This is a test. This is only a test.

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machinehead's picture
machinehead
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Posts: 1077
This is a test. This is only a test.

This morning, I see spoos at 742.50. The Nov. 20th intraday low of the S&P 500 cash index was 741.02.

Even
worse, we're in the seasonally favorable
end-of-month/beginning-of-next-month trading days, when new cash gets
committed to the market. Breaking down on the last trading day of the
month would be double-plus ungood.

This could be a fakeout, with
mysterious buyers rushing in during the final hour to head off a
technical breakdown. But if they don't, and the sucker just keeps
spiraling down, then all hell gonna break loose.

machinehead's picture
machinehead
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Re: This is a test. This is only a test.

Okay, the S&P closed at a 12-year low. The only positive
divergences I see are that XLF, the finance SPDR, did NOT set a fresh
12-month low. Nor did BKX, the bankster index.

Finance took us down, and finance will take us back up ... someday. Watch XLFand BKX for clues.

cat233's picture
cat233
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Re: This is a test. This is only a test.
machinehead wrote:

Okay, the S&P closed at a 12-year low. The only positive
divergences I see are that XLF, the finance SPDR, did NOT set a fresh
12-month low. Nor did BKX, the bankster index.

Finance took us down, and finance will take us back up ... someday. Watch XLFand BKX for clues.

machinehead,

From my experience the financials indeed are a clue... Until their change of direction is with the general market, we continue in the current direction. 

Not sure what your charts look like, mine are telling me the S&P is still ugly.  We will see what Monday brings and what the indicators are saying then.

Cat

 

machinehead's picture
machinehead
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Re: This is a test. This is only a test.

Here is a 'contrary opinion' article from Guy Lerner, pointing out that sentiment on stocks is extremely bearish --

http://www.safehaven.com/article-12783.htm

In
fact, bearish sentiment in the AAII (American Association of Individual
Investors) weekly survey is over 70 percent, the highest in its entire
history.

The bio on Lerner's blog reveals that he is a retired
medical doctor. I've come across a couple of other MD's who left
medicine and went into trading. They were very good, as is Lerner.
Because they had both the intellectual firepower, plus the training to
make objective inferences from empirical observations under uncertainty.

Lerner
has been uncompromisingly, and correctly, bearish for weeks. Now he
says the gloom is too extreme. I concur. I'm not involved in stocks
now. But if I were, I would be on the buy side. The pessimism is too
extreme. All that the MSM highlights is downside targets for indexes. This never lasts
long. We are being set up for a rally that will vaporize the
200-percent short funds that you see in the top daily gainers recently.
Caveat emptor.

machinehead's picture
machinehead
Status: Diamond Member (Offline)
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Posts: 1077
Re: This is a test. This is only a test.

Not to harp on this subject, but someone a lot smarter than me has
flipped to the bullish side. Jeremy Grantham correctly identified -- in real time -- both the housing bubble and the 1999 tech-stock bubble. Now he thinks stocks are messed up enough to buy. From Bloomberg --

March 10 (Bloomberg) -- Jeremy Grantham, who oversees $85
billion as chief investment strategist of Grantham Mayo Van
Otterloo & Co., urged investors to start moving money from cash
to stocks before “rigor mortis” sets in. “Typically, those with a lot of cash will miss a very large
chunk of the market recovery,” Grantham wrote in a March 4
commentary posted today on the Boston-based firm’s Web site.

Grantham, who last year reversed his decade-long bearish
stance on stocks, maintained his view from January that the
Standard & Poor’s 500 Index may fall below 600 before rebounding.
The benchmark U.S. index dropped yesterday to 676.53, the lowest
since September 1996, before gaining 5.1 percent to 711.56 as of
1:58 p.m. in New York. Based on his estimate of fair value, the
S&P 500 should be valued at 900.

“Remember that you will never catch the low,” wrote
Grantham, one of the co-founders of GMO. He expects stocks to
return 10 percent to 13 percent after inflation in the next seven
years.

Grantham told investors to make the shift from cash to
stocks in a “few large steps” instead of all at once. GMO
started reinvesting in stocks in October, and has a schedule for
more moves based on future market declines, Grantham wrote.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aqgLoNjE6tbg&refer=home

I would only take issue with Grantham's statement that 'you will never catch the low.'
Actually, by noting extremes in sentiment, it is sometimes possible to
nail lows and highs to the exact day. Just look at the timing of Guy
Lerner's essay linked above -- almost to the freaking hour. As I said,
the guy is good.

Ready's picture
Ready
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Posts: 917
Re: This is a test. This is only a test.

Machinehead, I was hoping to hear from you today.

Am I to understand you belive we have found a bottom to the market?

Rog

investorzzo's picture
investorzzo
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Re: This is a test. This is only a test.

I'm hearing that selling has become less and less over time. So we may get some kind of rally. But I wouldn't bet to much on it for to long.

 http://www.decisionpoint.com/ChartSpotliteFiles/090306_break.html

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: This is a test. This is only a test.

Rog, don't take my word for it. Or Jeremy Grantham's either. There
is no expert who can predict with certainty. At best, good traders can identify
probabilities better than even.

However, Jeremy Grantham from a value perspective, and Guy
Lerner from a sentiment perspective, both feel that stocks are closer
to a bottom than a top. Grantham's advice to scale in, through a series
of incremental purchases, is sound. This is called dollar cost averaging.

Also, one doesn't have to put 100 percent of assets into stocks. Allocating
only 50 percent or less to stocks, at a time when the market is quite
volatile, is a great way to cut risk and heartburn. The market is going to
experience violent fluctuations even after 'the bottom,' so for
goodness sake stay away from leveraged bets such as options and 'ultra
funds.'

suesullivan's picture
suesullivan
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Posts: 305
Re: This is a test. This is only a test.

Just out of curiousity, how can one trust any discussion of stocks bottoming out that doesn't address the currency crisis/credit implosion/unsustainability of our current economic model? *Why* would there be any reason for us to be done with a stock market crash right now?

investorzzo's picture
investorzzo
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Posts: 1182
Re: This is a test. This is only a test.
suesullivan wrote:

Just out of curiousity, how can one trust any discussion of stocks bottoming out that doesn't address the currency crisis/credit implosion/unsustainability of our current economic model? *Why* would there be any reason for us to be done with a stock market crash right now?

 

Good question. There won't be a real bottom until you see unemployment trailing off. Banks stop losing money and foreclosures slowing significantly.  When there is no one left to sell.........

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