Bullish Information

[Jim Nickerson]

Re: Bullish Information Re. Asian Markets

http://online.barrons.com/article/SB...ne_market_week



I don't know whether this is a bullish indication or not. If one is momentum player, perhaps it is bullish for most of Asia. When markets drop as China did last week in 3 days, it show how quickly gains can disappear, but if one has made 200%, of what significance is a minus 10%?

In the 2 weeks since I posted the above, China is back at new highs.

Should have bought the dip.

[Jim Nickerson]

Re: Bullish Information

http://www.decisionpoint.com/ChartSp...216_rydex.html

Carl Swelin Cash Flow Shows Wall of Worry

It is also worth noting that, in spite of a price advance of around 18% since last summer, investor response has been remarkably tepid, as demonstrated by the Ratio's failure to move to the top of its normal range. In my opinion this means that there are far too many people ignoring the trend in favor of their personal belief that a bear market is an absolute and immediate certainty -- a belief they have held for many, many months. I am reminded of an unforgettable line from James Dines: "Don't think. Look!"
Bottom Line: The Rydex Cash Flow Ratio shows that investors have been extremely reluctant to accept the market advance from the summer lows. Until they do, the advance is likely to continue.

This article which is short shows CRB as the only Bearish rating, everything else is either rated Bullish or Buy with Crude Oil (USO) an 30-yr. bond rated Neutral.

[Jim Nickerson]

Re: Bullish Information Re. Volatility

Sy Harding present interesting data on volatility of the market recently.

http://www.decisionpoint.com/TAC/HARDING.html

How unusual has the lack of volatility been? So unusual that investors and the media are astonished when the Dow occasionally closes up or down 100 points in a day. If it's to the upside it creates excitement. If it's to the downside it creates alarm.
And why not. Over the last three years there have been only 24 days when the Dow closed upor down 150 points or more. That's an average of 8 times per year. Is that unusual? During the five years from 1998 through 2002, which included roughly 2.5 years of bull market, and 2.5 years of bear market, there were 245 such days. That's an average of one day out of every five trading days that investors had to contend with the Dow closing up or down more than 150 points.
And even that was nothing. During those same five years (from 1998 through 2002), there were 122 days when the Dow closed up or down more than 200 points, 56 days when it closed up or down more than 250 points, 30 days when it closed up or down more than 300 points, and 8 days when it closed up or down more than 400 points.
How many times in the last three years has the Dow closed up or down 200 points in a day? Just five. How many times in the last three years has it closed up or down more than 250 points? None. 300 points? None. 400 points? None.
It's even been quite some time since the market has had that kind of move in a week, let alone a day. The last time the Dow gained more than 200 points in a week was mid-November when it closed up 234 points for the week. Prior to that you have to go back to August 18 of last year, when the Dow gained 293 points in a week. And you have to go back to June 14 of last year for the last time the Dow declined more than 200 points in a week, when it declined 351 points.

Will investors be surprised if and when volatility returns?
There was a similar period of very low volatility back in the early 1990s. Suddenly one day in 1994, the Dow declined two days in a row, for a total of 3.6%. One of my subscribers called the office in a panic and demanded that I issue recommendations of some kind, in view of the fact that "the market has just crashed". I had been assuring subscribers that there had only been two market 'crashes', a decline of 23% in 1929, and 26% in 1987, in 100 years, and another was not likely, perhaps ever. But after a long period with little to no volatility, no waves, or even ripples, a one or two day decline of 3.6% can seem like a crash.
Maybe this time will be different. Maybe volatility has gone away for good. Perhaps it moved down the road, got into real estate, and won't be back.

[Jim Nickerson]

Re: Bullish Information Re. Maund on Gold

http://www.safehaven.com/article-6963.htm Clive Maund 2/21/07

This is a couple of days old now, but he thinks the commercial traders are facing two options, either cover their short positions or face annihalation.

At the time of writing [2/20/07] gold has been temporarily capped again at the critical $680 level, but the strength of today's advance, with gold up over $20 in the space of a few hours, provides ample illustration of the disarray in the Commercials' ranks. Put yourself in their position, would you be willing to put your head on the block to save your compatriots from a wipeout? - probably not. It will be a case of every man for himself and so we may witness - are already beginning to witness - the rare spectacle of the Commercials in a state of blind panic.

The sudden $22 rise in gold today is believed to be the result of the onset of an unseemly scramble by the Commercials to cover their short positions. It's anyone's guess what will happen when the key $680 level is decisively overcome - all hell could break loose. It could quite closely resemble the scene when someone yells "fire!" in a crowded theatre.

Today's close (Friday) $GOLD WAS 686.70, so perhaps Maund will be proven correct, so far he seems to be.

[Jim Nickerson]

Re: Bullish Information Re. The World

Dan Sullivan, who is a long-time newsletter writer, in The Chartist, 02/22/07 http://www.thechartist.com/ (for subscription information) has been unflinchingly bullish since April 2003. He remains so now and puts forth his reasons.

The bottom line is we are in a world wide stock boom.
.
.

There is nothing more bullish than a market which continues to overcome one apparent obstacle after another i.e. climb a wall of worry. The slowing economy, $60 oil, subprime mortgage meltdown and the prospect of single digit profit growth in the coming quarters has not slowed investor enthusiasm for this bull market. Every pullback is greeted with renewed buying. This is evidenced by the fact there has not been a single down day on the S&P 500 of greater than 2% in the last 983 trading days. In fact, since the last S&P bottom on June 13, 2006, the largest single day loss was 1.36% on November 27, 2006. Furthermore, since the recent January 5 low in the Dow and S&P, the small and midcaps have become the leaders. Since January 5 the Russell 2000 has gained 6.6%, the S&P Midcaps SPDR 8.6% vs. the Dow gain of 2.75%. Historically, a market which sees the small and midcaps stronger than the large caps is representative of a healthy bull market.

We all know that trees do not grow to the sky. Which begs the obvious question, how much upside does this bull market have in it? There is no way to tell in advance of the fact how long the current uptrend will continue. However, there are no signs of a potential top or even a correction at this point. Experienced investors realize that the market can always turn on a dime. The name of the game is to have the odds in your favor and at this point of the cycle, the odds continue to favor the upside. The advance/decline line, which is just three trading sessions off of its bull market highs, has historically topped out ahead of the overall market, while the Utilities, which are just fractionally under their historic highs, often have a greater lead time than the A/D Line. As previously mentioned, the midcaps, which have come to the fore and are now leading the parade, bodes well for the market as well as the performance of the NASDAQ, which has broken out into higher ground. Add to this the impressive performance of the Value Line Geometric which is only 5% away from record high territory and you have a market in which there is participation all across the board. The high-low differential which is a ten-day moving average of new highs vs. new lows is near its highest level in over two years. Our advice for long term investors and traders is to continue to maintain current positions. Bottom line, we are in a bull market which has further to run until we see evidence to the contrary.

Having read Sullivan off and on over the years, these arguments are not atypical of his assessments. He is a momentum invester, "buy high and sell higher" a stategy that has worked well for him most of the time, though as I recall his "indicators" had him out of the market in 1999 as it went hyperbolic, but over the cylce, I expect he did okay.

The weekly NYSE adv-dec line was at its high for the week after Friday's close.

I sit here thinking whether or not I should buy into his arguments, which I personally think have some validity, but I am not going to go long anything now. As long as I maintain my opinion about this, the market will likely continue higher.

[jk]

Re: Bullish Information

As long as I maintain my opinion about this, the market will likely continue higher.

i feel the same way, jim. the most bullish piece of information i know [re equities] is that i'm bearish. at least, that's how it feels. i keep seeing things i've been intending to buy -- bhp, sgf and so on -- going up without me, because i've been waiting for the big pullback. if i get so tempted that i actually go long, i'll post it in the "bearish information" thread, so you can go short.

[DemonD]

Re: Bullish Information

just be patient guys. With the current bull run in stocks, I feel like I truly understand the axiom of "The best time to get in is before the bubble."

And this of course is why diversification is so important... if you were diversified into stocks in 2004, you would be sitting pretty now. I see 2007 as similar to either 1998 or 1999, although I wasn't investing then so I don't know if the p/e ratios are there. The point is that putting new money in now is risky, very risky, but if you are in then by all means STAY in while the dumb money moves into the market.

JK I think you are right to wait for a big pullback. I'm seriously annoyed that my limit orders for a certain mining company did not go through (i set the order at 2 cents below the lowest price), and now that company is up 19% in just two weeks based on commodity prices. Some oil companies i've been tracking are also up a good 5-15% in the past month after the pullback and now runup in oil prices. I think it's good discipline to stick to a price point that you want for a stock, and if it runs away from you, then let it go. There are so many stocks out there it's worth it to wait for what you want to come down to your level. It may be a little "safer" but you're more likely to keep your money that you do have and when the stock you want drops into your buy zone you will feel much more comfortable, and plus assuming the company's fundamentals are okay, will be much more profitable.

In the meantime I'm not paying a 20% premium on any stock, and I'm still looking for my exit point from the market in the next 6-18 months for some of my stock positions.

[Jim Nickerson]

Re: Bullish Information

i feel the same way, jim. the most bullish piece of information i know [re equities] is that i'm bearish. at least, that's how it feels. i keep seeing things i've been intending to buy -- bhp, sgf and so on -- going up without me, because i've been waiting for the big pullback. if i get so tempted that i actually go long, i'll post it in the "bearish information" thread, so you can go short.

I'll be watching.

I was just reading Chinese Market Mania by Mike Hewitt 2/24/07 http://www.safehaven.com/article-6990.htm in which he makes comments on the small investor in the Chinese Shanghai market (P/E 33 vs. Hong Kong ~18) In Shanghai retail investors control 60% of the shares, in Hong Kong institutional investors control 70% of daily transactions. In Shanghai, the "A" shares index has gone up 200% in 16 months.

The exuberance is seen across the board, including those companies with poor business operations and/or financing. Tianjin Global Magnetic Cards jumped 137% after it failed to report quarterly earnings last April. Shanghai Haixin Group shares doubled over the next two months after its CEO was under investigation for "irregular activities". Shanghai New Huangpu Real Estate rose 111% in five months after the company was linked to a major corruption scandal involving the Shanghai pension fund. The Industrial and Commercial Bank of China, considered to be nearly insolvent only a few years ago, was at one point the second largest bank in the world behind Citigroup. It appears that for the time being, any news is being regarded as good news.

Many investors believe that luck and confidence in that the government won't permit share prices to collapse are more important than fundamentals. A 61-year-old retiree who gave her name as Miss Hou admitted that she didn't know how to choose a stock and purchased those companies who's names sound lucky. Let us hope that Miss Lou is in the minority.

[JN emphasis]

I am sure I am less capable than Greenspan in recognizing bubbles, so what is going on in China could not be a bubble, could it?

[Jim Nickerson]

Re: Bullish Information

just be patient guys. With the current bull run in stocks, I feel like I truly understand the axiom of "The best time to get in is before the bubble."

And this of course is why diversification is so important... if you were diversified into stocks in 2004, you would be sitting pretty now. I see 2007 as similar to either 1998 or 1999, although I wasn't investing then so I don't know if the p/e ratios are there. The point is that putting new money in now is risky, very risky, but if you are in then by all means STAY in while the dumb money moves into the market.

JK I think you are right to wait for a big pullback. I'm seriously annoyed that my limit orders for a certain mining company did not go through (i set the order at 2 cents below the lowest price), and now that company is up 19% in just two weeks based on commodity prices. Some oil companies i've been tracking are also up a good 5-15% in the past month after the pullback and now runup in oil prices. I think it's good discipline to stick to a price point that you want for a stock, and if it runs away from you, then let it go. There are so many stocks out there it's worth it to wait for what you want to come down to your level. It may be a little "safer" but you're more likely to keep your money that you do have and when the stock you want drops into your buy zone you will feel much more comfortable, and plus assuming the company's fundamentals are okay, will be much more profitable.

In the meantime I'm not paying a 20% premium on any stock, and I'm still looking for my exit point from the market in the next 6-18 months for some of my stock positions.

DemonD,

Some days I wish I didn't know you. I keep trying to figure out whether or not you are young and foolish and I am just an old fool.

I certainly am in no way prepared to tell you that you are wrong, my fear for my own sake is that you may well be correct. Just be careful out there, and if you ever get to feeling, "I cannot believe I have made so much money via my genius" or however you see it, it could be wise to lighten up.

[DemonD]

Re: Bullish Information

Jim, you mentioned the p/e ratios above. The US broader market is closer to that 18. Okay actually let me get the number.

As of 1/31/07, the P/E ratio of the S&P 500 right now is 16.9. I obtained this information from looking at the vanguard 500 fund detailed webpage from vanguard.

Here is a pdf file that looks at the p/e of the s&p 500:

http://www.systemsandforecasts.com/A...onth/Nov02.pdf

highlight:

The 25 year P/E average of the S&P 500 is 17.78, the 50 year average is 16.48. The
level on June 30, 2002: 36.99.

This confirms more or less what I believe about the market. It's pretty much at fair value, without any reason to buy (nothing cheap) or sell (nothing really overvalued).

Your shanghai index looks like a definite sell. The Hong Kong Index looks like a mild sell.

I would say US companies would be a sell, but for the fact that so many companies that are multi-national and take advantage of of deflated wages of non-US countries.

Also Jim it's not like I've made hundreds of thousands of dollars. My total net worth is under 6 digits. Like many people I have made good and bad investing decisions, but on the whole I'm ahead and I find I get better at deciding when to buy and sell as I gain experience. I firmly believe now is NOT the time to sell stocks unless you are holding stocks that are real-estate related, and of those I own absolutely zero.

[Jim Nickerson]

Re: Bullish Information

2/27/07 and 3/5/07 were 90% down days in volume and points on the NYSE as defined in studies by Paul Desmond (for more info search iTulip for Paul Desmond).

3/6/07 was a 90% up day in volume and points on the NYSE. As I understand Desmond's works, such 90% days (called either "panic selling" or "panic buying" days are significant). A panic buying day following panic selling days are historically good entry points for being long the equity markets. Generally panic buying days as happened on 3/6/07 do not follow so quickly on the heels of panic selling days as occurred on 2/27 and 3/5. However, similarly close days did occur back last summer, and turned out to be quite indicative of an excellent time to be long the US equity markets.

Over the weekend, I received a "freebie" special report from Lowry's Reports (that is Desmond's firm: Lowry’s Reports, Inc. 1201 US Highway One – Suite 250 North Palm Beach, Fl. 33408)

One of the many unique indicators on our Lowry onDemand website is the percentage of Lowry stocks trading above their 10-day moving averages. This indicator has proven to be very helpful for our clients in measuring the short term extremes of market selectivity. Its accuracy in identifying worthwhile intermediate buying opportunities from time to time has also been especially helpful. That is, a number of significant buying opportunities have been identified in the past after periods of market weakness have caused the percentage of stocks above their 10-day moving averages to drop below 10%.

For example, as a result of the recent intense stock market drop beginning on February 27th, the 10-day % indicator dropped from its early-February’07 peak of 84.6% to a low of just 3.77% on March 5th, reflecting a deeply oversold market condition. The table below lists all similar cases since 1990 in which the percentage of stocks above their 10-day moving averages has dropped below 10%, and the resulting market action, as measured by the DJIA, over subsequent 2 weeks, 3 months, and one year periods:In summary, since 1990, there have been 18 cases in which the percentage of stocks above their 10-day moving averages has dropped below 10%. In 78% of those cases, the market was up an average of 2.98% in the next two weeks. In 94% of the cases, the market was anaverage of 8.9% in the next 3 months. And, in 94% of the cases the market was up an average of 20.1% in the next 12 months.

support@lowrysreports.com. Contact if you wish subscription information.

Another advisor I follow, Dan Sullivan, The Chartist, wrote Tuesday 3/13/07:

With all of the widely followed indexes closing at or near their lows of the day there is a distinct possibility that the May 5th lows where support is in evidence will be taken out in tomorrow's early going as the market probes for an effective bottom. With our models in a positive territory as they have been since 04/08/03, we remain steadfast in the bullish camp.

http://www.decisionpoint.com/TAC/TODD.html

We were quite pleased with the final result on Wednesday. We thought there was a good chance for the market to hold the closing lows of March 5, but when the Dow was down 135 points intra day, we

strongly considered hiding under the bed. As it turned out, the lows did hold and what we ended up with was a high volume reversal. There are no guarantees in this business, but that normally has bullish implications for the next several weeks. The next task for this market is to close above the levels of March 12. This will give us a pattern of ascending highs and ascending lows or an upward zigzag on the daily charts. We noticed another interesting point today. The EEM which is the ETF for emerging markets shows good relative strength versus the S&P500. It didn’t come close to its March 5 low. Upon further investigation, we found to our surprise, that the EEM tends to lead theS&P.

My interpretation from these observations and comments are that what began with the big down day back on 2/27/07 may not be the "beginning of the end" just yet.

Last edited by Jim Nickerson; March 15, 2007, 07:10 AM.

Jim 69 y/o

"...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

Good judgement comes from experience; experience comes from bad judgement. Unknown.

[bart]

Re: Bullish Information

There was a $17 billion 7 day US Treasury hot money injection (TIO) today that also likely had something to do with the markets behavior.

TIO page
http://fms.treas.gov/tip/index.html

My daily page, including TIO charts
http://www.nowandfutures.com/daily.html

[Pervilis Spurius]

Re: Bullish Information

Bart, I'm curious if it is the timing of this announcement that can have effect on the market. What time did that announcement occur? Does it coinicide with the dramatic midday reversal yesterday? Does GS, or C, or whoever the PPT operators involved are buy the market upon announcement of the TIO before the auction takes place? Are my questions moot because I'm misunderstanding something?

[bart]

Re: Bullish Information

Bart, I'm curious if it is the timing of this announcement that can have effect on the market. What time did that announcement occur? Does it coinicide with the dramatic midday reversal yesterday? Does GS, or C, or whoever the PPT operators involved are buy the market upon announcement of the TIO before the auction takes place? Are my questions moot because I'm misunderstanding something?

You're tracking pretty well with how I view the area.

My best answer is that I don't know. More often than not, the initial announcement is time coincident with the start of a move in my experience over the year or so that I've been tracking TIOs... and sometimes it's not.
All the initial public TIO auction announcements occur around 10 PM EST, and results are announced just after 11 PM EST... but the Treasury site does make mention of non public announcements to the banking system one day early.

In this case, it appears to me (opinion only - no facts) that the various trading desks that got part of that $17 billion waited until the markets were close to breaking below recent lows and then started buying, so as to get an additional effect from short covering.

[Jim Nickerson]

Re: Bullish Information

PETER BRIMELOW
Why Sullivan isn't worried
Commentary: Chartist editor says bull market's still alive and well
By Peter Brimelow, MarketWatch
Last Update: 12:01 AM ET Mar 19, 2007

http://www.marketwatch.com/news/stor...A4849B%7D&dist=

But Sullivan doesn't expect this. He thinks March 14, when the Dow lost 136 points before recovering to finish ahead 57, was a "key reversal day," and that the storm has passed.

Why is Sullivan so sanguine? His "models" are proprietary indicators they are presumably extrapolations from his stock-picking method, a variant of relative strength, sometimes summarized as "Buy high, sell higher." But he also offers a number of rationales.

One is that, although Sullivan acknowledges the subprime mortgage market is "a very real concern," he also says flatly that it's getting "too much attention."

Nice to know.

Another Sullivan rationale: Recent market volatility has to be put in perspective. He writes: "Although volatility has returned, it is nowhere near the levels of 2000. We activate our hotlines whenever the market as measured by the Dow rises or falls 1% or more. Back at that time, we were doing hotlines almost on a daily basis."

Prior to March 13's 242-point down Dow, he writes, "there had not been a single-day decline greater than 2% in over 980 trading sessions." And he adds that "on a point basis, it was the seventh-largest one-day decline in the history of the Dow. But on a percentage basis, it doesn't even qualify in the top 250 worst performances. Since 1950, it would rank as the 37th biggest single-day flop."

Sullivan also prints a list of the top 10 worst single-day percentage declines in the Dow since 1950. He concludes: "As you can see the stock market recovered nicely with every period producing gains 60, 90 and 120 days after the drop."

Sullivan's Actual Cash Account portfolio is currently 95% invested.