Thursday 18 October 2012

Market Wrap Up: October 18, 2012

The morning call was again on the money on all counts. SPX pulled back till 1452 against the wishful target of 1450 but closed down a tiny bit. The conclusion part of the morning call said “no reason to be bear”. Dow was also down a small amount but the biggest loser was Nasdaq and that’s a story which will be discussed 1000s times in main stream media and other intelligent blogs. So we will give it a pass here. Bottom line, readers of this blog knew and possibly was prepared for the pull-back.

Day before, in Options+, in bullish ideas, LEN was mentioned. Today it is up 1.5% in a down market. Market thinks that housing has turned around and good luck to those who believe in tooth fairy. But if you are reading between lines, may be you have come across this news:

One of the first big hedge funds to try to profit from a rebound in the U.S. housing market by investing in foreclosed homes is looking to cash out, even as other institutional investors are still getting in.
Och-Ziff Capital Management Group LLC, the $31 billion hedge fund led by Daniel Och, recently told its investment partner, 643 Capital Management, that it wants to exit from the foreclosed homes business, said several people familiar with the matter.
The hedge fund is looking to make a profit on a portfolio of about 300 foreclosed homes in northern California that were acquired at distressed prices, said the sources, who did not want to be identified because they were not authorized to discuss the matter.

Really smart folks will get out of this housing mess while others rush in. I think US housing is far away from finding a bottom and another 20%-30% drop by 2014 is definitely on the cards. Only this time, US would not be alone, Canada will join the party.

Regarding tomorrow, it is OpEx. The picture is cloudy. Stock Trader’s Almanac is indicating that tomorrow is bullish. On the other hand October OpEx, Dow down straight last 6 times and last 7 of the 8.  But today both SPX and VIX closed in red. Bonds were down as well. Normally that would mean a green day next day. And then we had the Google fiasco. I think it could be a roller coaster ride tomorrow but knowing that the cycle is up till middle of next week, even if we see indices weak during the day, it could be buying opportunity. Normally I avoid taking any position on OpEx and Fridays. Unless there is some very compelling  reason, I do not see why there should be an exception tomorrow. As usual, I will tweet through out the day as I see it .

Today one dear reader asked about Apple. If you remember my earlier call on Apple, I said that if Apple closes below $640, there are problems ahead. Apple did close below $640. Now it is due for a bounce and we might see a possible test of its high along with the general market melt up around mid-November. However it may not close above $675. Its trouble is far from over and I expect Apple to test $ 500 by end of the year. While discussing prices, please keep the time period in mind.

Commodities showed reasonable strength today. Gold and silver did not lose much ground and held their earlier lows. But Nat.Gas refuses to give the sell signal. Oil could be due for a short term bounce. 

The Options + was in its 2nd day today. Already we have quite a few trade idea and over 700 page views in less than 2 days. That shows that there is an interest in short term trading. But I want to emphasize again that investors with a longer term view should avoid it. That is preciously the reason I have set it up separately. As you can see, I am spending lots of time here in the blog and your continued help/support is absolutely essential.

Invite your friends to join the readership and Join me in Twitter (@bbfinanceblog)for the real time market updates and calls.  Now you have two more blogs to visit: and . And please send your feedback and comments.


  1. BB, just wondering how do you get this $500 number? Especially with the expected strong iphone 5 quarters ahead and the fact the the 200dma (@~580) historically acting as a support. Thanks!

    1. I was just looking at the Apple chart.It is very close to giving a sell signal. The lows for 2012 has been $524. And it is the biggest hotel California for the Hedge funds. When all look for exit door, there will a stampede. I expect a good sell-off of the market after election and I think Apple will be dragged down along with it. I will post a chart of Apple by Peter L Brandt tomorrow.

    2. And of course, it will depend how far Apple bounces up by mid-Nov.

  2. BB, do you think a pull back in SP is finished?

    How do you think Euro will do? seems stronger again

    1. I think we will have some more pull back today. Will have to wait and see how far it goes. Today is OpEx so expect it to be volatle.