Market Talk / Oct. 29 - Nov. 4

[mayday]

Thinking short term in a bull market can be expensive. This bull will try adamantly to kick you off. If you have doubts you will lose your grip like some others this morning. The name of this game is to make you lose your confidence and prevent you from recognizing the prevailing trend. At times like this don't listen to your stomach.

Hold Me

 

[robo]

Question Robo. If the jobs number is bad, then the dollar should tank. Correct? If this is correct then tomorrow we should be in the I fund. If the jobs number is good, then we should stay in the C/S fund.

What do you think?

The Bond Market is still thinking recession. I agree poor jobs numbers should hurt the dollar and the stock market. What to do? I'm staying in the G Fund, but I think the Bulls are still in control here until they are not! The odds favor some more upside since support seems to be holding. Good Trading whatever you do.

 

[ATCJeff]

I went 100% I for tomorrow. Agree, the bond traders seem to be leaning towards a recession. That's a tough call.

Market almost went green. Could we see an afternoon rally?

 

[vectorman]

This may not mean much, but I'll post it for additional comments. Some who like to follow the Dow Theory may find this interesting. The DJIA reached a all time high Oct 26th, 12163.66. The DJTA reached an all time high May 9th, 4998.949. The DJTA has failed to break above that previous high with a lower peak July 3th, 4974.91 and then again failed Oct 26th, 4788.72 which was lower than July 3rd. It should be noted, that the DJTA failed to reach a new high like the Dow on Oct 26th, even with the price of oil falling. The DJTA has yet to confirm the new high of the DJIA and thus should be watched in the up coming weeks. Light Crude appears to have bottomed and with the winter months approaching and OPEC cuttting back, the price of oil may continue to rise, putting a further burden on the DJTA. Compare the charts of the DJIA and DJTA back in mid 1998. I noticed this morning some on CNBC are saying this is a good buying opportunity.:notrust:

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=DJTA

http://futures.tradingcharts.com/chart/CO/M

http://stockcharts.com/education/MarketAnalysis/dowtheory1.html ( check out under sub-title ' How Averages Confirm '

 

[Birchtree]

The DJIA and DJUA will certainly pull up the DJTA - don't you think? All hell will break lose once this Primary cinfirmation hits the press. We'll all make money.

 

[mlk_man]

If labor costs were up for last month, wouldn't you expect there to be more jobs also?

 

[weatherweenie]

If labor costs were up for last month, wouldn't you expect there to be more jobs also?

'even though tomorrow's influential jobs report will be watched for evidence of growth rather than inflation, rising labor costs remain a concern to the Fed policy makers.'

 

[mlk_man]

I'm thinking numbers that are within estimates are probably the best thing at this point.

 

[weatherweenie]

NEW YORK (AP) -- The former chief executive of Computer Associates International Inc. was sentenced to 12 years in prison and was fined $8 million on Thursday for his role in a massive accounting fraud scandal at one of the world's largest software companies.

 

[tsptalk]

Tom,

Did you read this article? He seems to be saying that the valuation leg that you often talk about/use is not as strong as you are purporting. And what's strange is he seems to be citing the same source as you. Any thoughts?

Dave -
I have to run right now but I promise I'll respond to this a little later today. I didn't want to to give you a brief one line answer because this may take a little explaining.
Thanks,
Tom

 

[Birchtree]

Another rotation day - blame it on the McClellan summations. When you have the MCSUM as high as it is right now, many things roll off the market with relative ease. Price corrections have so far been contained.

 

[ATCJeff]

Thinking short term in a bull market can be expensive. This bull will try adamantly to kick you off. If you have doubts you will lose your grip like some others this morning. The name of this game is to make you lose your confidence and prevent you from recognizing the prevailing trend. At times like this don't listen to your stomach.

Oh I'm still in. No lilly pad for me. Just jumping over to ride a different gator. Do have lots of doubts but not ready to let go just yet. Tomorrow will be another piece in the puzzle. I'm just trying to position myself for a bad jobs report. We'll see what happens in the morning.

 

[tsptalk]

Tom,

Did you read this article? He seems to be saying that the valuation leg that you often talk about/use is not as strong as you are purporting. And what's strange is he seems to be citing the same source as you. Any thoughts?

Dave -
I think they are looking at a shorter time frame. It's interesting that they are using Jason from sentimentrader.com since I reference that site all the time. But they are saying when those conditions are met, "In the three months after such an extreme reading, the performance of the S&P 500 has ranged from a loss of 8.7% to a gain of just 1.7%."

That is just fine with me. The market is overbought and needs a rest. An 8% drop would be just what the doctor ordered. They also said that overbought reading came just prior to the 2000 bear market. True, but "my" valuation method was also bearish then.

I use the Don Hays approach which compares the S&P 500 earnings yield to the 10 year Treasury yield. When the red line below (earnings yield), is above the blue line (1--yr yield), stocks are a better value compared to bonds, and vice versa. That is currently about a 32% better value.

Look at late 1999 / early 2000 below. Earnings yields were dropping while bond rates were moving higher. That set up the valuation sell signal in 1999. That worked out well.

Since late 2002 /early 2003 we have been in a very favorable valuaton environment and that I believe is why we haven't seen a severe (10% or more) pullback in the S&P 500.

Hope that makes sense.
Tom

 

[Spaf]

Daily Yak

The Kingdom of TSP
Daily Edition
November 2, 2006 Closing​

Yak, Doodles, Tea Leaves & The Tin Box

Kingdom Yak:
Pro-Yak....................................Where did all the bulls go?

Con-Yak...................................Another Doji of indecision!

Jester-Yak................................Dip for sale!

Doodles:
Socks [$SPX] Closed at..............1367.34, dn -0.47
Stops......................................Alert: 1376 (broken). Trail: 1363
Trend (MACD-Hist)....................decreasing at -3.286.
Overbought/sold (S-STO)...........[80] 45.53 [20] dropping/cooling.

Lube (NYM) Closed at.................57.88, dn -0.83
Oil Markers...............................<70= ok, 70-75= worry, >75= panic.

Tea Leaves:
Yakndoodles.............................Red.

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

 

[tsptalk]

The jobs report came in lower than expected but the September revisions were ridiculous. The original report was like 50K and they now revised it to 145K. Why bother giving the first report? Seems silly, and it makes you wonder who is tabulating these numbers. Can you imagine if a company reported earnings like this? People would end up in jail.

I guess we won't know if today's October report is really this low until next month's revisions come in.

 

[tsptalk]

The jobs report has sent the dollar higher and the bond market is getting hit pretty hard right now.

 

[Birchtree]

Thankgoodness the revision numbers are not decreasing. But the reasons to be bearish are decreasing.

 

[tsptalk]

I agree, but again, only for the long-term. In the short-term this gives fuel to the Fed to raise rates... in the short-term. Look at the bond yields today. They may have to lower rates down the road but if they are still concerned about inflation, this is more ammunition to raise them.

 

[Birchtree]

Can the R2K shine enought light today to lead the rest of us out of the shadows. The small caps were leaders for many years. Perhaps they will begin to regain their previous stature with days like today. I can't be proud, I'll take it.

 

[vectorman]

For those of you who have not seen this notice yet. This is posted at the TSP Gov site.

November 10th (Veterans Day) is a Federal holiday, but the stock and bond markets will be open. In addition, we have been advised by the Department of the Treasury that it will be open to accept our investments in the G Fund. Therefore, the TSP will be operating on a limited business schedule on November 10th.