Global Chart Reveiw Shows Key Inflection Point
by Phil - January 25th, 2010 3:00 am
Chart Review by Michael Clark
“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
-- John Maynard Keynes
SO, IS THIS FINALLY THE ‘REAL’ CORRECTION?
What a week it was. The Bears gave the Bulls some payback. Obama got a wake-up call. And the banks got a well-deserved scare (and we hope they will get a well-deserved hair cut).
The markets reacted, as one might expect, with selling. Actually, the selling began before the Massachusetts election and before Obama sent a shot across the Goldman Sach’s bow. Last week Intel announced surprisingly strong earnings; and the stock started up and then sank. For the past half-year investor behavior had been the reverse: a buying spree for any stock that did not lose as much as it might have — beating ‘Street expectations’ that had been dumbed down over and over again during a quarter so that the company could report ‘surprising’ strength. Suddenly, now, even good earnings are being greeted with selling. Then came Massachusetts — wasn’t that a Bee Gees’ song?
All the lights went out in Massachusetts
Anyway, readers want to know where the markets stand today, after the sell-off this week. My view of it — my ‘view’, not my gut-feeling — is that we are, so far, merely correcting from an over-extended rally. This rally has been bizarre, to say the least. This has been a ‘fear rally’ — usually the ‘fear’ side of the equation is when selling comes in, ‘greed’ driving the expansion. But fear of systemic failure has driven this rally; and Ben Bernannke has been the captain sailing the ‘Boat of Fear’, Ben’s logic — that more debt will solve the insolvency crisis — has a shadow side, the logic that a collapse in stock prices will result in systemic failure, international chaos, revolution, repression…made him believe that preservation of the status quo was requiired, at any price. A ‘make-believe’ recovery could be jump-started, perhaps, if the Fed could just stimulate (and simulate) another asset-bubble. After all – that is how his mentor and predecessor, Alan Greenspan, had become the darling of the coctail party crowd, leading member of Time Magazine’s ‘Committee to Save the World’; and that was how he, himself, had become Time’s ‘Peson of the Year’.
Logic was thrown…
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DiggGermany’s DAX: Insight Into Europe’s Leading Economy
by ilene - September 17th, 2009 1:27 pm
Note: Our friends at Elliott Wave International have announced the beginning of their "FreeWeek event, where they throw open the doors to some of their most popular paid services to non-subscribers for one week." This time, they’re offering complete access to The Asian-Pacific Short Term Update and The European Short Term Update. – Ilene
FreeWeek Kicks Off With Germany: Click HERE to sign on and get invaluable insight into Europe’s #1 market.
Germany’s DAX: FREE Insight Into Europe’s Leading Economy
Courtesy of Elliott Wave International
It’s one of the first rules in the book of mainstream economic wisdom: a country’s economy is the thermometer which "reads" its stock market’s temperature. If financial conditions are heating up, stocks rise; if they are cooling down, stocks fall. Were it so simple — millionaires wouldn’t make up a measly .15% of the global population.
Obviously, there’s a major flaw with this logic; namely, it isn’t true. Time and again, stock prices smolder to near boiling even as economic growth chills to the bone. (The opposite also holds: Stock prices cool down even as the economy is on fire.)
Take, for instance, Germany’s main stock index, the DAX 30. On August 13, Europe’s number one economy reported a .3% rise in gross domestic product (GDP) — Germany’s first quarter of growth since January 2008. Soon after, the DAX began to rally and finished the day at a fresh, ten-month high.
In no time at all, every financial media outlet from Wall Street to la-la land had their story: "Germany’s DAX rose nearly 1% on the GDP data. The big picture will be one of ongoing gradual recovery through 2010." (LA Times)
One problem: the DAX’s bullish flame has been burning since the index landed at a two-year low on March 9, 2009. YET — the economic data over those six months has been about as "hot" as the Arctic Circle. Here, the following news stories from the time say plenty:
- March 24, Wall Street Journal: "There’s a slew of evidence that Germany is in an economic freefall: A 19% drop in industrial output, a 23% decline in exports, a 35% drop in new manufacturing orders, and on. The numbers we’re seeing are just mind-boggling."
- April 30, New York Times reveals a 17% year-over-year decline in Germany’s exports and writes, "With 47% of its GDP generated by
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Testy Tuesday – A Very Dangerous Line in the Sand
by Phil - February 24th, 2009 7:17 am
Well we are up in the pre-markets (7am) – that’s something…
Interestingly the global markets took our dip rather well. The Shanghai fell 2.8%, the Hang Seng gave back yesterday’s 3.5% gain, India hit the 2.5% rule, and the Nikkei fell 2.2% – a bad day but not worse than ours, as is often the case in Asia. The DAX is, of course, leading Europe lower with a 2% loss into lunch but the CAC and FTSE are down just a point. I had a busy evening doing a Big Chart Review and indulging in my political rant of the week about the budget fiasco but maybe that will be a weekend article as my comments alone in the members section were over 2 pages.
We went mildly bullish into yesterday’s close, mainly by covering our long index puts, looking for at least a bounce off what is now a 1,100 point drop since February 9th, when we did our previous Big Chart Review. We are actually 14% below the 8,280 on the Dow that we held that morning so another 1% down to go before we hit our next bounce, just over the 7,000 mark. The gravity of the 5% rule dictates that we are more likely to go down than up now that we blew through 12.5% and finished at yesterday’s low and getting back to that 12.5% line (7,245) will be our challenge for the day. On the S&P we’ll be looking for 760 to be taken back but we are just a hair over 738, which is the 15% drop off that 2/9 open. The Nasdaq is about 2% over 1,352 and just under the 12.5% line at 1,392 so we’ll be looking for leadership there to the upside.
The NYSE is our most worrying index. They are aleady down more than 15% (4,675) at 4,633 and the Russell (see David Fry’s chart) is the NYSE’s partner in crime, failing the 15%, 400 mark by 5 points already. So it’s going to be an easy day to look for a turn as we need the NYSE to break over 4,675 and 4,790 is our next stop. The Nasdaq needs to hold 1,352 and get back over 1,392 and the Russell must break over 400 and return to 411 in order for us to see anything more than a weak bounce in today’s action. …
Monday Melt-Down, The Fallen (Big Chart Review)
by Phil - February 23rd, 2009 8:22 pm
What a disaster!
Once again we are in a market that environment that reminds me of the Simpsons episode where Homer jumps over a gorge, crashes, is taken up by a helicopter (Ben) smashing against the wall along the way only to fall all the way from the top again. Pain, pain and more pain every time we try to get long. Today we finished near 11-year lows on the Dow and S&P, so much for that decade of savings….
I said this morning that we had a "wall of worry" to climb this week and we didn’t get very far up it before falling off a market cliff of our own. Fortunately, as I mentioned in the morning, we went pretty bearish into Friday’s close and I said at the end of the morning post "we’re certainly not going to be impressed by anything under 1.25% today." It’s very important to have a trading plan and we peaked out right at the open, well below our 1.25% target. My opening comment at 9:36, despite the "rally" was: "AAPL and the Qs not doing too well this morning. Financials up 3% already, SKF below $180 . We need a nice move in the Transports to shut up those Dow Theory people but this is a very weak morning move so far. Dollar is strong and that’s keeping us down (stocks are a commodity) but weak is weak so, like I said, roll up the long puts when you can and no need to cover the other half with short puts until we pass 1.25% at least."
Nonetheless our F play went well as an agreement with the UAW was announced at 9:44 giving us a quick trip to $1.90 before pulling back to a 10% gain on the day. We bottom fished a little on UNH and X but I said to members at 11:39: "Watch out if $7.40 breaks on XLF, that can drop us 5% fast in the financials. Hopefully it will hold." XLF finished the day down 3.5% but we ended up deciding it may be a little overdone. We shorted FAS and that went well but then we tried to day-trade them to the upside and that led to two aborted attempts to go long as we were trying to catch a wave up that never came. It was all over at 2:34 when CNBC broke a rumor that…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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