Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
VIX at a critical level near the November lows here.
http://stockcharts.com/def/servlet/SC.web?c=$vix,uu[h,a]daclyyay[dc][pb50!b200!f][vc60][iUb14!Lp14,3...
A lower close would be bullish for an extension of this rally, IMHO.
ROOM indicated down 8.5% on warning; EXPE indicated 7% lower in sympathy
Augie
KLAC H&S
would look a lot better without that big volume spike on the right S.
EXPE:
http://stockcharts.com/def/servlet/SC.web?c=EXPE,uu[h,a]daclyyay[dc][pb50!b200!f][vc60][iUb14!Lp14,3...
I'm short too. Aside from the fundamental reasons, chart looks like a descending triangle just broke to the downside, inverted cup and handle marking the top, and a gravestone doji yesterday.
jpar
No, it's just called being offensive. Please apologize for your original post or at least take it someplace else.
Original
Short sellers cannot change the long-term value of a stock merely by making an outrageous bid. Besides, why would they want to? If a stock is "worth" $10, wouldn't a short seller be better off selling for the highest price possible, rather than say $8, just to depress the price momentarily. The market price would pretty quickly come back to fair value. It may be possible to manipulate markets in the short term, but not for long. I don't even think central banks can do that...and their pockets are a lot deeper than the short sellers you are concerned about. I think CB's lose money most times they try. Of course, this doesn't stop them from trying!
Real estate is a bad analogy, because it is not fungible in the way stocks are. There is only one of every house.
Maybe you're upset when short sellers are willing to sell at prices lower than you? But long holders can do that too. I don't like it any more than you when my stocks go the wrong way. But, hey, that's the market. And when it happens, the market is always right and I'm always wrong.
Original
Short selling.
First of all, every short sale must eventually be covered, just as every long must eventually be sold. There is nothing inherently different between a short sale and a long buy, except the timing. In the long run, banning short sales would have no effect on share prices. But it would weaken the market itself by reducing economic freedom. Free markets are more liquid and more efficient ("fairer" prices), so they benefit everyone. The presence of short sellers actually helps would be longs, although they may not think so. Think of it this way: if you want to buy a stock, it would be a bad thing to arbitrarily restrict the available supply of that stock (including that from short sellers)...you may end up paying a higher price.
Coal In Amazon's Stocking
Ben Berentson, 12.26.02, 8:00 AM ET
NEW YORK - Curtis Hesler, the editor of the Professional Timing Service, deserves to take a bow. In 2002 he had a perfect record for picks in this column. On July 4, he recommended buying Kinder Morgan at $30. It now trades at $34, a gain of 13%. On Nov. 14, Hesler proposed a seasonal trade on gold stock ASA Limited. Then it traded at $32. It now trades at $38--a 19% gain. But his most impressive pick was his Feb. 7 call to short Microsoft. His proprietary Hyperion model had flashed a sell signal and predicted a drop from $62 to $40. It dropped to $41. But even if you hadn't sold at that point, you would still be up. Microsoft trades for $53 today.
Sign up for Forbes' Free Investment Guru Weekly e-mail.
So what is Hesler's outlook for 2003? "I'm bearish," he says. "I think we'll go lower than we did this year--below the October lows. I think that the economy will get worse and profits will fall on a real basis. However, I'm bullish on gold and energy stocks." Hesler still likes Kinder Morgan (nyse: KMP - news - people ) and ASA (nyse: ASA - news - people ), but his advice for 2003? Short shares of Amazon.com (nasdaq: AMZN - news - people ), which is currently trading for just under $22. "I think Amazon looks like a second chance to short the techs. If you've ever said, 'Boy, I wish I shorted the Nasdaq at 5000,' here's another opportunity." His pick is based on the same Hyperion timing model that called the Microsoft (nasdaq: MSFT - news - people ) short: It is based on weekly price data and locates reversals, also knows as pivot points, to trade on.
Amazon has been on a run for the second half of the year, moving up almost 80% since the summer. It has slipped back from a high of around $25 and has been treading water at around $22. "If we break below this consolidation level, there's nothing to support the stock," Hesler says. "The Hyperion timing model is waiting for a trade of over $22.62, and then will short it on the way down at $21.20." This pivot point represents the beginning of the mid-November price jump from $21 to $25. Hesler thinks Amazon could drop to $12 during 2003 and suggests initially putting in a stop at $25, but adjusting that to protect your gains.
source: Forbes.com
mlsoft
Re: TYC
You may be right about TYC, but IMO book value is not a good reason to be short. TYC's book value reflects the writedown of goodwill associated with thousands of acquisitions, and is something between misleading and meaningless. Who's to say that this goodwill is not "worth " anything? The only way to get a handle on what TYC stock is worth is to look at the cash-generating ability of their assets. On this basis, the stock actually looks cheap to me, BWDIK.
If the cash flow projections of the company fall short, the stock will go down. The other (related) big risk is liquidity and the company's ability to service its debt. Cash flow and liquidity may be good reasons to be short, depending on what you believe. But I don't think book value is.
Joe
You and I both! I'm finally in the black on this pig...plus, I got free shipping on the stuff I ordered.
Nice call.
Zeev, I believe LLC profits flow through to their owners and are taxed at the corresponding rate - i.e. the individual's marginal rate if owned by a person and the corporation's tax rate if owned by a corporation.
MSFT weekly slow sto oversold, has been pretty good at calling at least a short-term bottom in the stock, may provide some leadership here.
http://stockcharts.com/def/servlet/SC.web?c=MSFT,uu[h,a]waclyyay[df][pb50!b200!f][vc60][iUb14!Lh5,5]...
Gray Davis' comments and progressive taxes
Interesting comments. Notice that there is no mention of the link between tax rates and earned income. As the old economics saw goes, if you want less of something (i.e. work and earned income), tax it.
There are two things wrong with progressive taxes. The first is that it discourages our most productive people from producing. Those who face a marginal combined tax rate of 50% are often eager to trade off income for leasure time.
The second is that it makes it easier to raise the overall level of taxes. When 90% of the voting population believes that somebody else is picking up 80% of the burden, they are more likely to acquiesce to higher taxes. But when tax "revenues" fall short, government must make up the shortfall in the only way possible - by raising taxes on everyone. Since tax rates seldom go down, the whole cycle tends to repeat itself a few years later. The result is that we now have the highest overall tax burden in the history of the country, except for a brief period during WWII.
The only way to break this cycle of higher taxes and higher spending is to flatten the tax rates. It is no wonder that, in states with flat tax structures, it is next to impossible to raise taxes.
jb
Yes, i get the same sickening feeling. Aside from a very few things, plus of course Zeev's bullishness, there is very little to be hopeful about. I'm 30% long here...but don't ask me why.
Big plunge in stocks above 50 DMA:
http://stockcharts.com/def/servlet/SC.web?c=$NAA50,uu[h,a]dallyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3...
Note also the RSI and Stos. Same for 200 day. This, at least, is bullish.
We also have a full moon, which frequently marks a short-term turning point in the market.
And a nice H&S on the COMPQ itself.
http://stockcharts.com/def/servlet/SC.web?c=$compq,uu[h,a]daclyyay[dc][pb50!b200!f][vc60][iUb14!Lp14...
mlsoft
The conventional wisdom is that the dollar should decline, but I don't see the fundamental case for this. First, the balance of payments deficit is overstated, because it does not include the earnings of overseas subsidiaries of multinationals, because the value of products with high intellectual property (like software) is not counted properly, and because of transfer pricing for tax reasons. True, we have a huge and growing deficit with China, but their currency is pegged to ours. The important comparison, as it relates to the dollar, is with Europe. Their economies are in worse shape than ours, and will continue to be so for structural reasons. Their currencies are held up by artificially high interest rates, but that cannot continue indefinitely. When European real interest rates fall to our levels, their currencies will follow. What am I missing here?
Having said this, the chart does look bad.
I also believe that gold can rise even if the dollar doesn't fall, because gold has been suppressed by our favorite market manipulators, and it can rise against a basket of currencies.
Taxation of dividends
The issue of double taxation goes well beyond dividends. Every dollar of corporate income is taxed twice - once when it is earned by the corporation, and once when it is returned to the shareholders, either in the form of dividends or capital gains. But since the shareholders own the coporation, they are taxed twice. This unfair policy has the effect of restricting capital formation, all else equal.
Either eliminate corporate taxes altogether, or eliminate taxes on dividends or capital gains. I'll admit that there are some wrinkles, but they can be overcome.
Corporate taxes or taxes on dividends and capital gains (one or the other) should be set to the personal income rate. Income is income.
As for the "unintended consequences", so what? Markets should not be distorted by stupid policies. The fact that they get un-distorted should be an intended consequence. But I agree that changes should be phased in. People should not be screwed by changing the rules in the middle of the game, no matter how worthy the goal.
JMHO, and one which I know is not popular here, so I'll be quiet now.
ajtj
If we hold here and then trade up tomorrow (maybe a couple of big ifs), we would have a nice bottoming candle in place.
http://stockcharts.com/def/servlet/SC.web?c=$COMPQ,uu[h,a]daclyyay[dc][pb50!b200!f][vc60][iUb14!Lp14...
This, along with the recent COMPQ and NDX breach of the 200 MA, would suggest that we have some unfinished business on the upside. It just seems to me that this ugly market could quickly morph into a much more bullish setup. Am I reading this wrong?
Stop Snickering, this could be sweet.
Some weird chit happening tomorrow,
astrologically speaking. Not sure what it all means, but better fasten your seatbelts...it's gonna be a bumpy ride.
http://www.stariq.com/MarketWeek.HTM
Besides Mars entering Scorpio on December 1, the other outstanding signature in effect this coming week is the New Moon solar eclipse in Sagittarius, on Wednesday. On this same day, Jupiter will turn stationary retrograde. Look for this combination to correlate with large price moves, especially upwards. Not only in stocks, but big moves may be noted in Silver, Treasury Bonds and Notes, and Crude Oil.
sylvester
I hope the market goes higher short-term, as I'm slightly long. But I'm starting to worry...the bulls are getting pretty obnoxious. <g/ng>
wahz
The P/E you give for the S&P is based on optimistic assumptions about growth, and on "operating" earnings. On reported earnings, the P/E may be double what you say, especially given the inevitable large hits for pension underfunding. I agree with some of the reasons you have stated in your posts why the market may move higher, but valuation is not one of them.
Joe
Thanks for the info. I do understand how the Fed open market operations work. What baffles me is the linkage between the Fed and the large, coordinated intervention in the equity markets that has become commonplace. When the Fed creates liquidity, some of it will no doubt find it's way into the stock market. But if the Fed executes a repo, the counterparty bank would presumably want to mostly replace it with another fixed instrument, because they are on the hook to repurchase (soon) what they just sold to the Fed.
What I am wondering about is the largescale intervention, the at-the-money order for QQQs in size. Where does that come from? Does the Fed "encourage" Goldman to buy, and if so, why does Goldman risk their own capital to do the Fed's bidding? Or, is there advance knowledge that the Fed will be injecting liquidity, and is this enough to tilt the odds sufficiently in Goldman's favor so that they are compensated for their risk? Any ideas?
mlsoft
I don't have a problem with the Fed creating liquidity. That is their job. I do have a problem with them deciding where that money ends up - as in, say, the stock market vs. savings. In a free market, that is the job of the market itself. I don't believe the Fed intervenes by directly buying stocks. But I think they aid and abet large market makers like Goldman, although I am not sure of the mechanism (do you have any ideas?)
Like you, I am very bearish on stocks longer term. However, I went slightly long several weeks ago...why fight the trend? But I'm nervous with my longs. This will all end badly. The recent intervention must, by definition, be reversed at some point. And then we will be left with nothing but the fundamentals.
Happy TG, and best of luck to you.
oeo2oo
I do not have a target - simply looking for a retracement from an overbought condition. I will cover if the RSI or stochastics bounce from the 50 area. My stop is at yesterday's close, and will be adjusted downward if successful. This one scares me.
Sorry I am not able to respond to PM's. Good luck.
south lou
Yes, similar setup. Thanks.
Finally time to short AMZN?
Big black shooting star (gravestone?) doji, confirmed today. RSI and stochs overbought and turning down. I've just shorted it, but will use a tight stop, as I think this fits Zeev's "snorter" definition.
http://stockcharts.com/def/servlet/SC.web?c=amzn,uu[h,a]daclyyay[dc][pb50!b200!f][vc60][iUb14!Lp14,3...
If we drop to max pain, the SPX, DJI, NDX, and COMPQ will all have completed nice but small H&S patterns that should at least get us below the 50 ma and perhaps to fill some of those gaps below.
ajtj, sorry...I missed your post and posted the same thing.
SPX working on a weekly gravestone doji that looks a lot like the ones at the January and May tops.
http://stockcharts.com/def/servlet/SC.web?c=$spx,uu[h,a]waclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3!L...
Dollar is getting trashed. Hanging men on the SPX, NDX, DJI, and COMP from yesterday in the process of being confirmed today. And Zeev's Turnips are running for the hills. Lots of arrows lining up in the same direction.
Evening star doji on the Comp tonight.
http://stockcharts.com/def/servlet/SC.web?c=$COMPQ,uu[h,a]daclyyay[db][pb50!b200!f][vc60][iUb14!Lp14...
Confirmation tomorrow should set up at least a test of the 50ma. Futures are down early. Hope for the bears...
mlsoft
I'm not so sure this market is being manipulated here. The action in the dollar and gold are quite different from previous pumps. Da Boyz and da PPT may have started this, but it is being sustained by real buying: short covering and mindless mutual fund window dressing. Poor market breadth and volume mean we haven't seen the lows yet, but the markets reaction to dismal news suggests real momentum, IMO. I wouldn't be shocked if we were to revisit the August highs. I'm 20% short here, but not going to increase that until we see some moving average support broken...it's just too dangerous, IMO. Meanwhile, it's pretty painful...
Good luck.
Augie,
1280 is also around the 50 sma, which seems to be providing support to the indices as well as a number of important stocks. It is IMO the first important test to show whether this rally has legs.
BTW, is there a way on StockCharts to get an exact figure for the ma (or do I have to upgrade for that as well!)? Thanks.
maine
It does look like we should be headed lower now. And betting on a scenario that would fool everyone is always a good bet. One thought: the market seems to repeatedly exhibit a weird symmetry. The nature of a primary trend can often give clues about the nature of a countertrend move. Back in September, it looked like we should have rallied from an oversold condition. We did get a weak bounce, but then suprisingly dove sharply to new lows. The real rally happened 3 weeks later, and of course has been bigger than at least I expected.
Now we are at a point we we should retrench. Perhaps what we get here is a mild correction (to perhaps the 50 day ma), then a sharp advance to retest the August highs, and then (3 weeks late), the move to new lows that we are maybe expecting now.
I am as confused as you are about what is happening, but right now this is the scenario I am working with. Does it seem reasonable to you?
Joe, yes that's the idea.
Then you don't think it will work? I myself am not sure why it should...I only observe that it often seems to. See my last post.
Thanks for your response.
Augie, an example:
http://stockcharts.com/def/servlet/SC.web?c=$COMPQ,uu[h,a]waclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3...
Notice the RSI reversals in Dec. 00 - Jan. 01, Jan. - Mar. 01, and Apr. - May 01, all of which correctly predicted lower prices. Also note the same setup is occurring now (i.e. higher RSI vs. August, not confirmed by price), which implies new lows unless the August price highs are taken out in this rally.
BTW, I'm sorry I don't know how to post annotated charts. Am I allowed to do this as a basic member, or do I have to have the premium membership?
Did you ever fix that poor dog's tooth?
Augie - RSI Reversal
Since I am not a paid IHub member, I had to respond here to your post on the MDA thread (sorry Zeev). I have used the technique you mentioned for awhile, with some success. I'll paraphrase it here for those who have not read your post. An equal or higher RSI high, accompanied by a lower high in the stock price, is negative. Presumably, a higher high in stock price, accompanied by a lower high in RSI, is positive. Do I have that right?
I think it also works with any oscillator type indicator, such as stochastics, or even things like on balance volume. My reasoning is this: all stocks cycle through rising and falling RSI, but unhealthy stocks tend to be falling while this is happening - hence the negative RSI reversal that you cite.
What is interesting is that most technical analysts would look at this in the opposite way. They would call this a positive divergence, using your $NAMO example. John Murphy, for example, recently mentions a "positive RSI divergence" (what you would call a negative RSI reversal) as one of the reasons he is bullish here.
Because of this, I don't have a lot of confidence in this idea. Plus, it is far from perfect, although it does seem to work more often than not. And it does make intuitive sense to me.
I'd be interested in your thoughts, or anyone else's.