Replies to post #87298 on Zeev's Turnips Patch-No Politics (ZEEV)

[Public Heel]

The parallel to 2002 continues. Last year, the Naz spiked up in early March, to a little below the January tops, before the horrific selloff began.

If it were not for Iraq confusing the picture, and giving the hypesters so many reasons that "things are bad now but are bound to get better", I'd say a repeat of last year is bound to happen.

[brightness]

I was a bit too early in early February, but hey, I was dead on throughout October and November when I was butting head with the Turnips.

[Ilya]

Zeev, do you think there is a big chance that Bush won't make a war?
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=18701500

[wahz]

Zeev, why in heck would a two day rally bring new highs way up? A powerful rally of two days duration off of a low NEVER EVER EVER EVER EVER gets a big expansion of new highs...I don't understand why you use this one and talk about it on your threads. can you explain it to me and give me examples where and why I am wrong..I am hoping for some examples, frankly.

A very sincere.. "All the best to you and yours." May a miracle occur in the ME

W

[brightness]

How can there be many new 52 week new highs when the bottom of a general market sell-off is reached? as opposed to a typical sector rotation.

[mish]

Zeev one thing you failed to mention to support your case was the TRIN and TRINQ.
The TRIN and TRINQ suggested selling all the way down.
Out of the blue we reverse but even on the reversal day the TRIN suggested it was being sold. Only on the big day did the TRIN suggest mammoth buying.
No continuation today.
TRIN and TRINQ suggested selling most of the day.
Thus it waould apopear to me that this is a distribution rally or a max pain rally.
This is in contrast to the Oct rally which had a low trin for several days even as futures were dropping. Plenty of time for accumulation. I did not sense any accumulation to speak of on this rally other than chasing stuff all the way up.
Thoughts?

That does not mean it can not go higher and it bothers me that I reloaded too much too fast. I always do. But most of it was june or later and in the case of the DOW it was leaps.

As for new highs vs new lows I think I would be in the camp that I would not expect many new highs here particulary in the DOW and spoos whoch is pretty beat up relatively.

I do not follow that indicator at all but would think that the Naz SHOULD be showing decent new highs as it did not even come close to a nasacre this year.

How will this resolve? Is the Naz going to be stronger than the DOW all year?

M

[Malyshek]

Zeev, Is CAH becoming a buy here? Your comments appreciated.
Thanks.

[Culmus]

From Roger Arnold, FYI:

March 14, 2003
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The Working Group on Financial Markets at Work

I'm Glad to see a recovery this week in equities world wide and the corresponding reduction in Gold and increasing treasury yields.

I however do not believe there is any fundamental reason to believe that this is anything other than a near term turning point in the market.

I also do not believe that this was driven by market fundamentals.

On Tuesday evening, about 2 hours after the Japanese markets opened I sent out 2 e-mails to money mangers with whom I correspond:

First e-mail :

Watch for an increase in Gold long selling and short selling soon - perhaps tonight even - the cash will be used to buy US equities and increase margin into equities in an attempt to bolster US equities. This appears to be driven by PPT coordination as a means of halting a cascading sell off of equities.

I believe the near term increase in margin is anecdotal evidence that has already begun.

The margin increase is almost exclusively on the commercial side versus retail or professional trading side and is being targeted at large blue chips mostly.

Second e-mail: about 45 minutes later

Watch for an increase in Gold long selling and short selling soon - perhaps tonight even - something greater than today's $5 down - a $15 down day - the cash will be used to buy US equities and increase margin into equities in an attempt to bolster US equities. This appears to be driven by PPT coordination as a means of halting a cascading sell off of equities.

It occurred just after 1987's 500 point Dow fall - The PPT of course was born out of the that event.

I believe the near term increase in margin is anecdotal evidence that this has already begun.

The margin increase is almost exclusively on the commercial side versus retail or professional trading side and is being targeted at large blue chips mostly.


The point in sharing these with you now is that in my opinion the market action of the last 48 hours has been driven exclusively by intervention regardless of economic fundamentals.

Concurrently with the surge in Equities in Europe, which was the precursor to the increase in Equities in the US, there was terrible economic news out of Asia, both Japan and South Korea, which sent their indices down. The Japanese market fell another 1% that night, falling below the absolutely critical level of 8,000 which must be maintained to avoid a systemic collapse of the Japanese banking system.

That night, while we in the US slept, the Japanese Prime Minister, publicly requested assistance from the ECB and US Fed as well as from the Large governments of the world to help Japans currency and stock markets as the fiscal year ends this month.

At the same time in Korea a moratorium on withdrawals from mutual funds was instituted to avoid a run on the funds there following 2 days of massive mutual fund redemptions.

But within just a couple of hours of these occurring the European markets were opening up and heading up all day without any fundamental news to validate it.

This simply doesn't happen.

The risks of a systemic collapse of the worlds capital markets was approaching very quickly if the markets maintained their downward momentum. As this was well known the markets were accelerating their move to the downside. In this type of crisis market traders risk aversion increases and the selling becomes self validating. That is the path the world financial
markets were on this week.

There needed to be a catalyst to break the markets momentum. In my opinion that catalyst was a coordinated effort between the European fiscal and monetary authorities with those in the US and the associated large private money centers.

These organizations realizing that a systemic crash was imminent stepped in to stop the markets fall by :

Selling gold: Averting a crisis in the gold carry trade market, primarily protecting JP Morgan.

Selling US Treasuries: Averting an immediate interest rate derivative problem at JP Morgan and Fannie Mae.

Buying US and European equities: Averting an immediate reserve crisis at the German Banks.

This original catalyst was then picked up by the momentum traders and all of these markets extended the gains or losses for the day.

Within the last 24 hours the Japanese and Europeans have announced sweeping capital market reform plans in an attempt to ensure that the markets do not slip back into the trend they were in previously.

Will it work?

In the very near term the answer is yes. I believe it is highly unlikely to be successful in the long term however. The fundamental economic situation all over the world continues to be very bad.

I still believe the markets will reverse course again sending gold up, treasury yields down and equities down as the market begins to focus on those fundamentals again.

This is however one of those times when it becomes apparent just how difficult it is to apply macro-economic understanding to the capital markets on a daily basis.

I would also add that the intervention was absolutely necessary.

I just wish I had told you about here first.

[Tim Lamb]

For your reading pleasure.

http://www.zealllc.com/2003/waterfall.htm

Seems a confirmation of your overall view. He must be reading your posts.

[brightness]

Bags? What bags? ;-) Sometimes when a bottom is approached, buying a little early is okay. Being early by 9 days would have been hailed as great acievement in the Turnip patch.