Bearish Information

[Jim Nickerson]

Re: Bearish Information Re. Gold. ? Bonar.

James West http://www.buythebottom.com/blog/ 12/12/06

Gold: "Net-commercial position decreased by 2,444 contracts. From the commercial perspective I do not see a meaningful rally before we see a correction/consolidation."

Bonar/US$: "Net-commercial position decreased by 3,292 contracts. This is a critical point for the US dollar index, if commercials continue selling after the recent breakdown; this will be a big negative for this market. Unless that happens, look for higher prices as the dollar is setup for a rally."

[Jim Nickerson]

Re: Bearish Information Re. 2000 Redux

Ah, does anyone recall 2000?

http://www.safehaven.com/article-6501.htm

December 14, 2006
2000 Redux
by Paul Lamont

To quote Yogi Berra, "it's déjà vu, all over again."

Interesting parallels are examined between 2K and now. Internet Bubble 2.0, Youth, Mergers, Baseball salaries, and Art.

[Jim Nickerson]

Re: Bearish Information Re. General insanity?

Crash alert

...Today, we take the unprecedented step of issuing a "Crash Alert."...
Bill Bonner Thu 14 Dec, 2006 http://www.dailyreckoning.co.uk/article/14122006.html

From the article, "A woman goes into a grocery store and finds she can get tuna fish at half the price she paid a week ago. She is happy and decides to take advantage of it by buying twice as much. She stocks up and get twice as much for her money. Her husband, meanwhile, goes into his stock brokerage down the street. He finds the same stocks he bought a week ago now selling for twice as much. He too gets excited. He decides to stock up too…but only gets half as much stock for his money. Which one of them is doing the right thing?"

I take what Bonner to be saying is something that was probably said by someone 6 months ago, and might turn out that someone else is saying the same thing in 6 more months. If and when there comes another market crash, I think almost no one will be expecting it.

[Jim Nickerson]

Re: Bearish Information Re. 4-yr. Market Cycle Lows

THE DOW REPORT Tim Wood

Still Up, Still Positive and Still Pressing into the 4-Year Cycle Top 12/15/06

http://www.financialsense.com/Market/daily/friday.htm

Wood writes, "Since 1896, the inception of the Dow Jones averages, there have been twenty-seven completed 4-year cycles. When looking at the data surrounding these cycles collectively, it still suggests that the 4-year cycle low also still lies ahead and that we could even still see the market press higher into the top. But, nothing has changed the statistical data surrounding the 4-year cycle and the evidence is that the 4-year cycle low still lies ahead. Most people are not expecting the decline into that low. Most people seem to be totally discounting the 4-year cycle all together feeling that it’s no longer relevant or that it has all ready bottomed. I’m not buying it because the data just does not support it. Sorry, I have to go with the data rather than feeling or popular opinion."

"Now, when we add the current divergences between the averages and the internals along with the extreme complacency and statistics that continue to tell us that the 4-year cycle low is still ahead, it is reason for concern. It is when we look at this data collectively that is worrisome. Nonetheless, until an actual sell signal is triggered, these divergences can continue and the market can press even higher."

[Jim Nickerson]

Re: Bearish Information Re. Equity Market

Stock Strategists Raise Alarms With Call for Rally (Update2) 12/18/06

By Daniel Hauck

http://www.bloomberg.com/apps/news?p...dKE&refer=news

"Strategists at 12 of the biggest Wall Street firms agree that U.S. stocks will rally next year."

If you buy what the strategists of the biggest Wall Street firms are predicting, then obviously, this post should be in the Bullish Information thread.

But there is reference to at least one possible contrarian in the article,

"I'm an old believer that when everyone believes something is going to happen, the opposite happens,'' said David Kotok, who oversees $850 million as chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey. 'That causes me concern because I'm bullish too.'''

So when you count Kotok in with the others, there are no bears.

"The last time Wall Street unanimously predicted an advance for the S&P 500, in 2001, preceded a 33 percent slump over the next two years. The U.S. economy fell into recession and the Sept. 11 attacks battered financial markets."

[Jim Nickerson]

Re: Bearish Information Re. Gold

http://www.buythebottom.com/blog/

James West 12/18/06 COT Data.

"Gold [ http://www.buythebottom.com/gold.html ]
Net-commercial position increased by 3,886 contracts. The commercial setup continues to support a down to sideways period in the next little while. I remain neutral to bearish on this market, until I see noteworthy commercial activity on the buy-side."

[bart]

Re: Bearish Information Re. 2000 Redux

Ah, does anyone recall 2000?

And our Fearless Leader, (aka Wonder Boy ;)), is copied yet again (although perhaps inadvertently).

[Jim Nickerson]

Re: Bearish Information Re. Insider selling.

December 20, 2006
Alan M. Newman's Stock Market Crosscurrents
Alan M. Newman, Editor

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

If you are inclined to believe that insider selling foretells anything about market direction, then read what Alan Newman' article says.

"Incidentally, Thomson Financial’s stats for the first two weeks of December are even more discouraging than November’s sell/buy ratio to 34.7 to 1. So far, December’s ratio is 55.5 to 1. Insiders can’t even wait until January to avoid the tax bite for 2006? What does that tell you?!"

[Jim Nickerson]

Re: Bearish Information Re. Richard Russell

12/22/06

Richard Russell, dowtheoryletters.com (subscription) commented Friday,
"CONCLUSION -- Hmmm, the Dow dropped 120 points in the last two days before Christmas. That's unusual. Lowry's is now on a sell signal, and my work continues to deteriorate. As I've been saying, caution is the word. At these prices, stocks show little in the way of real value and stocks are not priced today for good profits over the coming decade."

"The seven-months of non-confirmation by the Transports continue to bother me. And why not -- I'm a Dow Theorist, maybe the last one or two last on the planet earth."

I posted this quote from Russell's daily comments because he mentioned "Lowry's is now on a sell signal." I know next to nothing about Lowry's except for a fellow there, Paul Desmond, who maybe runs it for all I know. Desmond developed an indicator for market bottoms based on NYSE volume, if interested search iTulip for "Desmond." His work of which I am aware about market tops is not as easily followed as is the market bottoms indicator. I surmise that Lowry's data are something to which Russell attributes significance, certainly enough that he mentioned its apparent "sell signal" as quoted above.

I have no idea if it is a short-term sell signal or a call for the markets tops.

A lot of individuals have made market top calls, and so far most have been wrong. At some point, somebody will be right.

[Jim Nickerson]

Re: Bearish Information Dominoes for 2007

TH*NK*NG (DOMINOES)
by Fred Cederholm
Economic Analysis Column
Columnist, Baltimore Chronicle & Sentinel
December 24, 2006

http://www.financialsense.com/editor...2006/1224.html


Cederholm is or fancies himself as being a "forensic accountant." If one does not know what that is, he explains in the first part of his article, which he concludes below.

"In 2007, we find ourselves at a precipice regarding so many problems facing this nation. The status of the Dollar, interest rate volatility, our debts/deficits, the real estate bubble, energy dependence, overpriced stocks, negative savings, dependence on foreign capital/investors, disaster ill-preparedness, and an overspread military are all inter-related much like a portfolio of troubled loans that are cross-collateralized and cross-defaulted. The blow-up of one would/ should/ could trigger the toppling of all the rest - much like my childhood string of upright dominoes. Will 2007 be the year of the “dominoes?” "

"So many times in my years spent working on litigation and investigations for the FDIC and the RTC on failed banks and savings and loans, I saw “alleged” guilty parties walk from all their misdeeds, responsibilities, and liabilities. When confronted with evidence against them and given a choice between being crooked or stupid, we so frequently heard: “Boy, was I dumb!” Costs for the problems, misdeeds, and inactions I’ve been chronicling will run in the mega-billions - even trillions of dollars. There is now potential to destroy this nation as we know it for generations to come. Thru my columns, I’m trying to inform my readership to preclude any defense of incompetence, of stupidity, of ignorance, of innocence, and of moronic stubbornness in allowing the guilty to walk free. If the “dominoes” fall in 2007, who will really end up paying the price - the guilty parties, or the people? I’m Fred Cederholm and I’ve been thinking. You should be thinking, too."

[Jim Nickerson]

Re: Bearish Information Re. Contrary Sentiment

http://hussmanfunds.com/wmc/wmc061226.htm

December 26, 2006
Lopsided Sentiment and Unfounded Optimism John P. Hussman, Ph.D.

Overbullish

Returning to the current overbought, overbullish condition of the market, the Russell Investment Group just published their quarterly money managers poll, which shows a fairly stunning 85% of advisors bullish for the coming year. Another roughly 4% expect a flat market, about 9% expect a decline of less than 10%, and just 2% expect a decline of 10% or more. That's amazing given that this is already the second-longest span on record for which the market has not experienced even a 10% correction.

In the latest poll of 80 analysts by Business Week, 71% of the analysts are bullish, with an additional 18% expecting positive returns but below the prevailing T-bill yield. 8% are slightly bearish - expecting a decline of less than 10%, and just 3 of the analysts expect a decline of 10% or greater. Evidently, there's not a lot of “buying power” available from converting that tiny pool of remaining bears, but there's a lot of room available in the bearish column in order to populate a more typical divergence of opinion.

Meanwhile, the “smart money” shows a distinctly different pattern. The latest figures from Vickers show heavy insider selling at 8.4 shares sold for every 1 share purchased. The 8-week average is running at a ratio of 6.9 to 1. As Paul Macrae Montgomery asks, “ We keep reading about how the share buy-backs, cash takeovers, and leveraged buyouts are proof positive that stock prices are a great ‘value'. Well if stock prices are such great values, why is it that all this buying is being down with ‘other peoples money,' and why are the savvy insiders simultaneously selling their own stock?”

Still, it's important to evaluate the bullish arguments carefully. Numerous weekly comments have already detailed the weak evidence for the most popular bullish argument - the Fed Model (aka “capitalized earnings model,” aka “stocks are still cheap relative to bonds”, aka “multiples are attractive on a price-to-forward earnings basis”). Here are a few additional bullish cases, along with my impressions.

Most weeks, Hussman's comments are worth reading.

[Jim Nickerson]

Re: Bearish Information Re. COT Data by West.

? Bearish on equity indices.

This afternoon I received the note below in an email from James West. He posts on financialsense.com and if one accesses one of his posts, it has a method to use to gain his free comments via email. To understand his comments one needs to look at his charts at the link below.
http://www.buythebottom.com/cot_charts/

We are finally getting some clues from commercials in regards to the stock-market: there was significant commercial selling in the Dow Jones and the Nasdaq-100. The stock-market looks like it has made/making a top. Notice also that commercials are buyers of the VIX, this again is forecasting that a healthy dose of volatility / fear is coming to the market indicative of price declines. Will the decline come in the last week of 2006? I would assume not, as the trading is light ahead of the holidays, but I am far from certain. In any case, if it doesn't come in 2006, watch out in 2007.

Right now the only index that looks anything close to being bullish is the Russell 2000 with commercials currently at a total of 6,793 contracts NET long; as long as we remain above 5,000 I am less bearish than what I would otherwise be. But that could change by the end of this week for all I know, so keep checking the data, because when/if the markets do breakdown they will not wait around.

** Crude oil is not doing much, but remains setup for a rally. Commercials are buyers of gold during the most recent pull-back, I do not see a setup yet, but it is getting close.

** The US dollar broke down while being setup for a rally, this was unusual and presented a buying opportunity. The setup continues to point to higher prices for this market.

[Jim Nickerson]

Re: Bearish Information Re: Merger Wave Bearish?

Spartacus http://www.itulip.com/forums/showthread.php?t=737 found an interesting piece by Mark Hulbert discussing the relationship between merger activity and overvalued stock markets.

Hulbert quote.

"The bottom line is this: The current merger wave means that stocks are probably closer to the overvalued end of the spectrum than to the opposite extreme, and that they also are vulnerable to tighter money in coming years."

"This doesn’t necessarily mean that stocks will fall in the near future. But it does imply that their prospects are well below average."

From what I read, there may never again be "tighter money."

[Jim Nickerson]

Re: Bearish Information

Out of curiosity for 10 days I have kept track of the number of views of this Bearish and the other Bullish thread.

There have been 220 new views of the Bullish thread.

There have been 398 new views of the Bearish thread.

I don't what that means, if anything. Possibly it suggests there are more "bulls" wondering if there is anything new under the sun to turn them bearish.

Or, perhaps a lot of "bears" continually seeking support for their negativism.

Probably some of both.

[Jim Nickerson]

Re: Bearish Information Re. Market history

Richard Russell, dowtheoryletters.com 12/29/06 noted some interesting market history that he attributed to Growth Fund Guide.

Russell wrote, "My friends at Growth Fund Guide (a really excellent advisory out of Rapid City, S.D.) notes in their latest report that since the 1890s, every '56-'57 two-year period has seen an important decline (examples, 1946-47, 1956-57, 1966-67, 1976-77). Some of these declines have started in a '56 year and others have started in a '57 year, but there has never been a two-year '56-'57 period when the market has not experienced an important decline. Six of these declines were more than 35% (the largest was the 49.1% decline of 1936-37) and three of the declines were mild or below 19% -- there was one decline in 1896-97 of 17.8%, one in 1926-27 of 16.7% and one in 1996-97 of 13.3%."

As I understand what he wrote, it seems conflicted in starting with " '56-'57" while citing examples from many periods not in the "50's. I guess that is a typo. Interestingly they did not cite 1986-1987, seems I recall an "important decline." in that period too.

Also Russell, "Growth Fund Guide follows the dividend multiple (price times the dividend) for the S&P 500 going back to the mid-1800s. For instance, the price/dividend ratio for the S&P was a fat 35 at the 1929 high, and you know what happened after that. In February 1966 the price/dividend ratio was a high 34 and a long bear market followed. In August of 1987 the price/dividend ratio was a high 38, after which came a market smash."

Russell wisecracks, "So what's the price/dividend today? It's a record high 57, but never mind, it's possible that "this time it's different," and there'll be no negative aftermath following the current extreme overvaluation."

From last Saturday's Barrons the SPX was 1418.30 and dividends were 25.67, that equals 55.25 ratio.

Not to worry if one is bullish, most everyone is, and someday something will happen in the market where "this time it's different" will be correct.