Dana Cole

Markets Look Set Up for an Ugly Fall

To quote my own post to a very similar article on another website:

Thank you for the interesting article, but I have come to the conclusion that in connection with the stock market, which is subject to the influence of billions of people:

THERE IS NO WAY TO PREDICT WITH ANY RELIABLE ACCURACY WHAT WILL HAPPEN TOMORROW BASED ON WHAT HAPPENED IN THE PAST.

If someone can convince me otherwise, please cite the evidence. I am more than willing to be wrong.

All charts do is tell you where the market HAS BEEN and where it is NOW. Trying to predict which way it is headed based on chart patterns is like trying to predict which way a flock of birds is going to fly based on where they flew ten minutes ago.

In late January the 10-20-30 day trend lines of TMA were screaming "Buy!" For a little lesson on making a trade based on trend lines, take a look at that chart now.

(My sympathies to those who bought TMA. I have made the same mistake more than once, which is why I am posting this comment.)

In the same way, in late January the 10-20-30 day trend lines on AA spelled doom for the stock. To see what actually happened, check out the chart now.

Anticipating breaks in trend lines - even long-term trend lines - is dangerous because the time when a break appears imminent (or, in other words, as charts looked TODAY) is exactly the time when stocks have become cheapest relative to where they have been. The longer the trend line, the cheaper they are.

Does that mean that charts should not be used? Of course not! They are the only really effective visual ways we have of determining what has happened and where we are now. And to the extent that up and down patterns DO tend to repeat themselves over time, they are highly useful in GUESSING were things are going. It is still just a guess, though.

We must always remember that no stock ever obeyed the dictates of a chart. Just because I draw a line under a price does not mean that that price will not be violated - NOR does it mean that it is at risk of being violated. It is only a line on a chart and that is all.

I'm only trying to save someone some time and a little money here. In the past I would have been grateful if someone had done it for me.

Why I'm Not Worried About the Market

Your article makes a lot of sense to me.
Obviously, the time to borrow money was back in 2003. The time to buy those who loaned it is either now or very soon.

Is an Accommodating Fed Really Bullish for Stocks?

Interesting, but aren't there other ways to read this chart? Isn't it also saying that after the Fed lowered rates in 2000 and 2001, a huge rally followed? Then, as the rally progressed, they felt the need to raise the rates again to keep inflation down.
Since they are lowering rates much more aggressively now than they did back then, the chance for an even bigger rally - or at least a near-term sideways range - is there.

The Writing Is on the Wall: Banks Today, the Rest Tomorrow

And yes, I'm going to start adding some fiber to my diet today.

The Writing Is on the Wall: Banks Today, the Rest Tomorrow

This is the scariest article I have read recently, mostly because, fundamentally speaking, I can’t find anything to argue with.
Yet, on the logic that the time to buy is when all the news is bad, there is a good chance that most of the extended credit contraction described here has already been factored into today’s prices.
Here’s why I say this:
As of today, February 14, 2008, the 30 Dow stocks are distributed as follows:

11 are nearer their 10-year lows
6 are somewhere in the middle of their 10-year range
13 are nearer their 10-year-highs

In other words, 17 of the Dow 30 are already in the middle or nearer the bottom of their 10-year ranges, including where they were during the bear market of ’01-‘03. Not to be a “glass is half full” kind of person but it seems to me that this is not the kind of distribution we would see if another 20% downwards move were coming in the Dow.
We have to ask ourselves: Do the CDO’s out there have any value at all, and if they do, what is it?
We’re not going to stop needing houses to live in, banks and investments in which to place our money and land on which to grow food any time soon. Aren’t the vast majority of all CDO’s based on these?
I couldn’t agree more that “cash is king.” But at some point someone with cash is going to see clearly what the real value of all these CDO’s is and is going to start buying with both hands. In fact, we are already seeing the first tentative signs that that is occurring.