frosty

Sobering Stat: ARMS Index Indicates Market Is at Peak, Not Bottom

The volume is not you and me buying 100 or a 1000 shares but computer trading against computer. Only they can command such volumes. And they might be in and out of some issues several times a day, exaggerating volume even more. The author is right when he says he's not exactly sure what to make of this.

Are we beginning to witness the demise of TRIN and other technical indicators that many analysts have relied on?

The Next American Revolution: Main Street vs. Wall Street

Bonuses began life as 'performance bonuses' and were given only to those who demonstrated exceptional performance compared to challenging objectives. Of late, they have become entitlements in the financial industry to the tune that after a year when the financial industry drove the entire world to the brink of a depression, the average wall street bonus is DOUBLE the median family income! Pay to retain these 'most capable', 'brightest', 'best performing' people? Sorry, they should all be fired for the poor performance they contributed to! And they should give back prior year bonuses! Personally, I'm getting burned twice - I took big stock losses from several of these firms and now I have to give them tax money! OK - if they take tax money, they work for the government and should be put on the civil service pay scale.

Wall Street Breakfast: Must-Know News

Re: AIG lawyer quits - aren't these the people that screwed everthing up? Let 'em go, hopefully to a smaller company that won't mean as much when it fails. There are good people who will rise to the occasion at AIG. We need prudent business people in financial companies not Las Vegas high rollers (and their attorneys). Good bye, good luck, good riddence! It really is a shame you got to rob the taxpayers one more time. How about donating a million or so to your local food bank. It's tax deductible.

Thursday Outlook: Commodities, Global Markets

I'll dispute your reference to "crummy news". You obviously don't watch CNBC where the financial news is always good! My goodness, negative earnings? The company remains in business doesn't it, so their stock is a bargain. Just wait until the e comes back into the p/e, then you'll REALLY see some action.

I do fear that, as you have so aptly suggested many times, that market manipulators through computerized trading are driving this rally to nonsensical heights.

Wall Street Breakfast: Must-Know News

I read that 2/3 of companies reporting so far have beat estimates. And yet a vast majority of these reported losses or lower earnings and significantly reduced revenue. Beating estimates in this climate seems to me to be more a critique of they analysts' estimates (they were excessively pessimistic) than the positive spin it implies, that companies are doing better than expected.

Richard Russell: Downturn Will Be 'Vicious'

"I somehow doubt that contingency plans have moved far beyond executives closing their eyes and wishing really, really hard."

They also have to remember to click their heels 3 times.

Wall Street Breakfast: Must-Know News

I thought shareholders were the owners. It's the compensation committee and board of directors who should have non-binding authority, not the owners. Even in congress' eyes, shareholders are mere lackeys.

Wall Street Breakfast: Must-Know News

AIG is a failed company. Failed executives can desert a sinking ship or sink with it. They don't deserve pay raises or bonuses, in fact they should refund past exorbitant compensation to the taxpayers.

Is the Market Correction Finally Here?

Brett Steenberger observes that ARMS is at an extremely low level (implying overbought on increasing volume typically seen at market peaks), which would also seem to add to your list of reasons for a correction. However trading is now dominated by computer versus computer, not you and me buying 100 or 1000 shares. Some analysts point out that computers not only command huge volumes, but dominate daily trading volumes. Sometimes they move in and out of an issue several times a day exaggerating volume even more.

What this implies for ARMS (and other technical indicators as well) is speculation at this point. Consider that in 2008, C averaged around 100 million shares a day volume. Over the last month, volume has averaged nearly 1 BILLION a day (diluted shares outstanding have increased about 15%). How much of this volume is due to millisecond speed software looking for pennies a share? Granted much activity is short selling and short covering (and, reputedly, Mr. Paulson taking a major position), however just consider the impact on ARMS, relative to history, when one issue advances on 10 times the volume ( => big decrease in its ARMS). Distortion relative to historical norms is certainly possible.

The same may also be true for other volume-based technical indicators since, what used to be a marketplace for individual investors, has been replaced by automatons vying with each other for a penny here and a penny there. Time will tell if noticeable distortions actuallly materialize, but my own guess is that future historical analyses of technical indicators will be suspect if they go back before 2009.

Tuesday Outlook: Commodities, Global Markets

I remember in the frothy days of 2000 when the old rules no longer applied in the "new economy". Primarily, some analysts said it was no longer relevant to judge p/e's in relation to history (especially for sprouting dot.com's) but what we should be evaluating is the sales-to-earnings ratio. Funny thing happened - not that many months after the p/e's went into the stratospere - the whole thing imploded (we now call this the dot.com bubble). Many of us now look back and wonder, "how could we have been so dumb?".

So now some analysts are telling us that volume is no longer relevant. Indeed, it appears that for this recent stretch of gains since March, that has been true, since volume has been light and upwards of half of that has been millisecond trading systems trading with each other. If David and I (or Goldman and Morgan) could command half the trading on Wall Street, there is a lot we could do for each other. Could we do it forever? Only if we know when to go short (and then everyone else needs to watch out) because at some point, p/e's come into play again.

Some of us believe that, relative to business prospects over the next year, p/e's are close to the stratosphere right now. As David recommends caution, you may notice me next to him on the loading dock, not on the tracks lookin for the train.

Roubini the Revisionist

Economists are much better historians than forecasters. Economics is the SCIENCE of analyzing the past (they use a lot of math) and the ART of forecasting the future (visionary stuff). Some economists get it right or lucky. Roubini has done it a couple of times. Will he in the present or future?

McCullough plays a tight range--918 to 896 is an hourly range. He uses an economic (revisionist) forecast to substantiate this call? I don't get it--focusing on a yearend end of recession call to set a short term target?

Wall Street Breakfast: Must-Know News

That's gratitude for you! You save a guy's life and he steals your wallet! Goldman and the others need to give the money back one way or another.

Can Americans Save Their Economy?

Condemning other countries' health care system without factual evidence or even broad based anecdotal evidence is pure ideological bs. If you can cite Canadian, British, German, Japanese, or French public opinion surveys that condemn their health care services then you speak with authority. Otherwise, like many others who may hear a few Canadians complain, you speak merely as sophomore. Many people complain about America's health care system too. Why not listen to them.

As far as Americans resenting big government--they only resent the big government they don't agree with. Big government spends big on defense, big government spends big on agricultural support/welfare, big government spends big on public education, big government gives generous tax incentives to many big businesses, big government does a lot of big things that people other than "socialists" agree with. Self-reliance, even in the business world, is theory that works only with big government behind it.

P.S. America has the biggest government in the world and every administration I can remember (even those that promised smaller gevernment) increased its size.

Job Losses Signaling Recession Isn't Over

Tax cuts for companies losing money and people losing jobs and taking pay cuts are not especially stimulative for jobs. It can be argued that Bush's tax cuts did not create jobs, rather the wars and their ramped up spendng created the jobs. The tax cuts were just squirrelled away in Switzerland and the Cayman Islands. The table below is interesting.

President Term Beg Jobs End Jobs Ann % Chg
Roosevelt 1933-1945 25,700 41,903 4.37%
Kennedy/Johnson 1961-1969 53,683 69,438 3.25%
Carter 1977-1981 80,692 91,031 3.10%
Clinton 1993-2001 109,725 132,469 2.45%
Truman 1945-1953 41,903 50,145 2.40%
Nixon/Ford 1969-1977 69,438 80,692 1.95%
Reagan 1981-1989 91,031 107,133 1.85%
Eisenhower 1953-1961 50,145 53,683 0.90%
H. W. Bush 1989-1993 107,133 109,725 0.60%
"W" Bush 2001-2008 132,469 134,580 0.20%
Hoover 1929-1933 32,100 25,700 -9.00%

All democrats created more jobs than all republicans. Reagan cut taxes, however he also gave us a huge boost in defense spending and the largest deficits since WWII. Even so, job increases were a measly 1.85% a year. Our worst president on the jobs front (since Hoover) is the one we just got rid of. Bush! 0.2%!! And the largest spending increase in history which, it can be argued, was responsible for keeping millions employed, rather than the tax cuts advocates seem to praise so much. Tax cuts are a knee-jerk conservative reaction to every economic problem. I fear the problem is much more severe and much more complex than a tax cut will cure. Our economy is changing dramatically and we need to figure out what it is changing to and then change our businesses and workforce accordingly. Consumerism is dead for awhile - perhaps it will come back some day. And globalization means production is everywhere in the world, the owners of production are everywhere in the world, and the U.S. no longer controls the world economy.

Tuesday Outlook: Commodities, Global Markets

Most of you characters who like to draw horizontal support-resistance lines also use the SMA as a signal indicator. However, the 200 day SMA includes last Sept & early Oct when the markets were still relatively high. Those days form 180-200 days ago carry the same weight as recent days in the SMA. If you use the EMA, which weights recent days more than long ago days, a different picture emerges. Since early April, for both DJIA and DJTA, the 200 day EMA is resistance and the 50 day EMA is support. SPX shows nearly the same (support is somewhat above the 50 day EMA). In none of these cases, however, have the indexes penetrated the 200 day EMA. So the "convergence" of the 200 day SMA and the horizontal "resistance" line doesn't, in my mind, hold as much significance as the fact that the 200 day EMA has not been penetrated. Why favor the EMA over the SMA? It's a matter of "what have you done for me lately?" versus "remember when?".