MarketVVizard's Market Thoughts

Top 510. Nov 20, 2003 2:11 PM

» Normxxx - Re: Re: Thoughts

In response to message posted by MarketVVizard:

What about the Thanksgiving week rally?

-- posted by Normxxx

Top 511. Nov 20, 2003 3:18 PM

» pbradford6 - Re: Re: Re: Thoughts

In response to message posted by Normxxx

What about the Thanksgiving week rally?

That would be nice! Can you arrange one a long with a Santa rally? smile

-- posted by pbradford6

Top 512. Nov 20, 2003 3:55 PM

» Normxxx - Re: Re: Re: Re: Thoughts

In response to message posted by pbradford6:

Be thankful for what you get! I'll have to look up the stats for the Santa Claus rally.

Two of the most positive days of the year historically have been those immediately surrounding Thanksgiving. This phenomenon has been in effect for several decades, and it shows few signs of letting up. Since 1950, the day before Thanksgiving has been positive for the S&P 500 more than 77% of the time, with an average return of 0.4%, a maximum gain of 2.9% and a maximum loss of 1.9%. The day after the holiday has been just as positive, with 79% of the days closing higher than the day before. If one had invested $10,000 in the S&P 500 on the close two days before Thanksgiving and sold on the close the day after the holiday, that $10,000 would have turned into just over $15,000, with an amazing 87% of the trades being profitable to some degree. That’s a pretty good return for the 50 years or so, considering one would have had money at risk only 2 days each year.

A common perception is that since seemingly everyone knows about these holiday biases, then traders likely buy earlier and earlier, trying to get a jump on the other suckers that come in later. I’m not sure why that perception exists, because it’s just not true. Market performance around this holiday has been very consistent for the past 50+ years.

If we look at times when the day before the holiday goes against its historical pattern and closes negatively, then it doesn’t have much of an impact on the day after. In fact, the four times when the day before closed down by more than 0.5%, the day after bounced back three times for an average gain of 1.2%. The other time, it lost 1.5%.

The day before Thanksgiving had a streak of nearly 20 years from the 1960’s to the 1980’s where it was positive without fail. Since that time, there have been 7 down days, some relatively large. However, the days before that haven’t become more positive during that time, which would have signaled traders were buying in anticipation of the positive seasonality. While the day before and the day after the holiday are typically positive, the day three days before and two and three days after are historically negative, though not massively so.

There is little evidence that the bias around this holiday is changing from its historical pattern, so although nothing is perfect, this is about as close as you’re going to get, at least with a one-input method. Buying before Thanksgiving and selling one day after has been a winning trade for many years, and there’s no reason to believe it won’t continue.

For a second input, the markets are quite oversold, short term.

-- posted by Normxxx

Top 513. Nov 20, 2003 6:49 PM

» MarketVVizard - Mortgages

Until today, it seems mortgage rates have been quietly creeping down without much fanfare. From bankrate.com I currently see rates as low as 5.26APR no points no orig. fee on a 30 year fixed. I'm surprised I haven't gotten a Rogergram yet (maybe he finally purged me from his list).

With a tax adjusted rate in the low 4's we are about as close as I've ever seen to the "paid to borrow" point. And considering my longer term inflation forecast, I think now is a great time to make a move.

On another note: Fannie Mae continues its RELENTLESS advertising (or should I say "sales") campaign running radio ads all day long on Bloomberg radio, television commercials on prime time, and full page ads in Barron's. You have to ask yourself why they are so eager to sell their stock. On the same token we learned today that GE is also selling their mortgage insurance business, does this tell you anything?

Speaking of spin offs... November has been the biggest month for IPOs in well over a year, and December is on track to top November. This is very bad news for the market if you believe in liquidity theory.

p.s. BRCD down 10% AH after missing its numbers.

-- posted by MarketVVizard

Top 514. Nov 20, 2003 6:56 PM

» rasputin13 - Re: Re: Re: Re: Re: Thoughts

In response to message posted by Normxxx:

"If one had invested $10,000 in the S&P 500 on the close two days before Thanksgiving and sold on the close the day after the holiday, that $10,000 would have turned into just over $15,000."

Are you pretty confident regarding your math here? I'm thinking you might want to check it. I could be wrong tho'.

-- posted by rasputin13

Top 515. Nov 20, 2003 7:33 PM

» Normxxx - Re: Re: Re: Re: Re: Re: Thoughts

In response to message posted by rasputin13:

Well, I lifted the figures from a published report (sigh). I don't know what the compounded annual return would be, but the 0.4% average return compounded over 53 years (which should yield a spuriously high result, if I am correct) would only yield $12,356.25. Chalk the rest up to inflation.

-- posted by Normxxx

Top 516. Nov 20, 2003 7:53 PM

» Normxxx - Re: Re: Re: Re: Re: Re: Re: Thoughts

In response to message posted by Normxxx:

I see the error. The 0.4% was only for the day before Thanksgiving. If we also add the day after Thanksgiving (as in the example), we probably get to $15,000+.

-- posted by Normxxx

Top 517. Nov 21, 2003 6:55 AM

» Austrian - Re: Mortgages

In response to message posted by MarketVVizard:

VViz,

If you are contemplating a mortgage, for what ever reason, and believe inflation is coming down the pike, then you should take the longest fixed term policy available. The longest available (which may take a bit of searching) is a ten year interest only followed by 30 year amortized, for about an eigth premium over standard 30 year mortgage. Word on the street is a 15 year interest only is coming out shortly. Right now I have a COFI, care of Roger, and will seriously contemplate the above mentioned instruments after my pre-payment penalties expire.

I think housing and mortgages will remain strong for at least another couple years, as this is the mechanism for introducing new spendable monies by the typical consumer. When this cycle ends, consumer retrenchment and all the associated implications (bankruptcies, debt liquidations, etc) is inevitable. I do not think that will be allowed to happen until after the election, and will only happen in a "managed way", meaning over a sustained period of time.

Personal Random Musings

I am personally leaning toward inflation of commodities and necessities and deflation in consumer junk. I believe we will have a bout of stagflation caused by the devaluation of the US dollar leading to import inflation of things like oil, natural gas, steel, etc while consumer crap in Wal-Mart remains low priced. After the stagflation, massive 1970's style inflation or worse.

Recall my secular shift posts from several months ago, this reasoning (in my delusional mind anyway) is consistent with that thesis.
Oh, and for all you who want to label me a permabear or a pessimist, I am VERY VERY BULLISH on GOLD, SILVER, FOREIGN CURRENCIES and NATURAL GAS. These plays seem to be the lowest risk, highest potential reward sectors in the market for the reasons outlined above and in previous posts.

Down the road a ways, say five to seven years from now, I think these sectors will be deep in a liquidity driven bubble and will share many of the same characteristics of the late 1990's internet craze. Which will be my step off point.

-- posted by Austrian

Top 518. Nov 21, 2003 7:32 AM

» Kirk - How would you buy/invest in Natural Gas?

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In response to message posted by Austrian:

Oh, and for all you who want to label me a permabear or a pessimist, I am VERY VERY BULLISH on GOLD, SILVER, FOREIGN CURRENCIES and NATURAL GAS. These plays seem to be the lowest risk, highest potential reward sectors in the market for the reasons outlined above and in previous posts.

How would you buy/invest in Natural Gas?

Myself, I am playing the BOWG gamble/gambit... I think the promoters are setting up to take advantage of higher natural gas prices and make a killing like they did with iNet stocks.... they seem to be accumulating shares now... perhaps hoping for success like IVAN had?
http://stockcharts.com/gallery?ivan

for me, that is a penny stock gambit so I'd like to have a more "solid" way to participate but I have not seen any home runs. Someone I know did well with IVAN...
http://stockcharts.com/gallery?ivan

-- posted by Kirk