Friday, July 11, 2008

Where there's smoke, there's fire

Or should we say "where there's smoke, people get fired?"

In a previous post, I wrote that surprises happen in the direction of the trend. Of course, someone gave me a cyber "duh" essentially saying that's why its called a trend.

Well, that's not quite right but the point is that as long as the trend in any stock, sector or stock is solidly to the downside we can expect more bad news to surface. The Enron scandal broke literally months AFTER the stock broke down and shed multiple dozens of percent of its value.

As for when it's done, the market looks into the future and knows when the coast is clear. We know when the market knows because the trend eases and a basing, or repairing, pattern begins to form.

Remember, the market is not trading on the news today but what the news will be tomorrow. No, not the exact news that a CEO steps down or that the entire derivatives portfolio has been purged but the general news that the worst is over. Somebody always knows something and acts on it no matter how hard the SEC comes down on insider trading. And somebody sees when that first somebody takes action.

Explain rallies into "whisper numbers" any other way.

Either people are guessing or they know something. And that something may even be legal but it is not distributed to the general public.

But back to the topic at hand - the trend in the financials was super down and still is. And there has been no capitulation yet, either, so mark my words, a major bank, broker (gee which one could that be?) or insurance company is going to fail. I won't say a credit card company like Visa or MasterCard is on the same boat because why? Their trends are not spiralling into Hades. Capital One is also arguably OK, solely based on the trend and what the market thinks of the whole thing.

Don't forget the free technical analysis offer in the previous blog post. What have you got to lose? It's free!


Anonymous said...

Oh Oh! More bail-out! This bear I think will be here longer than most of the people thought!

Anonymous said...

Think I should say! Thank you Ben!

Anonymous said...

Chairman Bernanke sitting in an invincible position! Just call me skittish, I covered all my shorts! What a day!


Michael Kahn said...

Hey, I can't make my next car payment. Can I access the discount window, too?

The more the politicians meddle, the worse it will be when it comes time to pay the piper.

Anonymous said...

What I feel really interesting today is people saying "TODAY" is the day of CAPITULATION and we have found a tradable bottom! I think I better go out and take a walk, the weather is exceptionally fine today!

Oh, nearly 800 new lows trading in NYSE, at least the numbers don't lie!

Michael Kahn said...

I'd love to give you my thoughts on the new lows and how/when to read them as a bullish sign but I have to save something for subscribers.

But I can tell you - even without seeing the Dow come bungie-cording down in the final half hour - that a 200-point decline ain't no capitulation.

Take that walk and pop open a cold one while you're at it. The media is going to feast on this volatility over the weekend.

Tease - bonds did something, too, and I don't just mean falling in price.

Anonymous said...

I guess the FED's balance sheet can't bail out two Fs at the same time!

Have a very good weekend Sir!

Michael Kahn said...

IndyMac was just taken over by the Feds. When I said "mark my words, a major bank, broker or insurance company is going to fail" earlier today I did not think it would happen within hours.

Mr. Bernanke, do you read this blog? I was just kidding about the helicopter.

Anonymous said...

"In a previous post, I wrote that surprises happen in the direction of the trend. Of course, someone gave me a cyber "duh" essentially saying that's why its called a trend."

You're referring to my post. So, i feel free to defend myself. There was no "duh" nor was one implied. Nor was i mocking you.

In a trend, the news supporting the trend has an impact; the news that does not support the trend is largely ignored. Technicians say, "It doesn't matter until it matters." And yes, we should expect "surprises" in the direction of the trend.

Michael, it's very interesting that you should criticize me for that which you wrote above yet when i tried to warn you on July 7 that a website was plagirizing a Barron's article you never acknowledged that.

I guess it's a question of whose ox you feel is gored.

Michael Kahn said...


Go back to that website you pointed out and check out the reader comment - and the date it was posted. I read all, absorb all and remember all. I also reported it to the Barron's Online managing editor.

Before we get off on he said, he said in the very impersonal world of email, texting and IMs, we are arguing on the same side and I respect your comments.

Most of the miscommunication in today's world never happened before people stopped talking face to face.

Anonymous said...

What everyone seem to be only remembering is the VIX bear signal of over 35 in August 07.