Bearish Information

[Jim Nickerson]

Re: Bearish Information re. Margin Debt

From Alan Abelson, Barron's 02/05/07

THE OTHER CHART ON THE PAGE COMES FROM another astute viewer of the investment scene and also no stranger to this space, Alan Newman, editor of CrossCurrents.

What it shows, among other things, is that the insatiable appetite for credit that has been such a critical element in the various asset bubbles in recent years (housing, private equity, hedge funds, etc., etc.), hugely aided and abetted by the open-spigot policy of the Federal Reserve, has been a powerful reason for the great revival in the stock market.

As Alan notes, the combined debit balances of the Big Board and Nasdaq have reached a record high of $303.29 billion. That tops the previous peak of $299.93 billion, set at the end of March 2000.

Essentially, we view the chart as a profile in extreme speculation. And, as we saw in 2000, that kind of excess is typically the perfect prelude to a fall. Reflecting on the spike in margin debt, Alan asks, "How can anyone in a fiduciary capacity buy into this rally at this juncture?"

[Jim Nickerson]

Re: Bearish Information Re. R. Russell hints.

Russell wrote Friday 2/9/07.

Some concern shown by the market regarding housing but no "biggie." I'd want to see three stock market days down in a row before getting too bearish. New lows on the NYSE only 22 today. Keep your eyes on those new lows. If they rise above 40, it starts getting interesting -- for the bears.

Note that the Utility Average was up today. When the real selling pressure comes in -- all the stock averages do down -- ALL of them.

I put this in even though I don't take it as predictive, but I think it is worth noting what an experienced "geezer" like Russell looks for when watching for possible changes in the market, even 3 days down is only a "baby step."

I tend to agree with Russell, that when things start to turn down, ALL the averages go down. There may be some place safe to hide, and in his same note today Russell didn't see anything wrong with being in cash paying 5%.

[Jim Nickerson]

Re: Bearish Information Re. What does Buffett do?

From Sy Harding on Buffett. 2/7/07 http://www.decisionpoint.com/TAC/HARDING.html

If one pays attention to what he says, he does advocate market-timing even publicly, making no bones about advice to get out early when risk becomes high. Some of his quotes in that regard include:

· At the start of the party the punch is flowing and everything's going well, but you know at midnight it's all going to turn into pumpkins and mice. People think they'll be able to get out just before midnight, but everyone else thinks that too.

· What the wise man does at the beginning [of a rising market] the fool does at the end. Once a price history [rising market] develops enough for other people to see it and get envious, greed takes over markets.

· We simply attempt to be fearful when others are greedy, and greedy when others are fearful.
The way I read Buffett is that he says (and puts into practice) that there are indeed times to buy and hold, but also times when risk becomes high and it's just as important to hit the exit before the crowd.

[idianov]

Re: Bearish Information

Interesting piece of news from Feb 9, 2007 at http://www.nationalmortgagenews.com/

Merrill Forces Margin Calls on B&C Clients

Merrill Lynch & Co. -- which has been stung by two high-profile subprime bankruptcies in six weeks -- is conducting margin calls on certain B&C originators that receive financing through the firm's warehouse group.


The low grade ABX indexes for subprime lenders MBS at http://www.markit.com are plunging along with higher grade indexes showing signs deterioration across the board. The MBS investment demand must be going into the drain judging by a high number of subprime lenders closing their doors and Merrill cutting losses before it gets ugly.

[Jim Nickerson]

Re: Bearish Information

Major Stock Market Tops of the Past Century
by Robert McHugh 2/10/07 http://www.safehaven.com/article-6888.htm

McHugh][/b]We've been researching and discovering that almost all the major stock market tops of the past century were marked by a Broadening Top pattern. This pattern, also know as a Megaphone, which also looks like a set of jaws, is uniquely characterized by two mirroring boundary lines. The top boundary line is ascending; the bottom boundary line is descending. What is amazing is that each boundary line has the same slope, one rising, the other falling. We found another one this week: 1965-66's pattern.

.....

The lines are formed by simply drawing trend-lines connecting the peaks and connecting the troughs. Each line is formed by connecting at least 2 points. In other words, neither boundary line is manufactured by a biased analyst. Rather, it is formed where the market decided to top and bottom along its path to a major top. What are the odds that the slopes of these trend-lines would be exactly the same? What are the odds that seven of the greatest market tops of the past century in the Dow Industrials would bear the markings of this pattern? This is not random. This is a normal pattern of distribution and market buying/selling psychology that naturally leads to major tops, and subsequent declines ranging from 10 percent to 40 percent over a period from a month to 11 months.

These patterns were found in 1929, 1957, 1965-66, 1972-73, 1986, 1987, 1998-2000, and now 2004-2007. These were the big-boy tops of the past century. The Jaws of Death pattern.

And, the punch line? We have the exact same pattern as these 7 other occurrences right now in the Dow Industrials.

[Jim Nickerson]

Re: Bearish Information Re. SPX

A Short Look at the Volatility Index

BY MARTIN GOLDBERG, CMT 2/15/07

http://www.financialsense.com/Market...2007/0215.html

The S&P 500 is up trending on diminishing volume. While a correction has been due for quite awhile, the still-alive trend has been for corrections to be of minor duration and magnitude. Each and every correction since the summer rally began has been stopped quickly above the lower Bollinger band with most stopped at the 20 day moving average (shown).

What Goldberg states is true, but who knows how long such can continue?

[Jim Nickerson]

Re: Bearish Information Re. Fred Hickey on Tech.

From Barron's 2/19/07 Alan Abelson's column

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

We chatted with Fred on Friday, and he remains very much of a mind, as he wrote earlier this month in his newsletter, that Vista is "not an epic disaster for Microsoft" because "ultimately, businesses and consumers will resume their regular upgrade patterns and buy PCs that come pre-loaded with Vista." However, he's convinced its effect on the "PC food chain" stacks up as another and very much sadder story.

Spurred in part by a study commissioned by Microsoft that concluded Vista would generate $72 billion in related hardware, software and service revenue, Fred relates, what he calls the PC food chain -- distributors, resellers and solutions providers -- went wild and hugely overbuilt in preparation for a post-Vista release boom that is clearly not coming.

The result, sighs Fred, is that through the length and breadth of the industry, from semiconductor companies to electronic retailers, there has been a massive inventory build-up -- which, he contends, is a prelude to a disaster. He suspects that the first tremors of real trouble will be felt a few weeks hence, when some dismal earnings forecasts begin to seep out.

What confounds him and could greatly exacerbate a collapse in techs is that investors continue bullish on them despite six long years of underperformance by the sector. Besides Microsoft, his most recent published list of stocks he's negative on includes Best Buy, CDW, SanDisk, Texas Instruments, Lam Research, KLA-Tencor, Nvidia, Research in Motion, Apple, Microchip Technology, STMicroelectronics, Amazon.com, International Rectifier, Dell, Novellus Systems, Xilinx, Motorola, Applied Materials, NetLogic Microsystems and Fairchild Semiconductor.

Looking over that abundant roster, it occurs to us it might have been more efficient simply to list the tech stocks Fred's not negative on.

I attempted to remove the links to stocks above but couldn't; they won't work unless you are an online subscriber to Barron's.

[Jim Nickerson]

Re: Bearish Information Re. Swenlin reversal in a week.

Last week in Bullish Comments I posted an opinion by Carl Swenlin of decisionpoint.com suggesting that the equity advance since summer was likely to continue.
http://www.itulip.com/forums/showthr...=7314#post7314 see post #92.

Now this week, letters and emails to him have prompted him to re-evaluate his thinking which is explained here http://www.decisionpoint.com/ChartSp...223_rydex.html

and references an accompanying chart.

notice how in the last few months bull cash flow is declining and bear cash flow is rising. This is a similar pattern to the three prior bull cash flow peaks, albeit much smaller. As in the previous cases, I think this shift is a precursor to a correction or consolidation.

Despite this revision in his interpretation of Rydex Funds cash flows, his indicators are still Bullish for everything he notes in the article, except the dollar (Bearish); crude oil (USO) and 30-yr bond are Neutral.

My impression is that he is a bit more skeptical about the markets than he appeared to be a week ago.

[Jim Nickerson]

Re: Bearish Information Re: What happened Tues. 2/27/07.

http://www.financialsense.com/Market/wrapup.htm

I liked Goldberg's description of the MSM hoopla surrounding Tuesday's "itsy-bitsy-crash." He is worth reading compared to a lot I run across in that he does a good job, I think, of trying to keep his analyses original. Not a jump-on-the-bandwagon sort of guy. The entire article is worth reading.

Complacency Not Wrung Out Media Behavior Proves It

BY MARTIN GOLDBERG, CMT 3/1/07

For a number of reasons, the market is likely to sustain additional losses in the weeks ahead. While the market has been lulled into complacency, Tuesday’s action does not change anything regarding the public’s complacency toward the stock market. Nothing has been wrung out - in fact Tuesday’s action merely reinforces the existence of public complacency. Consider that in terms of historic perspective, there was nothing special about what happened on Tuesday. The magnitude of the drop, only a little over 3% on the S&P 500, was nothing tremendously unusual when taken in historic perspective.

Yet in spite of this rather benign price action, radio, TV, and newspapers were overwhelmed with news, guidance, counseling, cheerleading, discussing, predicting, and various proselytizing about the stock market. CNBC dedicated a night time show to guide their viewers to not get nervous and sell out at the bottom and to focus on bargain hunting. The stock market was the lead story in many news broadcasts both Tuesday evening as well as Wednesday. I’m told that they broke into the Oprah show with a stock market story on Tuesday. While it is refreshing to see the stock market lead, it is totally inappropriate for the market to become the lead story on action that is rather ordinary when taken in historic perspective.

The news stories all seemed to have the same tone. That is, “don’t worry folks; you don’t want to sell out at the bottom.” There was also a lot of talk and advice on “bargain hunting.” In addition, TV viewers were able to watch straight-faced comparisons between Tuesday’s action and that of the 1987 and 2000 crashes. While this may make for favorable TV ratings, there is no technical truth to such a premise. Below is a chart of the Dow Jones Industrials before and through the 1987 crash. In this case, a long standing uptrend beginning in mid-May was finally broken in early September (The top occurred in late August) – more than 30 days from the market top. The broken trend was about one month old when the crash occurred.

By contrast, Tuesday’s action is likely to be the end of an uptrend instead the end of a downtrend as had occurred in 1987. This is clearly shown in the chart below. Tuesday’s action came only 5 days from a (possible) intermediate term top.

[emphasis JN]

[Jim Nickerson]

Re: Bearish Information Re. HUI, XAU

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

3/1/07 Tim Ord, Ord Oracle

Gold Market:
Since little has changed from yesterday, we have kept the same commentary as yesterday’s. We might add that a “Sign of Weakness” appeared yesterday and helps to confirm the downtrend has begun.
“ Below is the chat of Market Vectors Gold Miners (GDX). Previous we have shown what we were concluding was an Elliott Wave (3-3-5) irregular correction. We had the Elliott wave 5 count up from the January low near correct but the market changed the 5Th leg into a “5th wave extension”. Today’s decline confirms our expectation of an (3-3-5) irregular correction to be correct (in our opinion). Our downside target is still the 32 range on GDX and 115 range on the XAU. Price Relative to Gold has crossed down through the red up trend line connecting the lows and has triggered a sell signal by this method. Also notice that the MACD momentum indicator is about to crossover and another bearish sign. Seasonality for gold is also bearish from late January into mid March. The next major impulse wave up may start near the 115 range on the XAU. We are neutral on the XAU for now.”

[emphasis JN]

I'm not an "Ellioteer" so I can't comment on Ord's counting of waves.

I don't know if the Ka in Ka-Poom will happen, but if it does, then I believe its effects will be negative for gold. My impression is that there has recently been a lot of bullishness about gold, and if everyone's bullish who's left to buy?

Finster, http://www.itulip.com/forums/showthr...=7749#post7749 post #8 writing about the gyrations of Tuesday's markets 2/27/07 concluded "Cash went up."

If cash is up, gold is down.

Also Goldberg referenced in post above made comments on Silver Standard (SSRI) and the HUI and regarding latter using Elliot stuff said, "For now the preponderance of evidences suggests a continuation of Wave II, a corrective pattern against the long term bull market."

[Jim Nickerson]

Re: Bearish Information

http://www.iht.com/articles/2007/03/...g/bxinvest.php

Investing: A diehard bear predicts market may drop 50%

NEW YORK: David Tice, whose bet against U.S. stocks the past four years punished his Prudent Bear Fund, said that the market is headed for a drop of as much as 50 percent.

"We see the first crack," Tice said. His Prudent Bear Fund, based in Dallas, is always positioned for a decline. "I've never been more confident in our economic theories."
His $651 million fund has lost 21 percent since stocks began rallying in October 2002. The S&P 500 almost doubled investors' money, including the reinvestment of dividends, during the same period. "We are bloodied, but not out," Tice said.

[medved]

Re: Bearish Information

http://www.itulip.com/forums/attachm...1&d=1173812757

This is the current "rising wedge" pattern of the Permanent Portfolio mutual fund. This is a *really* diversified fund, it includes US stocks, bonds, Tbills, PMs, and Swiss bonds.

PRPFX usually shows consistend downtrend when the *real* interest rates rise, (or, by whatever means it is achieved, *real* global liquidity decreases). A good example is the big drop in May-June of 2006.

This bearish pattern predicts, that another drop is likely between now and the end of summer. If we have a big drop (below the blue line of 200 DMA), I would expect it to be the moment of transition from the current Ka to the next Poom.

m.

[Jim Nickerson]

Re: Bearish Information Re. Margin Debt

Margin debt hits second straight high
By Sam Lewis
March 20, 2007

http://www.investmentnews.com/apps/p...0/REG/70320018

Margin debt figures for the New York Stock Exchange hit a record high last month, breaking a record set only a month before that, according to published reports.

Margin debt, as tracked by the NYSE, totaled $295.87 billion in February, up from January’s record of $285.6 billion. In January, it broke the prior high set at the peak of the so-called Internet bubble in 2000.
Margin debt is the amount of money borrowed from brokerages to buy shares.

Through margin accounts, investors are able to purchase shares on credit.
Market analysts track margin debt activity as an indication of investors’ appetite for speculative trading.

The advance has come amidst the market’s end-of-February drop, the full impact of which won’t be known until March’s margin debt figures are released in April.

[Jim Nickerson]

Re: Bearish Information Re. Gold

http://www.alexa.com/data/details/tr...?url=kitco.com

This link shows the number of Kitco.com hits using a chart.

For a period of 1 year, the current number of hits is at the lowest point, and according to the data provided, the number of visits is down 23% from 3 months ago.

[bart]

Re: Bearish Information Re. Gold

http://www.alexa.com/data/details/tr...?url=kitco.com

This link shows the number of Kitco.com hits using a chart.

For a period of 1 year, the current number of hits is at the lowest point, and according to the data provided, the number of visits is down 23% from 3 months ago.

On the intermediate term, this seems bullish to me.