BullBear Trading: Stock and Financial Market Technical Analysis

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Excerpts from Mr. Louis Navellier's latest article:

"9/20/11

5. Strike while the Iron is Hot and Buy, Buy, Buy

We're in the midst of a perfect buying opportunity. Even with all the negative factors at play, the positive forces are taking over, and now is the time to jump in and build up your portfolio.

Investors are continuing to return to the market after their summer breaks. Trading volumes still haven't returned to normal, and as a result there is a wealth of bargain-priced stocks waiting to be picked up. Last week's 500-point jump in the Dow is a perfect example of investors essentially going on a shopping spree and grabbing up stocks at great prices. And this won't be this last time.

Buying pressure is going to build ahead of next month's earnings season. By taking advantage of the current lull in activity and prices you'll be ahead of the game once earnings announcements begin to roll out and the next market breakout occurs. So, strike while the iron is hot now and buy, buy, buy!"

 

Not so soon, please.

Wow.  That's horrible.  I was long but cautiously and only for a short term trade and looking to turn around short.
In 5 days, VictorVest's Buy/Sell Ratio was beaten back from over .20 to .06 as of the close today.  The number is very very low.  On 3/9/2009, VictorVest's Buy/Sell Ratio was at .07, even higher than today. On 8/8/11, the Buy/Sell Ratio was lower at .04.  on 10/27/08, the Buy/Sell Ratio was at .01.  On 12/16/2008, the Buy/Sell Ratio was at .06.

Mindful that the move to the downside can be drastic and huge, but with Buy/Sell Ratio near the previous climax level, the bottom should be near (in term of time) ? Bottom, by all means good until the next down move begin.   Who knows 12/16/08 was not the real bottom? When the real one come by on 3/9/2009. the not too smart and the too smart people absolutely don't believe it.  Is the 3/9/2009 the real bottom? May be the real bottom is still in the future?

 

 

 

 

 

Excerpt from Tom Bowley's Latest Article:

"September 17, 2011

ANOTHER ROUND OF TARP FOR THE BELEAGUERED FINANCIALS
Tom Bowley

I'm not buying this rally - not yet anyway.  This past Sunday night, I calculated max pain for the ETFs that track our major indices.  After staring at the numbers, I wondered "can they do it again"?  By "they", I meant the market makers.  You see, a month ago while I was in Seattle at StockCharts' ChartCon conference, an astute member of ours pointed out mid-week (August 10th) that max pain was WAY above current prices.  In options lingo, this simply meant there was a TON of net in-the-money put premium on the table just as EXTREME pessimism was kicking in.  Take a look at the chart below:
 
EOPCR 9.17.11 

The green arrows highlight the EXTREME levels of pessimism.  Notice how each of these extremes marks a bottom on the S&P 500?  I've been noticing it for years, which is why sentiment analysis should be a big part of every trader's arsenal.  Now take a look at the blue circle highlighting the S&P 500 bottom the second week of August.  In addition to extreme pessimism, max pain suggested a SIGNIFICANT upward move was likely based on the imbalance of equity calls and equity puts.  Extreme pessimism hit the -20% threshold on August 8th.  The S&P 500 bottomed on August 9th.  More importantly, the S&P 500 rallied over 100 points from the August 9th low to the August 17th high.  I think that qualifies as a SIGNIFICANT upward move.  Chalk up more TARP for the financials (market makers)"

 

Tom Bowley's full article is here:

http://blogs.stockcharts.com/chartwatchers/2011/09/another-round-of...

 

It appears quite simple and  may be it isn't.  Last Friday was the option expiration.  The manipulators/market makers has the interest to move the market up to cancel out the money they otherwise would have to pay out to those expiring option holders.  So, they are the one and only one buying in the last up move. There are simply no other buyers in the market.   I have a problem with what happened last month.  Noted that the market tanked on 8/17, 2 days before the option expiration day of 8/19.  You would think those manipulators would have enough fire power to hold the tide up at least past the expiration date of 8/19.  How did the equation changed when those market maker actually joined the party and became sellers themselves ?

 

Fibtimer issued an exit signal on its bullish position on NDX100 as of Thursday night.
Thanks Chan.

Second Half of the Hurricane           


September 23, 2011

This is a picture of Hurricane Ike which hit the Gulf of Mexico in 2008. It can serve as a visual metaphor for what seems to be about to happen to the global economy and global financial markets.

 

We evidently went through the first half of "Economic Hurricane IKE" during the fall of 2007 through March of 2009 as we endured the first fallout from the "credit crisis". Eventually economies and markets seemed to bottom and stabilize. As the eye of the hurricane passed over us later in 2009 and into spring and summer of 2011 it was easy to assume the storm had passed. The wind died down. Everything went calm and we had survived. 5T clients and team actually survived in pretty fine fashion.

 

As I have heard many times before "assuming" makes an ass out of u and me." (ass-u-me)

 

It is becoming increasingly clear that we were simply in the eye of the storm. The calm was only temporary and it now looks like we are about to experience the second half of IKE.

 

Hurricane Ike 

 

The likes of Gary Shilling, Peter Schiff, Nouriel Roubini and David Rosenberg have been consistent in their message that this would happen. Almost everyone else we read missed it including Goldman Sachs, Bank Credit Analyst, JP Morgan, and many other brand name firms. Only recently has Goldman Sachs, for example, significantly trimmed their earnings estimates and market targets. They now have a year and target, or base case, for the S&P 500 of 1250. But they also advise that it could close anywhere in a range of 1006-1250. That kind of analysis doesn't really help anyone.

 

Shilling, Schiff, and Roubini have been bearish about most everything since I have known of them. Rosenberg is known as a perma-bear too, but that isn't true. Of all the people we read I have the most confidence in him right now because of his willingness to be flexible and use the facts to make his case. I don't have to worry about overwhelmingly bearish bias tainting what he writes.

 

On the other side of the coin firms like Goldman Sachs and JP Morgan have a strong tendency to be bullish. They simply couldn't do what they do if they weren't optimists.

 

At 5T Wealth there is a tendency toward optimism. That is my nature and it seems to be Lee's even more than mine. But this is not a time for optimism or pessimism to be significant factors. We have come to a critical turning point in markets and it is absolutely essential to our financial health to interpret it and act on it correctly.

 

In the past few newsletters I have been trying to reveal to our readers that evidence is pointing to a new bear market for equities. Many commodities seem headed for a bear market as well. If we are headed into another global recession there will be less demand for steel, copper, aluminum, oil, coal, natural gas, etc. It seems clearer every day that condition is global.

 

I have tried to use data and evidence from objective charts to point out the rising risks of a new bear market. I have also tried very hard to leave out the rhetoric and opinions of others, all of which are so conflicting.

 

As of today the case for a new bear market is all but confirmed. It will actually take until the end of September for true confirmation. That will be explained later in this letter. But given the tremendous volatility we are experiencing all of us at 5T felt it was important to get a newsletter out this week.

 

Once we have confirmation then all future rallies should be considered within the context of a new cyclical bear market. In other words, rallies should be used to lighten up on stocks and get short the market.

 

Somewhere down the line markets will find a bottom from which we can advance into a new bull market. But right now I think that we are closer to the beginning of the new bear market than we are to the end.

 

What caused the new bear market?

 

My wife, who I often find to be as insightful as David Rosenberg, the Chief Economist for Gluskin Sheff, makes the case very simply. She says the recession of 2008-2009 never really ended. She acknowledges that it did statistically. We have seen the economy growing. Gross Domestic Product has grown since the official end of the last recession. The Purchasing Managers Indexes we often show you have been positive since September 2009.

 

But she observes that for many on Main Street the recession didn't end. Unemployment remains stubbornly high. Most of those who are working haven't had a raise in at least four years. Many are working two jobs. Savings rates are up, which is a good thing. But spending is muted because people are saving. It is hard to find a house in this country that still isn't going down in value.

 

CNBC did a segment on Napa Valley real estate yesterday. Over 50% of the houses that are for sale here are bank owned. That is an amazing statistic for this valley, where it is assumed everyone is rich! (not true). They interviewed one guy who built a spec house and originally put it on the market for $8.5 million. He has reduced it to $3.5 million. He has to sell it by January or he loses it to the bank.

 

We have known that the U.S. is grinding along the bottom all year, yet 5T has made a case that global growth could remain consistent through 2011. We have pointed to solid growth in China and much of Asia as fuel for continued global growth. Our base case was that if Asian economies grew faster than the U.S. and Europe that global growth would hold up. Our base case has also assumed that while the U.S. and Europe may crawl along, that they would avoid a new recession. We still think that the shift in economic power from Europe and the U.S. to Asia is the long term economic theme. There is no doubt in our minds that over the next 25 years that shift will take place and many investable ideas will come from it. But for now it seems their growth is slowing too and that is part of what is taking markets down this week.

 

New Zealand, Australia and China all posted some weak economic numbers this week. That makes us suspicious that others will follow.

 

CNBC.com reported yesterday:

 

"China's factory sector contracted for a third consecutive month in September as flagging overseas demand put the brakes on new orders, HSBC's China Flash PMI showed on Thursday.

 

Factory Worker in China
AFP | Getty Images. A laborer works in a textile factory in Yiwu, east China's Zhejiang province.

The continued deceleration in the vast manufacturing sector pointed to a slowdown in the world's second-largest economy, but analysts see little near-term risks of a hard landing due to resilient domestic demand.    

 

The flash Purchasing Managers' Index (PMI), designed to preview China's factory output before official data is released, dipped to 49.4 in September from Augusts' final reading of 49.9 and hovered below the 50-point mark for the third straight month. 

 

China's August exports pulled back from a record high and imports jumped, indicating the economy is feeling the pinch from weaker global growth while domestic demand remains resilient.

 

Analysts generally expect export growth to slow further in the coming months as indicated by weaker new orders. 

 

Both new orders and new export orders sub-indices fell further below the 50-point mark in September, reflecting declining global demand as consumers fret over the possibility of another U.S. recession and a spiraling euro zone debt crisis. 

 

Other sub-indices that missed the 50-point mark include those for output, stocks of purchases and employment."

 

The graph below shows China's PMI and industrial output from January 2008 to September 2011. China's PMI has been decelerating for several months and is now below 50. A value above 50 is indicating economic growth. A value below 50 characteristic of a contracting economy

 

China's PMI 

 

We were hopeful that QE1 and QE2 (quantitative easing) here in the States would have been more stimulating for the economy. We are sure Ben Bernanke hoped the same thing. Given that conditions have improved so little it is clear that they only kept things from getting worse, but they have not necessarily made things better. The U.S. economy still has more risk of falling back into recession than it does hope to reignite. The Fed acknowledged that in their last FOMC report on Wednesday.

 

Since QE1 and QE2 have seemingly provided so little lift everyone is questioning the Fed's latest effort, called the "TWIST". They will be selling short term bonds on their balance sheet and reinvesting the cash in longer term Treasury's and mortgage backed securities in order to force long term interest rates lower. With the 10 year Treasury yield at 1.71% and the 30 year at 2.78% one wonders why the Fed is even bothering.

 

We were very supportive of the Fed when they proposed both QE1 and QE2. But one has to wonder about this program. Bernanke and Co. know that the economy has not responded the way they would have liked. They are very clear in their recent statement that the risks to the downside have intensified. Being active is their style.

 

All of that aside, the main cause of the current turn down seems increasingly clear. Governments around the world are laden with too much debt and don't have any apparent plans to escape the debt cycle. Everyone knows that countries like Portugal, Ireland, Italy, Greece and Spain have unsustainable debt loads. Less emphasis has been placed on the U.S. and Japan, but in many ways their problems are as bad as or worse than the European countries that the press is currently so focused on.

 

Over the past four years a huge amount of debt moved from corporate balance sheets onto government balance sheets. That is because of all of the money spent by governments to bail out banks, car companies, etc. There have been arguments made that our Treasury and Fed actually made money on various bailouts. We honestly don't know if that is true or not. It is certainly what has been widely reported but we are suspicious of fuzzy government accounting to "account" for profits.

 

Please bear in mind that none of the money used for bailouts in the USA existed before it was allocated to bailouts. Remember, we are the country that is more than $14 trillion in debt ($129 trillion if you count all unfunded entitlements). It is not as if we had an account in the bank that held excess cash that was at the ready "for a rainy day". Instead we have a creative Federal Reserve Bank and we have had two really smart Treasury Secretaries in Hank Paulson and Tim Geithner. Between them all they have come up with ingenious ways to add to the money supply (some call it a printing press) and bail out practically everyone.

 

If you have the time, check this out. It is a good article that explains some of the funny money accounting. 

 

Whether direct bailouts have been profitable or not is probably the smaller issue. Governments around the world have spent trillions of Dollars, or Euros, or Yuan or Yen, to stimulate their economies over the past four years. The one spending Yuan (China) could afford it. The rest couldn't.

 

Today many governments are drowning in debt they can ill afford. Both the International Monetary Fund (IMF) and the European Central Bank (ECB) would like to see government debt loads reduced to 60% of GDP. Most European governments, the U.S, and Japan run deficits in the range of 100 to 200% of GDP. All of them are talking about ways to cut deficits, but no one other than Ireland and Greece currently has any plans to do so. Greece's main plan is default, one way or the other.

 

We have placed a chart below that you need to understand in the context of this report from the IMF, which was published this week. Read it before looking at the chart.

 

"For anyone who believes the U.S. is immune to the sovereign-debt problems that are plaguing Europe, the latest analysis from the International Monetary Fund provides some sobering reading.

 

In its semi-annual Fiscal Monitor published this week, the IMF notes that the U.S., by some measures, is worse off than several countries at the center of the European crisis. Consider Italy, which has seen its bond yields rise as investors increasingly worry about its government finances. To get its debt burden down from the current level of about 120 percent of GDP to a more sustainable level of 60 percent by 2030, the Italian government would have to raise revenue or cut spending by an annual 4.1 percent of GDP.

 

To achieve the same goal -- taking into account expected increases in the cost of caring for retirees -- the U.S. would have to raise or cut about four times as much, or 17 percent of GDP (see chart). That's about two thirds of the entire federal budget. As a share of GDP, it's almost as bad as Greece, and worse than Portugal, Ireland, Spain or even Japan, which has the developed world's largest government-debt burden, at about 220 percent of GDP.

 

So why are investors piling into U.S. Treasury bonds instead of running away? There are several possible explanations. For one, the IMF notes that the bonds are held largely by domestic investors, who are less likely to flee. Many investors in U.S. bonds are central banks, pension funds and other big institutions, which provide relatively stable demand. No other securities are as easy and inexpensive to buy and sell in an emergency as U.S. Treasuries. And the U.S. has a track record of getting its debts under control.

 

Still, achieving fiscal discipline will require almost unprecedented sacrifice. To reach a debt burden of 60 percent of GDP, the U.S. would have to run an average budget surplus of 5.4 percent of GDP for 10 years. According to the IMF, the U.S. budget surplus has never exceeded 2 percent in any ten-year period since 1970. The more the U.S. delays the process of getting its long-term finances in order, the more daunting the challenge becomes -- and the greater the chances investors' confidence will falter."

 

GDP 

 

Right now we are hearing all kinds of people telling us that Greece simply can't meet the austerity goals mandated by the European Union and therefore default is inevitable. If the USA had to meet those goals we couldn't do it either. Meeting them would drive us into a severe depression and that is exactly what is going to happen to Greece if they keep trying. Therefore it is my humble, but now long considered opinion that they won't keep trying. They will eventually default, probably sooner than later.

 

Politicians all over the world are like me in one respect. A year or two ago none of us truly understood the gravity of the situation. I admit that I didn't. One reason is that I was focused on a lot of other things, including surviving the first half of the economic hurricane. It was during that time that governments were creating trillions of new fiat money to bail out everyone in sight.

 

Lots of people are currently referencing a 2002 quote by Dick Cheney, "Reagan proved that deficits don't matter". But deficits do matter now. Deficits have never grown as fast as they did in this period. If you have any illusion that our debt has been brought under control as a result of the recent rhetoric in Washington please go to http://www.usdebtclock.org/ and divest yourself of that illusion. Our debt continues to grow at a staggering pace even as the super committee gets nothing done in Washington.

 

We have simply come to the end of the road with deficit spending, and everyone seems to be getting it all at once. But politicians are almost powerless to do anything meaningful about it. How do they take away the punch bowl? So markets are reacting very negatively. It would not surprise me to see the negative reaction turn very violent in the end.

 

In Greece the punch bowl is being taken away by the European Union (EU). It is like having a friend who went with you to the party at which you got piss drunk. The friend let you get that way, but now feels compelled to make sure you get home safely. The USA has no such friend. It is our punch bowl after all.

 

So what is next?

 

For that answer let's go back to the charts. Let's look at the forest again like we did last time. Prior to September 22, 2011 even I had to concede that a bullish case could be made for equity markets, particularly here in the USA. It was not my base case, and I have tried to make that clear. But it could not be ruled out. As of the 22nd I think the door slammed shut on the bulls.

 

By way of explaining that I will show you some very short term charts, some medium term charts and some long term charts.

 

But before I do, let me tell you that Dan Sullivan sold his entire equity portfolio yesterday and went to cash. Who is Dan Sullivan? He is the Publisher of The Chartist and one of the best two or three market timers on the planet over the past 45 years. Now onto to the charts!

 

The first one shows you two key sell signals that will not be confirmed until the month of September ends. That is because they are calculated using a full month of trading data. But as of Thursday they are both triggered sells. They are the 20 month simple moving average (SMA) and the MACD crossover sell signal. Monthly charts are used to determine major changes in trends. They are not to be ignored. These are the longer term signals that truly tend to separate bull and bear markets.   

 

SPX 

 

This chart shows sell signals on a weekly version of the chart of the S&P 500. These signals will trigger sooner than signals using monthly data. They tend to be early warning signs of major changes. They are a bit less reliable than signals on monthly charts because they are more prone to rapidly changing the following week, a condition referred to as a "whip-saw." These sells signals triggered last March and six weeks ago. The monthly signals on the chart above are confirming signals, should they actually trigger at the end of September. I treat the weekly signals as warnings of a new bear market and the monthly as confirmation the bear has arrived.  

 

SPX 

 

Here is a chart that I find totally fascinating and frightening at the same time. It is a chart of the S&P 500 in the monthly time frame. Every hash mark, or candle, represents one month of price movement. The first big red oval encloses the stock market crash in 2000-2003. The second one encloses the crash of 2007-2009. The third one may wind up containing the crash of 2011-2013.  

 

You have often seen us reference secular and cyclical bull and bear markets in Ellumination. Let's get those definitions down before we proceed further to explain the chart. Secular refers to the major or dominant trend. Cyclical refers to shorter term trends within the context of the major trend.  

 

I believe we have been in a secular bear market since the peak in 1999. That was preceded by the secular bull market of 1982 to 1999. In our lexicon everything that has happened in the U.S. stock market from the peak in 1999 to present time has happened in the context of a secular bear market, in which the major trend is downward.  

 

Each of the large ovals contains a cyclical bear market within the context of the major secular trend. The periods in between are referred to as cyclical bull markets. They act and feel like real bull markets in many ways, except they tend to be bumpier. Their main purpose is to provide hope and frustrate the crap out of people when they end. I fear that the cyclical bull market of 2009-2011 is ending right now, thus the comparison to entering the second half of the hurricane.

SPX 

 

The good news for us is that we have had two previous cycles in very recent history that can offer real clues as to what should be coming. The early warning signs of a new bear market are now more easily recognizable. The red squiggly lines that enclose the hash marks or candles are Bollinger Bands. I referred to them in our last letter. You can see them trending up and down and essentially forming a border around the rise and fall of the market.

 

The purple line in between them is the 20 month simple moving average (SMA), which I referred to previously in this letter. These cyclical bear markets trigger when the S&P 500 (or any other major average) reaches the top of the Bollinger Band and then falls very quickly below the 20 Month SMA. It has happened in both previous occurrences and I believe it will signal the next bear market too.

 

There is another clue you can't see on the chart because the green arrows covers it up. Each time this has taken place the average first moves down below the 20 month SMA only to recover; then in the next month it actually fails. If history is to repeat itself we will see this sell signal trigger at the end of September as it attempted to break the 20 month SMA in August and recovered.

 

When this bear market trigger happens things actually get trickier. In previous occurrences the market has always attempted to recover and get back above the 20 month SMA only to fail and tumble again. In 2000 the relief rally lasted two months then the market really plummeted and never looked back. In 2008 the relief rally took three months and then the cascade down started. So if we get the signal this time it is quite possible that October-December could actually be up months for the market. If that happens we will be looking for any rally to fail right at the 20 month SMA. That would be the PERFECT place to exit any remaining long equity positions and short the market.

 

There are other confirming signals on this chart as well. In 2000 and 2008 the market was grossly overbought at the time this 20 month SMA signal triggered. That is shown on the top part of the chart labeled RSI. RSI kept tumbling until the market bottomed in both cases.

 

There was a MACD sell signal cross over in both 2000 and 2008. If the market closes at its current level or lower on September 30, 2011, that signal will trigger again.

 

All this may beg the question of why I am declaring the bear market to have started when we need a few more days to confirm it. That brings me to a shorter term chart.

 

This chart is in a daily time frame. Each candle represents one day of trading. There are so many brand new sell-signals on this thing it is hard to know where to look first. It is like someone took a shot gun to the market on Thursday. Given this chart I am ready to declare the new bear market even though the monthly chart is still 6 days away from confirming. I consider it like stopping a fight early to save a pummeled boxer from dying if he takes one more punch.  

 

SPX 

 

As I am drafting this on Friday morning the market is up. That figures. The first thing that is likely to happen is a back test of the broken support line on that bearish rising wedge in the chart above. The market might make it back into that channel and give every-one hope that this fighter is actually Rocky and he really has a chance. I have believed that too. But this fighter isn't Rocky. This fighter has actually been set up by his handlers to take a fall.

 

I have listed many of the conditions that brought us to this point in the paragraphs above. I now believe that the only thing that can save this market in the short term is dramatic action by our politicians to legitimately solve our debt problems without pushing us into a depression and for the Europeans to do the same. That is a tall order. Maybe Joe Palooka could have done it. But I don't think our politicians really get the dire nature or the severity of the problem. I really don't-and I would be absolutely delighted to be proven wrong. Besides, given the IMF report it is too daunting a task. None of the conversation that is taking place publicly among American or European politicians even acknowledges the enormity of the problem. All of them are chipping around the edges.


As I told you a newsletter or two ago, we need this super-committee and the "pols" in Europe to act decisively and quickly. We are running out of time to save this market from the third cyclical bear market in 12 years.

 

Joe PalookaHere are some key points to remember. Even if I am right about a new bear market coming (the second half of the hurricane), we are likely to have more time to get prepared for it.

 

Second, we do not know how deep or long it will be and there is no use in me trying to get prophetic by trying to forecast either.

 

Third, the bond market remains in a raging bull market and is likely to for at least a couple more years, thanks to Chairman Ben and the Fed.

 

Fourth, stocks that pay good dividends should hold up much better in a bear market than those that don't.

 

Fifth, we do not intend to be idle. On August 22nd we sent you a newsletter called "Preparing the Models for a New Equity Bear Market."

 

We will be updating that newsletter after the close of the market on September 30th and I suspect we will be making some revisions. We will be as specific as we possibly can about how we intend to hedge each model to get it through the second half of the storm.

 

All the best,

Paul's Signature
Paul Krsek
MANAGING MEMBER & CHIEF INVESTMENT OFFICER  
5T Wealth Management
(707) 603-2672 Office
(707) 486-7333 Cell

Paul@5TWealth.com 
Lee Signature
Lee O'Dwyer, CFA
PORTFOLIO MANAGER   
5T Wealth Management
(707) 603-2673 Office
(707) 299-0326 Cell

Lee@5TWealth.com 

Excerpts from Fibtimer's Weekend Report:

 

"The SPX has closed below the rising trend support line (see daily chart below). However it did not cross below or close below the prior early August correction lows.

This may be bullish and point to a bottom, but we will point out that the Russell 2000 Small Cap Index - RUT is down over 25% from its 2011 highs. Solidly in bear market territory and this does not bode well for other indexes. The SPX is now down 16.7% on a closing basis.

The correction lows at SPX 1119.46 are support and this level should be watched next week. A decisive close below and we will be headed for a bear market for the SPX.

Are we headed for another recession or double dip as some forecast? We do not know. There are many opinions but if you believe the stock market can see ahead, then we have a dramatically slowing economy in coming months.

Thursday's huge global decline and U.S. markets decline was followed Friday by a tepid rally. This does not feel bullish. Almost like investors pulled back to see what would happen after the prior day's losses and a small number of bulls took advantage. There is no way to know what will happen next week but we do not want to be exposed in any way in these conditions."

9/23/11 Sy Harding wrote in his week newspaper column,

“ . . .  took our double-digit profits on August 10. The market's short-term oversold condition had me expecting a temporary summer rally. We took the downside positions back last Monday, September 19, since my expectations for a summer rally had been satisfied, and my technical indicators indicated the bear market was about to resume.

So far so good, it was an ugly resumption of the market decline this week.

My next job will be to determine when the bottom is in and it's time to take the downside profits and buy again.

One thing is for sure. At the bottom investor sentiment will be extremely bearish and disgusted, and most will have again suffered losses and sworn off 'the damned market' for good.

Thus is the historical pattern sure to continue of corporate insiders and professionals having sold near the top and taken downside positions, while individual investors remained confident at the top and hopeful most of the way down.”

Sy Harding wrote in his 9/24/11 blog,  

“The bad news is that while fear is rising toward that level usually seen at bottoms, it's not there yet. “

As I said in my weekend newspaper column, fear is now rising toward the level usually seen at market bottoms, but is not there yet.

For instance, we consider the weekly poll of its members by the American Association of Individual Investors to be in the zone where we should watch our technical indicators more closely for the next potential buy signal when those bearish reach the 55% to 65% level, and those bullish have fallen to under 20%.

Last week’s poll, released Wednesday evening, and showed the bearish level at 48.0%, and the bullish level at 25.3%. That’s quite different from the 43.6% bullish, 28.8% bearish levels of April. But not yet at the level of gloom and despair usually seen at bottoms.”

 

So, Mr. Harding is looking for bearish sentiment to go up another 7 to 17% and bullish sentiment to go down another 9%.

Excerpts from Sy Harding’s 9/23/11 blog:

 

“The sell signal on bonds is moving against us so far, but we are staying with it.


Yes, we are aware, as so many are pointing out, that the Fed’s ‘bond twist’ program is aimed at lowering record low bond yields even lower, and bond prices move opposite to their yields.

I remind you that that was the same criticism we were receiving at our sell short signal on bonds in October, that the Fed’s QE2 bond buying program was aimed at lowering bond yields.”

 

Mr. Harding’s position on TMF took on 8/30/11 is underwater by 11% and the above writing indicate he does not blink his eyes. Good for him.  On the other hand, Fibtimer took on RYGBX on 8/1/11 is now up 29.9%, looking very good for the trend follower.  Just hope that he doesn’t give a lot of it back before exiting.

Excerpts from McCleean's Latest Article:

 

 

Here is the full article:

 

http://www.mcoscillator.com/learning_center/weekly_chart/1946_analo...

 

Just an idea? It would be dangerous to burn it in one's brief that it must happen that way.

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