Carl Spackler

As Expected, Big Down Day Arrives

Today should be a pause day in the action with the S&P bouncing between support at 820 and resistance at 850. We need some news to get a move in either direction going. You are right that the market has broken its pattern and appears to have brokern a rising wedge formation to the downside. These moves usually have a headfake up before they resume downward. For a good down move, I would like to see some bulls get trapped by a fake rally up to 850. If the market breaks 818, however, we could see the downleg early.

We're Still Not Done with This Bear Market Rally

Simple success formula = short the market whenever it crosses the 50 day MA. Market has crossed the 50 day MA 4 times prior and every time if failed within a month to hold over the 50 day MA. Average stay above the 50 day MA was about 2 weeks. We are a little over 2 weeks above it now. After making a ton following this simple formula, I will not bet against it this time. In markets with strong trends (in this case downward), never go counter-trend. It is usually suicide. Counter-trend bettors can be right for only a month, but then you are left holding a bunch of $2 bank stocks. Too much downward momemtum is around - just check the monthly charts.

Is the Rally For Real?

I see idiots claiming to forsee the next great bull market (see above) and I also see doom and gloomers expecting social unrest and Dow 3000. Usually both of these excessive camps are wrong. If you step back a view the big long term picture of the charts, this market is really in a choppy sideways to downward sloping trading channel since the October of last year. Odds favor a trading range between 870 and 650 on the S&P. This market will cream those trading on the upper edge or lower edge of the trading band. History has shown that great market falls require 9 months of sideways trading action to build a proper base of long holders which can stomach any potential fallback. We are not there yet. I am not ultra negative or ultra positive on this market - I just expect it to fall back down to the bottom of the trading range (650 S&P). We are in the washing machine cycle of this market - it will kill the bulls and bears each time as they try to predict a major breakout. Reality is that we are in a sloping sideways to down trading channel and the only way to make money is to be long as it falls below 700 and short it above 800.

Market Volume Continues Downtrend, Despite Recent Higher Move

Formula to win in this market over the last 2 years has been real simple - sell it short whenever it breaks the 50 day moving average and wait between 5 days to 30 days for the "sh$% to hit the fan". If you have done that over the last 2 years you have enjoyed a wonderful return. We are now 15 days into a break above the 50 day MA, so we are spot on the the average turning point. This market is due to nosedive by that measure. Never bet against the trend and the market has not bucked this strategy in the last 5 attempts!

My Personal S&P Target - 950

I will gladly take your bullish money. This deleveraging event is still unfolding and has a few months left in it. At the rate of descent that the market is following, another 4-5 months could mean 20-35% lower stock prices. I hope you are not on margin.

Global Meltdown, Part III

I am duly corrected and you are right!


On Mar 31 04:12 PM fxmaven wrote:

> That was from Bill Murray, but in Ghostbusters! ( talking to the
> mayor of new york city).

No Slowdown for the Case-Shiller Home Price Declines

Hey! I thought the recession was over judging by all the bullish headlines over the last two weeks? I guess not. Next to fall is the commercial mortgage market. Everyone lately has been calling bottom, but I just see one or two positive reports and the rest are bad like this one. Has the market gotten too far ahead of itself?

Global Meltdown, Part III

Let me finish your story for you - "Dogs and cats sleeping together, mass hysteria" - From the movie "Stripes".

Your a little heavy on the pending apocalypse, but I think we do have further to fall. My brother also falls into the same category - the "end of the world is coming" bear. Heck, I am bearish too, but if we get this bad why even invest. You would be better off buying an old nuclear bunker in Idaho and holing up for the next few years. Will things get worse - yes, but I doubt we are going to see the end of American democracy, modern industrialism and capitalism. These are great times for those that can see beyond the bullish diatribe that the press floats out there, but people have been betting on the end of the world for ever and nobody has collected on that bet yet. My brother too is talking about "civil unrest" and the coming gangs of marauders, but if it gets that bad, betting on the direction of any market or commodity is worthless. If you truly believe in this scenario, you should be stocking up on soup cans and Uzi's.

Spotting the Bottom: Is This the New Bull?

Just another bottom caller in a long list of bottom callers. Look at the monthly charts of the S&P and you will be shocked at the swiftness and momentum of this movement. On a monthly chart basis, we still look like we are on the steep part of the hill sliding downward fast. You cannot stop a fast sled coming down the hill and you cannot stop this market until you see 6 to 8 months of sideways movement.

Expecting a Pullback to Then Become a Buying Opportunity

Very nice work! I have my own indicators that measure intra-day movements and they also are showing major topping signs. Usually these are preceded by a very large short term down movements. I, however, think that this may well be the start of the final capitulation of the market - the big move to 4000 or 5000 dow. Every move up in this market has been met with calls of "the bottom was put in". Everyone is still too ready to be bullish. We have had a steady drumbeat down, but the true end of the bear market can only occur when we have a number of very large and successive down days - like a few 500 point floggings. Hang on to your hats, because it looks like we are within a few days of some serious butt-kickings!

Play Falling Commercial Real Estate with SRS

Just like the financials, Commercial Real Estate (CRE) will take a while for the harsh realities to set in. Dividends will be reduced, then reduced further at a later date. Like the banks, this is a market that catered to investors who sought high dividend output. When these high dividends disappear, the CRE market will have to transition to a different type of investor. The temporary shift from income seekers to capital appreciation seekers usually causes the downward move to over-react. The ownership of these structures will experience a near complete turnover as this occurs.

I agree with the author's comments that the charts for this ETF are somewhat unuseable. 2x inverse ETF's that are releatively new are hard to draw concrete conclusions from. You have to buy and sell this animal on a fundamental basis and close your eyes. If the fear returns in spades, 120+ is more than a target on a long term basis (6 month). On a shorter term, there is no reason why 80 should not be broken. Yes, some of you will wince when I consider 6 months as long term, but you should not be using this ETF for long term investing. The taxes and its use of swaps as its sole investment do not make it useful for multi-year plays. On a shorter term, however, I love it. This ETF has great swings!

Fully Invested, No Bottom in Sight

Three words - Dead Cat Bounce!

Fisher on the Coming Bull: 'Swift and Steep'

I would imagine that the dynamics of this market crash will be remarkably similiar to that of a real estate crash. In both cases, investors are burned and shun risk for a determined time. The standard book on real estate crashes (and I lived through on in Texas in the 80's) is that it takes 3 years for prices to begin to have positive traction and 10 years to recoup their previous highs. If you run this by almost every real estate correction of the last 100 years (even regional ones), it works. The reasons for this are usually rooted in the investor psyche, not the fundamentals of the investment products. People burned badly shun the particular investment for a while, and once they do start to re-emerge, they are careful whenever prices rise too fast. This is why Texans have been unwilling to bid up real estate over the last 15 years while the rest of the country went wild on it. I suspect the same thing will occur in stocks. I think most analyst forget this import piece of the puzzle - investor psyche. A lot of people have pulled their money completely out of stocks and they will not return quickly. Many of these burned investors will take years to be lured back into equities. This will mute returns for at least a decade.

All that being said, is it hard to fathom that we will take 3 years from the pop of the bubble (August 2007) before we start a long term move up? August 2010 would be the start of the up cycle and the markets would top 14,000 again by 2020. The bad news is that this would imply that the Dow would only yield 5.6% per year in return. Time will tell if equities follows the cycle of other real asset crashes, but if it does, returns will not be spectacular.

Gold Bubble Still Expanding - Canaccord

Analysts predict Oil will reach $200 per barrel by the end of 2008. Sound familiar? What goes up also goes down and usually when you least expect it. Just to be fair - I like gold on the long term basis. I think a lot of the reasons gold bugs cite are valid - excessive issuance of new money, possible devaluations, unstable governments, etc..., but I think everyone has jumped on the bandwagon too fast and too early. We will see inflation eventually, but we are currently in the middle of a deflationary spiral. This deflationary move has tremendous momentum, and a extra trillion of government spending here and there is not going to break the momentum that quickly. Like a large ship, the economy will continue to lumber down the deflationary path and will turn to inflation slowly.

When all the inflation watchers grow frustrated that they are not seeing the immediate signs of inflation and devaluation, gold might make a sizeable correction. To me, this will be the time to buy more gold. Right now, there are too many people talking about gold. There are gold commercials, gold analysts, hucksters selling Obama gold combative coins - it just smells bad. It is time to blow some froth off the top and set the base for a meaningful rally. That is usually done when there are solid and scary corrections. Just remember Oil. Everyone was bullish and everyone had Oil investments, but there was no one left to propel the price higher. That may be the case here. As someone who is long term bullish on gold, I hate to see people shoot the messenger of caution. This just might be an intermediate top.

S&P 500: Finally, Bottoming?

HJ, I agree about Walmart, but undoubtedly his timing has been wrong this time. Now I am sure the Buffet idolizers will be all over me talking about he will be right in the long term, but everyone will be right in the long term - stocks will be lower and higher in the future and distant future. The plain fact is that he bought in several months ago and his positions are off by large margins. Yes, he is collecting dividends, but he undoubtedly would be getting the same purchases at prices at least 20-40% less than what he bought them for just a few months ago. That is called poor timing. Plain fact, he underestimated the depth of the problems in the financial and insurance sector.

In addition, he has ridden many of his holdings are down dramatically. We judge all money managers on their performance, and Buffett's performance is that BRK.A stock is off 48% from its high, and he has made some disasterously large and poorly timed acquistions recently. Everyone still wants to give him a free pass though. I am not saying he is bad, I am just saying the guy real secret over the last 20 years is that he is so big that he can extract terms the everyday money manager cannot. If you are a company in trouble and you need a few billion, he can fill the void and in return get excessive dividends, but average investor cannot do this. His returns have been generated in ways that cannot duplicated by the average investor and his timing is often not right on. It is time people realize this and look for a more suitable example.