Watch the 1,250 Area of S&P 500 as the Fed Abandons U.S. Stocks [View article]
Hi Jon,
You made nice call of "Epic Bear Market" on September 20, 2007. People who followed your call had made tons of money by getting out of long positions and aggressively going short.
Now the pattern is forming, which seems the repeat of summer of 2007 (my blog on our site). Bulls who believe the relieve rally could be trapped in gigantic peak, while smart money sees that as the last window to unload positions.
What are the key drivers to this formation? You count them. Dire unemployment situation, stagnant housing market, shrinking real American income, and of course, the halt of printing money by the Fed. Greek issues will constantly serve as some background noise. The last and the most important one is that you may see the very first earnings deterioration across the board in the coming July.
Technically March 16 low and 200 Day Simple Moving Average are the major support levels. These are in striking distance of current price and could be taken out in one major blow (or gap actions).
Why I'm Lightening Up on Stocks for Good [View article]
Any portfolio allocation strategies will not only consider conclusions out of decades of historical data, but also current phase of market development. Why? History based analysis is more static, not very useful for forecasting purposes, much less for portfolio strategies. We are in a cyclical bull market embedded in a huge secular bear market. We may still have some small legs to run for bulls before major a drop in early fall. That said, I don't agree to "lightening ... for good". It will be more prudent to make appropriate portfolio adjustment during different phases of market cycles.
10 Reasons the Markets Have Further to Fall [View article]
Very nice analysis Bret! One more thing I'd like to bring up here is the dire unemployment picture. No matter where the Fed directs the monetary policies, the stubbornly high unemployment rate wouldn't budge. QE1 and 2 only diluted people's purchasing power and weakened the dollar. The unemployment problem is a structural one as the government failed to make any commitment to curb rampant outsourcing practices. The vicious circle continues to develop as next generations have lost interest in core job skills for middle class, which makes outsourcing indispensable.
That being said, I would foresee a major setback of the market with Mar 16 low closely watched. I'd also like to see whether major market players are willing to mount positions around these levels.
We have 21 overbought signals, very close to the top. Today's action is a mini confirmation. Checking our charts, retail, utility, technology, and financial sectors seem to be weakening. We are waiting for transportation to confirm the 5-7% correction signals before increasing short positions.
When Crunch Time Comes And Diversification Won't Help [View article]
Hi Bob, you posted a nice article. In today's market, stocks move in tandem. But there are some solutions if you really want to diversify. Yes, the economic growth is anemic; yes, the unemployment rate is stubbornly high; yes, European debt crisis seemed worsening. What is the flip side of the fact that more people are being in poverty? There are some outliers to the herd behavior. You see, people are delaying buying new cars, which has benefited the independent parts dealer AutoZone. More people have been visiting Dollar Tree and Family Dollar Stores. These stocks are setting records while others are in slump. If an investor tries to be more conservative, she can explore the bond market. Even muni has had a great run since last crisis. Macro economic forces will kick another leg down to the equity market. August 9 low will be eyed. If broken, the real and dire bear market is waiting for us.
High Yield Market Underweight Follow-Up [View article]
I have mixed view on the high yield market. The US economy is pointing to a shrinkage, while the corporate debt load has improved in the last several months. The chance of another mild sell off in the high yield market has increased significantly as the S&P is lingering around 200 simple moving average again. However, the income component will serve as a cushion to any free fall and the comeback will be equally furious.
Keeping the macro trend in mind, it will depend on the incoming earnings report cards. It is more likely than ever that investors will be sucked in current rally starting from 200 day simple moving average of S&P 500, only setting them up for another big drop. I'd agree we will see the secular bear market in full force after the rally runs out of steam.
5 Option Income Ideas With 10% Yield Potential and High Margins of Safety [View article]
It's an excellent analysis. I've used put selling since early 2008. 90% of the chance I kept my cash even in the free fall of the market in 2008 and 2009, only 10% of my positions were assigned. Yeap, it's a good strategy. However, I would also have to agree with Moozi. At this stage of market rally, the probability of being assigned will be much larger than two years ago. With that being said, market cycle watching may be coupled with this strategy.
Oops, I forgot one more thing. DAL is an airline stock. The volatile energy market will make your airline holdings a nightmare.
Shopping For Women's Apparel Stocks [View article]
EXPR is good. But their focus is on younger population and more casual side. One thing I do like is their cash flow vs. their debt level. That'll make investors more comfortable.
Regression To Trend: A Perspective On Long-Term Market Performance [View article]
Great analysis. My conviction is that the crowds tend to challenge the old high. That said, we may need to eye ball the volume when the market penetrate the old nominal highs. We will probably have couple more dozen points to run for the S&P 500 before it turns south. Late bulls will be trapped around mid to high 1500 levels.
The Oct 2007 high was an all time high back then, meaning that all bulls have to be lured into a gigantic trap before the leg down. Before that happens, the market is waiting for late bulls to catch up and exhaust themselves.
Is There Any More Juice Left In The Junk Bond Market? [View article]
Taking Ally Financial out of the equation may get a little more balanced view. But our forecasting indicates default rate increase in 2013 may come from non-financial sectors, especially retail and manufacturing sectors, which echoes Moody's models.
Diminishing Volatility Will Characterize The Rest Of 2012 [View article]
Thanks for sharing. By looking at our ZIA list, I think the market has been modestly overbought. In contrast to last August, ZIA Volatility dropped significantly, pointing to a 5-7% correction. However, both bulls and bears will be happy in different ways
Monday Market Movement: Can We Continue To Ignore And Soar? [View article]
Thanks for sharing. By looking at our ZIA list, I think the market has been modestly overbought. In contrast to last August, ZIA Volatility dropped significantly, pointing to a 5-7% correction. However, both bulls and bears will be happy in different ways.
Selling Puts: Mandatory Option Trading Techniques for the Income Investor [View article]
Unlike ordinary income vehicles, put selling will for sure need to be executed with well planned strategies. Basically an investor is prepared to own underlying securities. The put premium becomes income only when he/she is not assigned the security.
There are three scenarios. First, the overall market is trending upwards. An investor will be better off by directly accumulating long positions of the underlying security. Second, the market tumbles, the premium the investor receives will not mitigate the loss incurred. Finally, the market is trading sideways. That is the only time put selling may be brought into play. If you are not sure which scenario current market is in, you may leave the process to professional managers who will quantify that for you.
The pitfall for put selling in a sideway market is that the collapse of volatility will squeeze the premium. The trick is how the investor can capture the fat premium before the volatility eases down. The investor would want to know more about Greeks. Once again, if you don't know what you are doing here, leave it to professional managers, or stick to ordinary income strategies.
Watch the 1,250 Area of S&P 500 as the Fed Abandons U.S. Stocks [View article]
You made nice call of "Epic Bear Market" on September 20, 2007. People who followed your call had made tons of money by getting out of long positions and aggressively going short.
Now the pattern is forming, which seems the repeat of summer of 2007 (my blog on our site). Bulls who believe the relieve rally could be trapped in gigantic peak, while smart money sees that as the last window to unload positions.
What are the key drivers to this formation? You count them. Dire unemployment situation, stagnant housing market, shrinking real American income, and of course, the halt of printing money by the Fed. Greek issues will constantly serve as some background noise. The last and the most important one is that you may see the very first earnings deterioration across the board in the coming July.
Technically March 16 low and 200 Day Simple Moving Average are the major support levels. These are in striking distance of current price and could be taken out in one major blow (or gap actions).
Why I'm Lightening Up on Stocks for Good [View article]
10 Reasons the Markets Have Further to Fall [View article]
That being said, I would foresee a major setback of the market with Mar 16 low closely watched. I'd also like to see whether major market players are willing to mount positions around these levels.
Commodity Chart Of The Day: S&P [View article]
When Crunch Time Comes And Diversification Won't Help [View article]
High Yield Market Underweight Follow-Up [View article]
Half Year Report Card [View article]
5 Option Income Ideas With 10% Yield Potential and High Margins of Safety [View article]
Oops, I forgot one more thing. DAL is an airline stock. The volatile energy market will make your airline holdings a nightmare.
Shopping For Women's Apparel Stocks [View article]
Regression To Trend: A Perspective On Long-Term Market Performance [View article]
The Birth Of The Mega Bull? [View article]
Is There Any More Juice Left In The Junk Bond Market? [View article]
Diminishing Volatility Will Characterize The Rest Of 2012 [View article]
Monday Market Movement: Can We Continue To Ignore And Soar? [View article]
Selling Puts: Mandatory Option Trading Techniques for the Income Investor [View article]
There are three scenarios. First, the overall market is trending upwards. An investor will be better off by directly accumulating long positions of the underlying security. Second, the market tumbles, the premium the investor receives will not mitigate the loss incurred. Finally, the market is trading sideways. That is the only time put selling may be brought into play. If you are not sure which scenario current market is in, you may leave the process to professional managers who will quantify that for you.
The pitfall for put selling in a sideway market is that the collapse of volatility will squeeze the premium. The trick is how the investor can capture the fat premium before the volatility eases down. The investor would want to know more about Greeks. Once again, if you don't know what you are doing here, leave it to professional managers, or stick to ordinary income strategies.