Market Talk / Nov. 19 - Nov. 25

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Spaf

Spaf

Honorary Hall of Fame Member
The Kingdom of TSP
Sunday-Weekly
Early Edition
November 19, 2006 ​

Fortuneteller.gif

Yak, Doodles, Tea Leaves & The Tin Box

Kingdom Yak:
Pro-Yak....................................Inflation abated. Oil at 17 month low!

Con-Yak...................................It's a momentum advance.

Jester-Yak................................deja vu!

Doodles:
Socks [$SPX] Closed at..............1401.20, up +20.30 for the week!
Stops [$SPX]............................Alert (-1%): 1388. Trail (-2%): 1375.
Trend (MACD-Hist).....................increasing at +1.561.
Overbought/Sold (S-STO)...........[80] 90.94 [20] decreasing

Lube (NYM) Closed at..................55.81, dn -3.78 for the week.
Oil Markers................................<70= ok, 70-75= worry, >75= panic.

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

Tin Box:
TSP:........................................Safe; capital preservation.

TSP (week ending)......G=11.65..F=11.12..C=15.46..S=18.60..I=21.11
....(1 week past)........G=11.64..F=11.11..C=15.23..S=18.24..I=21.17
....(2 week past)........G=11.63..F=11.03..C=15.04..S=17.88..I=20.89
....(3 week past)........G=11.62..F=11.04..C=15.18..S=18.08..I=21.01
....(4 week past)........G=11.60..F=10.97..C=15.08..S=17.90..I=20.73

Le Chart​

SP5001117.gif

Chart courtesy of www.stockcharts.com​
 
Spaf,

Your Tea leaves have changed from Green to Yellow. Am I right in interpreting this as a warning of a potential pullback even though we might have a positive week near Thanksgiving Day?
 
Birch,

I was looking at the McLellan page you posted. Interesting stuff! Although I have a limit as to how many subscriptions I can pay for, your interpretation and input are most welcome. Quoting part of yesterday's post, you noted, "The market is essentially always in "bear mode" and requires energy in the form of money flow to keep prices stable. The more money coming into the market pushes prices up - sometimes like Friday there is shifting going on from group rotation and you don't see it in the closing indexes. Because the MCSUM's are at new highs the average stock price is going to move in higher percentage moves in the direction of the advance. Above +500 you willl tend to see up to 1 point moves in stocks..."

I was reading an explanation there, which I quote in part, "Among the most significant indications given by the Summation Index are the identification of the end of a bear market and the confirmation of a new bull market. Bear markets typically end with the Summation Index below -1200. A strong rise from such a level can signal initiation of a new bull market. This is confirmed when the Summation Index rises well above +2000. Past examples of such a confirmation have resulted in bull markets lasting at least 13 months, with the average ones lasting 22-24 months." According to what I see in the graph, The bull market seems to have been confirmed when the Summation Index rose above +2000 in the last quarter of 2001. Am I correct? But the graph also shows the Summation Index dropping after it peaked. Of course, I don't have access to the most recent movement, but relying on your posts yesterday, we are in an acceleration to the upside. Is this correct? In your post, quoted above you stated that "Above +500 you willl tend to see up to 1 point moves in stocks". I only want to clarify what I see as conflicting. In your opinion, and based on the data, could we have a 1 point move in stocks to the downside before Christmas without invalidating the continuation of the Bull run? Perhaps this might explain why so many other technical analysts are calling for a pullback with a good buying opportunity ahead????
 
I opened the TSP.gov page to check my account and saw that the last update was on 11/16/2006. Any reason for this? Does anyone else have the same problem?
 
sponsor said:
Spaf,

Your Tea leaves have changed from Green to Yellow. Am I right in interpreting this as a warning of a potential pullback even though we might have a positive week near Thanksgiving Day?
Click to expand...

Tea Leaves aka Yakndoodles are made up of talk and indicators. If the majority is positive I go green. Majority negative = red. Mixed or critical = Yellow.

My take is that the economy is good, the fundamentals are ok. However the market is overbought and needs a rest. Yet we have a energy euphoria in a seasonally good period. The market is kind of running off adrenalin. I feel that it is advancing to fast.

I base what I say after getting the information or feelings from a lot of folks.

IMHO the current conditions offer an increased risk to folks near or in retirement. A pull back or a correction could be quite costly and a risk that I can afford to bypass.

If one is building a nest and the egg is a long way off, its ok to fly around.
However, once that egg is in the nest, you stay pretty close.
 
Sponsor,

With the NYSE breadth MCSUM our next area of probable resistance comes in at the +1200 level. A MCSUM lrvel of +1000 gives you point levels of up 1 and 1/2 moves. We are always susceptible to a correction at anytime. And you have to be careful in not getting emotionally motivated that a change of trend has occurred - when it hasn't.

Capitulation by hedge fund bears would be a sign that the rally is ending. Keep an eye on Tom as an indicator. The magnitude of a correction will be determined by who sells. If a correction is mostly an unwinding trade by hedge funds, it probably will be minor. However, if long only accounts sell along with the hedge funds, the correction could well be on the order of 15-20%. However a correction plays out, it is a buying opportunity. There is a potential cycle reversal date on 11/28. I plan to cycle ride it on my Ducati.

During all bull trends you will see sharp and short corrections to keep the majority from participating.
 
Thanks for the explanation. When you say that there is a potential cycle reversal date on 11/28, are you contemplating a reversal after a correcrion or pullback, or are you thinking that we are on rally mode until 11/27, and then a correction? Whatever your answer, keep a nice detailing job on your Ducati.:)


Birchtree said:
Sponsor,

With the NYSE breadth MCSUM our next area of probable resistance comes in at the +1200 level. A MCSUM lrvel of +1000 gives you point levels of up 1 and 1/2 moves. We are always susceptible to a correction at anytime. And you have to be careful in not getting emotionally motivated that a change of trend has occurred - when it hasn't.

Capitulation by hedge fund bears would be a sign that the rally is ending. Keep an eye on Tom as an indicator. The magnitude of a correction will be determined by who sells. If a correction is mostly an unwinding trade by hedge funds, it probably will be minor. However, if long only accounts sell along with the hedge funds, the correction could well be on the order of 15-20%. However a correction plays out, it is a buying opportunity. There is a potential cycle reversal date on 11/28. I plan to cycle ride it on my Ducati.

During all bull trends you will see sharp and short corrections to keep the majority from participating.
Click to expand...
 
Rally mode until 11/27 - I don't see any indepth correction. All the corrections from the 2003 3000 point run were of minor consequence and the same goes for 1995. My friends from Merrill think otherwise: They say their stock market indicators suggest that a cyclical correction of 8 to 10% is likely during the coming week. Is it possible that the bullish seasonal pattern occurred early this year, in Sept and Oct. During the 1990s, for example, the SPX corrected by at least 6% from Nov to Dec three times (1991, 1994, and 1996). Volume leads price, and volume indicates that the stock market is forming a distribution top.

I hope they have kept their client base in cash since the July bottom - that would be classic. I've seen them do it before and be totally wrong. I routinely go in the opposite direction of these professionals - have been with them for years and they seldom get it right. Being out of the market except for a small insurance play is more risky than being invested. This market could melt up at any moment with vigor to the tune of hundreds of points in one day. Snort.
 
Birchtree said:
My friends from Merrill think otherwise: They say their stock market indicators suggest that a cyclical correction of 8 to 10% is likely during the coming week. Is it possible that the bullish seasonal pattern occurred early this year, in Sept and Oct. During the 1990s, for example, the SPX corrected by at least 6% from Nov to Dec three times (1991, 1994, and 1996). Volume leads price, and volume indicates that the stock market is forming a distribution top.

.....being out of the market except for a small insurance play is more risky than being invested. This market could melt up at any moment with vigor to the tune of hundreds of points in one day. Snort.
Click to expand...


I tend to agree- no facts that tell me that, just gut feeling. And my gut is telling me we should see a pullback of anywhere from 3.5% to 8% in the next ten trading days. Probably not this week, but soon.

Just a gut feeling, nothing else.
 
Birchtree said:
There is a potential cycle reversal date on 11/28. I plan to cycle ride it on my Ducati.

During all bull trends you will see sharp and short corrections to keep the majority from participating.
Click to expand...

I've been thinking the same thing! That's the day before the 2nd report on 3Q GDP.
 
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