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July 9 2004 Bad News Crawls Out From Underneath The Rug
We have chortled recently at the torrent of good news about employment, sales, yaka yakka and gloried in being early bears.
What is this new news? Bad employment figures. Pessimistic projections. Does it change with the phase of the moon? Evidently, because now companies are missing earnings targets (or in the case of Yahoo blowing them away and still being blown away). Lay goes to court. Rigas goes to jail. Ridge dips into terror. (Terrorizing the public. How many times can you cry wolf, anyway?) How we pity investors who believe the news. Traders know the only news that matters is the news about price, and the other news is just geese gabbling. (A very slight exaggeration.)
Now to the real news. Is this or is this not a downtrend? So far so good (or bad). Price now hangs in mid air with nothing to support it but hot air and lies. It looks to us like it's headed for a test of the May lows, but you never know till you know, as Yogi Berra said. If the lows hold (a chance, but unlikely we think) then we might be in for a wide swinging trading range for awhile.
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Last week we bought CEF a proxy for gold and silver bullion. If it behaves we will be buying more. Gary Anderson (equitypm.com), a formidable analyst, addressed our graduate seminar at GGU this week and called our attention to a seasonal tendency for the metals to do well in the coming months and for stocks to do poorly. As we have said about cycles we like them when they have motors on them. Otherwise if they agree with the chart, good. If not, too bad. |
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Speculators might be (and probably are) long the bonds. Bears, start the engines on your motor cycles and get ready to ramble. Novice bears will be selling the SHY and such like (not yet, not yet) while full grown grizzlies will be rampaging in the futures and selling calls. Be very careful. This is a two edged razor blade. This might be a flag, In which case higher prices ahead. Timing is of the essence here and if you don't have it don't do it. |
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July 2 2004 Let Freedom Rain. On the Plain. In Spain and Viva Pamplona.
But don't let it rain on our 4th of July parade. We lament as much as anybody a bear market. But the inescapable essence of trading (and investing) is to recognize reality and capitalize on it. Otherwise the market will decapitalize us. And our faithful readers. Against these forces stands jmta::dor, Spiderman of the Market (and the Web), bravely telling the truth and getting ready to make a pile as the bulls head south. Beware of low flying metaphors.
And also of lower lows, which occurred Friday in the Dow. All last week we tried to sell out of the money calls (testing the market) but they were too smart to buy them. It is impressive how quick traders are, as well as astounding that the majority of market participants can't recognize a broken trendline when it hits them in the face. What's in our face this week is the increasing volatility of the sideways pattern occupying most of June. Of course we think this is a reversal pattern, but nothing will be proven until the May lows are taken out. At the moment lower highs and lower lows would seem to confirm that.
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And (or but) it could be a broadening pattern (also bearish). Readers understand that 99% of the time what we say (or anybody else says) about the market this moment is conjecture. We make trades based on probabilities. Only time will tell whether we made the right decision. (No wrong ones so far.)
We have previously said that the short bond trade was over. But we would not get long, in spite of the chart here which is a clear invitation to buy. Or was some days ago. (We HATE entering a market after the signal, which in this case was given 6/24 and 6/30. There was also a good signal for the shooter the 15th. As for this bear we are licking our chops at the prospect of shorting higher. Anyone who thinks higher rates are not inevitable is smoking something illegal.
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Can it be that tulipomania has returned to the Qs so soon? Investors really do have the memory span of geese (or turkeys). And they are talking about $90 for the price of Google stock. We haven't seen the p/e ratio that would imply yet, but we can imagine. But we cannot be fined by the FCC for the obscene nature of our imaginings. We suspect that Google bears might take a mighty bite out of this IPO. The problem, of course, with shorting individual issues is that the shortee might be taken over by Microsoft.
Technically the Qs diverged from the $COMPQ and we have been watching this little runaway try to vault the horizontal resistance lines. We think it might be turned back now--but who knows what evil lurks in the heart of speculators. Only the Shadow knows. We don't.
We only know that the nation is ripped down the middle by a Vietnam in the Middle East and despicable politics at home. Secret prisoners? An American Gulag? Habeas Corpus morte?
Have a happy Fourth.
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