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…reminds me of this Audi Fail versus BMW. Sort of. S&P looks like an organization hell-bent on getting its reputation back, in a pretty badass way. They are downgrading everyone in sight today, including Old Man Buffett.
Comments »Yearly Archives: 2011
Superhero Dip-Buyers Showing No Sense of Urgency
All Bets are Off
Even in comparison to late 2008 and early 2009, as well as the Flash Crash, I would describe the selling pressure over the past ten trading sessions as being as close to a “Black Swan” as I have ever seen. The forced selling has seemingly come out of nowhere, right off of a sharp rally in late June and much of July. When that happens, all technical levels and reference points are rendered irrelevant, as the market cuts through them like a knife through warm butter.
I wrote last evening that this week would be crucial for bulls to avoid a confirmed breakdown. Thus far, they are off to the worst start possible. Bottom fishers have been steadily punished to the point where no one believes it is worth the risk to even try. Despite that, we have yet to arrive at a true bottom. Which brings me to the next point: Crashes are rare events, and it seems foolish to even raise the possibility, but the longer we stay this oversold the more of a possibility it becomes. As ugly as some losses got last week, RaginCajun and I are sitting in 100% cash inside the 12631 Trading Room in The PPT service, and it is never too late to raise some cash.
In sum, until we see signs of stabilization, all bets are off.
Comments »Still Not a Full-Blown Bear Party
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After being flat-out wrong with respect to equities for the majority of the past two years, hardcore bears earned a decisive victory last week. There are no two ways about the price action of late–It weakened considerably in a short amount of time. By the closing bell on Thursday, I was back in 100% cash after having taken some lumps, with about 1/3 of my portfolio long up to that point.
Whether we are in a mini-bear market or still in a cyclical bull may very well be a trivial argument over semantics at this point. That said, I view this upcoming week as BY FAR the most important week for the bulls since the trading week of July 5th, 2010, through July 9th, 2010. Why that week? As I discussed in my video market recap on Friday, that week marked a non-confirmation of the breakdown below 1040 on the S&P 500 last summer. Instead of that swift move lower to 1010 being a true rejection of the bull case, it served as a vicious trap from which bears who “shorted the breakdown” were never even offered a reprieve (we would never fall to 1010, let alone below 1039 from there on in).
Applied to the current market, we know that the S&P 500 saw a clear weekly close this past week below the 1249-1260 area, which is not unlike last summer’s 1040-1050 range of support. If the bears can confirm that breakdown with another weekly close below the 1250 zone, it will be only then that we can say a different animal is upon us.
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I would also be remiss if I did not point out that the bears properly breached that simple weekly trendline that I had been discussing, going back to March of 2009. While credit is due, a breach of that steep trendline does not mean, by any stretch, that a fresh new bear market has been ushered in. I recognize that this is not what a great many of you want to hear, seeing as the easy answer is always more enticing.
As evidence, let us take a look at the 2003-2007 bull market versus the current one. As you can see, to expect a steep trendline off of the bear market lows to guide us through the duration of the bull is basically an absurd notion, as price needs time to flatten out and digest huge moves higher. In fact, backtesting trendlines indicates to me that a more constructive way to view a support trendline would be to draw one from the first major higher low of the new bull, as I have done for you below on the weekly charts of both bull markets. In the current market, we are probing that support trendline from July of 2009 as well.
As you can see, the upcoming week is highly likely to be a turning point, either way. If the bears win this one, then my friends of the ursine variety will be in for some long overdue fun…but not before they actually earn it.
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Saturday Night at Chess Cinemas
Billy Bob Thornton as Karl Childers (Billy Bob also wrote and directed the film) in Sling Blade (1996) is as good a character study as you will see. Karl is a simple man, hospitalized for the killing of his mother and her lover as a kid, and now released back into society in a small town. The entire cast is terrific, with plenty of recognizable faces. It is a required viewing.
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[youtube:http://www.youtube.com/watch?v=6-SSQbr4_qw&feature=related 550 412] Comments »Smokes are No Jokes
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In the midst of the carnage last week, tobacco stocks unsurprisingly showed relative strength. Until we see a full ban on cigarettes in this country, despite the best efforts of Midget Bloomberg in New York, these high yielding firms with excellent cash flows will represent safe havens. If the market refuses to stabilize next week, it may very be well be worth picking away at these stocks for long-term accounts.
Click on image for full size view.
