MarketVVizard's Market Thoughts
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» MarketVVizard - Re:Market
In response to message posted by azxcvbnm:
MarketWiz, I thought Gold's decline and the rise in the dollar were positive news for the stock market. Gold's sell off means the money is probably headed to bonds or stocks, and a stronger dollar will encourage foreign investment in our stock market. Am I wrong?
As I like to say, you don't know your right (or wrong) until you bet! 
That said, I was stopped out of the QQQ short (basically break even) yesterday. Still short NVLS and it will probably be put to me over the weekend (around 3% profit).
I am planning to short the open today. My stop will be a bit higher this time, 1% above the 52 week high.
While at a glance you might think Gold down, dollar up is good for the market -- no, I do not believe this. Think about the last year -- market has been on fire while gold was going up and dollar down. Now you want to believe that a reversal will be good for the market? The biggest red light is merely the fact that "something different" is going on here. That and the fact that sectors are clearly looking "toppy". I'll admit I'm wrong when the market proves me wrong, by breaking out to new highs (which could happen today for all I know).
As Hussman said months ago, the revaluation of the Yuan could be disastrous to the US economy. I agree with this. The moves in gold and the dollar are cyclical in my opinion, we were LONG overdue for a pause, nothing goes straight up or straight down. Where is all the money going? Well its been POURING into treasuries recently. I now believe that trend will continue (more on this later - yes, I do believe lower rates ahead). I also believe that money will continue to dump into real estate and out of stocks in the coming year.
I will be posting later today some content from Marc Faber's book "Tomorrow's Gold" which I found interesting. He basically describes the 6 phases of an "emerging market" (one of my biggest beefs with Faber is his ambiguity and redefining of terms) which can very clearly be applied to the US markets at this time. More later...
-- posted by MarketVVizard
» MarketVVizard - From latest public Trimtabs [Dec 22]
From latest public Trimtabs [Dec 22](which I think has some good points as always):
____________________________________________
BOTTOM LINE: WE TURN FULLY BULLISH FROM CAUTIOUSLY BULLISH. ABSENT AN EXOGENOUS SHOCK, WE EXPECT TO STAY FULLY BULLISH THROUGH JANUARY.
We turn fully bullish from cautiously bullish. What's more absent an exogenous shock, we expect to stay fully bullish through January.
The reasons are simple. Both the new offering calendar and tax selling-whether to offset losses in prior years or to offset losers against this year's winners-are winding down. Thus, the supply of shares is diminishing. At the same time, not only do inflows from individuals-undeterred by the usual December concerns about taxable distributions-and from pension funds remain heavy but corporate buying has resumed.
HANGOVER FROM STOCK MARKET PARTY WILL AWAIT BINGING INVESTORS EARLY NEXT YEAR.
Investors should enjoy the stock market party while it lasts. For a few weeks, the liquidity picture should remain wildly bullish as the new offering calendar lies dormant. At the same time, individuals will be chasing the rising market and pouring year-end bonus money into equities.
Beginning in February, when insider selling will resume in full force and public companies-the house in the stock market casino-begin printing more new shares than investors' cash can absorb, the festive atmosphere on Wall Street will start to ebb.
Previously we had written that a spike in tax payment related selling this April should end the bubble. What we didn't realize was that most investors - who don't follow liquidity theory - have huge tax loss carry forwards.
In our model portfolio we will buy five March S&P 500 futures. By moving to fully bullish from cautiously bullish we boost our exposure to equities to 100% from 50%.
_______________________________________________
I said before that I thought the Google IPO would come within 2 weeks of the market top. I have decided I will wait until Feb to get seriously short. I will still stick with my plans for now though, and open a small short position on the QQQ this morning with a stop 1% above the 52-week high.
-- posted by MarketVVizard
» azxcvbnm - Re: From latest public Trimtabs [Dec 22]
In response to message posted by MarketVVizard:Too little is being made of the Yuan revaluation. It is sure to increase domestic US prices as almost everything is made in China these days. The initial revaluation looks to be from 8.8 Yuan = 1 dollar to 8.0 Yuan = 1 dollar, a 10% implied rise in the cost of Chinese goods. Now suppliers and wholesellers will probably absorb some of the initial price increases and increase prices gradually, but we've probably seen lows for manufactured goods.
-- posted by azxcvbnm
» Austrian - Re: Re: From latest public Trimtabs [Dec 22]
In response to message posted by azxcvbnm:You are right. The Yuan revaluation will be small at first, but the entire world was not expecting a change in peg or revaluation. This revaluation must be caused by increasing raw material costs outweighing the benefits of finished goods exports. Given most Chinese companies operate at less then 10% gross margin, even a modest increase in RMs leads to a need to change the Peg.
The goal of the revaluation is dollar up, copper down, iron down, and oil down, generally all commodities down as they are dollar denominated in international trade. A side effect is the Dollar, gold and silver should correct, perhaps severely.
Given the significant move in the dollar over the recent few months, the correction could be extreme due the extended nature of the currency markets. This has lead to massive treasury purchases, a lowering of interest rates, which can become self reinforcing similar to the opposite when Greenspan said the Fed would not buy long term bonds.
Gold could easily break 400 on the downside, the Ten year treasury could approach 3.8%, and 30 year mortgage rates could drop below 5%.
Regards,
--Austrian
-- posted by Austrian
» Normxxx - Re: Re: Re: From latest public Trimtabs [Dec 22]
In response to message posted by Austrian:I sure hope you're right. I've been long bonds and closed out my Gold trading position several weeks ago. (I don't dare short Gold and hold a 'core' position at all times.) My target is for a peak in the dollar&bonds/bottom in Gold early in February.
What do you think the market will do?
-- posted by Normxxx
» azxcvbnm - Re: Re: Re: Re: From latest public Trimtabs [Dec 22]
In response to message posted by Normxxx:I posted on the Gold forum my views on the dollar. Central Banks are talking the dollar up, but they all know that they can't prevent the dollar from eventually sliding. Their strategy is to merely slow the decline of the dollar so that their industries have time to react. A rise in Chinese products means we will finally see an increase in CPI from manufactured goods. There's no doubt that long-term rates are headed higher, and I think we've seen the top for bonds. As for gold, it'll increase once everyone figures out talk is cheap and the European Central Bank only wants to slow the decline of the dollar, they can't possibly prevent it (Japan has spent $60 billion in the past month alone to slow the dollar's decline, not reverse it). I look for 10 year yields to go back to 4.5% and then higher next year when the Fed raises short term rates. Keep your bond maturities short to intermediate.
-- posted by azxcvbnm
» Normxxx - What If the Received Wisdom Is All Wrong?
Why it pays to bet against a sure thing
Rising interest rates, a falling dollar and a plunge in the overvalued tech sector seem to be foregone conclusions this year. What if the prognosticators are wrong?
By James B. Stewart
I’ve never thought of myself as a contrarian investor, but I still find some merit in the contrarian philosophy. If everyone already knows something, that knowledge will be fully reflected in stock prices. There's little money to be made in following the herd. But unlike many contrarians, I also recognize that there's plenty of money to be lost by going against the herd when the herd turns out to be right.
But many people purport to know things to a certainty that simply can't be known, such as what the future holds. Then there often is money to be made in taking a contrarian view. I have been struck lately by how widespread the consensus about some key economic issues seems to be this year.
Since all of the issues turn on future performance, I'd at least consider the possibility that something else will happen, as so often happens in markets. Here are three shibboleths for 2004 that almost no one seems willing to argue against.
Rising interest rates
Interest rates are going to rise. I've certainly been in this camp for the past year, and interest rates have risen. Interest rates on 10-year Treasurys are nearly a percentage point off their lows of last year, and the bond market experienced a historic sell-off last summer. But with virtually everyone betting that interest rates will rise further, maybe now isn't such a bad time to consider some longer-term bonds.
Obviously at some point the Fed will raise rates, but I'd consider at least the possibility it will be later than most are now predicting, and that the effect on longer-term rates will be modest. I wouldn't go overboard, but I expect to modestly increase my interest-rate exposure over the next few months.
The falling dollar
The dollar will weaken further. The dollar has been in a serious slide for over a year, as anyone knows who has traveled to Europe recently. Economists blame ballooning U.S. deficits and note that currency trends, once established, are slow to reverse themselves. All true. This has led investors into stocks of foreign companies and mutual funds, which convert their local currency earnings into dollars, and to U.S. manufacturers who sell to foreign markets in what are now cheaper dollars. The value of commodities such as gold is also denominated in dollars.
But let's assume the unthinkable: The dollar strengthens. In that case, you'll have wanted to take a few profits in those areas, where prices already reflect the effect of a weak dollar. Put the proceeds into U.S. companies with healthy domestic markets.
An overvalued tech sector
Tech stocks are overvalued. 2004 has already proved this to be wrong, with techs once again outpacing the broad market in the first week of the year. So much for conventional wisdom. I agree that tech stocks like eBay and Nortel are pretty richly valued, but as usual I prefer to make no predictions. They won't prove to be overvalued if tech spending takes off and profits rise.
While I've recently taken some profits in the tech sector, and plan to take more if the rally continues, I still have considerable holdings in technology and wouldn't dream of having no exposure to the most dynamic sector of the U.S. economy.
Speaking of taking profits, the Nasdaq ($COMPX) is nearing my next selling threshold of 2,150. It has been a long time since I've experienced four straight selling opportunities without an intervening correction, but here we are. It's good to be prepared by looking at opportunities to sell covered calls or to sell some stocks outright. I'd start by looking at my positions with the biggest gains, which should dovetail nicely with any portfolio rebalancing that might now be in order.
-- posted by Normxxx
» MarketVVizard - What market phase are we currently in?
First, I should say that busting out on the NASDAQ Friday on high volume does not bode well for me I still have the small QQQ short position. Up volume was 81%. Put/call still very low. NVLS trade is closed (put to me) making me up a couple percent for the year.My gut says we are at the top, but I've been burned so many times in the last year I will play it cautiously. I also share the liquidity theory rationale for higher prices right now.
The following is from "Tomorrow's Gold" by Marc Faber. Sorry, these scans were best I could do. Hope its readable.
<img src=http://www.creationfaq.net/VViz/LifeCycl...>
[VViz: I added the red note]
<img src=http://www.creationfaq.net/VViz/Phase4Ev...>
-- posted by MarketVVizard
» MarketVVizard - LifeCycle Applied
Just for kicks I decided to superimpose the Yahoo chart of the NASDAQ composite index onto Faber's Life Cycle chart. This is the result:<img src="http://www.creationfaq.net/vviz/LifeCycl...">
REFERENCE:
<img src="http://chart.yahoo.com/c/my/_/_ixic.gif" width="512" height="288" border="0" alt="Chart">
-- posted by MarketVVizard
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