Seeking Alpha

Stephen Mayo's  Instablog

Stephen Mayo
  • on Market Outlook
Send Message
Somewhere between disaster and "more of the same" is the world we all live in today, and it may go on in this same state for our lifetimes. No black swan, no collapse, no implosion of the Republic. Because there is no knowing I have given up trying to know or predict. I have one goal.... More
View Stephen Mayo's Instablogs on:
  • A Little Note On The Market Outlook

    DOW IND

    In the DOW 30 chart below we can see that the small pullback has found very good support from the (visible) trend line.

    Thursday AM

    The slow stochastic is in the overbought range. and prices have bounced nicely off the line. The question is, will the expected downdraft in the next few days test the line or break the line? Or will an updraft crush the stochastic against the top of the chart as prices race up from here.

    In my opinion, the line's integrity matters the most.

    DOW UTILS

    Utilities

    The DOW Utilities have broken their uptrend line and are building the overhead downtrend line. WHile the industry seems split into two types of utilities, the Index make no distinction and shows the sector positioned for correction.

    S&P

    S&P

    A pretty healthy uptrend is in place. Looks solid. The possibility of a pullback, as indicated by the stochastic, would likely keep it about the longer term uptrend line.

    NASDAQ

    NASDAQ

    More volatile. Anyone's guess.

    GOLD

    Building a pretty good base, it seems. But slow in developing. Very slow.

    GOLD

    Happy Trading! Happy Holding!

    Aug 14 11:21 AM | Link | Comment!
  • What The Dickens Is This Market Up To?

    The continuing story of The Day I Sold Everything - An episodic journey, the context to these remarks.

    THE OLD CURIOSITY SHOP - Where they sell companies

    Friday, August 8, 2014 Closing Prices

    This is the list of stocks I sold in a bundle on the morning of July, 25. Last week the average decline in price of the bundle was 3.15. This week, after bouncing around and rebounding nicely on Friday, the average was still down, admittedly only 2.85%.

    It should be noted that two of my pretties have moved against me. WPC is up from my sell point. So is PG.

    And I am looking to more of the same. (Time permitting I'll go into some individual issues.)

    GREAT EXPECTATIONS

    Looking to the week ahead, I am mildly expecting a rebound in prices. Here is why.

    Dow 30 Uptrend Intact - Aug. 8

    The uptrend line remains intact. Prices for the DOW 30 have bounced up from it. The Slow Stochastic shows plenty of room to bounce upwards with upward moving prices and the MACD is in the oversold terrain. While anything can happen, I am mentally prepared for a strong week.

    There is a reverse case. Should the trend line be decisively broken, I'd expect to see another flagstaff-like decline, abrupt and of about equal height.

    OLIVE OR TWIST

    Is that a martini joke or a Dickens joke?

    Anyway, the Dow Jones Utilities are bringing a little more drama, a twist if you will. See this SA post.

    Dow Utilties Aug. 8.

    The year's uptrend seems to have been broken, in classic form. Break down through the line, snap back to the line - perhaps - as yet incomplete, but a snap back no less, and then?

    Some utilities seem well positioned, others seem more vulnerable. I'll leave that research to you, but the headlines are not conclusive for the industry as a whole.

    GREAT EXPECTATIONS

    Let's peek briefly at one of the more interesting, or should I say seductive and dangerous, little companies in the panoply of little stars.

    SeaDrill (NYSE:SDRL)

    A tempting morsel. Look at those dividends. Look at that chart. Look at those news items.

    SeaDrill

    I like the looks of that one. But parsing the news? Trickier.

    (click to enlarge)Ah, the news.

    Who among us is so brave or foolish?

    AN OLD CURIOUSITY SHOP

    Have look at the sheer contrariness of stock investing. A great company. Walgreens. WAG.

    But what a wild ride.

    Shattered WAG Trend

    There is a shattered trend if there ever was one, no? I shall not speculate on the likelihood of recovery, the wisdom of grabbing it low, or the view of the cautious to stay away. I may nibble, but a fool I am likely to be.

    WAG serves as a cautionary tale on two points. First, that a company with this positive a track record, making what looks like a solid acquisition, can suffer in the marketplace awakens one to the power of the bear. A very good article appeared making the case for WG on SA here.

    The second point of illustration applies to the whole market in general, but is basically the same thing. Markets can act irrationally. On Tuesday the company is worth $72 and on Wednesday its worth $59.

    BLEAK HOUSE

    Six months of gains, gone in a flash. A matter of days.

    The Days

    I'll leave that chart with this thought. I may be amiss in my decisions, but Ms. Market can be mercurial, and this chart shows what can happen. Imagine this going on for months.

    This is why I get overly cautious. Just remember that the losses of 1929-1933 were not just abstractions. They soured a generation or two on the entire idea of stock investing. And lack of buyers is what lead to the long, long recovery time when you look at the averages. And that crash was the precursor to a great depression, a monetary and social crisis, that led to the worst world war in human history.

    HARD TIMES

    Look at the news of the day. (Good SA article here.) Monetary uncertainty, vast derivatives, all currencies fiat, peak oil, global warming and cooling all at once, religious wars starting to rage, a leaderless western world, and belligerent Chinese and Russian empires stretching and rumbling, and getting themselves aligned.

    And to top it all off, the Roulette Wheel of the Fed is spinning. Where will that stop? (Good SA article here.)

    Sorry, Charlie, but anyone not worried about the world and their money is asleep.

    Disclosure: The author is long WAG.

    Additional disclosure: I'm dabbling as I have mentioned. SDRL is in my sights and may be targeted Monday. Others depending on action. You saw my favorites list. Any may be purchased.

    Aug 09 8:59 PM | Link | Comment!
  • Over The Weekend And Through The Woods.

    A little commentary, "The Day I Sold Everything," that I wrote garnered over 700 comments, and has kept me busy answering a few of them when possible. Whew. So that's the context for the following notes.

    DOW 30 As Of Last Friday

    Dow 30

    What Just Happened?

    (As always, I rely on BigCharts.com to provide charts for 99% of my looks at price action.)

    In the above chart we see one year's prices culminating at the close on Friday, August 1.

    Those who scorn trend lines and such, skip ahead. For the intellectually open minded (jk), here is the same chart with a rising trend line supporting prices, and parallel overhead resistance line. In this case the overhead seems of little value right now.

    Dow 30 with trend lines

    But That Support Line Has Meaning

    The relevant point here is that a few days of down-hard price action could mean absolutely nothing in this bull market. It appears on this chart that the trend line held in the face of the week long onslaught. Remaining a virginal trendline after such a persistent assault tells a tale of technical virtue, if nothing else. And technical virginity counts for something.

    If prices consolidate and move back up into the channel, which is a real possibility, the position of "buy and hold" would be totally validated for long term investors. If a penetration of the line succeeds, then so much for resistance.

    The Trend May Not Be My Friend

    Traders of various types may have done well or lost, but as of today the year long trend remains intact. It should be noted that Friday was really a day between days, in a sense. After such a hard down draft on Thursday, a bouncy Friday with the market down but withso many issues popping back up? This seems like a reasonable and normal reaction.

    I actually consider Friday a bounce day.

    Right now some readers are jumping up and down saying that down 70 (-70) is hardly a bounce. They have a point. But consider this: the low for the day was about 60 points below the close, so from that level we did see a bounce. And it was a bounce that, as I read it, kept us in the uptrend channel.

    Looking only at closing prices can be deceptive.

    Ok, BigMouth, How'd You Do?

    For my own records only, and certainly in no way trying to recommend anything, I want to record what I sold, what the price was and where that is at the close Friday.

    What, and How Much.

    I'm doing this to quell my troubled psyche. I'm very sensitive and the emotional baggage from the commentator's pummeling is hard to handle.

    Well, not really.

    (It is a curious thing how a mere difference of opinion arouses such anguish and angst among some folks. May I remind you if you simply can't handle my stupidity, I am the guy that buys and sells from you when you are right!)

    Actually, I enjoy a cordial give and take. Even those who find me a fool had many interesting and useful ideas to share. But I digress. So, anyway, there is the math, best I can assemble it from the debris I call my records.

    Having been accused of gloating over being "right" I would like to point out to anyone suddenly looking for their brass knuckles, it seems nothing moved against me. Some solace and salve in a rough and tumble game of SeekingAlpha! (I expect Monday to take this moment of hideously tasteless gloating from me with a vengeance. Please note, 3% right is about my college record also.)

    My Leftovers At The Open Friday, August 1.

    My current inventory, in my tax deferred accounts, not including the REIT account mentioned in other articles looks like this. (These are approximate and aggregated over several key accounts.)

    T - 3% of account balances - Note that some shares were sold. Dividend Investor gives T a three star out of Five rating.

    SO - 5% of account balances - Note that some shares were sold, and yes I was overweight for my rules. Dividend Investor gives SO a four out of five star rating.

    BP - 2.5% - The trade that never went off. Dividend Investor gives BP a no star out of five star rating.

    BOUGHT ON FRIDAY

    Just to confound the critics I bought some shares late on Friday. These are what I call Pilot Positions. I liked the way the charts moved on these, nothing more than that, and I did get back in to them a tiny amount below my escape price.

    Here is what I added:

    CVX 1.25% - Why? Yielding 3.35% and a PE of 12.11 the price action shows no confirmed support but price appears to be reacting emotionally not on the business case. Pilot position is establish at a comfortable level, and leaves open further accumulation. Dividend Investor gives CVX a four star out of five star rating.

    COP - 1.25% - Much the same reasons, except 3.62% yield and 10.86 PE. Same strategy. Dividend Investor gives COP a no star out of five star rating.

    XOM - 1.25% - 2.79% yield PE 12.5 - Same strategy. Dividend Investor gives XOM a five star out of five star rating.

    O - 1.25% - The blue chip of REITs. 5.1% yield and a great operating history. Further declines mean more purchases. It should be noted that the REIT account balance declined .10 percent on Friday as compared to .42 for the Dow. Dividend Investor gives O a four star out of five star rating.

    The Devil Is In The Punctuation

    If you are awaiting my next illogical, idiotic, foolish, or tragic move, let me telegraph you the plan!

    My intent is to gradually, probably over three steps, re-enter the market. The general idea would be to purchase shares upon 10%, 20% and 30% re-tracements from the price at which I sold.

    This depends entirely what the tea leaves of the charts tell me is happening with momentum, trends and accumulation/distribution patterns.

    For the record, here is the first set of target prices.

    Target for Re-entry.

    For those who subscribed to my Instablog, thanks. No need to stick around unless you have a little fun with my diary. If the SA editors elect to punish the public and publish this little missive, I'll be finished wiping the pie off my face and ready for the next round soon.

    Follow your inner voice. But don't talk to it out loud.

    Good hunting, all.

    Tags: SO, T, BP, XOM, COP, O, CVX, Market Speculation
    Aug 03 5:49 PM | Link | 2 Comments
Full index of posts »
Latest Followers

StockTalks

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.