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Genesis Posts: 71421 Incept: 2007-06-26 
KD^2 
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http://market-ticker.denninger.net/2007/.... Discuss it here! ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-07 00:16:36
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Cigarlover Posts: 83 Incept: 2007-06-26 
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On the S&P 500 charts (can't see that clearly), the MACD is positive and sloping upwards, and that's bullish, isn't it? From other charts, CMF is also positive and sloping upwards, bullish too? Charts can be interpreted so many ways. Agree that fundamentals are poor, hence probable correction soon. By October this year?
2007-07-07 01:28:14
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Tfinavia Posts: 117 Incept: 2007-07-06 TX
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What if markets trade sideways and give us no direction next week and rather have us wondering either to take off our broad-based market shorts and lick our wounds or go long with it. Do you see it possible?
2007-07-07 01:36:25
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Ocbear Posts: 1684 Incept: 2007-06-29
OC, CA
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My shorts are getting clobberred. I am this close to going long on RIMM, BIDU, AAPL and a few of the others crazy. Somebody convince me why I shouldn't ride these bastards up for a few points w/ Calls. I have short-dated Russell 2000 puts because it was trading in a channel that appears to be violated now.
2007-07-07 01:41:41
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Ilikethehype Posts: 573 Incept: 2007-06-26 
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I read today's WSJ and thought it was very bullish. Then I opened my Barron's and read Jonathan Laings article "Garbage in Carnage out" on CDO's and did not get to the next article on housing's recovery being far off. Not yet anyway. These articles will be discussed all this week...
---------- Bernanke himself revealed the various policy measures the Fed might take in response to a crisis: buying government bonds, providing overdrafts and other short-term credits to banks, currency swaps (to boost the dollar), and "securities lending," that is, lending money to institutions to buy stocks. URL htt
2007-07-07 09:51:09
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Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
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In 1995, the yen was 85/$. In 1998, it traded as high as 146/$. So in terms of what the Japanese will do, it seems like the dollar can fall a lot before it gets into unexplored territory. China will likely follow the Japanese lead. I'm not sure that they really care what their dollar holdings are worth in local currency as long as they can keep the exports flowing. As mercantile economies, they have the "export tiger by the tail" and cannot let go. When the dollar sinks real low, they'll come in and buy cheap American assets at inflated prices just to inject more money into the US economy. So, in terms of fundamentals, this could be a long slow unwinding because the foreign central banks do not understand how fragile the US economy has become. Injecting a $trillion/year at low interest rates covers a lot of fragility in the economy. Furthermore, I don't think our government understands how weak the average consumer is financially. Otherwise they would not be pushing immigration reform that will continue to depress wages. So, as long as the money men think that everything is A-OK, they'll keep injecting money into the system. So the recession might be postponed for quite a while. p.s. After throwing this one out for discussion, I have to head out for the day. Enjoy ---------- The truth is out there Last modified:
2007-07-07 10:36:28 by rmonical
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Genesis Posts: 71421 Incept: 2007-06-26
KD^2
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The MACD on the S&P has crossed positive, but just barely. I wouldn't call that convincing, and, by the way, it did this once before (the previous retest) and immediately failed. The slope of the MACD is down; divergent from the alleged direction people think the index will head. This is an internal divergence (one of many.) With the RSI being where it failed on the last retest, it appears that we may be setting up for another failure. Remember that the Japanese got clobbered playing games with their currency. They've learned from this and I suspect the Chinese do not want to repeat their mistakes. As for the Chinese coming in and buying US assets, I wouldn't bet on that being allowed. We have a tremendous protectionist sentiment building in the Congress. Could we trade sideways next week? Yes. And if we do, I'm not abandoning any of my short positions. My thesis is that we've got two possibilities - we either surpass the highs in a blow-off top, followed by a wild ride downward, or we simply run out of steam trying to get through the highs..... The government isn't the one pushing immigration reform. It is businesses who are literally trying to remain solvent through the use of illegal workers...... how this translates into "bullish" is beyond me. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-07 12:34:06
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Sellnrun Posts: 434 Incept: 2007-06-26
Murrieta, CA
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My guess is that we will see a small rise to retest some trading ranges this week. The markets seem to consistently take the opportunity during the economic data-news-lacking first half of the month to push the envelope, then capitulating to the truth later in the month. I have found certain truths to be of historical significance which I now expect to play out in the demise of this market: 1) 80+% of all crashes (declines of 34% or more) occur (begin) between September and December 2) They generally begin in the second half of the month (between the 15th and the 30th) The markets need now only trade sideways to slightly down for 40 days to make this hold up. The 1929 market peaked in the July-August time frame and had about a month of mostly down days before it tanked in the second half of October. I submit that history is our best guide for the unfolding of the events to come. Provided a wild card in the form of a debt-market implosion does not hasten things... ---------- "Study the past, if you would divine the future."-Confucius "Blest paper credit. Last and best supply To lend corruption lighter wings to fly..."-Pope
2007-07-07 13:13:11
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Genesis Posts: 71421 Incept: 2007-06-26
KD^2
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A mild rally will not provoke me into abandoning any of my shorts. While I have some pain right now in the SDS position my total short profits have been quite high, and on-balance I'm ok. A monster blow-off type of rally will lead to me to cover immediately as it starts, of course. I've noticed a deteriorating pattern here as we approached the all-time highs in the S&P. Coming out of the February plunge we had a very strong rally up until about the first part of May. But then things started to get a bit more dicey as the slope began to decrease right around the first week of May. Attached is an image that shows this pretty clearly using trendlines, with the original slope, a slightly lower slope as we established the uptrend, and finally, the deterioration in May. That May deterioration came with the internal divergences. Looking at the chart I just put up, this is made even more clear. Back in December, we saw the same sort of deterioration, with the leading indicator coming in October. But more troubling, the current level of the S&P represents a failure of the trendline - at the lowest slope established in the late 06 rally! We had a clear attempt to punch through that level and "fix" the breakdown in February back in early May. The June 4th all-time highs were above that level. But that level did not hold, and then we made a lower high trying to get above it AGAIN! And now, as we move upwards, we are getting SMALLER candles and SMALLER moves, and are running out of gas before we get to that trendline - it is now acting as overhead resistance. This is what happens at tops - internal divergences are your early warning, and the market tries to chug higher but is unable to get enough steam up to power through those old trendlines. This pattern is troubling. It does not necessarily mean we're going to blow up right here and now, but it does mean that you need to be very, very careful, and despite people thinking that the "short side" is the more dangerous to play here, exactly the opposite may be true. I want to present two charts. The first here is the 1998/99/early00 chart of the SPX. You can clearly see the slope deceleration; I've outlined it with the same trendlines, leading to the 1552.87 all-time top. We know what came last. The second is the current S&P chart. Notice anything similar in the decelleration of the trendlines? The "mini-plunge" back in the summer of '99, and the strong recovery - which faltered? The spasmodic, "last ditch" run at all-time highs - which we may be setting up to see here before the wheels come off. The only difference I see here is that we may not see one of those last-ditch 200-point-style monster runs on the S&P. Why not? Because it appears that the markets do not have the "mojo" to mount that, as the trend deterioration has been considerably sharper - this time - than the last, with one failed assault to set this up already (and a second possibly brewing right before our eyes.)
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-07 13:39:49
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Bubble_watcher Posts: 215 Incept: 2007-06-26 San Diego
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My thesis is that we've got two possibilities - we either surpass the highs in a blow-off top, followed by a wild ride downward, or we simply run out of steam trying to get through the highs..... I've looked at the volume numbers for the SP500, and this to me looks like exhaustion (i.e. the market has simply run out of buyers).
2007-07-07 17:30:49
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Genesis Posts: 71421 Incept: 2007-06-26
KD^2
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Yep. But don't be sure yet. The holiday week is tough to base anything on. Wait until next week - everyone will be back on the ball Monday, and volume should go back to normal. I'm not drawing a lot of conclusions from this last week's action - its dangerous to try to read too much into light volume like we had, as you will often be proven wrong when the volume comes back. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-07 17:49:36
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Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
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Thanks for the charts. How does these two compare to the 2003-2004 top? There is something called the Lowry Selling Pressure Index and the Lowry Buying Pressure Index. I don't know much about these, but the Selling Pressure Index has apparently hit its lowest level since 2005. The accompanying (Richard Russell) comment said that the market is very overbought, it takes selling pressure to knock it down. He asked "can a market fall without any warning from technical indicators?": Three instances were cited: San Fransisco earthquake, fall of France in 1940 (I consider this the singularly most important event of the 20th century), and the 1962 steel standoff between big steel and President Kennedy. He speculates that a Shanghai crash might be such an event. His conclusion, the market is overbought and "straining", but it can trade sideways and not roll over. I point this out because Russell and Karl agree on all of the fundamentals. Russell is concerned about the near term prognosis. He says that usually we have a correction about now, then go into a third blow-off phase of the bull market when the retail investor jumps in. I think I read that there is $2.5 trillion sitting in money market equivalents. It may be hard to get a traditional correction is if there is a huge amount of "dumb" money looking for an entry point. So again, heed Karl's advice and be very careful with those shorts. ---------- The truth is out there Last modified:
2007-07-07 23:11:31 by rmonical
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Genesis Posts: 71421 Incept: 2007-06-26
KD^2
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Well yes, you need selling pressure to knock it down - the issue becomes, where are the sellers? The blow-off phase may or may not come this time. I'm not convinced either way. Logic says it should, but I'm not buying it yet. There are things that have changed. Chief among them was 2000, when so many people got ass-****d. That wasn't a "bear market" if you were in at the top of the Nasdaq - it was a positive slaughter. Those sorts of events have a way of changing behavior until they "roll off" people's consciousness. A significant percentage of people who went through that will not get sucked in a second time. I see lots of stresses but so far, we've avoided the "major event" triggers. The odds of us continuing to do so are not all that good though - eventually, everyone's luck runs out - no matter how good it has been up to that point. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-07 23:31:46
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Jazmia Posts: 347 Incept: 2007-06-26
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I am a avid Richard russell reader and have to disagree with him. The first time i disagreed with him was in March 07. He came around to my belief we still had a third phase left. Russell believes its just started and i feel its over. Look at the foreign markets over the last 12 months and look at the US markets during that same time. Every thing is saying we should of been down in 06-07 but the market has been running. All reality was thrown out the window. That to me says third phase. The reason i feel so strongly that we don't have a huge move ahead of us is the the Bond issues are now on the front pages. From all the news on subprime, the 10year and the real bomb the CDO's I dont see how we can overcome what was once only BEAR thinking that the credit game is coming to an end. Bear Sterns is all over the news and now they have to re-price there own funds in the coming weeks. Remember when we used to have to look at blogs to read about CDO's and all there potential problems now you cant open a paper without seeing it. I just read Barrons and there are two very critical articles about the bond game. I just cant see the market being able to ignore reality for a long period of time. I also think that the public has used whatever spare cash they had left over from the tech boom on real estate and now cant sell that house like a stock and have missed out on the big run in stocks.
2007-07-08 14:46:12
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Matt Posts: 3820 Incept: 2007-06-26
Bothell, WA
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Yeah, with all the money tied up in housing and a consumer lead recession nearing in, you have to wonder were the perported retail investors are going to come from.
---------- "Market players should be buying things even though they are overvalued, Cramer advised. Although this may seem irresponsible, traditional market thinking is not going to get people anywhere right now."
2007-07-08 15:17:33
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Genesis Posts: 71421 Incept: 2007-06-26
KD^2
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Here's the bottom line guys. There has never been a housing decline that has not led to a recession. The only "partial exception" was the "mini-decline" that led to a "mini-recession." THIS decline, however, is the worst since the 1930s. Now tell me how we avoid the recession, and I'm on the bullish side. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-08 20:48:16
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Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
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<i>I also think that the public has used whatever spare cash they had left over from the tech boom on real estate and now cant sell that house like a stock and have missed out on the big run in stocks.</i> Careful. I'm bad at remembering numbers, but I think it is something like $2.5 trillion in money market and CDs. ---------- The truth is out there
2007-07-08 21:00:33
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Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
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"He came around to my belief we still had a third phase left. Russell believes its just started and i feel its over." The counter argument is that that "dumb" money has not piled into this market. That valuations are not as insane as they were in 1999. So the "smart" money is apparently hoping the "dumb" money piles in and lets them unwind their long positions (see previous comment). Maybe the "dumb" money is not so dumb this time. It certainly has a whole lot more resources with which to get the big picture. I hope that you are right and that we do not get a speculative blow-off caused by john-Q-public piling in. ---------- The truth is out there
2007-07-08 21:04:43
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Genesis Posts: 71421 Incept: 2007-06-26
KD^2
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I hope we do get a speculative blow off! I'll lose money on my PUTs but man will it be like winning the ****ing lotto when it comes apart! I say bring it on! ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-08 21:22:03
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Jazmia Posts: 347 Incept: 2007-06-26
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If you take away stock buy backs then the P/E ratio is around 20-23...
2007-07-08 22:33:55
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Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
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Why should we take away stock buy-backs? My guess is that increasing earnings per share via buy backs because that is the best use of capital would indicate that there are no more productive investments these firms can make so that earnings should deteriorate over time.
---------- The truth is out there
2007-07-08 22:39:31
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Genesis Posts: 71421 Incept: 2007-06-26
KD^2
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The problem with buybacks is that they do severe damage to the company that employs them. What, you say? How's that possible? Well, here's the problem. Let's say that you're Joe Corporation. You have an "extra" billion laying around. You have a number of choices. You can sit on it, which makes good on your balance sheet but doesn't do a thing for your shareholders. You can spend it expanding the business, which in turn should lead to higher sales and helps your shareholders. You can spend it optimizing your business, which results in higher profit margins and helps your shareholders. Or you can buy back shares. The latter is a net null. People talk about it "supporting" prices but in fact it does no such thing. You remove an asset and an exactly equal item on the other side of the balance sheet - shareholder equity. So why do prices tend to be supported? Because it removes from the total number of shares in circulation. But, in return, it makes you a smaller company! In the long run this damages the firm because a smaller firm has less in the way of assets to work with. If the firm issues debt to buy the shares back then its even worse, because instead of a net trade, the firm now takes on interest expense to reduce the share count! So now its a net negative instead of a neutral transaction..... ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-08 22:43:57
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