Market Talk / May 20th - 26th

[Spaf]

The Kingdom of TSP
Sunday Weekly
Early Edition
May 20, 2007​

Yak, Le Charts, Doodles, Tea Leaves, The Tin Box, The 5-Tribes and The Barn Yard

Kingdom Yak:
Pro-Yak.....................................SPX remains in a bullish trend as the 13d MA is above the 50d MA, and SPX is relatively stable with B. bands closing more than normal.

Con-Yak....................................However, B. bands point to stocks being priced hgher than normal. While the Stochastics oscillator is bullish with %K above %D the oscillator is above 80 indicating overbought conditions!

Jester-Yak.................................Building Your Trading Tool Chest! Before you buy that first share of TSP, be certain that you have the right mix of trading software, hardware and internet access to be sucessful!

Le Charts

Charts courtesy of www.StockCharts.com​

Doodles:
Stops.................................................Alert (-1%)...Trail (-2%)
.....SPX....1522.75 +16.90 for the week....1507............1492

Dollar.......................................82.12 +0.05 for the week ending...$USD

Lube (NYMEX) Closed at..............64.94 +2.57 for the week ending...NYMEX
Oil Markers................................<60= ok, 60-65= worry, >65= panic.

Tea Leaves:
Yakndoodles...............................Yellow.

Tin Box.
TSP (week ending)......G=11.92..F=11.31..C=16.97..S=20.36..I=24.35
....(1 week past)........G=11.91..F=11.37..C=16.77..S=20.41..I=24.28
....(2 week past)........G=11.90..F=11.38..C=16.76..S=20.40..I=24.40
....(3 week past)........G=11.89..F=11.34..C=16.62..S=20.28..I=24.14
....(4 week past)........G=11.88..F=11.34..C=16.51..S=20.19..I=24.24

....(end of 2006)........G=11.71..F=11.14..C=15.69..S=18.76..I=22.22

5-Tribes.
Tomorrow.................Tribes holding 2.5 bears and 2.5 bulls.

The Barn Yard
Location...................100% G-Fund...... Not buying high!

 

[Birchtree]

When I'm in a snorting, raging bull market I don't care if I buy high or buy low, I just want to buy. The only problem is I don't have any money. I need a takeover to take me out of a position to garner some spill money. Waiting for a 10% gap opening on the Dow to signal the epicenter of Primary wave 3 - and I know it's coming. A Dow of 15,600 and beyond. Ferdinand says all you chickadees should go ahead and take the summer off to relax - don't worry about a few dollars not being made.

 

[wht00ss]

Many people consider the Elliott Wave (made popular again in the 80's by Bob Prechter) an excellent tool for evaluating markets in a long term context. The shorter term waves are far more subjective and more difficult to figure out. People are constantly changing the shorter wave counts.

In my opinion Elliot Wave is much too subjective. Look at five E-Wave guys and they'll have five different "counts".
I trade with a heavy emphasis on technicals for entry/exit timing, and I find E-Wave to be a load of manure, personally.

I used to follow pretcher for a while then I realized that with the complex fib patterns, the more complex, it was, the easier to explain away missed calls.

For a further example, if he (Prechter) could actually make profitable calls he would have run a hedge fund for a few years like Jeff Vinik and then retired to manage his own portfolio. Writers of letters are admitting they cannot trade, or even call the market. I learned that by losing money as a Prechter subscriber when I was inexperienced and stupid and thought gurus were real and walked the earth. In retrospect his letters were hilarious as they would say essentially that the market was poised to go up or down and then in later letters he would excerpt the parts that had been correct! What a joke! But the laugh was on me as he got my money and I paid market tuition for my folly. Some people may be able to make money with EW, but not me. I say do the work and figure out what works for you. If you can't make money in the market by yourself, buy Vanguard funds and rebalance or find the next Warren Buffett and load up. If any of this were easy we would all be rich.

white

 

[wht00ss]

Another look


The Dow continues to make new all time highs however when you look at the 30 stocks that compose the Dow you would never believe it's currently 1800 points above the previous all time that occurred on January 14th of 2000 which was at 11723. A table of the 30 stocks that make up the Dow is shown below with their closing prices on 1/14/00 versus their recent prices on May 18th of 2007. Notice only 13 out of the 30 stocks that make up the Dow are higher today than on 1/14/00. Also basically only 5 stocks (BA, CAT, MO, UTX and XOM) have made substantial gains during the past 7 years with a return of 100% or more. MO has been the leader with a gain of 283% since 1/14/00 followed by CAT which has gained 188% since 1/14/00. It's pretty amazing that only 5 stocks in the Dow are considerably higher now from their closing prices on January 14th of 2000 even though the Dow is currently 1800 points higher than its previous all time high made 7 years ago. Thus it's obvious when an index only consists of a small group of stocks it can be moved higher by just a few stocks versus a large index such as the Nasdaq or S&P 500 which consists of hundreds of stocks.

Check out the charts:

http://www.amateur-investor.net/Weekend_Market_Analysis_May_19_07.htm

Although the Dow has been making new highs for several weeks the S&P 500 is now only 4 points away from its all time closing daily high of 1527 which occurred on March 23 of 2000. Meanwhile when we look at the longer term monthly chart of the S&P 500 it broke out of an Inverted Head and Shoulders pattern in 2004 and has been in a steady up trend every since. Also notice that the S&P 500 has been holding support at or above its 20 Monthly EMA (points A) each time a pullback has occurred. Thus until the S&P 500 closes below its 20 Monthly EMA (blue line) then its longer term up trend from the late 2002 low will remain intact.​

Although the Dow has been making new highs for several weeks the S&P 500 is now only 4 points away from its all time closing daily high of 1527 which occurred on March 23 of 2000. Meanwhile when we look at the longer term monthly chart of the S&P 500 it broke out of an Inverted Head and Shoulders pattern in 2004 and has been in a steady up trend every since. Also notice that the S&P 500 has been holding support at or above its 20 Monthly EMA (points A) each time a pullback has occurred. Thus until the S&P 500 closes below its 20 Monthly EMA (blue line) then its longer term up trend from the late 2002 low will remain intact.​

white​

 

[Birchtree]

Those are some nice graphs. Bob Prechter I believe is still predicting a gloom and doom scenario with a Dow of 800. I've never listened to him but I think the nomenclature is correct. I read a few of his letters back in the late 70s but could not understand them.

 

[fabijo]

Waiting for a 10% gap opening on the Dow to signal the epicenter of Primary wave 3 - and I know it's coming.

YIKES! 10% in a day??

 

[Show-me]

http://www.briefing.com/GeneralCont...estor&ArticleId=NS20070514080221TheBigPicture

We aren't complaining that the stock market isn't responding rationally to the fundamentals. This happens all the time.
We also aren't saying that a bubble similar to the late 1990s is forming. At worst, this is a process of moderate overvaluation.
Yet, the S&P 500 index has run up 22% since the lows of mid-July last year. It is up 6.2% so far this year, equivalent to a 16.5% annual rate of increase. This has occurred amidst a stable interest rate environment and a worsening earnings outlook. The market is clearly outrunning the fundamentals.
Investors need to understand that they aren't getting bargains on stocks right now. They also need to understand that sentiment shifts occur. If one occurs now, the downside risk is increased by the fact that stocks have gotten ahead of the fundamentals.
For now, we are retaining our Moderately Bullish view on the stock market. We are also maintaining our extremely cautious stance with a sharp eye towards anything that could undermine the current momentum.
The longer the stock market outruns the fundamentals, the more the risks increase.

 

[Birchtree]

Would 10% make your head spin to much - there is something big coming to kill the shorts - I think a thousand point gap would do it. The higher we go the large point numbers are easier to get. Remain vigilent and prepared to ride the coming bull - I can here the hoofs in the distance even without putting my ear to the rails.

Dennis - permabull #1

 

[weatherweenie]

Briefing.com
08:30 am : S&P futures vs fair value: +1.2. Nasdaq futures vs fair value: +5.0. Still shaping up for Friday's gains to carry over into today's opening bell. Meanwhile, since the economic outlook is merely stable and not a particularly bullish factor for the stock market, the absence of any scheduled economic data this morning is placing even more emphasis on the liquidity factor that continues to provide a floor of support for this market.
On the earnings front, Lowe's Companies (LOW) missed forecasts and cut its full-year guidance while Saks (SKS) merely matched expectations with an 86% drop in Q1 profits. Neither report, though, is likely to have much of an impact outside of their respective retail segments since the latest earnings season is basically over.

 

[tsptalk]

The cheerleading on CNBC is in full force. This morning Mark Haines kept repeating that the S&P is 3 or 4 points away from a new all-time high. What he should have been saying is from an all-time closing high. The old high is actually over 20 points away. I think Bob Pisani tried to correct him but why let details get in the way? Still, the market continues to push higher.

 

[wht00ss]

Mark Haines is a buffoon. The questions he asks his guests are on the verge of a 3rd grader (no disrepect intended for 3rd graders :laugh. But hey you can't complain Tom it seems following Trader Fred is so far working out for you.​

Looking at sentiment again dumb versus smart from Liz Ann Sonders:

The Dumb Money Confidence (DMC) index is a contrarian indicator while the Smart Money Confidence (SMC) index is noncontrarian. Note how optimistic small investors were in early 2007 and how equally pessimistic large traders were … just on the eve of the big market swoon on February 27. Quick as lightning, the dumb money "reacted" to the market drop and lost all their confidence, while the smart money saw the drop as an opportunity to increase its confidence level. The crossing again of the two readings as the market has rallied bears watching, though neither is anywhere near the danger zone.

The table below shows how, in the past 20 years, the S&P 500 performed 90 days after "buy signals" (when SMC was above 60% at the same time DMC was below 40%) and "sell signals" (when SMC is below 40% at the same time DMC is above 60%):

Buy Signals___Sell Signals​

% of time S&P 500 positive: 75%________40%​

average return: +11%_______-8%​

white

 

[tsptalk]

I'm not sure if Liz uses the same data as Jason at sentimentrader.com, but he now has the smart money down to 33% but the dumb money hasn't quite made it over the 60% level. Currently 57%. So no official sell signal yet for Jason but it may be close enough for me to hide again.

 

[wht00ss]

Actually Liz was using Jason from Sentimentrader.com but one of her favorites that she uses is Ned Davis Crowd sentiment poll.

She like it because it's an amalgamation of several popular sentiment measures including that aforementioned Investors Intelligence and AAII, among several others, so it's a decent proxy for aggregate sentiment.

"What I particularly like about this measure is the detail of historical performance Ned David Research puts around its ranges."

It's based on the SP 500 and when the NDR Crowd sentiment poll is above 62% they've measured a gain/annum of -1.1 for 35.8% of the time - Between 53 and 62 gain of 7.8% 34.2% of the time and 53 and below a gain of 21.3% 30% of the time.

The Poll is currently at 64%. This, of course, doesn't guarantee a market correction, but the tendency for the market to retreat when the poll is in this zone is notable.

Liz goes on to say:

"Hedge funds not chasing rally
Finally, although hedge funds are relatively opaque vehicles (and therefore data on their positions is difficult to come by), their net investment exposure is tracked by a number of firms. As noted by Ned Davis Research, hedge funds are currently very pessimistic. Back in March, only 23% of hedge funds were bullish on stocks with a huge 69% bearish (a net of –46% bearish). The latest reading as of the end of April surprisingly saw bulls falling further to just 17%, while bears fell as well to 58% (a net of –41% bearish), despite the market trading at all-time highs.

Mixed messages
So, why all the mixed readings in a very unmixed market trend? Probably because the market has been inundated with conflicting economic data. The worriers about economic growth and the worriers about inflation both have ample statistics to support their cases. And, as I wrote in my May 9, 2007, post–Federal Open Market Committee (FOMC) meeting commentary, the Fed isn't providing much direction either, opting to stand pat on rates for the seventh consecutive meeting without any meaningful change in its accompanying statement."

white

 

[Spaf]

The Kingdom of TSP
Daily Edition
May 21, 2007 Closing​

Yak, Le Charts, Doodles, Tea Leaves, 5-Tribes, and The Barn Yard.

Kingdom Yak:
Pro-Yak....................................Socks [SPX] still remain bullish with 13d moving average above 50d MA.

Con-Yak...................................Appears socks are loosing momentum in the wake of rising lube prices.

[Note: Bolinger Bands (RE: www.incrediblecharts.com). Contracting bands warn that the market is about to trend: the bands first converge into a narrow neck, followed by a sharp price movement. The first breakout is often a false move, preceding a strong trend in the opposite direction.]

Jester-Yak................................Will Krude mess it up?

Le Charts

Charts courtesy of www.stockcharts.com​

Doodles:
Stops.......................................Alert (-1%)....Trail (-2%)
.....SPX........1525.10 +2.35.........1510.............1495

Dollar........................................82.35 +0.18 for the day.

Lube (NYMEX) Closed at...............66.27 +1.80 for the day.
Oil Markers.................................<60= ok, 60-65= worry, >65= panic.

Tea Leaves:
Yakndoodles...............................Yellow!

5-Tribes
Tomorrow...................................Tribes are holding 1 bear to 4 bulls.

The Barn Yard
Location.....................................100% G.

 

[weatherweenie]

Briefing.com
08:00 am : S&P futures vs fair value: +0.8. Nasdaq futures vs fair value: +2.8. Early indications suggest stocks may open on a flat to slightly higher note as investors sift through some more deal making. Last night, Kirk Kerkorian's Tracinda Corp. disclosed it wants to buy MGM Mirage's (MGM) Bellagio and City Center properties. Unfortunately for the bulls, this news is about all they have to hang their hat on since the economic calendar is again devoid of any reports, there is nothing on the earnings front with any market-moving potential, and historic highs on the Dow and S&P 500 leave valuations in question.

 

[Medic72]

OK here is yet another question

I really do not know where to post this, so i will leave it up to the mods to put it in the right place, seeing that i do not have my own account talk yet.

I am still reading all the forums, yes all of them going way way back, just to try to learn as much as i can.

ok here is the question,

I put everything into the C,S,I as trader fred had suggested back on the 18th, i did that through a ift.

All is well and good, i logged on the tsp site this am, and found that the new allocations have hit and now i have shares in the g fund again. I take it that is how my new allocations are set up to go straight into the g fund.

should i leave the shares that are in the g fund alone, or reset it all to where the other shares are? or is there a certain percentage that i should leave in the g fund all the time, and play with the rest?

ok wow i re-read what i wrote and i am so close to just deleting it because i think it sounds stupid lol. but you all say that there is no stupid question so, here it is.

go easy on me please

 

[FundSurfer]

OK here is yet another question

ok here is the question,

I put everything into the C,S,I as trader fred had suggested back on the 18th, i did that through a ift.

All is well and good, i logged on the tsp site this am, and found that the new allocations have hit and now i have shares in the g fund again. I take it that is how my new allocations are set up to go straight into the g fund.

should i leave the shares that are in the g fund alone, or reset it all to where the other shares are? or is there a certain percentage that i should leave in the g fund all the time, and play with the rest?

Depends. If your account is as big as Birchtree's then the amount going in to G is a small perceentage of your overall value of your account and waiting a month or so till your next IFT will not have that big an effect. If your new to FERS and your input into the system is a significant percentage of your account, you may want to IFT more often to sweep that money into the right fund.

I'd suggest you figure out which fund you will spend the most time in and set your contribution allocation to that fund(s). Some people prefer everything to go into G-fund and they move it where they want since they IFT frequently anyway. I have my contribution allocation set up to split between CS&I because I'm very aggressive. I also IFT on a fairly regular basis so that money gets swept where I want it to go fairly often.

Hope that helps.

 

[Medic72]

Thank you very much for your reply, makes alot of sense.

 

[tsptalk]

I get that question asked often Medic and FundSurfer has it right. The other alternative is to just get in the habit of making a contribution allocation change each time you make an interfund transfer, just so you know they match. It just takes a few extra seconds to do both.

 

[Medic72]

Noted, thanks again. For some reason i thought i had to call to make the contribution allocation changes, but i just did it online along with moving the rest out of G. Much appreciated.