Where Do We Go From Here?

I’m using any rallies to scale out, take profits and /or get short using inverse ETFs like [[SKF]], [[SRS]], [[DXD]], [[SZK]], and [[FXP]]. Do not be fooled by a reflex bounce. This market is going lower. The charts don’t lie.

Yesterday, the NYSE Bullish Percent Index, a measure of the percentage of stocks on the NYSE that are on buy signals on PnF charts, turned negative. The index fell to under 49%. It has now reversed from X’s to O’s on the chart.  

This is signaling a longer term reversal in the market trend since the April Fools Day rally. Generally, these trends may last for several months. We now have an inflection point established, and it is pointing downward.

The best thing I can do right now is to follow my discipline and take the signals I’m getting. I trust them. I’m not going to get cute and try to out guess the market’s direction. Nobody knows exactly where it’s going, anyway, least of all, me. I think Trader Caddy said it best (and I paraphrase), “listen to the market…it will tell you what to do”. That’s some of the best advice, and something that I’ve always subscribed to. 

It may be worthy to note that in the past year, the NYSE Bullish Percent used in combination with some of my proprietary indicators have been useful in signaling an inflection point in the market.

06/11/08 Bearish

04/03/08 Bullish

10/31/07 Bearish

10/01/07 Bullish

07/22/07 Bearish

03/29/07 Bullish

Also, take into consideration that support for the Dow is in the 11,700 – 11,800 area. Were this to be violated, we could be headed for 11,200.

If people are thinking that bonds are a safe haven right now, they may want to think again. The Dow Jones Corporate Bond Index has also fallen, down to 100.75 yesterday from a reading of 102 last week. This move broke a double bottom on the longer term PnF chart. This is negative for bonds and another sell signal. The shorter term chart also indicated a sell signal at 101.25, breaking down through a spread triple bottom. (Unfortunately, my sources for the chart are going homo on me, so I am having trouble posting. I’ll try to update later.)

I will also continue to look at scaling into [[USO]] with some of my money, using pullbacks to add. to the position. I think we’ll get to see $150 oil this summer. 

Finally, [[DBA]] is a good way to play “milk the farmer”. It’s high carb allocated 25% corn, 25% soybeans, 25% wheat, and 25% sugar, so fat fuckers may want to go easy on this one. The past three months, DBA has been shit on by city slickers, not realizing that people have to fucking eat sometimes. Recently DBA has broken out to the upside, busting loose through a spread triple top yesterday. Weekly momentum is now positive. 

Disclaimer: This information is not intended to be used as the primary basis of investment decisions.  Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. 

 

 

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I spent most of the market hours raising more cash by taking profits and selling off laggards. I also shorted the whole bleeding lot of financials via more [[SKF]], because I expect the market to further knock their *blinkin’* block off. And, at the behest of those running the fire drill, I added more to [[FXP]]. Other than that, I don’t expect to do much else for a while

All in all, my cash equity curve looks like a Fibonacci retracement from my fully invested position the first week of April.

The offense has punted and now the defense is officially on the field, ready to sack the bulls, NY Giants-style (even though it’s baseball season). 

The bear bitch is back for an extended stay, at least through the summer.  Don’t say you weren’t warned.

 

 

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Great balls ‘a fire…..don’t look now, but another bomb may be hitting the financials in the near future, courtesy of the Fed, Comptroller of the Currency and the FDIC.

The Shared National Credit Program was established in 1977 by the Fed Board of Governors, the FDIC, and the Office of the Comptroller of the Currency to provide an efficient and consistent review and “classification” of any large syndicated loan. The program covers any loan or loan commitment of at least $20 million that is shared by three or more “supervised institutions” (that means the banks, you layman). The joint-agency review is conducted annually, usually in May and June, and is currently underway.

The purpose  of the examination is to focus on the stability and soundness of the banking industry and to identify “classified” loan commitments. These are loans that are “classified” into three categories: substandard, doubtful and loss. Examples of these include loans with liberal repayment terms such as little to no amortization prior to maturity, e.g. “interest only”, reliance on refinancing as a primary source of repayment, and lack of meaningful financial loan covenants such as leverage and fixed charge coverage ratios.

Expect the volume of classified loans to increase significantly in 2008 from the 2007 numbers. Last years audit showed that the total Shared National Credit commitments (SNC) increased 21% to over $2.28 trillion from $1.87 trillion in the 2006 report.  (This is the largest increase since 1998). Of those totals, nearly $72 billion represented the “classified” loans, up over $10 billion from 2006.

The 2007 review was conducted in Q2 last year, which didn’t include the deterioration and weakness in non-investment grade or leveraged credit facilities. Pile on top of this the disruption of the  global credit markets and you have a potentially greater risk to all syndicated loans and SNCs.

Bottom line, there will be more write-downs for loan loss reserves in Q3 this year due to a potential record increase in classified loans. How much of an increase in classified loans? Figure in a double digit increase. Obviously, the banks will report egregiously lower earnings.

Some names that have above average exposure to classified loans include: [[KEY]], [[C]], [[BAC]], and [[WB]].

You want to buy more bank stocks, Mr. Kass? Go ahead. Flush your money down the toilet.

To read last years report about SNCs, here is a link to the Fed’s website. This year’s data will be reported in September.

http://www.federalreserve.gov/newsevents/press/bcreg/20070925a.htm

You may continue to short the banks at your leisure.

Update: If the Dow, the P’s and the Naz are all down today, I will take the offense off the field and summon the defense to gang tackle the weak bulls. In other words, a confirmed extended down trend will be in place. We’ll at least test the March lows.

Disclaimer: This information is not intended to be used as the primary basis of investment decisions.  Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. 

 

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I can’t remember when so many of my stocks got gang-raped so badly. Witness [[CLR]], [[CLF]], [[CNX]], [[WLT]], [[PBR]], and [[SID]], in the Alpha portfolio, which took a 4.26% hit to the balls today.

However, I do know that these same names tend to bounce back nicely after selling off, so I’m not too worried, at this point.

That didn’t stop me from raising cash today and shorting names like [[MS]] @ 39.22, [[LNC]]@ 52.60, and [[PNC]]@ 60.95 in the rest of my portfolio. These make sense, as they are 98-pound weaklings, struggling to bench press 40 pounds. Right now, I’m hoarding cash and planning to go double inverse on selected sectors bets, should this situtation worsen.

Thankfully, I’m still up 27.9% on CLR, 10.9% on CLF, 9.8% on CNX, and 6.3% on WLT, since May 12. No complaints there.

Much to my dismay, PBR and SID were both down today, as the stupid Brazilians decided to take the day off and party (for no reason).

All in all, the Alpha group of stocks has not given up the ghost, and is still up 6.7% in a month’s time.

Disclaimer: This information is not intended to be used as the primary basis of investment decisions.  Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. The author may have a position in one or more stocks mentioned here. Trade at your own risk.

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[[MS]] ….stupid bankers and brokers. Target is 26.

The stock is a weaker stock than it’s 98-pound weakling peers, who constantly get sand kicked in their faces.

Disclaimer: This information is not intended to be used as the primary basis of investment decisions.  Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. The author may have a position in one or more stocks mentioned here. Trade at your own risk.

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She’s coming for you…maybe even this week.

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