A much beautiful picture than US.
Is this a decision time or what?
Tuesday, March 17, 2009
Is China Gona Have a Trend Change?
A much beautiful picture than US.
Is this a decision time or what?
Sunday, March 15, 2009
Is This the Final Low?
I am finding it harder and harder to keep up my planned pace to update this blog. I have so many chores to finish in the evenings and weekends. I can't do much during the day time weekdays. Before I change to full time trader/money manager, I have to behave at my full time job. I have to finish some work related essays today (it has been delayed for couple months now, each time I started writing, I ended up looking at the market), but today I find it compelled to put up my thoughts here in my blog at this important market juncture.
Wall Street participants are obsessed with calling for market bottoms. Eventually they will get it right after they have been wrong so many times in the past (I bet when you ask them, show me the money? they have red all over their balance sheet). Ridiculously, people in Wall Street (or Main Street) seem heedless of these callers' past credibility. When they finally get it right, they will soon be dubbed as the new Wall Street Prophesiers (who correctly predicted the end of the miserable 2008 recession).
Is this the Final Low? No one knows, only the future market development can tell you if this is THE FINAL low.
There are lots of notorious Wall Street Cliches, their only purpose is to fool the mass. I consider the worst two of them are the followings,
The rule number two says, the fact you are lack of financial know-hows (you will never know them all) and you are always late and ignorant (or at least partially) to understand economic/social events, You basically can't do it successfully in the stock market. Having your money managed by "professionals" is the only way to outperform.
I will elaborate in separate essays in the future on why these cliches are misleading and they will lead you no where in your financial well being.
There are some basic facts, however, that the Wall Street never wants you to know, one of them is that YOU DON'T NEED TO CATCH/KNOW THE EXACT MARKET BOTTOM TO MAKE A TON OF MONEY.
Over the weekend, I was looking at the 2000-2003 market bottom. I find some interesting comparisons, let's take a look of the following charts and see what kind of information it provides us.
There are some striking similarities and I will show you the significant differences as well. After vicious down move, Mar 2002 -- Jul 2002; Sept 2008 -- Nov 2008, both market entered a low volume one to one and half months bear market rally. After they were sold off and the new lows were both taken out. Although in 2002, it was only marginally.
The next piece of the news is more important. After the final low put in Oct 2002, the market went on with heavy accumulation. Do you see all green tall volume bars? Clearly, it is not average joe is buying.
If down the road, the market can not rise in high volume and pull back in low volume, instead, distribution days soon piles up, then this is clearly NOT the low. I think this is likely the case, we have to wait and see.
The second important piece of the puzzle is the leading stocks. For any market to have staying power, leading stocks (growth companies with new product, new services, new economic conditions with sound technical charts) need to form proper bases and break out to new highs one after another. Right now, we see almost NONE.
What did we have in Oct 2002 back then? Take a look of the following stocks,
They are absolutely gorgeous. They are the stocks which can make you filthy rich, not buying junk-from-the-bottom stocks.
All of them are in clear uptrend and heavily accumulated during (even BEFORE) the Oct bottom.
We have NOTHING like them NOW in this market. Could leaders emerge soon after ... yes, they could, but until you see them, don't bet your money.
The message is clear. If no leading stocks are setting up and breaking out, and the market continues to rally in low volume and distributes in high volume, This is NOT the FINAL LOW. Hoard your cash or short the rally continues to be the more profitable actions.
Now I need to get back to my essay writing. I probably need to burn the midnight oil tonight.
Thanks for reading.
Wall Street participants are obsessed with calling for market bottoms. Eventually they will get it right after they have been wrong so many times in the past (I bet when you ask them, show me the money? they have red all over their balance sheet). Ridiculously, people in Wall Street (or Main Street) seem heedless of these callers' past credibility. When they finally get it right, they will soon be dubbed as the new Wall Street Prophesiers (who correctly predicted the end of the miserable 2008 recession).
Is this the Final Low? No one knows, only the future market development can tell you if this is THE FINAL low.
There are lots of notorious Wall Street Cliches, their only purpose is to fool the mass. I consider the worst two of them are the followings,
- If you want to outperform the market in the long run, you have to be invested at all time and you need to sit through the market downtimes, like we are experiencing now.
- In order to be on top of the market, you need to follow the economic/political news (or you should watch CNBC, because you get it all?). You need to be very sophisticated and knowledgable in finacial knowhows, e.g. understand and interpret correctly what SEC is doing -- they are removing uptick rules; or what the congress is doing, e.g. they are revising the mark-to-market accounting rules.
The rule number two says, the fact you are lack of financial know-hows (you will never know them all) and you are always late and ignorant (or at least partially) to understand economic/social events, You basically can't do it successfully in the stock market. Having your money managed by "professionals" is the only way to outperform.
I will elaborate in separate essays in the future on why these cliches are misleading and they will lead you no where in your financial well being.
There are some basic facts, however, that the Wall Street never wants you to know, one of them is that YOU DON'T NEED TO CATCH/KNOW THE EXACT MARKET BOTTOM TO MAKE A TON OF MONEY.
Over the weekend, I was looking at the 2000-2003 market bottom. I find some interesting comparisons, let's take a look of the following charts and see what kind of information it provides us.
There are some striking similarities and I will show you the significant differences as well. After vicious down move, Mar 2002 -- Jul 2002; Sept 2008 -- Nov 2008, both market entered a low volume one to one and half months bear market rally. After they were sold off and the new lows were both taken out. Although in 2002, it was only marginally.
The next piece of the news is more important. After the final low put in Oct 2002, the market went on with heavy accumulation. Do you see all green tall volume bars? Clearly, it is not average joe is buying.
If down the road, the market can not rise in high volume and pull back in low volume, instead, distribution days soon piles up, then this is clearly NOT the low. I think this is likely the case, we have to wait and see.
The second important piece of the puzzle is the leading stocks. For any market to have staying power, leading stocks (growth companies with new product, new services, new economic conditions with sound technical charts) need to form proper bases and break out to new highs one after another. Right now, we see almost NONE.
What did we have in Oct 2002 back then? Take a look of the following stocks,
They are absolutely gorgeous. They are the stocks which can make you filthy rich, not buying junk-from-the-bottom stocks.
All of them are in clear uptrend and heavily accumulated during (even BEFORE) the Oct bottom.
We have NOTHING like them NOW in this market. Could leaders emerge soon after ... yes, they could, but until you see them, don't bet your money.
The message is clear. If no leading stocks are setting up and breaking out, and the market continues to rally in low volume and distributes in high volume, This is NOT the FINAL LOW. Hoard your cash or short the rally continues to be the more profitable actions.
Now I need to get back to my essay writing. I probably need to burn the midnight oil tonight.
Thanks for reading.
Sunday, March 1, 2009
Two Months into the Year, the Market Traded a New 12 Year Low
The Waterloo campaign continues, the market is on retreat. The bear coalition is defeating the once mighty Wall Street.
The market registered a major technical break down. On monthly, SPX500 broke decisively the year 2002 low. The market dropped all the way back to 1997. You don't think buy-and-hold (or buy-and-hope) strategy should be thrown to the garbage?
The technical picture is NOT pretty. Where is the ultimate low of this bear market?
The market continues its vicious cycle of deleveraging. The big boys are selling, and they are selling hard.
The market can't even muster a decent bear market rally. In the last bear market from 2000-2003, on three occasions, the market went on with a multi-month ~20% bounce. Each happened when the full stochastics on Monthly registered a major oversold signal. Since the mid of 2008, the monthly full stochastics went below 20 and has been under 20 since. Guessing when the market turns is a loser's game. CANSLIM investors don't catch falling knifes.
Looking at the performance chart of the sector Spiders, the nine funds representing 10 industry sectors within S&P 500, Financials continues to be the biggest loser with -39% return year to date. Technology shows the best relative strength with -8% loss.
In bear market, no sector is immune. Bears will eventually attack all the remaining sectors. Up to last week, Medicals and Health Care had been showing the best relative strength. Many leading stocks showing good fundamentals and technical merits were in Medical and Health Care sectors. Health Care and Medicals were creaminated last week (Thank you, Mr. President)
Take a look one of the leading stocks in Biotech, Gilead Science (GILD). Since the low made in the Nov of 2008, some institution money has been piling back to GILD. GILD recovered within 8% of its all time high on early February 2009. It rolled over last week, breaking below 200MA on big volume. 200MA is flatting and rolling over. A lower high is in the making. This is a classic long term topping pattern.
Looking at the 10 year weekly chart of GILD, GILD has been on steady up move for many years. If this is the final top, it could easily drop back to 20s.
Disclosure, I am holding a short position on GILD. I am going to hold and looking to add more short positions as it goes down.
Cash is still the KING; Shorts are QUEEN; Hard Metals are PRINCE and PRINCESS.
The market registered a major technical break down. On monthly, SPX500 broke decisively the year 2002 low. The market dropped all the way back to 1997. You don't think buy-and-hold (or buy-and-hope) strategy should be thrown to the garbage?
The technical picture is NOT pretty. Where is the ultimate low of this bear market?
The market continues its vicious cycle of deleveraging. The big boys are selling, and they are selling hard.
The market can't even muster a decent bear market rally. In the last bear market from 2000-2003, on three occasions, the market went on with a multi-month ~20% bounce. Each happened when the full stochastics on Monthly registered a major oversold signal. Since the mid of 2008, the monthly full stochastics went below 20 and has been under 20 since. Guessing when the market turns is a loser's game. CANSLIM investors don't catch falling knifes.
Looking at the performance chart of the sector Spiders, the nine funds representing 10 industry sectors within S&P 500, Financials continues to be the biggest loser with -39% return year to date. Technology shows the best relative strength with -8% loss.
In bear market, no sector is immune. Bears will eventually attack all the remaining sectors. Up to last week, Medicals and Health Care had been showing the best relative strength. Many leading stocks showing good fundamentals and technical merits were in Medical and Health Care sectors. Health Care and Medicals were creaminated last week (Thank you, Mr. President)
Take a look one of the leading stocks in Biotech, Gilead Science (GILD). Since the low made in the Nov of 2008, some institution money has been piling back to GILD. GILD recovered within 8% of its all time high on early February 2009. It rolled over last week, breaking below 200MA on big volume. 200MA is flatting and rolling over. A lower high is in the making. This is a classic long term topping pattern.
Looking at the 10 year weekly chart of GILD, GILD has been on steady up move for many years. If this is the final top, it could easily drop back to 20s.
Disclosure, I am holding a short position on GILD. I am going to hold and looking to add more short positions as it goes down.
Cash is still the KING; Shorts are QUEEN; Hard Metals are PRINCE and PRINCESS.
Tuesday, February 10, 2009
Sunday, February 8, 2009
The Hope and the Reality
Hope is a wonderful thing in life. It gives us reason to continue and courage to move ahead. In stock market, HOPE is a dangerous emotion.
In his book, "How to Trade in Stocks", Jesse Livermore wrote the following on HOPE,
HOPE -- Hope lives hand in hand with greed when it comes to the stock market. Oce a trade is made hope springs alive. It is man's nature to be hopeful, to be positive, to hope for the best. Hope is essential to the survival of the human race. But hope, like it's stock market cousins, ignorance, greed and fear, distorts reason. Hope clouds facts, and the stock market only deals in facts. Like the spinning of a roulette wheel, the little black ball tells the outcome, not greed, fear, or hope. The result is objective and final with no appeal ... like nature.
To trade the market on hopium that the worst is over and Mr Obama and his gang is our savior is self destructive.
Let's strip all the noise and discover what is wrong under the hood.
First of all, let's make no mistake, the big trend is solidly down. The precipitous drop of the stock market world wide since Nov 2007 foretells us the tough road ahead.
Secondly, this market continues to trade on headline news and rumors. On 01.28.09, market followed through on the 6th day of the rally attempt on CNBC 'rumor' that the government was contemplating structuring a 'bad bank' to purchase the distressed assets of the major banks. Within the next five trading sessions, the market was followed with two distribution days to throw the market back to market undress pressure. On last Thursday and Friday, the market, again, moved higher on hope Obama is going to shot US economy a magical medicine next week. The market volatility continues to call for cautious approach to the market.
Thirdly, on the landscape of leading stocks, there is nothing popping up to feel excited. Education stocks, gold, food, medicals are dominating the IBD's top rated stock list.
On the short term, market looks bullish. Nasdaq composite lead the market higher and broke above both the 50MA and the downtrend line drawn from last August. SP500 bumps up right to the 50MA and the downtrend line.
It will be interesting to see how the market fares after the street scrutinizes the details of the financial rescue plan, which is to be announced next Monday. Whether the market will start a significant bear market rally or another leg down remains to be seen. Once the trend is established, there is plenty opportunity to participate, but at this moment of time, treading water cautiously is the best strategy.
Gold
In spite of the uncertainty of the broad market, there is one group of stocks showing solid accumulation and favorable chart patterns. When the governments world wide are printing a lot of money, the expectation of inflation is rising.
Gold has been basing for a year. After the three distinct down legs, starting Nov 2008, the right side of the base has seen solid accumulations. The long term moving average 200MA is flattening out and the golden cross of 50/200MA is about to happen.
I am holding some positions in GLD in both of my 401k acct and trading acct.
Stem Cell
Will Obama lift the stem cell ban? The stocks are saying yes. Let's take a look of a few very bullish stem cell stocks, ASTM, STEM, GERN.
I own some positions in both ASTM and GERN in my trading account.
In his book, "How to Trade in Stocks", Jesse Livermore wrote the following on HOPE,
HOPE -- Hope lives hand in hand with greed when it comes to the stock market. Oce a trade is made hope springs alive. It is man's nature to be hopeful, to be positive, to hope for the best. Hope is essential to the survival of the human race. But hope, like it's stock market cousins, ignorance, greed and fear, distorts reason. Hope clouds facts, and the stock market only deals in facts. Like the spinning of a roulette wheel, the little black ball tells the outcome, not greed, fear, or hope. The result is objective and final with no appeal ... like nature.
To trade the market on hopium that the worst is over and Mr Obama and his gang is our savior is self destructive.
Let's strip all the noise and discover what is wrong under the hood.
First of all, let's make no mistake, the big trend is solidly down. The precipitous drop of the stock market world wide since Nov 2007 foretells us the tough road ahead.
Secondly, this market continues to trade on headline news and rumors. On 01.28.09, market followed through on the 6th day of the rally attempt on CNBC 'rumor' that the government was contemplating structuring a 'bad bank' to purchase the distressed assets of the major banks. Within the next five trading sessions, the market was followed with two distribution days to throw the market back to market undress pressure. On last Thursday and Friday, the market, again, moved higher on hope Obama is going to shot US economy a magical medicine next week. The market volatility continues to call for cautious approach to the market.
Thirdly, on the landscape of leading stocks, there is nothing popping up to feel excited. Education stocks, gold, food, medicals are dominating the IBD's top rated stock list.
On the short term, market looks bullish. Nasdaq composite lead the market higher and broke above both the 50MA and the downtrend line drawn from last August. SP500 bumps up right to the 50MA and the downtrend line.
It will be interesting to see how the market fares after the street scrutinizes the details of the financial rescue plan, which is to be announced next Monday. Whether the market will start a significant bear market rally or another leg down remains to be seen. Once the trend is established, there is plenty opportunity to participate, but at this moment of time, treading water cautiously is the best strategy.
Gold
In spite of the uncertainty of the broad market, there is one group of stocks showing solid accumulation and favorable chart patterns. When the governments world wide are printing a lot of money, the expectation of inflation is rising.
Gold has been basing for a year. After the three distinct down legs, starting Nov 2008, the right side of the base has seen solid accumulations. The long term moving average 200MA is flattening out and the golden cross of 50/200MA is about to happen.
I am holding some positions in GLD in both of my 401k acct and trading acct.
Stem Cell
Will Obama lift the stem cell ban? The stocks are saying yes. Let's take a look of a few very bullish stem cell stocks, ASTM, STEM, GERN.
I own some positions in both ASTM and GERN in my trading account.
Sunday, January 11, 2009
The First Week of the Market in 2009 is a Terrible Tell of What is Ahead of Us ...
I did not get a chance to update my blog, but the title of this brief summary tells all. Once this miserable retarded uptrend is over, the Nov low of 2008 will be most likely tested.
The year of 2009 could be as challenge as 2008, if not worse. The world is full of unknowns. How the economy and the market will evolve is in anyone's guess.
My number one priority in 2009 continues to be preservation of cash. At some point down the road, we will have a strong bear market rally; but until it arrives, I make no second guess and all my money will be meticulously protected like my baby.
The year of 2009 could be as challenge as 2008, if not worse. The world is full of unknowns. How the economy and the market will evolve is in anyone's guess.
My number one priority in 2009 continues to be preservation of cash. At some point down the road, we will have a strong bear market rally; but until it arrives, I make no second guess and all my money will be meticulously protected like my baby.
Saturday, January 3, 2009
A Look Back at 2008
The year of 2008, in many ways, is like depressing black humor Hollywood classics, gripped the hearts of Wall Street audiences. It has been a year like no other with the worst global economy in decades; and the elect of the first black president in history. The year of 2008 was unfolded with the collapse of the US corporate giants; unprecedented government intervention; the debacle of the hedge funds and the biggest Ponzi Scheme scandal in Wall Street history. The DOW industrials lost 33.8%, the biggest one year drop in 77 years. Only 1931 (-52.7%) and 1907 (-37.7%) were worse. The S&P 500 dived 38.5%, the worst since 1937. In this article, we look back at 2008, the events, the implications and especially, what we can learn to protect ourselves financially in bad times, and eventually thrive and prosper in good times.
I will start by filling up the "Current Market" section before moving on to other topics.
The first day of the 2009 started with a bang. S&P500 went up 3.16%; Nasdaq Composite went up 3.5%; Dow Jones went up 2.94%; S&P 600 Small Cap went up 1.32% and IBD100 went up 0.64%. The leading stocks continue to lag the big board. All Major indexes held above 50MA and cleared the trading range to the up side. This is no doubt a short term bullish development.
The troubling factor of the whole move up from the Nov low continues to be the low volume rally. The entire move is characterized by the buying from the retail crowd and the MMs raising the bids.
The best performing groups on the first day of the trading of 2009 were all from beaten down commodities.
No Expansion of New Highs. In a healthy market, with major indexes breaking above a trading range and going up 3%, you would expect a major expansion of new highs. We don't get it. New highs in NYSE and Nasdaq are lingering around 20s.
In the landscape of the leadership stocks, the quality of the leadership remains to be a big concern. Other than a few stocks in medical/defense/education, the rest are all thinly traded, LPHI, AIPC, CSKI, LOPE for example. These are not the landmark showing the strength of a strong bull market.
The market is off the oversold condition from the Nov sell off. The market is no longer oversold. As a matter of act, it is getting very overbought in both short and intermediate term. In short term, the upside limit should be limited.
Could this market go higher? Absolutely, the enthusiasm of the bottom callers and retail crowd certainly could push the market higher as big institutions continue to sit on the sidelines with no buying, but no selling as well. This is not the kind of the market I am interested in playing, at least based on the market condition as of now. Without institutions on my backing, I won't make big bets. Majority of all my money will be continuing to park in the safe, locked waiting for a better opportunity. In stock market, the best advice I have ever acquired is that you don't need to play the market all time. This is the time I won't play heavy.
Today I was reading the market message from John Murphy (I find he is very good in discussing inter-market relationships as well as some historical repeating market patterns). He talked about the January effect as well as the first-five-trading-day-effect. Here is an excerpt,
"As January goes, so goes the market ... What the market does over the next week is important. As I explained the previous Friday, what the market does during the first week of the new year often gives a clue about direction for the remainder of the year. According to the Stock Traders Almanac, "S&P gains during January's first five trading days preceded full-year gains 86% of the time". The predictive ability of the month of January is nearly as impressive. "The January Barometer predicts the year's course with a .741 batting average. 12 of the last 14 post-election years followed January's direction" (Almanac)."
Next week is going to be important after business gets back to normal. The big boys will show their cards. If we can build on further gains on higher volume and then drop back to test the break out on lower volume, I will deploy some capital to work.
At this moment of time, all I am doing is to wait and see how things unfold.
I will start by filling up the "Current Market" section before moving on to other topics.
- The Burst of the Wall Street Levee
- The Government Intervention
- The Hedge Fund Debacle and the Scandal
- The Destroy of a Living Legend -- Bill Miller
- The Start of the Dive -- 2007 Market Top
- The Final Thrust of the Commodity Boom -- March to May Bear Market Rally
- The Great Shorting Opportunity -- Sept to Nov Market Plummet
The first day of the 2009 started with a bang. S&P500 went up 3.16%; Nasdaq Composite went up 3.5%; Dow Jones went up 2.94%; S&P 600 Small Cap went up 1.32% and IBD100 went up 0.64%. The leading stocks continue to lag the big board. All Major indexes held above 50MA and cleared the trading range to the up side. This is no doubt a short term bullish development.
The troubling factor of the whole move up from the Nov low continues to be the low volume rally. The entire move is characterized by the buying from the retail crowd and the MMs raising the bids.
The best performing groups on the first day of the trading of 2009 were all from beaten down commodities.
No Expansion of New Highs. In a healthy market, with major indexes breaking above a trading range and going up 3%, you would expect a major expansion of new highs. We don't get it. New highs in NYSE and Nasdaq are lingering around 20s.
In the landscape of the leadership stocks, the quality of the leadership remains to be a big concern. Other than a few stocks in medical/defense/education, the rest are all thinly traded, LPHI, AIPC, CSKI, LOPE for example. These are not the landmark showing the strength of a strong bull market.
The market is off the oversold condition from the Nov sell off. The market is no longer oversold. As a matter of act, it is getting very overbought in both short and intermediate term. In short term, the upside limit should be limited.
Could this market go higher? Absolutely, the enthusiasm of the bottom callers and retail crowd certainly could push the market higher as big institutions continue to sit on the sidelines with no buying, but no selling as well. This is not the kind of the market I am interested in playing, at least based on the market condition as of now. Without institutions on my backing, I won't make big bets. Majority of all my money will be continuing to park in the safe, locked waiting for a better opportunity. In stock market, the best advice I have ever acquired is that you don't need to play the market all time. This is the time I won't play heavy.
Today I was reading the market message from John Murphy (I find he is very good in discussing inter-market relationships as well as some historical repeating market patterns). He talked about the January effect as well as the first-five-trading-day-effect. Here is an excerpt,
"As January goes, so goes the market ... What the market does over the next week is important. As I explained the previous Friday, what the market does during the first week of the new year often gives a clue about direction for the remainder of the year. According to the Stock Traders Almanac, "S&P gains during January's first five trading days preceded full-year gains 86% of the time". The predictive ability of the month of January is nearly as impressive. "The January Barometer predicts the year's course with a .741 batting average. 12 of the last 14 post-election years followed January's direction" (Almanac)."
Next week is going to be important after business gets back to normal. The big boys will show their cards. If we can build on further gains on higher volume and then drop back to test the break out on lower volume, I will deploy some capital to work.
At this moment of time, all I am doing is to wait and see how things unfold.
- My Agenda for 2009
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