Replies to post #565678 on Zeev's Turnips Patch-No Politics (ZEEV)

[yayaa]

Eye,10/5 Phi turn date setting up perfectly.Analysis follows,Cheers and stay nimble.

Although the wait is akin to watching grass grow, a turn date was identified a while ago, that window finally starting tomorrow, and lasting a couple of weeks, with an ideal fit of October 5th, next Friday, +/- a few days. Since prices are rising into this turn window, we believe the major stock averages are in the process of putting in another important top. End of month and end of quarter window dressing, whereby Wall Street pushes prices higher so that portfolio statements look good to wealth management clients, is coincident with the coming phi mate turn date, and suggests more upside to flat price movement is possible tomorrow. Volume has lagged as this rally matures, with NYSE volume coming in at only 71 percent of its 10! day average on Thursday's 35 point DJIA rise, which is Bearish. Weighing heavy against this recent rally is a Bearish Divergence between the 10 day average Advance/Decline Line and prices in both the NASDAQ 100 and the S&P 500. Such divergences should not be taken lightly. They inevitably lead to declines as there are fewer and fewer stocks advancing, index prices being lifted by a narrowing breadth of stocks. In other words, the underlying strength of the market is weakening. The key point tonight is that volume is drying up on this rally - Bearish.

We would not be surprised to see another Hindenburg Omen observation over the next week or two, perhaps several observations, as conditions are ripening for another signal. What is the big deal with Hindenburg Omens? It means underlying weakness is occurring in the market, to a severe degree, a forerunner to significant declines. The recent price strength in the NASDAQ 100, which exceeded its July highs this week, is not being confirmed by breadth. In other words, a few issues are doing the heavy lifting, AAPL in particular, along with GOOG, GRMN, RIMM, and WYNN doing the heavy lifting. Not much to brag about from the other 90 some stocks.

Other conditions warning of an approaching top are the PPT indicator sitting within the range where declines can occur, and the weekly Bollinger Band analysis, where tonight the DJIA and NDX sit at the top of their respective upper BB, where declines often start within a week or so. Bears may need to be patient another few days or so. Bulls, your day is coming after the next leg down, and it could be sweet for you.

[yayaa]

Eye & all,Why did Citi upgrade homebuilders? Read this analysis and be VERY careful this October. Anyone upgrading the housing sector should be prosecuted IMHO! Todays run is playing out Perfectly for our Oct.5th(+or-a few days) Phi turn date. A Major top is in and we are headed for a MAJORPHI turn imho. Cheers all and please read this carefully.

Before getting into why Citigroup may have upgraded the homebuilders, let’s review the similarities between October 1987 and October 2007 as hopes of a rate cut trap the bulls.

October 19 marks the 20th anniversary of the day nervous investors lost it all. It was the day floor traders headed to the exits, screaming with eyes shut, ears covered. It was also the day top floor investors were asked to hand over their window keys.

Managers were fearful of “jumpers” on the day the Dow plunged 22%.

But could it all happen again? You bet.

Even today, we have the same “crash” triggers in place: inflationary fears, skyrocketing oil prices, and Middle East tensions.

So, yes, it could happen again.

While we’re beginning October 2007 on a high note, be cautious. October has historically been a raucous month for the major indices. I’m sure you’re familiar with the crashes of 1929, 1987, October 27, 1997’s 554-point plunge, and the beatings of 1978, 1979 and 1989.

Scary similarities between 1987 and 2007…

In 1987, we had a rookie Fed boss in office.
In 2007, we have a rookie Fed boss in office.

In 1987, we had a powerful run on the stock market.
In 2007, we have a powerful run on the stock market.

In 1987, we had a weak dollar thanks to the Plaza Accord of 1985, which produced coordinated interest rate cuts and the eventual depreciation of the U.S. dollar in relation to the yen and the deutsche mark.
In 2007, we have a weak dollar because of overly aggressive interest rate cuts.

In 1987, oil prices were skyrocketing. Oil prices were dominating the wild fluctuations of consumer prices during the first three quarters of the year.
In 2007, oil prices are skyrocketing. Oil surged above $83 a barrel last week.

In 1987, we had Middle East issues with Iraq and Iran.
In 2007, we have Middle East issues with Iraq and Iran.

In 1987, we had a problem with housing.
In 2007, we have a problem with housing.

Similarities aside, the one big difference is inflation. But then again, is what the economists telling us about inflation true? My grocery bill is outrageous. My oil bill is ridiculous. Gold is at $750. Oil is above $83. The dollar is getting killed.

Could October 19, 2007 happen again? You bet… and it will.

As for the homebuilders…

There is still no bottom. Housing prices are dropping. Home sales are plummeting. Millions of ARMs will reset. Millions will lose their homes. Millions will become delinquent in payments. And housing prices will continue to come down.

Lennar and KB Home just posted monumental losses.

Yet, Citigroup is upgrading the homebuilders? Just why did they do that?

According to the analyst behind the upgrade, “We are not trying to suggest that trends in the home-building sector are about to get much better ... they have never been worse. And in this sector, with its long history of feverish booms and catastrophic busts, it is precisely when things have gotten this bad that the stocks start looking good."

So, because things have gotten bad, the homebuilders now look good. What?

There’s further downside risk for homebuilders because the homebuilders aren’t earning anything. They’re cutting home prices because of glut. Nothing is looking good. These builders will continue to write down impairment charges to write down the value of land held on books.

So, because more write-offs are expected and housing is expected to get worse, an upgrade is warranted?

Has thinking become a crime?

Here’s another reason not to listen to Citigroup. While you and I were shorting builders, lenders and banks for triple digit gains throughout 2007, the likes of UBS and Citigroup were heavily invested in subprime.

Citigroup just wrote off $5.9 billion because of subprime troubles and anticipated mortgage and banking losses. Q3 profits will now come down about 60% because of that. Q3 net income will now fall to $2.2 billion from $5.51 billion.

The truth – housing is a mess. ARM resets will wreak havoc starting this month. Home prices will continue to plummet because of heavy 8-month supply glut. Yet, homebuilders should be bought?

Please… ignore the banks. They got it wrong betting on the long side of subprime and lending. And they’re getting it wrong again.

Thinking has become a crime.