Saturday 4 August 2012

Are We There Yet?


I remember writing somewhat similar headline around the same time last year. More things change more they remain the same. So here we are again, oscillating between breaking higher on hope and promise or breaking down on Euro worries and Global slowdown. The Central Bankers have not yet showed up with the promised money to propel the market to far away galaxy. But that has not exactly stopped the the bulls. We are almost near the high of the year. Will we break it and reach new highs?

There are many reasons for the market to march higher. Almost 50% of the S&P 500 companies have exceeded the earnings forecast. But the bar was set low to start with. With growth in real earning being negative, I do not see what will propel the economy higher. Where the growth will come from if people do not have money to spend in the 1st place?

But we are not here to discuss economics. There are many intelligent folks out there who do a better job of explaining the economics. I simply to try to figure out where the market will go next. Try to read the minds of  TPTB as to what they have in store for the sheeples. It is like reading the tea leave and pray that it works out  as I see it.

So far I have been lucky and I hope that the luck runs a bit further. The formula is to reduce risk and not fall for the temptation that our masters are dangling before us. Last week I expected the action, rather the lack of action from the Fed and ECB. I also saw the immediate market reaction and what is coming next. It is like playing a game of chess and trying to read the mind of your opponent. Only here we cannot see the opponent but he is very much there, in many shape and form, waiting to rob you of your money.


In " Waiting for Mario" I said I will be more comfortable to short if we reach 1400 level. We are almost there. I think even now it is OK to start shorting with a very tight stop, but I want to wait few more days to see if they can push it past 1400. Logically they should make every last effort to cross that landmark. That will convince many that a new bull market is here and jump in. Now that they have killed the bears, their next target is to bring in more bulls to the slaughter house. So I would prefer  to wait a little while more but I think the game is up.

I was looking for the correction by 1st week of August but it got pushed down the time line by factors like FOMC and ECB. Now there is nothing much between earth and hope for at least till  Jackson Hole when Ben will bring in QE3.

So play it safe. Do not chase the bus. And above all, remember, even if we miss this opportunity, there will be many more to come. Markets always go up and come down. But once our capital is gone, it will be very difficult to get it back. I do not have much of fancy charts to show you but I can share what I have learned by mistakes and all the hard punches the market has given me over years. Even if it benefits one person, I will consider that as mission accomplished.

Thank you for sharing my thoughts. Please share it with your friends and if this blog has benefited you in any way, please invite others to join the readership. Right now, that is my only motivation. Have a wonderful weekend folks.

23 comments:

  1. So when do you think the market starts to decline. It seems like everywhere I read people are saying a bull market. Twitter is full with bulls.

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    1. have the sentiment turned totally bullish yet? Please forward me some of those bullish links if you can.
      I think it should turn south as soon as next week.

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    2. If you go on finviz.com there are lots of bullish articles. ECB helping Greece until September when they implement things...etc. I am on your side thinking the market will tank because it doesn't make sense to be this high.

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    3. Market doesn't care makes this sense or not...

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  2. Very good article indeed!, I am thinking of buying TVIX again early next week. Is it a good choice?.

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    1. It's a bad choice because
      a) it's heavily manupilated product - http://vixandmore.blogspot.ca/2012/04/tvix-premium-to-indicative-value.html
      b) Contango (it goes to zero) - http://vixandmore.blogspot.ca/2012/02/four-key-drivers-of-price-of-tvix.html

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  3. You may want to read this: http://vixandmore.blogspot.ca/2012/02/will-tvix-go-to-zero.html

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  4. BB, are you still confidence that we can see 12XX of SP500 in August?

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    1. lets not get hung up on numbers. When the president of US does not want the market to fall because it will hamper his re-election chances, we have to be careful with the numbers. The general direction is towards that.

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  5. Hi BB, Be rest assured that your blog has benefited immensely to many and much more to me. THanks and please continue with the same.
    I read thrice or 4 times to make sure each of your words is ingrained in my brain cells.
    I am now assuming, the next 3 to 4 weeks will be full of bad news from every quarter including Iran!

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    Replies
    1. It may not be 4 weeks but definitely 2 weeks or more.

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  6. BB,

    I appreciate you and your blog but I take exception to one comment in your swing trader section that talks about longterm hold being dead. I think in very bearmarket there is a bullmarket somewhere if you look hardenough. MOst people are thinkingit is commodities; it is not; its the biotech sector. I am a physician and I follow the biotech sector carefully and have seen a lot of companies I follow double/triple in the last two years. The blots and HFT make it extrordinary volatile but if you pick stocks carefully and early enough and hold through the volatility you will make a fortune.

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    1. Biotech is one sector which is doing well for now and you are right there. In fact I plan to go long in Biotech sector in Sept after the coming correction.But I will hold them for a short time.Can you please suggest some good names which will benefit the readers.
      Coming back to buy and hold, in a situation like 2009/9 which I think will repeat again in 2013/14, no share or asset class will be speared. till the Central Bankers continue to try to inflate the balloon some asset prices somewhere will go up

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    2. I can share one name that I am aggressively long. The company is called ARNA; it recently had drug approved for treatment of obesity. The drug is modestly effective in conjunction with diet and exercise but more importantly has no major side effects. It also lowers blood sugars in diabetics and although not approved for that indication will be used offlabel by physicians for this purpose. It is awaiting DEA classification and will be on the market by the end of 2012/early 2013. This is going to be a blockbuster drug, bigger than lipitor.

      The stock is very volatile as it was held only by retail and shorted by all hedge funds. They did not expect approval and were heavily short the co. (40% outstanding shares are short). they are now trying to cover and go long and they keep on short selling the stock to scare retail away. It recently dropped from 13 to 7.

      If one can buy it and keep it in my IMO it is an easy triple in twelve months.
      This is not a solicitation or a recommendation to buy the stock but one physicians opinion. Please due your own due diligence.

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    3. BB..you meant a situation like 2008/09 rite?.. btw awesome blog..thx

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  7. The bullish argument from Schaeffer's:
    "The above excerpts give you an anecdotal flavor for the extremely low-expectations environment in which we are currently operating. Admittedly, the headline risks are many, identified each day in the financial media (Europe's sovereign debt crisis, slowing growth in emerging markets and domestically, political/regulatory/fiscal uncertainty, to name a few).

    'But as we said on July 14, "a lower-expectation environment should be viewed as a good thing for stock investors." And contrarian investors should feel even better about the risk-reward in the market when benchmark price action is strong in the wake of this underlying fear. Such is the case at present, with the S&P 500 Index (SPX – 1,390.99) gaining more than 10% year-to-date and doubling in value (and then some) from its March 2009 low.

    Essentially, such environments tip the risk-reward equation in favor of the bulls. Any negative news is discounted into the market as investors underweight stocks by raising cash or carrying larger-than-normal short positions. Therefore, selling is muted when widely followed reports meet lowered expectations, as many investors have already prepared their portfolios in anticipation of bad news. On the flip side, sharp rallies become the norm when data exceeds expectations, as we witnessed with Friday's jobs number."

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  8. BB; Here is the link to the Schaeffer's quote I sent you:

    http://www.schaeffersresearch.com/commentary/content/ezines/5+reasons+why+this+market+is+impressive/mondaymorningoutlook.aspx?id=112261&utm_source=8%2f4%2f2012&utm_medium=email&utm_campaign=MMO&trackback=mmoezine%20&utm_content=continuereading&clicklocation=continuereading

    We are in a rising channel with wild swings both ways.

    http://stocktwits.com/TraderFlorida/message/8986558

    Therefore in this market one can predict either way and be right.
    The amazing things about your blog is that you have been incredibly timely in calling the turns and that is extraordinary. Thanks. C.C.@CCItrade

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  9. schaeffersresearch.com (SC in short) has always been bullish, even in 2008/9. They have to sell hope and newsletter subscription. In fact Marketwatch ran a report in 2005 which said that SC is the worst of the newsletter services.They call him terrible ten. You can read the review here: http://www.cxoadvisory.com/3746/individual-gurus/bernie-schaeffer/
    I had the misfortune of asking for some information from SC and now everyday they keep sending emails offering deals of life time and I would be able to retire tomorrow if I take their offer. They are worse than spam. I do not your experience with Barnie, but regular investors should avoid SC or Barnie like plague. My personal opinion and other may differ.
    Thanks.

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    1. Oh! BB Don't hold back. Tel us what you really think of SC. LOL C.C.

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    2. Between you and me, I only follow SC's "Monday Morning Outlook." It is a Sunday morning ritual for me. I find Todd Salamone is at times worth following. However, he tends to present, every week, reasonable arguments for all 3 possible market scenarios, i.e. the market will go "up" if it does not go "down" or go "sideways." His arguments for each scenario are usually quite accurate, however taken on the whole he is obviously not predictive. One has to take his arguments along with one's own view of market direction. What annoys me is that every week he takes a victory lap based on the scenario that panned out. Oh well. Thanks again. C.C.

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  10. BB, I appreciate you taking the time to pass on what you have learned over the years. You read the tea leaves pretty well, and always remain calm.

    Your comment "And above all, remember, even if we miss this opportunity, there will be many more to come. Markets always go up and come down. But once our capital is gone, it will be very difficult to get it back." says it all.

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  11. BB, I have been reading your blog for the last couple of months, and the accuracy of your calls has been quite impressive. We are closing in on the 1400 mark on the SPX...are you initiating any short positions today?

    Thanks

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    1. Not yet. Waiting is good. Hopefully will get a better entry. Let us keep in mind that we are fighting against some very powerful people.

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