Seeking Alpha

Philip Davis'  Instablog

Philip Davis
Send Message is the fastest growing stock and option newsletter on the Web. "High Finance for Real People - Fun and Profits" is our motto and our Basic and Premium Chat Sessions offer readers a chance to speak to Phil live during the trading day as well as authors like Optrader,... More
My company:
Phil's Stock World
My blog:
Phil's Stock World
View Philip Davis' Instablogs on:
  • 5% Rules – Finally Time For A New Chart?

    It's been 3 years since the big crash.

    In all that time, we have not had to adjust our Big Chart, which is based on our 5% Rule and has steered us well through the recovery. Now that we are all the way back to our pre-crash highs, it's time, finally, to make a more bullish adjustment. We will be changing our long-standing +10% line at 1,359 to the new Must Hold line at 1,360 - one point off from our original estimate after gathering 36 months of additional years of evidence.

    That's right, it turns out our +10% line is still pretty much right on the money, only now we switch our focus to our goal of 1,600 and begin running our numbers off there, rather than from 800. I know I have been (and still am) Fundamentally bearish on the market at the moment - I just think we are making this move too soon - but that is not to say I think the move is unmakeable.

    SPY WEEJKYAs noted in the Chart, other than overshooting the 50% line in early 2010, we had very predictable moves all the way through last week but, in retrospect, we may just be looking at phase 3 of the move back to 1,500. As long as we are over 1,280 now (20% off the top) we will remain in the bullish range and that means we have higher expectations for our indices so our next goal is 1,440, 10% off the top.

    After all, if we're going to be bullish, then our goals should reflect it, right? That makes our new series for the S&P on our Big Chart -20% at 1,280, our must hold line at 1,360, -10% at 1,440 and -5% at 1,520. If we fail to hold the Must Hold line and especially if we fail 1,280, we revert back to the prior Big Chart numbers, where the calculations were made off the bottom. It's like Gravity, as we get closer to 1,600 - it begins to exert more influence. We can also expect the 2.5% lines to become more prominent, as those were 5% lines off 800 and still will probably provide good resistance. This is why you see slowdowns and consolidations as you get near major moves like 100% off the bottom - various Bot programs using different base-lines begin…
    continue reading

    | Join Member's Chat - 47 Comments Here »

    Email This Post Email This Post Facebook Twitter LinkedIn Digg

    Mar 19 4:34 AM | Link | Comment!
  • Weekend Reading – Mopping Up Liquidity Already?

    Is it time to tighten already?

    Volker Kauder, the head of Germany's leading Parliamentary group thinks so, saying: "I hope that the ECB acknowledges its limits and quickly rakes in the money later." Mr. Kauder's warning follows similar comments made by Ms. Merkel at the most recent summit of European leaders on March 2. Responding to warnings by Brazil about a "tsunami of cheap money" flooding global markets, Merkel said during a news conference that she was certain that the ECB had now ended its program of issuing cheap 3-year loans to banks. Merkel also reassured critics that the ECB would not repeat such measures again.

    The ECB's balance sheet is now nearly 1/3 of the Euro-Zone economy, 50% worse than the Fed's 19% stake in the US and even the Bank of England has "only" pumped their balance sheet to 21% of the UK GDP. On Friday, through some interesting number juggling, Germany's Federal Statistics Office announced that the country's deficit plunged in 2011 and, at 1 percent, is now well within EU limits. They are now ratcheting up the pressure for other nations to follow suit. As pointed out by Mish:

    Spanish prime minister Mariano Rajoy has already announced his own budget target of 5.8% of GDP in 2012, ignoring the EMU mandate of 4.4% on the way to an alleged 3% in 2013. Rest assured 4.4% will not be met, nor will 5.8%. Last year's deficit was 8.5% and with Spain heading into a monster recession, 7.0% might be a more reasonable expectation for 2012.

    This may all be just internal noise to placate the hawks in Germany or it may be stage one of panic over the 2.5% plunge in the Euro last week - despite Greece being "fixed" again. The bottom line is, without similar balance sheet inflation from the BOE and the Fed next week, the Euro still has a long way to fall and we know how a bouncing Dollar plays havoc with the markets.

    Portugal is already showing a 2.8% CONTRACTION in GDP for the final 3 months of 2011, 1.3% worse than Q3 and no one thinks it's getting better in Q1. Their statistics agency said domestic demand and investment fell sharply, while growth in exports slowed. Portugal's largest export partner is Spain, who are just beginning…
    continue reading

    Edit | Join Member's Chat - 30 Comments Here »

    Email This Post Email This PostFacebookTwitter LinkedIn del.icio.usDigg

    Mar 12 8:27 AM | Link | Comment!
  • Fixed Markets Friday – Greece All Better – Next!

    The Greek debt crisis is over!

    Again. Well, for now. Despite the "voluntary" participation of 85% of the debt-holders, collective action clauses (NASDAQ:CAC)will be triggered to force other bondholders and a similar action in Argentina led to 10 years of lawsuits - so we have that to look forward to. "The rule of law has been treated with contempt," said Marc Ostwald from Monument Securities. "This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Spain and Portugal."

    "Even if we band aid this Greek situation right now, they're going to default down the road or write down 100 percent of the debt," said Scott Wren, senior equity strategist at Wells Fargo Advisors.

    Now the European Commission has sent a team of experts to Spain to check its budget deficit data, according to Spanish website Expansion, and they will be greeted by a National Strike,scheduled for March 29th, to protest the austerity measures the EU is trying to enforce. Greek bonds are already passing the 20% mark again so this "fix" has lasted all of a few hours and already we're seeing rates creep up in Italy, Spain and Portugal (Ireland can't even borrow money - at any price) and part of the reason is they just blatantly screwed over the last batch of bondholders and Credit Default Swaps have now been revealed as completely useless tools to protect bond investments - and part of the reason is Uncle Sam needs to borrow a record $227Bn to pay the bills for February alone:

    While the above chart may look like a catastrophe to a casual observer, especially considering February is the shortest month of the year - others may be cheered by the thought that the US will never actually have to pay this money back, as Greece has now shown us all that the path to default is celebrated by global markets climbing to record highs. So, if Greece's $450Bn default can get us to Dow 13,000 - imagine what the US's $16Tn default will do - I can't wait!

    We are waiting for the jobs report this morning but according to the Gallup poll, there aren't any. Gallup sees 9.1% unemployment in February, up
    continue reading

    Edit | Join Member's Chat - 13 Comments Here »

    Tags: AAPL, CMG, FSLR, GMCR, Greece, QQQ, SBUX, SQQQ, TLT, unemployment

    Email This Post Email This Post Facebook Twitter LinkedIn Digg
    Mar 09 9:36 AM | Link | Comment!
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.