was from October to May. During that long rise, they were pushing shares out to the buyers, distributing them in a market where the buyers thought they were getting a good deal. But, it allowed the big players to distribute their shares at good prices without ruining the price structure of the market.

By May, the veneer was running thin as the BOJ (Bank of Japan) had pulled the plug on global liquidity in March and called in their loans. Hedge funds had been selling to meet calls on loan money, but the supply of shares to sell became too great (the buyers finally wised up and backed off) and the price structure of the market broke down very quickly in mid-May.

The best time for these same large players to do their buying is on dips because a plentiful supply of sellers are available and such buying can be done without sending the prices of those shares up. In order to accumulate large quantities of shares, a willing supply of sellers must be available. Right now, the public is interested mostly in selling, not buying, so the supply of sellers is adequate. Once the big players have finished accumulating their inventory of shares, they will have absorbed all of the supply of shares on offer and the only thing left for the market to do will be to go up. Of course, as you probably know if you've been investing for long, the "dumb money" at that point in time will be the jackrabbits who have accumulated paper profits on their short sales. When prices start going up, those jackrabbits will have to become buyers in a hurry or risk their profits disappearing.

 

[Mike]

http://money.cnn.com/2006/08/09/markets/stocks_pause/index.htm

According to this, the S&P has averaged a decline ranging from ~2.5-4% following an end to the tightening cycle since '29 (since ending rate hikes tends to correspond with a slowing economy / recession).

So the question is, when is the Fed done?

 

[tsptalk]

I'll take 2.5%. The S&P is already down 2% from last Friday's high.

 

[Griffin]

Wednesday, August 09, 2006
The Fed may very well surprise the market with emergency rate cuts in coming weeks as they wish to avoid a repeat of the 2000-2003 recession. Another recession coming so close on the heels of the prior one could be devastating to the economy given the severe slump in housing and the explosive rise in gasoline prices putting a huge crimp in consumer disposable income in recent months. Thus, the very real possibility of rate cuts from the Fed is very high before the end of the year.

Robo, is this from Henry? A rate cut in the next few weeks would absolutely confirm the fears that we are slipping into a recession and become a self fulfilling prophecy. Therefore, I don't see that happening (yet). Not that the Fed cares, but if we cut rates, the foreign central banks would be in a real jam.

I'm not saying we won't slip into a recession, if the current price channel of the S&P 500 collapses, I would attribute that to the market pricing in a recession which would have the same effect (layoffs, downsizing, trimming R&D, etc...). I think the best thing for the Fed to do, is to stay paused until the economy (and the foreign central banks) have time to catch up with the last few moves. A move in any direction will be bad for the market.

 

[Pilgrim]

Then there are the conspiracy theorists who claim that the market is being manipulated ahead of the elections. If the game plan is to push it down, then pump it up so that everything spectacularly explodes right on schedule - somebody better get to work cuz time is growing short.

 

[robo]

Robo, is this from Henry? A rate cut in the next few weeks would absolutely confirm the fears that we are slipping into a recession and become a self fulfilling prophecy. Therefore, I don't see that happening (yet). Not that the Fed cares, but if we cut rates, the foreign central banks would be in a real jam.

I'm not saying we won't slip into a recession, if the current price channel of the S&P 500 collapses, I would attribute that to the market pricing in a recession which would have the same effect (layoffs, downsizing, trimming R&D, etc...). I think the best thing for the Fed to do, is to stay paused until the economy (and the foreign central banks) have time to catch up with the last few moves. A move in any direction will be bad for the market.

Griffin,

Those comments came from Market Clues. I should have posted the link.

http://marketclues.blogspot.com/

 

[Birchtree]

You can rest assured that if Robo puts it out there there is substance behind it.

The expectation that the Fed is done raising rates and that the ECB is just getting started has helped push the euro higher against the dollar. The reason: If European rates rise while U.S. rates stay still, and if European economic growth is speeding up as the U.S. is slowing, then European assets become relatively more attractive to investors than U.S. assets.

That's one way to trade today's rate moves. Of course, the view depends on Europe's un[roven ability to stand on its own. A slowing U.S. economy could drag Europe down with it. Then the ECB will have to go back to the drawing board, and so will investors.

The rock wall of worry looms larger and higher to scale. But I don't fear the bull - I embrace the opportunity to participate. Feels like old times.

 

[Spaf]

Daily Yak

The Kingdom of TSP
Daily Edition
August 10, 2006 Closing​

Yak, Doodles, Tea Leaves & The Tin Box

Kingdom Yak:
Pro-Yak...................................Lube pulls back; socks advance!

Con-Yak..................................August is the worst month for S&P in past 18 years!

Jester-Yak...............................A good month to go on vacation!

Doodles:
Socks [$SPX] Closed at..............1271.81, up +5.86.
Volume (CMF) (money flow).........+0.018, increasing.
Averages (MACD) (trend)............+4.100, decreasing.
Momentum (S-STO) (signal).........56.87, decreasing.
Strength (RSI) Overbought/sold....[70] 53.07 [30]

Lube (NYM) Closed at..................74.00, dn -2.35
Oil Markers................................<70= ok, 70-75= worry, >75= panic.

Tea Leaves:
Charts & Stuff............................Yellow / Yellow [doodles +3-2 / Lube > 70]

Tin Box:
Position....................................100% socks
Stops [$SPX].............................Alert: 1267. Trail: 1254.

 

[Birchtree]

Did that bird dog Wimpy choke when the Wizard exited, he hasn't been around for awhile with his liberal agenda. Not that I could care - just curious as to whether or not he choked.

 

[tsptalk]

I think he quit because the Iran War thread was deleted / moved.

 

[robo]

Thursday, August 10, 2006

A Liquid Market
The government's so-called "security experts" banned all liquids from air travelers Thursday in a bid to bolster public confidence that they were doing their jobs. They probably did fool the masses who believe that sort of stuff, but as the real security experts point out, "air security focuses on past threats" and they should really be prohibiting watches, calculators and laptop computers if they were serious at preventing another 911 incident.

So, while air travelers were inconvenienced by Thursday's futile gestures, the stock market rallied. Why this odd reaction? Well, perhaps they believed the government that the threat had been stopped for now and that the status quo would soon prevail. Or, maybe the market saw lower energy and metals prices as a sign of cooling inflation and that would lead to lower interest rates from the Fed. Whatever the reason, stocks opened at their lows of the day and quickly rallied, closing very near the highs of the day.

One thing Thursday's lack of downside action clearly shows, though, is that the bears who loudly proclaim that the stock market will go much lower are unable to follow through. If they can't get the market down on a "bad news" day, what will happen on a "good news" day?

http://marketclues.blogspot.com/

 

[FundSurfer]

I think todays lack luster performance is due to a lack of buyers. Nobody wants to buy in front of the weekend given the uncertainty surrounding the Middle East (Iran, Israel/Lebannon), the terrorist situation, oil prices, etc.

 

[tsptalk]

Someone mentioned that the Monday's of options expiration week have been strong lately. That would be this coming Monday.

 

[Griffin]

Someone lied :nuts:

 

[Dave M]

August In NYC

It is Friday afternoon, in August, in NYC -- they're outtathere. Yet we came through a difficult week without major damage. Come Monday, everything will be different. Retail sales are up, oil is down, gold is down and the stage is set for a green week ahead.

Dave