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Stock market and technology enthusiast analyzes the financial markets, economic trends, technology ideas, and tech companies. Sajal has a passion for investing and evaluating/refining ideas using fundamental and technical analysis. Understand. Collaborate. Profit.
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  • Reading links on market direction.
     It’s been a while since I posted on market predictions from the financial gurus. This might be a critical time, with a few commentators warning that markets could be topping out in August.

    Well, this linkfest specifically focuses on market prognostications!

    • VALUE LINE HASN’T BEEN THIS BEARISH SINCE 2000 : Value Line reduced its recommended equity allocation to the range of 60% to 70%.This reflects a cautious to outright bearish posture on Value Line’s part, since the firm has never lowered its recommended allocation to below 50%. The last time it was lower than it is now was October 2000.?

      Value Line’s rationale for lowering its recommended equity allocation was not that the economic and financial news is about to take a big turn for the worse, however. Instead, the firm’s concern is that the stock market has rallied so far, so fast, that it has gotten too far ahead of itself.
    • Marc Faber: Expect a correction over the next 2 months.(CNBC)
       
    • Barry Ritholtz : I wouldn’t be surprised to see a 60-70-80 % rally before all this is over and the market rolls over and dies. This is a trading rally not a multi-year rally so it’s likely to end and retrace a part of it.

      Ritholtz has 1050-1080 as an upside target for the S&P 500, with a slight chance it can go as high as 1200 (It’s a low probability event). Making up 68% of loss is not unheard of. If the rally does extend to those outer limits, Ritholtz sees the Dow topping out "somewhere around 12,000.
    • Is this the start of the big one?

      I don't believe in market calls, and trying to time turns is a perilous game. But most savvy people I know have been skeptical of this rally, beyond the initial strong bounce off the bottom. It has not had the characteristics of a bull market. Volumes have been underwhelming, no new leadership group has emerged, and as greybeards like to point out, comparatively short, large amplitude rallies are a bear market speciality.
    • Top adviser turns bullish, for at most one quarter! (Well, I thought the headline was misleading, the advisor is actually BEARISH!)
    • Paul Tudor Jones on the bear market rally
      The bottom line is that we are not inclined to aggressively chase the market here. Rather, we eye a better opportunity to be long equities into year-end on a potential autumnal pullback.
    • Rounded Reversal into Exact Fibonacci Confluence on SPY
    • TOO FAR, TOO FAST? By Rob Arnott

      Now is not the time to be complacent. Most assets are no longer the bargains they were a few short months ago. As we have stated many times, tactical asset allocation is about taking risks when they are compensated and backing away when they are not. In some cases, the snapback has led risky asset classes like equities and high yield bonds to be susceptible to further price declines
    • Let’s play Ping Pong!

      The point here isn't so much to say, "Ah, prices are extreme and this is a top". Barring a market top, the extreme move from March, 2009 is indicative of two things: 1) the easy gains are behind us; and 2) the indices will likely move sideways to higher but in a more choppy fashion. If a market top comes out of this consolidation, it is likely to develop over the next several months. In general, market tops are affairs; market bottoms are events.
    • China Stocks Enter Bear Market as Index Falls 20% From High
    • More bearish data points for equities.
    • Manic Monday I'm sorry, the reality we see in the market does not justify options prices this high. Is there a reality in the market we don't see? Because if not, Fear is way too high, and anecdotally bullish.
    • Surprising sentimentHulbert :Sentiment picture has taken an unexpected turn for the better
    • Gummy Bears. Try not to overthink what the market might be saying. Cut in half from here? Unlikely.

     

    Check complete post here:
    financialjoyride.blogspot.com/2009/08/re...
     

    Tags: SPY, FXI, markets
    Aug 26 09:14 pm | Link | Comment!
  • Bob Janjuah : Exit short positions if market crosses 1022 4 days in a row.

    Note: This post originally appeared here: http://bit.ly/1Gepi

    Came across this David Tice interview, courtesy Pragcap.

    While the interview was standard David Tice fare, there was this quote from Bob Janjuah which caught my ears. (I’ve referred to his crash warnings earlier here. For an even better compendium, check out this FT Alphaville post.).

     

    IF market closes above 1022 for 4 days in a row, it is time to hit the exits.

    Note: Here "exit" refers to exiting from his short positions via stop loss. Basically, he's looking for a momentary spike to 1025-1050. If we can sustain above 1022 for 4 days, then it's time to exit short positions as another asset bubble is coming our way...

    Hmm..I guess we’ll find out soon enough! (Tuesday was the second day the markets did exactly that).

    PS: As I type this, the Asian markets are selling off. If the sell off should extend to the US markets and S&P 500 closes below 1022, then this count shall be reset to zero.. 

    Tags: SPY, markets, outlook
    Aug 25 05:04 pm | Link | Comment!
  • S&P 500 and the Shanghai index: How far to go?
    Back in early April, I had written about the 50 day - 200 day Moving Average crossover in the Shanghai stock market. I think we should look at the Shanghai index as a ‘leading indicator’ to gauge US markets. This crossover happened a good 2 months before the US markets did. We also got an early non-confirmation of the March lows when the Shanghai index failed to make a new low at that point of time.

     
    Since I believe this is a cyclical rally in a secular bear, I wanted to use Fibonacci analysis to gauge the retracement levels in the Chinese markets. This basically gets you an idea of how far this bear market rally retracement should go. While you might not believe in Fibonacci or technical analysis, it's still useful to keep these levels in mind as selling and buying pressure would appear around these levels from people following these trends. As can be seen from the chart below, we’ve already crossed the 38% retracement level, which means the 50% retracement at 3800 on the Shanghai Index is in play. This suggests further upside ahead.



     
     
     
    Since we’ve crossed the 38% retracement on the Shanghai index, I expect a similar move on the S&P 500 as well. A similar 50% retracement on the S&P 500 gets us to 1100.


     

    Babak points out the over-extended nature of the current rally, and the similarity to the speculative blow-off of October-November 2007. The RSI indicator in the chart is also similarly showing an overbought reading in excess of 70. This marked the top during the previous bull run. However, the overbought conditions became even more overbought, and stayed that way before the markets corrected. In fact, the Shanghai market went up more than 100% after registering RSI readings in excess of 70!!

     Note also the similarity between the 1 day 7% decline two weeks ago and the 8.8% one day decline on February 26th, 2007. (John Authers talks about this in FT.) The Shanghai markets continued rallying for the next few months after this decline. Historically, the bear market rally of 1929-1930 also consisted of a 50% retracement back to 294, after the initial decline took the Dow from 381 to 198. Here’s an excellent FT piece on comparisons with other historical periods.

     Well, turns out Fibonacci has really been in the news for retracement levels last week. For a  list of sample instances, please refer to the link. While the absolute numbers might differ marginally, the upshot is the same. These levels are being watched by a huge number of investors. 

     The key point is that most commentators see the equity markets upside capped at around 0-10% from here, but the downside is considerable, quite possibly retesting the March lows. Even the non-Fibonacci fundamentals driven consensus seems to be for at most a rally to around the 1,050-1,100 mark on the S&P 500. This suggests we’ll either:
     
    a) go down around here, or
    b) go right through 1100.
     
    Consider the second case. If one were to look at all this Fibonacci analysis from a contrarian perspective, this might be bullish news. Just as the widely discussed head-and-shoulders pattern turned out to be a head fake and the equity markets rallied sharply, the current consensus using Fibonacci retracements could be a bullish omen.

     
    To paraphrase the Bespoke group, with so many market and economic indicators reaching pre-Lehman levels, one has to ask: will the markets be next? Reaching pre-Lehman levels would take us to 11,000 on the Dow and 1,200 on the S&P 500.

    Note: This article originally appeared on Fundamental Insights here and here.

    Ful Disclosure : No positions
    Tags: FXI, SPY, TAN, China, Market Outlook
    Aug 11 05:52 am | Link | 1 Comment
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