Dr. Duru

Chart of the Week: Trend In Cash Holdings Beginning to Shift?

Either that, or folks are pulling down cash from these accounts to meet expenses and pay bills.

Evidence That Big Inflation Is Coming

Thanks, Adam for this piece and the data. I am fascinated by the (theoretical) battle between deflationists and inflationists, and I remain in the inflationist camp based on classic monetary theory. The trick, as always, is with timing...but I would rather prepare for inflation in the future than get overly caught up in the panic in the present.

Using the T2108 Indicator to Identify Overbought S&P 500 Conditions

Thanks, AussieTim!


On Jan 06 05:27 PM AussieTim wrote:

> great analysis. Other commentators should note this before offerring
> their weak and ambiguous opinions on an indicator. In the meantime
> Dr. keep it up!

Using the T2108 Indicator to Identify Overbought S&P 500 Conditions

Hi Dividendmachine,
I am not quite sure what you are asking, but I will try an answer. The indicator works exactly the same. It measures the position of stocks relative to recent trading levels. Let's assume when stocks hit their highs, T2108 is above 80%. When they drop 50% in a short-time, T2108 would probably collapse to something under 20%. If you sell when T2108 crosses 70%, you would be out of the market long before the 50% decline eats up your capital.
T2108 cratered below 20% last fall. The S&P 500's decline was so severe, T2108 essentially "broke down" (I wrote about that last year). But the rule of thumb on the downside is that when T2108 falls below 20%, it's a poor time to initiate new shorts and you should probably cover. When T2108 falls below 10%, seriously consider covering. Bulls want to start buying at these levels. Interestingly enough, the S&P 500 is currently LOWER than it was when the T2108 bottomed in October. To me, that's a bad sign (but I don't have data to back up my concern...yet!). The market has put in a lot of work to push T2108 from near zero to over 80% and yet we have nothing to show for it.
Feel free to email me if you have any other questions.

On Jan 05 09:27 AM dividendmachine wrote:

> Just one quetion ho does this idicator work when stocks are down
> 50% off a high in such a short period?Just curious

January Gains Delivered

Very true. My next piece actually tried to do some analysis around your point.
Again, my expectation right now is that the market goes nowhere for the week and that perhaps most of the gains for January were delivered on Friday. That is more of an endorsement to do nothing than to buy or sell.

On Jan 04 10:57 AM Alphameister wrote:

> If this is the start of a more meaningful rally than has been seen
> to date in the bear market, as might be suggested by the broadly-based
> move past key resistance levels (including the 50-day avg), is it
> not true that various cycle indicators can remain overbought for
> extended time periods and that it usually is best to wait for such
> indicators to break below the 80% or 70% threshholds before turning
> negative instead of trying to anticipate such reversals?

Weak Consumer Confidence: Time to Buy?

I think the monster rally on 10/28 should be treated as an outlier. Take that data point out and you get an even more modest 0.39% average gain. I think that is too small ("in the noise") to generate a strong trading strategy? Perhaps it could be improved by buying the typical dip (or plunge) AFTER the survey results are announced - assuming the data comes during trading hours.

Inflation on 'Sale' as Deflation Dominates Markets

Good piece. I fully agree that America will print as much as it takes to defeat deflation.

Fund Managers Attempt to Calm Nervous Investors

Author note: this piece is not really about the collapse of the bubble. It is more about the message I received from my fund manager. Original title: "Keep Investing: Nothing to Worry About Here"

Follow the Mutual Funds: Solar Is Bottoming

It would be good to know when else these funds have added purchases of shares. Since they have existing holdings, I can only assume that late Nov is not the only time they have added to holdings....and that would mean that their buying is not a strong bullish signal. The latest bounce in solar stocks is also not the first. The bounce alone is not sufficient to mark a bottom. For example, FSLR ran up 70% in late October and into the election, only to make fresh 52-week lows by Nov 20.

Deflation Is Worse Than the CPI Indicates

Interesting. I would like to get my hands on more hard data though to fill out the anecdotes.
Regardless, these government statistics are always suspect, and I always felt they under-estimated inflation on the way up. So, under-estimating deflation wouldn't be a surprise.

Surprised that you cite Kohn's comments as evidence the Fed isn't taking deflation seriously. I think the Fed is taking deflation extremely seriously given all the action and speeches to date. If the money supply numbers show cash hoarding, it is just evidence of how tough a job the Fed (and Treasury) continues to have and why it continues to come up with more and more acronyms to get this thing going!

Finally, also surprised that you cite Ford's campaign against inflation as an example of what Obama should do about deflation (note that Obama has already explained the dangers of deflation in one of his addresses to the nation). Ford failed to tame inflation. It was Fed Chair Volcker who finally stamped it out with forceful rate hikes and a withering recession in the latter Carter years and early Reagan years.

Betting on Goldman's Future

Note that as of typing, my submission contains a few numerical errors on calculating returns. I hope to get them fixed soon (they are corrected in the original piece on my site). The return on the call spread is 200%. And the straight call required Buffet's warrants to be 14% in-the-money to get a 200% return in January, 2010.

Sunil94062: I would love more detail on how you came up with your valuation model...

What to Do Now With Solar Energy Stocks

As usual, the commentary on any article related to solar stocks combines insightful rebuttal, entertaining rants, and opinion presented without bothering to read the original piece carefully.
Here are my responses for various things I can respond to - in case it still matters to anyone:
1. Sol Invictus: Shares short from nasdaq.com
2. 31October and jcordes: clarification on LDK - My article says that my original thesis on financing turned out to be wrong.
3. Bob55: I recommend you review my articles again to get clarification on where I have stood short-term vs long-term in solar. Summary, short-term lots of risks remains for solar and I have been one to under-estimate just how bad things could get. In the long-term, I am positive on solar using just a few select positions that I am willing to hold through the short-term problems.
4. dr hoodoo: It's "Tootie" not "Tootsie"
5. jcordes: I had no comment on SOL, I offered no personal opinion on poly supplies. I provided quotes from analysts on THEIR opinions.

Is Jim Cramer Right? Is Apple Really a Market Barometer?

I did use a one-day delay and results worsened. Both charts show those results. The correlations also include a look at 1-day time lag. I stopped there because I saw nothing that told me it was worth the time to make this analysis even more complicated. Cramer presented no evidence of predictive power (outside of one trading day where the S&P futures were limit down in the pre-market), and I thikn it's dangerous to base investing advice and especially trading advice on "spirits." I would love for someone to take this analysis a step further, but I doubt it's worth anyone's time to do so given what we see here.

What didn't make this copy of my original article is that I also recognize that this analysis does not tells us whether AAPL performs better than any other stock as a market barometer. If that were the case, it is also understandable why Cramer could make the mistake he did.

On Nov 09 08:47 AM win wrote:

> I think Cramer may have been speaking of Apple's predictive value.
> Simultaneous price correlation and the other tools you use would
> be useless to assess this metric. Instead, I would use a delay of
> one day and assess AAPL's price correlation with the SP, then 2 days
> and so on up to 5 days. Then I would do the same on a weekly chart.
> That is one way of measuring predictive value.

Energy: A Value Trap - Merrill

I agree with "investor88" - based on this list (minus insurance machinery), the broader stock market is likely a value trap. Would have been interesting for Merrill to accompany their value trap sectors with sectors that they consider investable now.

On Nov 09 09:14 AM investor88 wrote:

> Most interesting article. Energy a value trap, may well be! Going
> one step further, isn't the broad equity market [ and other asset
> markets ] a value trap too in the light of deteriorating fundmentals?

Looking for Something Different From Intel

Good add! Thanks...