Monday, April 30, 2007

Here's Your Pickle Surprise, Pal....

One of the readers of this blog posted a link to an interesting article called The Last Bear Standing that you might find of interest. Here is an excerpt:

"As Grantham points out, a bubble needs two things: excellent fundamentals and easy money. 'The mechanism is surprisingly simple,' he wrote. 'Perfect conditions create very strong 'animal spirits,' reflected statistically in a low risk premium. Widely available cheap credit offers investors the opportunity to act on their optimism.'

"And it becomes self-sustaining. 'The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you.'"

"My colleagues suggest that this global bubble has not yet had this phase and perhaps they are right. ... In which case, pessimists or conservatives will take considerably more pain."

So - encouraging in a way, although discouraging in another. I strongly believe, as readers of this blog know by now, that we are in the midst of the hugest Ponzi scheme in human history, and one day it's going to completely collapse. The question is whether that "day" is tomorrow or five years from now. One thing in certain - between now and then, the bulls will persist in posting their taunts here. Although at least to a lesser degree, now that the shield of anonymity has been taken away.

One other article of interest is Dead Market Walking, emailed to me by another thoughtful reader.

Today is the best day I've seen in a long time for my portfolio. I sometimes wonder on days like this is our national nightmare is finally over. One day does not a trend make (or break), so that remains to be seen. All the same, as you can see from this chart of the $INDU, the big boys gave up some ground, and the cyclic indicators are looking mighty encouraging.

The NASDAQ Composite, which has been weaker than the Dow, also fell. The key difference is that it was down pretty much all day, whereas the Dow sported a 40+ point gain at one point in the day before shriveling away.

My favorite index, the Russell 2000, fell the hardest. I like what I see here.

The S&P 500 remains above its former resistance, but any further drop will pierce that line and put us back into that gigantic upward-sloping channel.

The Gold & Silver index, which has been mercifully weak, continued to fall today. This is one of the cleanest, prettiest channels around.

As for the $XMI, it has kissed the underside of its former support line and is now heading in a more intelligent direction.

Ironically, I don't have much time today, so this is going to be a quick post with hardly any specific stock symbols. I offer here a few short suggestions (but not nearly as many as I could.....) There's Akamai (AKAM):

Affiliated Managers Group (AMG):

Avalon Bay (AVB):

MWP is turning down hard:

PVH is not as clean as the others, but it has certainly lost a lot of momentum.

Hopefully I will have more time tomorrow. Thousands of people come to read this blog every day, and I'm flattered and grateful for your interest. If the blog is this popular during this air-headed runup in prices, I can only imagine its popularity when we actually enter a honest-to-God bear market. Until then, I can only yearn to trade stupid, except for occasional days like today.


Dennis said...

Well, the market finally acted rationally for a change today. I think sooner or later, it will wake up to terrible fundamentals (terrible economy and high inflation). Is today's action the beginning of a big bear market? It could be but I am not entirely sure because it wasn't the big breakdown that I am looking for. Still, it is a good start. There are however individual stocks that are due for big falls, namely GOOG, LVS, and MA.

Leisa said...

My SRS acted nicely today. Though it appears that it had two closings today and one level that was more than $80, to a final level that was about 2x IYR>

I bought some Jul $100's last week--after selling my $105's at a a slim profit because it looked like the American consumer would die with a credit card slip and a pen in his/her hand! I was still cursing this decision (particularly since a moment of inattention landed me 10 more than planned). Last week I marvelled (read: head scratched) that RTH was up but 80% of its constituent parts were down.

I'm still a believer that it is the American consumer that will bring this economic boom to its knees. Do you think that they think that they hold such power?

Methinks that we are at an inflexion point.

Good luck to all whether you are long or short.

JakeGint said...

Dennis, no disrespect but "terrible economy?"


We had a soft quarter, but unemployment is at all time lows... again. Granted, we may be in for a shift, but there's no "terrible economy" here, yet, or the $3.50 gas and the bottoming housing demand would've had us feeling a lot more pain at this point.


Tim ,

Congratulations on the nice day one works harder or deserves more than you and your raders. As you know I put on the Bear suit last Thursday and detailed how the breadth of the market in the last 6 sessions had the average NYSE stock actually flat while the DOW was up several %. This will not be "the big one " with support and buyers waiting with cash in hand might even be 1/2 of the FEB-MAR decline hoping we can get 3-5% out of the SPX is wishful thinking..all it will do is set up another huge run to 14,000 By Christmas. I still have QQQQ hitting 50 by the 4th of July with the help of the US Government and GS at 250 also !!! I will keep those CLAWS on for about 3-7 sessions then go back to hooving up the wall of worry !!!
Thanks for the great site !!!

ross said...

Leisa beat me to the comments about SLR. It was very impressive today taking out two previous highs on the daily chart. Also take a look at DXESX as it appears to have put in a low as well. The RUT was creamed today and its behaviour is very important going foward.

NewEquity said...

Your days are numbered Tim/Leisa it must be hard to watch your stops trigger on the Russell and then it takes a nice dive. OOPS.

b.healed said...

i enjoyed the rut move...i like the way these other indexes are setting up.

curious about the trendline drawn on the indu. it kinda looks like taking the low of the chart and connecting it today's high. it didn't seem to hit any other points.

thanx for your work....i enjoy reading your stuff

Leisa said...

New Equity,

Stop being such a goof.

JakeGint--The economy is slowing rather dramatically. It has been more than one soft quarter. I agree that unemployment is low, but it always is prior to it increasing. Unemployment is beginning to move off the pegged needle. But to be frank, the BLS has screwed the numbers for the last 12 months, I'm not sure what to believe. I don't think that the housing slowdown has percolated through yet.

I still think that the American consumer is the lynchpin in the world economy. If the consumer continues AND liquidity remains high, then I'll agree that we have more tender for the blazing world market fires.

Leisa said...

Oh, and update on SRS. The final few transactions seem to have been repriced from what I posted. Very strange. I use Fidelity ATP.

Leisa said...

Regarding MWP: no shortable shares from Fidelity.

JakeGint said...


"Slow" does not mean "terrible." My gosh, we've had rates ramped three hundred plus basis points (and holding) and oil prices near quadrupled off the late nineties lows, I sure hope it slows a little bit...

But inflation? A bit on the commodity side, but not much if you follow the CRB. Deflation is my bigger worry... that's what hamstrung Nippon for 20 years...

sam said...

Tim, did we have a engulfing bearish formation in the nas. 100 yesterday? Sammy

Tim Knight said...

"Tim, did we have a engulfing bearish formation in the nas. 100 yesterday? Sammy"

Yep, definitely.