Uptrend's Account Talk

[Uptrend]

Wow!
Ben B and Paulsons remarks today should be be significant for the market.

"I strongly endorse both the decision by (Federal Housing Finance Agency) Director (James) Lockhart to place Fannie Mae and Freddie Mac into conservatorship and the actions taken by Treasury Secretary Paulson to ensure the financial soundness of those two companies," Federal Reserve Chairman Ben Bernanke said in a statement.

Fine Print

1) The US housing/credit markets are in bigger trouble than widely believed. World investors are now nervous.

2) If you own stock in FRE or FNM, under Paulsons plan you are last on the list to claims.

3) The Bear market should now accelerate towards a flush-out. Lets look at the SPX chart on where we are going.

View attachment 4608

As you can see, going back 3 years, we have strong support in the 1075 to 1150 area. If that breaks, it is 825.

I am waiting for the temporary snap-back rally that will happen when we hit the 1100 area. IMHO this flush-out will take to around the next 30 trading days to complete based on EWT.

No F, no I, No nothing, just Geeee til then.

 

[FogSailing]

UT, I'm also expecting a significant downturn soon based on Elliott Wave analysis. I hope it stops at 1100 and bounces off that support. I agree with you...G for me for a bit longer..thanks for posting.

FS

 

[Uptrend]

Have not decided why there is a divergence in the bonds; yield curves going up, while prices are going up - it should be the other way around. Might somehow be related to the FRE and FNM bailout?

One thing is sure: The markets are in a steep sell-off after a gap up at opening. FRE and FNM are down 80%! Yikes Stock ain't worth crap!

I is a winner today, as it was further ahead in time and will hold up. IMHO time to get out, cuz this rally is not sustainable.

 

[Uptrend]

Aftermath of the bailout - looks like Asia did not believe the US plan and now the US market is bailing. On one hand the gov told the GSE's to lower their standards and make lending credit available to poor risk clients (remember a few months ago?), and now they take over? The gov is not the solution, but rather the problem. These GSE's made millions in personal profit and now the taxpayer foots the bill?

SPX 1260 is a key level, and we have just dropped below with poor July home sales readings Also yesterday the 50 day sma was acting as resistance to the upside.

Levels down from here 1200 -4.7%, 1100 -12.7%

Since the market prices things in generally before the event (except for week-end Fed manipulation of the markets), and there is all kinds of leaking info on poor Q3 earnings, I am still thinking we will go down this slide fairly quickly (by early to mid-Oct), just in time for a big relief rally prior to the elections.

 

[luv2read]

Aftermath of the bailout - looks like Asia did not believe the US plan and now the US market is bailing. On one hand the gov told the GSE's to lower their standards and make lending credit available to poor risk clients (remember a few months ago?), and now they take over? The gov is not the solution, but rather the problem. These GSE's made millions in personal profit and now the taxpayer foots the bill?

Actually the government told lenders to TIGHTEN up standards which they did...there are a number of stringent conditions for the "bailout" loans in the housing bill which actually makes them harder to get, and one of the reasons why the GSE's failed despite the housing bill and now are being taken over. It was designed to happen.

 

[Steadygain]

Aftermath of the bailout - looks like Asia did not believe the US plan and now the US market is bailing. On one hand the gov told the GSE's to lower their standards and make lending credit available to poor risk clients (remember a few months ago?), and now they take over? The gov is not the solution, but rather the problem. These GSE's made millions in personal profit and now the taxpayer foots the bill?

Uptrend,
I'm surprised by your comments - as they are much more caught up in "the hype" - and I honestly thought you saw beyond that stuff.

China, Asia, and others know way more than you realize and are very much abreast of what is happening. Surely you don't believe that something as big as Fannie/Freddie work in isolation to the US as opposed to the Global Economy.

My friend take note of REALITY. Our country functions way more on "the communist/socialistic realm" than anyone could imagine. Luv2read is RIGHT ON TARGET - the design itself was doomed to fail and Government has to be the one to take responsibility and make it right.

This is just a piece of the puzzle my friend. Government (the Federal System) is messed up and many Administrations have made attempts to address it (both Rep and Dem) - but it's just gotten higher and wider and now is the biggest to date. So it is doomed to fail without major trimming and restructuring. Maybe some day someone with the needed insight can do what needs to be done but Fannie is just a spoke in the big wheel.

 

[Uptrend]

Luv2read and steady New legislation and the FHA:

"The number of homeowners who could lose their homes to foreclosure by the end of 2009 is estimated by some to be around 2.8 million. Under the legislation, 400,000 having trouble with payments could avoid it by trading their loans for new, more affordable mortgages through the Federal Housing Administration.
Their banks would have to agree to allow the swap and to take a large loss in exchange for avoiding the lengthy and costly foreclosure process. To qualify, homeowners would have to be paying more than 31 percent of their incomes toward their mortgages and show they could afford to make the payments on a new, smaller loan.
The measure also is designed to help stabilize markets, in part by making credit more easily available amid rising defaults and falling home values."

http://www.msnbc.msn.com/id/25928299

How can this be tightening standards? So now taxpayers will take the risk? Stupid FHA This is insane! If you are paying more than 31% of your income toward a mortgage, either you should not have one, or you are living too high on the hog. Sounds like pork barrel politics to me.

 

[justbizness45]

Luv2read and steady New legislation and the FHA:

"The number of homeowners who could lose their homes to foreclosure by the end of 2009 is estimated by some to be around 2.8 million. Under the legislation, 400,000 having trouble with payments could avoid it by trading their loans for new, more affordable mortgages through the Federal Housing Administration.
Their banks would have to agree to allow the swap and to take a large loss in exchange for avoiding the lengthy and costly foreclosure process. To qualify, homeowners would have to be paying more than 31 percent of their incomes toward their mortgages and show they could afford to make the payments on a new, smaller loan.
The measure also is designed to help stabilize markets, in part by making credit more easily available amid rising defaults and falling home values."

http://www.msnbc.msn.com/id/25928299

How can this be tightening standards? So now taxpayers will take the risk? Stupid FHA This is insane! If you are paying more than 31% of your income toward a mortgage, either you should not have one, or you are living too high on the hog. Sounds like pork barrel politics to me.

I know a guy that bought a 300K house in 06. He makes 50K a year, wife and kids. He got the loan on a 2 year ARM with deferred interest. It's balooned and now he can't afford the payments. He is walking away from it. He was led down the path by a fast talking realtor and an unscrupulous broker. I can't believe a bank underwrote it. They didn't even verify income!! Who should pay? I think the bank. They approved and brokered the loan.

Bottom line is my tax dollars should not be paying the bank back for their failed policy.

 

[Uptrend]

TSP Swings 2008 (based on closing prices)

1/22 Low C 14.79 S 17.41 24 trading days to next high

+5.68% C +8.50% S

2/26 High C 15.63 S 18.89 9 trading days to next low for C, 14 for S

-7.74% C -9.74% S

3/10 Low C 14.42
3/17 Low S 17.05 50 trading days to next high C, 62 for S

+13.18% C +17.77% S

5/19 High 16.22 C
6/05 High 20.08 S 39 trading days to next low for C, 27 for S

-15.01% C -14.19% S

7/15 Low C 13.87 S 17.23 23 trading days to next high

+7.07% C +8.53% S

8/15 High 14.85 C 18.70 S 17 trading days to current low of today

-5.52% C -6.95% S

9/9 Low 14.03 C 17.40 S

Year so far
C +25.93% -28.27%
S + 34.8% - 30.88%

Mean Swing Days
C L to H 32 H to Low 22
S L to H 36 H to L 19

Conclusion: S has had higher gains and higher losses. Currently we are below the average swing from high to low - we have gone 17 days and the average is 19 for S and 22 for C We are still below the average loss between swings, so need to go dwon more first. Looking at the charts for SPX the next stop of support is 1219 and then 1174. On EWT we are in a #3 downwave. IMHO wave #4 upwave of the downtrend will probably start around the 1175 mark. That is another 4% down, and lines up better with the average loss between swings. Upwave surges have averaged around 8% for S, but have been as high as 17%.

 

[Corepuncher]

Uptrend, I appreciate your analysis, thanks!

 

[FogSailing]

Thanks UT. Guess I'll enjoy my TIMEOUT in G a while longer.

Regards,

FS

 

[luv2read]

Nice analysis UT! Thanks.

 

[luv2read]

Luv2read and steady New legislation and the FHA:

"The number of homeowners who could lose their homes to foreclosure by the end of 2009 is estimated by some to be around 2.8 million. Under the legislation, 400,000 having trouble with payments could avoid it by trading their loans for new, more affordable mortgages through the Federal Housing Administration.
Their banks would have to agree to allow the swap and to take a large loss in exchange for avoiding the lengthy and costly foreclosure process. To qualify, homeowners would have to be paying more than 31 percent of their incomes toward their mortgages and show they could afford to make the payments on a new, smaller loan.
The measure also is designed to help stabilize markets, in part by making credit more easily available amid rising defaults and falling home values."

http://www.msnbc.msn.com/id/25928299

How can this be tightening standards? So now taxpayers will take the risk? Stupid FHA This is insane! If you are paying more than 31% of your income toward a mortgage, either you should not have one, or you are living too high on the hog. Sounds like pork barrel politics to me.

It's tightening standards because there was no verification of income and no downpayment required on the failed loan. Those are now REQUIREMENTS for FANFRE to buy out the failed loan and for the homeowner to get the new, smaller loan. The risk to the taxpayers is in putting up the money for Fannie and Freddie - not in the new loan process. It's failed anyway because the requirements were too stringent, not enough homeowners could qualify, so Fannie and Freddie are taken over and the Bill will probably get amended accordingly.

 

[Uptrend]

Regarding my technical post #469, on TSP Swings for the year, it was a little misleading, so let me try and clarify. As you know, we are limited to 2 IFT's a month. The idea here is to use the fewest IFT's possible, and get the most gain. Of course, it is extremely difficult to call tops and bottoms of uptrending and downtrending waves. That said, lets review my strategy.

Pattern
The up/down waves conincide with the Elliot wave theory. One can argue different wave counts, but here is my take. For the S fund 6/05 ended the upwave, and this could roughly be representated by $EMW. So, an upwave in a bear market is an a, b c correction against the grain of the downtrend, and the c wave ended on 6/05. We know this is the case, because 20.08 for S has been the highest closing price. The a and b waves of the a,b,c ended on 2/26 and 3/17. So, using the end of the c upwave as a reference, we locate the next 5 wave pattern down with wave one ending on 7/15, wave 2 (up) ending on 8/15, and wave 3 currently underway. Now the trick here will be to identify when this wave ends, and we have a short uptrending upwave (wave 4) before completing a big downwave (wave 5). I want to play the wave 4 and get out before it rolls over. But we need to know when to get in.

Price
Because we are in a bear market, we know that we will need to go below the 7/15 price low of 17.23 for S. At Tuesdays close we were at 17.40. 7/15 is the botton of downward wave 1, and wave 3 must be beneath it. So, looking at the charts (I have been using $SPX here), we identify 1174 as a strong support area. This is 4% down from Tuesdays close and matches up quite well with an average down wave of a 5 down pattern, in this case about -11%. Downwave 1 ending on 7/15 had a loss of -14%.

Time
We know market sentiment flucuates with time. We know there are turning points with time. Looking at the data in my #469 post, downwaves are normally longer than upwaves. And I am now thinking that EWT a,b,c corrections have different time lengths than 5 down patterns. At any rate, time seems to be a little less reliable, but is almost always over 20 trading days for downwaves and can be double that amount.

Wave 4 Retracement
So I am thinking to get in when we arrive at SPX 1174, but when to get out? Looking at the 8/15 high it was exactly a 61% FIB retracement of the wave 1 decline! So using this as a guide, -11% for S to 1174 and 61% retracement and converted to TSP closing prices is 17.82. That would be SPX 1253. It is also below the 1260 resistance point. That also puts wave 5 in a 150 point decline range to end at strong support in the 1100 area. A real possibility.

So there you have it. This trade could be worth as much as 6.7%

 

[justbizness45]

Very impressive analysis. Thanks Uptrend

 

[luv2read]

Thanks UT! VERY helpful analysis!

 

[Steadygain]

Uptrend,
This is the real YOU - You at your best.

Excellent - I mean that this is OUTSTANDING.

Thank you

 

[Uptrend]

Wanna get depressed?

Shall I say WAMU? (Seen their stock lately?)

WASHINGTON MUTUAL

NEW Real-time: 1.95

0.37 (15.95%) 10:43AM ET

They are as good as gone Read this:

http://market-ticker.denninger.net/2007/10/wild-wednesday.html

 

[Uptrend]

I am getting sick and tired of government sponsored bailouts, such as work going on behind the scenes at Lehman Brothers. Another financial institution ready to go under. A week-end announcement. More promises. Paulson needs to go on AL. Quit engineering the market. Put the PPT on recess. These government guarantees will soon get more and more unbelievable. Then what? 1929?

Anybody that thinks we have turned the corner and are now heading up has got to be kidding. Daily swings. Wait til options X next week! Short Sellers paradise, until caught in a squeeze.

If the market closes and holds above 1260 for more than one trading day, I will buy back in. Until then, it is knee-jerk reaction until your dollars are whip-sawed from you; just what the hedge funds wanted.

One key here will be the XLF. Can't claw above the 50 sma. If the market were to rebound, we would have an alternate EWT wave count. But, I don't think so. The technicals don't support it. The economy is running on empty. More financial surprises every day. Consumer debt too high. Unemployment too high. Balance of trade off. Ready for a dollar drop and a rebound in oil. Some commodity indicators up today, like potash +5.4% The inverse relationship should hold, so the market should fall. Plus uncertainty should be the frosting.

 

[Steadygain]

Smoke and Mirrows - it's been the trend for quite some time.

What I had projected as "economy wonderful" - I now view totally the opposite. Both parties will rant and rave how they are going to save the economy and turn everything around.

It's beyond us my friend, something we simply have to live with.