Thursday, January 29, 2009

Suggestions wanted for my column

Over the years, I have written about hundreds of stocks, dozens of sectors, all asset classes and just about all of the most commonly used technical indicators. After all, I have been writing "Getting Technical" for Barron's Online since 2001 when I took over from my mentor, John Murphy. Former editor Howard Gold, if you are reading this, I thank you every day for reaching out to me. I could not ask for a better association than Barron's Online.

So now I turn to my readers. What topic in technical analysis would you like to see tackled? And what sectors of the stock market do you want covered either soon or on a regular basis?

Thanks for your continued readership and support.

Poll closed - bulls are scarce

As you can see on the right, the results of the reader poll are in. The majority category was "pogo stick" meaning lots of volatility with no real trend over the next six months.

The middle two were a little and a lot lower. But add them together and more than 2/3 of all respondents think the market is going at least a little lower.

Now combine that with the lowest vote-getting category was "bull starting" and if this were an actual valid survey, I might just jump on my contrarian horse to ring the bell (or is that grab the ring on the carousel?).

I caution everyone that this is far from a valid survey and I have to assume that anyone reading a blog that can only be found via a link in the bio of my column has to have a better than average grasp on the markets and risk.

But now you know what 140 of your fellow readers are thinking and it could not hurt.

Wednesday, January 28, 2009

Take the Poll ---->

There is one day left in the little market opinion poll I have set up on the right of this page. So far, it looks like there is no real overweight of opinion on any of the choices although the pogo stick answer does have a clear majority. Please take a moment to vote - and it really only takes a moment.

Let's say that overnightwe get a rash of votes for the pogo stick. What would that potentially mean? For starters, absolutely nothing since there would be no statistical validity to it. We'd need thousands and thousands of votes to get a handle on what the public is really thinking.

But let's say for fun that we get a 90% reading for the pogo stick. That would be an overwhelming majority and tell us that everyone is thinking the same thing. As we know, the market loves when that happens so it can do the opposite. In this case, that would be a directional move and a big one. The opposite of a trading range is a trend.

Which way? From this there is really no way to know. But anyone who has followed my work or subscribed to my newsletter knows that I don't believe that the market is going to go a whole lot lower. Undercut the old lows maybe. But not the doomsday levels some are forecasting.

So speak out, dear reader! Take the poll and lets see what you sophisticated investors are thinking.

Tuesday, January 27, 2009

No Dow 10K, so now what?

In early December, I put out a framework for the Dow reaching 10,000 before rolling over for its next death dive.

Well, this month it got to 9000 before keeling over, much to my chagrin. I did learn a valuable lesson about expecting trends to behave in a gigunda trading range that we are in and expect to be in for another 6-18 months. That lesson is that trends to not last long.

A rousing Duh! for me!

Here is an updated chart with a different type of look. I'll skip to the ending here - the answer is sideways and bumpy.

The problem with this chart is that it does not jibe with my multi-month trading range view. But not every triangle or pennant pattern actually breaks out one way or the other. Sometimes they break on just the passage of time and that is a meaningless move. Breakouts must have vertical movement and hopefully some volume.

So what does it mean? Probably a whole lot of nothing for a while and then a trip to the top or bottom of the trading range (7500-9700) and then a trip in the other direction and so forth. I am with the survey (see right of this page) and look for a pogo stick market for a while.

If you did not vote in the survey, please do. It ends in two days (total one week).

Saturday, January 24, 2009

Credit Card Companies are Crooks

Yeah, I just said what everyone already thinks - I mean knows. Among several, I have a Washington Mutual card - actually it is a debit card - and now that the beast known as JPMorgan Chase & Co. has eaten WaMu they sent me a letter telling me about the new terms of our agreement.

First of all, if they change an agreement and then tell me about it then it is no longer an agreement. If I OK it, then it is an agreement but for now I have not agreed to anything new. But lets not dwell on semantics.

The letter had a full page of new terms. Half were provisions that were mandatory - such as referring to the bank issuing the card as Chase Bank. OK, no prob. I'll even accept small changes in the way they calculate finance charges (remember, this is a debit card so no big deal here, either).

But there was an even larger section that was optional. Really? I can just say "no" and the new usury and ownership of my first born provisions will not apply to me? Sounds like a deal. Good thing I read this letter!

Stuff like keeping my fixed APR rate instead of going to a variable (again, remember this is a debit card and there is no APR to apply). Then there are new fees, default interest rates, treatment of certain charges as cash advances and their ability to change the agreement anytime at will. Boy, it is a good thing I can nix this stuff, even if half of it is irrelevant to me.

The final paragraph, with bold face type, leads with "Right to Opt Out" and then spells out how to do it. Of course, they want a written letter but we've come to expect this from a**-covering simps in the financial world. It's for our protection. Yeah, right. That's a steaming pile of BS.

But I read the entire paragraph. Get this line - and I sort of quote:

"If you choose to write to us, please include your name, address - blah, blah, blah - and mail it to - blah, blah."

.................Pay attention, dear readers

"If you send us such a letter, these changes will not apply."

.................So far, so good.

"Your account will then be closed and you may not use it further."

.................(head shaking double take) Whaaah?

So if I do not accept the optional changes then they close the account? Do they not understand what the term "optional" means? Why go through this stupid exercise and instead of the quick and understandable thing up front? "We are changing the terms, if you do not agree, take your business elsewhere." Thank you for your honesty, now I will decide.

I think I will just become my own credit card company. I'll put 25 grand in an account from which I will draw when I need to make purchases. Then I'll pay myself back each month from ordinary income and if I am late - whoopee! It's my money. I charge myself a fee! And then waive it!!!

After all, the reason many of us have credit cards (or debit cards) is to avoid having to carry hundreds, if not thousands of dollars around with us. And as the world changes, so we can buy things and pay our bills online. Using credit cards for actual credit - that means carrying a balance - is not part of that gig.

Mikey Credit Card Corp. Everyplace Mikey wants to be.

Oh, and as long as I am a credit card company, I think I'll apply for a bailout.

Thursday, January 22, 2009

If you thought your mutual fund was bad before...

In Financial Advisor magazine interview, Vanguard's Fran Kinniry raised a very interesting point about what investors are likely to see in their portfolios. Here's an excerpt:

"What’s happened is that the strong positive returns of the fourth quarter of 1998 are rolling out of the ten-year performance numbers and being replaced by the staggering losses of the fourth quarter of 2008. If that weren’t bad enough, the outsized bull market returns of 1999 will also be winding out of the decade performance numbers in 2009, to be replaced by the bear market numbers of 2000, 2001 and 2002.

As a result, stocks are likely to show losses for ten-year rolling periods in the quarters and years that lie ahead. Kinniry thus fears investors will conclude that stocks in the long run do not pay off."

How are you going to market that one, mutual fund industry?

And what is going to be the reaction by investors when they see their March quarterly statements? I've had this (expletive) fund for 10 years and I lost money? You have got to be kidding! Sell this (expletive) right now!

As I alluded in my column today ( I think we've had our capitulation already but this might be the last straw that sets the low a la October 2002. I think that bear ended in July 2002 (you have to look at the bar chart of the S&P 500 with NYSE volume to see it) even though it made a lower low a few months later.

Wednesday, January 21, 2009

Makes you go "OMG!"

Here are a few chat room posts (all from the same place) that make you go "OMG!"

From UK trader Trevor Neil. This is sourced to JP Morgan and found on Bloomberg.

Kind of reminds me of a planetary model where a million Earths can fit inside the Sun. But now we can see who is left standing and who should be fired, if not jailed.

Again, from Trevor Neil. You'll love the quotee:

"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism" ----- Karl Marx, Das Kapital, 1867

Say it ain't so!

And to end on a better note, Larry Williams (yes, that Larry Williams) found this:

Using 100 weeks of data ending on these dates produces a very high correlation to current action and suggests higher prices

I have not checked them out but considering the source I don't have to do so.

Tuesday, January 20, 2009

Lumpy Mattress

Hey, I thought "money in the bank" was an expression of something being solid and reliable. "It's like money in the bank," they say. Judging by the performances of major banks on Wall Street it looks like we've been had.

OK, money in the bank is different than owning shares of the bank but still - banks are supposed to be safe places. That's why they're the ones that have safes, right? You don't drop your Will and Grandma's gold off at the safe at Wal-Mart, do you?

Let's see, Wells Fargo, the bank with the stagecoach logo full of prospector's gold I believe, fell 23% today on top of the bear market it already had. PNC down 41%. State Street down 57%.

Even JPMorgan - "the good bank" - was down 19%. What's going on here? I'd say all that TARP money has evaporated. Smooth move, Hank.

Rather than bottom fish in Love Canal (line stolen from a chat room) I think I'll buy some Sealy (ZZ) since it is already on the sea floor (just kidding - this is not investment advice).

Why? Mattress sales are sure to increase as investors park whatever money they have left at home where they can keep a closer eye on it. At least little Johnny won't use it as collateral for a CDO on his X-box.

Friday, January 16, 2009

Keeping it real, dawg

OK, I'm an American Idol fan. Otherwise, I have no business calling anyone "dawg."

Anyway, the keeping it real part is like this: About two weeks ago, I started to get a feeling (from the charts) that the market was ready for a little correction. After all, no market runs in a straight line. After a few days of decline, the market was giving all sorts of small signals that it was time for the correction to end - low volume, hammer candle, support, moving averages.

And then none of it held and the market broke down. Do I blame the VIX over 50? That seems to be where nothing matters on the charts anymore.

Not really. There were a few technical signals that the pullback was something more. Since I was looking to buy the dip and not sell into the decline, here I am on the sidelines with no trading positions. I suppose that being in cash is no so bad.

Now the question is when to buy the slide and get ready for another short-term rally?

Isn't it fun to be a trend follower in a trading range market - not!

Thursday, January 15, 2009

Gepetto, CMT

A friend of mine, who must remain anonymous due to his compliance requirements, builds furniture as a hobby. Years ago he told me that he could use carpenter activity as a market indicator. Here is what he sent me recently:

"Historically it has been anywhere from a six to nine month lag from the time auctions of cabinet/woodworking equipment peak and when housing bottoms. We appear to be getting close to peak in equipment sales. Its not a fancy thing but it has worked better than any government stat I have seen!"

Where he gets his data is an unknown to me, a desk jockey in NY. But it sure does make sense. People will eventually have to give up (sell their equipment) when things get really bad. In the markets, we call that capitulation. In real estate, boy would I like to have deep pockets and buy up big chunks of property for a song. How about a company on sale?

A few years ago, we knew it was a bottom in commodities prices when Merrill Lynch shut down their commodities trading operation. Capitulation.

And we can see similar stoopidity (don't want to slander anyone) in market budgets, R&D budgets, employee hires and any other area of business expense that gets cut back just when it is needed most.

If you can find a stock of a company that is spending money to gain market share, go for it. Hopefully, we chart readers will see that activity on volume or price action or simple resilience in the face big price declines.

Wednesday, January 14, 2009

Golden Cross

There is a moving average crossover system that has worked pretty well over the years. Buy when the 50-day exponentially smoothed moving average crosses above the 200-day (a golden cross) and sell when the reverse happens (a black or death cross).

We got a death cross in the S&P 500 December 2007, thank you very much.

The question now is when will we see a golden cross? Of course, we cannot know that in advance but we can put a framework down to see where it might happen using non-crash conditions and non-we-just-bagged-Osama-and-solved-the-credit-crisis market melt-ups.

Using an aggressive plan for a rally over the next few months, that cross cannot happen for at least four months. And if the market putzes around for a while, that cross gets pushed out even farther into the future.

And if the market goes down to probe its old lows from November, push it out even farther - so far that we cannot even think about figuring out where. Why? Because the 50-day will get even farther below the 200-day, presenting even more ground to make up.

The point is that this system is not going to sound the "all clear" for quite some time. You may be able to pick some profits out of the market using short-term methods but long-term investors are going to have to wait.

Tuesday, January 13, 2009

Where are the bears?

What? Where are the bears? The stock market fell 4 of 5 days before today and I say there are no bears?

If you take a look at volume you will see it lower than average and for the Nasdaq still falling. That's no way to run a bear market! It is supposed to have people fleeing for the hills but January has been marked by apathy, not selling.

No doubt, the charts look kind of weak on the surface but in the absence of true selling pressure, buying the dip seems to still be a good bet.

Famous last words.

Sunday, January 11, 2009

Markets Lesson from Football

Last week, I lamented going 0-4 in the NFL wild card games. All the teams I either wanted to win or thought would win lost. Its a good thing I don't bet on this stuff!

And then there is this weekend. Through the first three games I was 0-3. At least the Steelers, and I am not a fan nor a hater, look to be on track to beat the Bolts with a dozen left in the fourth quarter.

So what's the market lesson here? It's that no matter how you prepare and how the odds are stacked in your favor, the market is always going to throw a monkey wrench into the machinery, if not at your head. We already knew how bad employment was but summing it over the year and then graphing it was enough to make anyone sick. Stocks sold off.

Analysis and forecasting is a game of probabilities. The problem with being 99% sure of an outcome is that there is still that 1% event. Not necessarily a black swan but if the outcome falls in that unbelievable to expect 1% we still lose as if it were a coin toss.

On paper, we make our forecasts. The Panthers, Titans and Giants should have steamrolled their opponents - at home, with better stats and every reason to expect to win. So, let's keep studying, get all that stuff on our side on paper (trend, volume, momentum, cycles, sentiment, etc.), and then make sure we prepare for the market not doing what we thought it should do.

As they say, be humble when dealing with the market of the market will do it for you.

Friday, January 9, 2009

Bailouts Gone Wild

I just got an email from Vinny Catalano ( and stole his subject line for this blog post. He writes about the porn industry now asking for a bailout. Of source, its a stunt but if porn - a thriving business - wants help, then everyone should get in line for help, too.

In another email received ealier today from friend Tom McMahon, he sent a Calvin & Hobbes cartoon from 15 years ago. Evidently, Calvin's lemonade stand business practices were so rife with greed that his business failed. He went to his personal govenrment (Mom) for a subsidy.

Here is the link at one of the humor websites:

Amazingly accurate and relevant to today.

Socialism cannot change these attitudes. Only a good housecleaning by capitalism can flush out these greedy idiots. But since we are a civilized nation, a safety net for the innocent victims is still a good idea. Innocent victims are workers laid off by failing companies - not management and not dumb investors.

Wednesday, January 7, 2009

Supersize My Bailout

In today's column, I mentioned briefly that the $1.2 Trillion (with a T as in Turkey) budget deficit reported today was without the recent stimulus and bailouts factored in. Read on.

SFO Magazine ran some analysis by market maven Jim Bianco in its current edition and the gist was that the government grants, loans and guarantees are practically more than the country has ever spent combined. Maybe I exaggerate but according to data compiled by Bianco, CNBC, Bloomberg and the Wall Street Journal the government is now on the hook for a potential $8.7 Trillion hickey, and I mean that in the vampire, not make-out, sense.

Here is the link to SFO's table on how deep we could be in the doo doo.

Basically, its $5.1T for the Fed, $1.5T for the FDIC and $1.8T for the Treasury

Check this from the magazine about major purchases from the past and present:

  • Marshall Plan—$115.3 billion
  • Louisiana Purchase—$217 billion
  • Race to the Moon—$237 billion
  • S&L Crisis—$256 billion
  • Korean War—$454 billion
  • The New Deal—$500 billion (estimated)
  • Gulf War II/War on Terror—$597 billion
  • Vietnam War—$698 billion
  • NASA (total cumulative spending since inception)—$851.2 billion
  • --Grand Total: $3.92 trillion

    Can we spend our way out of this mess? Let's just fire up the money presses!

    Tuesday, January 6, 2009

    More good news?

    Someone sent me an email with all sorts of links to reliable sources saying that the best cars in the world are made right here in the US of A. For you readers not living here, please indulge we Yanks on this one as it is a harbinger of better things to come for all of us. After all, if Detroit actually makes good stuff, consumers just need to be educated to keep them employing thousands and thousands of people.

    Here is it - unedited. I've checked a few of the links for legitimacy but not all so reader beware. And perhaps auto stocks might just be winners - if they don't burn through their bailout cash too fast, that is.

    1. Which country can boast that their brands occupy 2 of the top 3 spots for long-term reliability? Answer: Per J.D. Power Vehicle Dependability Study, Mercury and Cadillac are in the top 3, along with Lexus. And in 2007, Buick was tied with Lexus for the top spot.

    2. As of August 2007, which manufacturer had the most recalled vehicles in the U.S. for that year?

    Answer: Volkswagen. According to Business Week, Volkswagen had the most recalls at this time a year ago. The second worst was Toyota. /content/aug2007/bw20070810_455098.htm

    3. Pick the brand from each group that has the highest initial quality.

    a. Answer : Cadillac (better than both Acura and BMW)
    b. Answer: Mercury (better than both Honda and Nissan)
    c. Answer: Chevrolet (better than Acura, BMW, and Mazda)

    This is according to J.D. Power’s Initial Quality Survey.

    4. Which midsize sedan has the highest initial quality?
    Answer: The Chevrolet Malibu has better initial quality than any competitor, including the Honda Accord, Toyota Camry and Nissan Altima. The Ford Fusion also beat all three Japanese competitors.

    This too is from the J.D. Power Initial Quality Survey, which also reveals that above average are American brands Mercury, Ford, Cadillac, Chevrolet , Pontiac, Lincoln, and Buick. Below average are import brands Acura, Kia, Nissan, BMW, Mazda, VW, Subaru, and Scion (and several others).
    http://www.jdpower. com/corporate/news/releases/pressrelease.aspx?ID=2008063

    5. Which large sedan has the highest initial quality?

    Answer: Again per J.D. Power, the highest quality large car is the Pontiac Grand Prix, beating the Toyota Avalon. Two other Detroit cars that beat the Avalon are the Mercury Sable and Mercury Grand Marquis.

    6. Which midsize pickup has the highest initial quality?

    Answer: The Dodge Dakota has the best quality for midsize pickups, proving that Chrysler too can beat the imports. Both the Dakota and the Ford Ranger beat the Toyota Tacoma.

    7. Which car is the most economical overall?

    Answer: Per, the premier automotive analysis site, the most economical car in America, taking into account not only mileage but all costs, is the Chevrolet Aveo. The Honda Fit is #3 and the Toyota Prius is a distant #34.

    8. Which car did the Los Angeles Times describe as “a better car than BMW or Mercedes or Lexus or Infiniti”?

    Answer: Cadillac makes a better car than BMW or Mercedes or Lexus or Infiniti, and that car is the 2008 CTS. No other car in the mass market dares so much as this expressive and audacious bit of automotive avant-gardism. Dan Neil, LA Times. (It might be interesting to know that the latest sales figures for full size luxury cars had the new Lincoln MKS at #3, just behind BMW and Audi, but ahead of Lexus and the Cadillac CTS.),0,5427133.photogallery

    9. Which company makes the winner of the 2008 “Green Car of the Year” award?

    Answer: The Chevrolet Tahoe Hybrid is the winner of this award. How could a full-size SUV defeat the media darling Prius? Read the link below and you will discover,

    What’s equally eye-opening is that the Tahoe’s 21 mpg city fuel efficiency rating is the same as that of the city EPA rating for the four-cylinder Toyota Camry sedan.” (The new F150, non-hybrid, also gets 21 mpg highway.)

    Did you catch that? A huge, full-size SUV from Chevrolet that gets the same city mileage as a 4-cylinder Toyota Camry!! Chevy obtained this remarkable achievement through the use of its 2-mode hybrid system, a technology that Toyota does not have.

    10. Which car was selected by the North American automotive press corps as the “North American Car of the Year” for 2007?

    Answer: Not only was the Saturn Aura picked by the automotive press corps as better than the Honda Fit and the Toyota Camry, “When a panel of 47 journalists named the Saturn Aura the North American Car of the Year over the Toyota Camry, the vote wasn't even close, 205-89.” Chicago Tribune, 1/15/07

    11. Which car won the same award for 2008?

    Answer: GM again crushed the Japanese competition in 2008 when the Malibu received 190 votes to the Honda Accord’s 95. The Accord actually came in 3rd since GM’s other finalist, the Cadillac CTS, received 165 votes.


    12. Which company had a luxury vehicle, a midsize sedan, and a large truck removed from the Consumer Reports recommended vehicles list in October 2007 because of mounting quality problems?

    Answer: Toyota’s much publicized quality problems resulted in Consumer Reports actually removing from their recommended vehicles list the Lexus GS luxury car, Camry V6 sedan, and Tundra pickup. This demotion occurred in October 2007.

    This Q &A list was put together by an employee of an American car company who just might lose his job because of public perceptions that do not match reality. If you are one of the many Americans who gave up on Detroit’s cars because of a bad experience many years ago, it’s time to rethink your position. Rethink Detroit.

    Detroit automakers: 79 U.S. jobs per 2,500 cars sold in America

    Foreign automakers: 33 jobs per 2,500 cars sold in America

    Friday, January 2, 2009

    The Silver Lining

    Here is a something I read somewhere - presented in first person just so you can get inside this person's head. I took some artistic liberties with it, too.

    What recession? I've been in recession for a few years already, just barely making my bill payments, juggling who gets paid when and looking longingly at travel ads knowing I'm not going anywhere anytime soon.

    My mortgage was killing me and I have no idea where the money to pay my taxes is coming from. I'm spending what I should be putting into my estimated tax account.

    Yeah, people are now starting to hurt, too. But for me, I not only have company but justification for all my financial woes. Nobody has to know they started long before subprime problems were a twinkle in Uncle Ben's eye.

    But lo and behold (I always wanted to say that) my mortgage payment has been cut by 30% thanks to my adjustable rate. I did not have a low teaser rate but a regular old adjustable and now it has adjusted down thanks to the credit crisis. Can you believe it? My payments are much lower now.

    Gasoline is half what I got used to paying. Heating oil, too. And for the things I do need to buy prices are somewhat softer, too. No, I'm not buying a car or a TV but sales on clothing (sensible, not movie star chic) are pretty good.

    Just for kicks, I even took advantage of a football hero's fall from grace (and likely to jail) and bought his jersey online at half price with free shipping. Even for struggling people like me there is opportunity thanks to the times. I'd rather be buying that vacation condo in Florida but a jersey is a bit more in line with the budget.

    I am actually in better shape now than I was six months ago. Perhaps the economists were right - lower interest rates helped. Perhaps I was just ahead of the recession curve - falling sooner than the rest and now recovering sooner.

    You know, the future just got a bit brighter.