Tuesday, June 30, 2009

Agree to Disagree

Never before have I seen so many polar opposite forecasts as I am seeing now. I agree with people with whom I never agree (or respect, in some cases) and I disagree with people with whom I usually agree (and respect a lot). But then again, not all of them on both sides.

Some say healthcare is the way to go yet I panned hospitals a few weeks ago.

Some say tech will carry the bull but I panned it a few weeks ago.

Some say bear market to new uncharted (at least not in the past 50 years) territory and others say a new major bull market is underway.

The VIX at 27 is a good thing while some say it is not good at all.

Some say sell in May while others look for the summer rally

Some say inflation while others say deflation (funny, nobody talks about benign ole' disinflation).

Some say the consumer is coming back and others think he/she is still scared poop-less.

Some say the government is fixing things while other say they are making it worse.

You say tomato, someone else says tomatoe. You can keep your to-mah-to.

What the deal? Who knows? Nobody knows but that is no excuse for investment paralysis. I called it "retreating into an investment cocoon" on another website. Do your homework, follow some respected analyst's analysis (but make your own conclusions) and then control risk.

As was mentioned in a previous post, it really is all about money management - make your bed and lie in it and control the heck out of risk. A good trader can make money no matter what portfolio he is given because he will cut the crap out right away and let the correct decisions ride. Trite but true.

Steve Nison, aka Mr. Candlesticks, likes to push a trading triad - Eastern Technicals, Western Technicals and Money Management. Everyone knows how to buy but few really master the art of selling.

Monday, June 29, 2009

Still More Observations from the Advisor Conference

Just found this note I wrote to myself on the plane ride back from the Insite Advisor Conference in Ft' Lauderdale three weeks ago.

Michael Lewis, the Liar's Poker guy, spoke at the conference and his presentation was called "What Happened?" (more or less). He went through the events leading to the meltdown, CDOs, leverage, hubris and everything else as though he wrote it for one of his books. Bottom line - there were some really big Wall Street geniuses who were allowed to run amok. Scary, obvious in hindsight and proof that greed drives bubbles.

Another session had three advisor/trainer types talking about how to restore client trust. They made a lot of sense with strategies of simply talking to client saying "I am still here for you."

Then they starting in with asset allocation does not work and long-term investing is still the way to go. They scoffed at timing. (Their timing at realizing asset allocation bombed was pretty bad, wasn't it?)

Of course, I was seething but it was their show not mine. They can figure out how a 20-year time horizon in the stock market produced a return of zero. That's zero. A bagel. Goose egg. Squat.

T-bills outperformed, I think you get my drift. But then again, that is a secular bear market and asset allocators were out or greatly underweighted in long-term portfolios.

They went on to say that clients need advisors more than ever now and I totally agree. But not the guys that were blind to what was happening as they clung to old ways of doing business - ways that worked in secular bull markets.

But now that we are at the back end of a bear, at least a cyclical bear, buy and hold is going to work again. Just when these knuckleheads have capitulated to the idea that it is dead.

Friday, June 26, 2009

Fuddy Duddy Buys Gold

Bloomberg reported a few weeks ago that Northwestern Mutual bought gold for the first time in its 152-year history as a hedge against asset declines. Click here for the full story.

A colleague passed along the thoughts of John Serrapere, President of Arrow Insights:


Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company's 152-year history to hedge against further asset declines. This is very significant in that this firm is considered one of the most prudent asset managers in the world.

My (his) take away: Institutions invest as a herd. Many more will follow this firm. Retail investors will also begin to follow institutions over the next few years, which is when we will become sellers of gold.

This is big news.

End Quote

Sounds pretty good. Except that this is like Warren Buffett buying into high tech (he is notoriously averse to things he does not understand although he is a lot smarter than he lets on.) When the last holdout capitulates the game is over.

The question is not so much about gold but about asset values. NOW is when they decide to hedge? If they are so good then then should have hedged a year and a half ago.

Thursday, June 25, 2009

The followup and some tidbits

First the tidbits
- Fitch downgrades the State of California
- Pipelines attacked in Nigeria
- Helicopter Ben gets defensive over his role in BofA/Merrill (too defensive?)
- from a chat room, posted by Isam Laroui, CMT

There's a blog (http://newsfrom1930.blogspot.com) that posts a selection of articles from the WSJ from each week 79 years ago. One bullish article from June 1930 made the following point:

"Historically there has been no case in this country since 1900 when business failed to turn upward the year following a depression."

The implication was that, since the depression was over as almost everybody thought at the time, business was bound to do better sooner or later. A 3-year depression was not even considered possible.

Back to the present: Pretty good stuff, right?

And on to the followup:

Today's big rally does not change my view that the market has probably topped. But as I wrote yesterday in the column, I was not about to "call that top" due to ongoing unstable conditions in the markets since last year. The TED spread is back to normal but both the T and the ED are still at near zero levels. That is not what I'd call normal.

Volume was rather light on the day, too, so I'll just take it as another black eye on the way to winning the fight.

Wednesday, June 24, 2009

Review of an old forecast

Here is a link to a March 20, 2008 post in this blog:

Essentially, I laid out a framework for the next year or two and how I saw two cycles of rally and decline before the major basing process completed. As we all know, the first rally was hot and if I am right it ended this month.

In today's column, you will see that the upper border for the pattern has been flattened out but the cycles remain. I am not after short-term trading turns but rather a framework on which to hang your strategy.

More after the column is published. I don't want to step on it.

Tuesday, June 23, 2009

What do you expect?

Really, what do you expect the Fed to do? Drop rates to .0001%? Raise rates even a smidge? When the Fed is caught between a rock and the floor (get it? floor= zero. Ugh. What do you want? It's been raining for four straight years here in metro NY) there is nothing to Fed day any more.

Last week, I had an article on cycles in oil, gold and bonds. Oil and gold were supposed to be quite hit this summer yet they fell hard this week. Wrong call? Nope. The seasonal cycles kick in later in July and August. I stand by my long-term view that commodities are going up.

And Monday, I was torn between writing about the market's peak and the sector piece. It turned out either would have worked but since I went sector I'll be addressing the market Wednesday. Can't give anything away here for obvious reasons.

One thing I will ponder will be my rather bullish column at the start of the month. Hopefully, every caught the part where I said it would be short-lived. I doubt anyone but newsletter subscribers knew that the Nasdaq, not the S&P, was the index that actually hit its upside target as suggested in that column.

That's it for now. Sorry to have missed a few days here but the kids are graduating various schools and we are packing them up for summer camp. Distractions!

Thursday, June 18, 2009

More quotables for a rainy day at the US Open

Financial Advisor Magazine interview with advisor Chris Davis:

"The hardest thing is that every day the market tells you you're an idiot."

"My grandfather used to say that you make most of your money in bear markets. You just don't realize it at the time."

"What is so pervasive today is the chasm between risk and the perception of risk."

"People are paying an irrational premium for the perception of safety."

Wow, those last two make him sound like a technical analyst. Actually, that first one does, too.

What, me worry?
- A. E. Newman, CDO consultant

Wednesday, June 17, 2009


Let's see, I just connected with the girl who chased me down on Sadie Hawkins day at sleepaway camp - in 1971.

I connected with one of my neighbors who is married to a guy from my class in college with whom I just connected.

And my 14-year old daughter has topped the 1000 mark for friends. I kid you not. I don't think she has even met 1000 people but they are all real life friends and friends of friends and friends of friends of friends.

My wife is addicted and I myself seem to check it a few times per day. Yet, I have not made a single business deal on any social media ever (I am on LinkedIn but tweeting and twittering is just beyond my need to know. "Oh, I just had grapefruit for breakfast. Come to my seminar!")

A new way to go back in time or the fall of Western civilization?

Stock up on Pampers

There is a discussion on LinkedIn about financial advisors and their clients, as follows:

Are they more optimistic about their investments than a few months ago? Feel worse off? Feel the same?

There were plenty of thoughts posted about this and I wanted to re-post two of mine and one of a colleague's here:

The "pulse" I got at Pershing Insite last week was that advisors are still talking about bear market strategies, capital preservation and the realization (finally) that asset allocation and diversification does not work in bear markets. That's the last battle, not the current battle

From Dave Steckler: My fear is that when the second leg down arrives, and arrive it will, many people will be scarred for life. They will have the same mentality that affected millions during the Great Depression - avoid anything other than government-insured instruments (CDs and Treasuries).

And from me again: At the risk of self promotion, I have to say that I wrote about what Dave just said in my column several months ago. The next leg down will devastate the psyche of the investor - who thought the broken market was all fixed and safe again - even though I do not see a new low being set. But for me, that is the final washout that sets the stage for better things ahead. Once the dust settles it will be the worst time to retreat into an investment cocoon. Advisors must grab this opportunity or risk being seen as being late on both ends of the bear.

Tuesday, June 16, 2009

Notable Quotables

A Quick Takes Pro subscriber wishing to remain anonymous said the following when making comparisons between bear markets:

"It fits perfectly with my "smarty pants" theory of big institutional managers. These guys will never move in size when the reward/risk is optimum ... only after the market has proven them "right" ... so a lot of them are buying huge right now ... which sets up the trap that could take out the March lows ... because what do they do when monthly returns sour ? They have no credibility with public anymore if returns don't consistently climb."

I'll add to this something I heard at the advisor conference I attended earlier this month.

What I overheard - The public needs advisors more than ever now. (I agree)

What I think they should have said - The public needs advisors more than ever now but not the same old advisors that did not get them out of the way of the bear.

One of my favorite Wall Street jokes:

A fundamental analyst (read - advisor) and a technical analyst were having dinner. Suddenly, a knife was knocked off the table and it landed point down squarely in the fundamental analyst's shoe.

"Why didn't you move your foot?" asked the technical analyst.

The fundamental analyst replied, "I thought it would go back up!"

Monday, June 15, 2009

Trade the News? I Don't Think So

When I did my column this morning, hospital, nursing and home services stocks were in the pooper. My editor rightly wanted to make mention to Pres Obama's speech on cutting costs since it was germane to the sector.

Considering that I write a technical column, it really was irrelevant. However, we must operate in the real world and not making mention would risk readers thinking we are out of touch. I liked how he added the text for me.

Anyway, in our email exchange I wrote the following:

"You are right - a mention is very appropriate. But it was not the cause (of today's carnage in the sector).

I mentioned (in the column) that the sector peaked June 2 and now ask a serious question - was Obama's speech known at that time? Was there something out there for the public about what would be in the speech?

What I am trying to say is that the sector started to fall two weeks ago. Today's news may have triggered a little panic selling (I do check the news on each stock but there was nothing about the speech) but unless there was something known two weeks ago it was not the cause."

This is a mistake many investors make - thinking that the news drives the stock market. The stock market anticipates the news. Somebody always knows something before anyone else. Someone always reads the tea leaves (and I am not talking about the charts). They act and their footprints are visible in the market for technically oriented Columbos to find and then act in turn.

Don't believe me? Put this in your bong and smoke it:

Why did the stock market peak in October 2007. The fundamentals looked great. Bears Stearns was still in business. Subprime had not exploded. There was not such thing as TARP and Bernie Madoff was just the guy who owned the market maker that kept screwing me on executions.

In short, the world was still in terrific shape - yet stocks started to fall.

The news causes wiggles but the market peaks and troughs before the public gets its firts whiff of the news that matters.

Friday, June 12, 2009

More confusion

In my Barron's column I talk about upside targets based on the May trading ranges. Well, the Nasdaq hit its target intraday Thursday.

Perhaps never shorting a dull market can mean don't waste your time because we ain't going' nowhere.

Thursday, June 11, 2009

Golden Cross update

This is a follow-up post to one from January on the same topic.

The Golden Cross is a trend following technique that gets you long when the 50-day exponential moving average crosses above the 200-day exponential average. The Death Cross, or Black Cross, is the opposite and it gets you short. Over the past decade it has worked sweetly.

We ran a chart of this in the newsletter this morning showing how things have been developing lately. My editor also asked about it but my answer was that it is not quite ready for a serious challenge to the current bearish view. In other words, it will be some time before the Golden Cross can occur barring a market melt-up.

You will see this in my column when it gets close but thinking back to the summer of 2006 when they almost crossed (to the downside) I will remind you not to jump the gun.

As for the long or short only result, you have to use money management, too. That would have gotten you flat a long time ago after (but not at) the March bottom.

Wednesday, June 10, 2009

Dull market?

While I still clash a bit with my editor on some headline issues, when I sent the article in today the Dow was still down 90 (before closing down only 24) Therefore, the tight range, low volume affair we've had for the past 7 sessions remains intact and shorting is premature.

A chat room I follow pointed out four consecutive days of doji candles on some market indices. And hourly S&P 500 shows an ascending triangle.

All told, I hold on to my semi-bullish short-term view as I wait for the market to finally top out. There is so much more money to be made on the short side but you have to be patient, grasshopper. (dedicated to the late David Carradine.)

Tuesday, June 9, 2009

Inside Trendline

This chart was posted in a chat room but the trendline was poorly drawn. After scolding the poster about it, I though I should tell my blogees about it with my better-drawn trendline..

What this shows is a line that supported previous lows - lots of them - and now looks be coming through the level I have been writing about as the target for this rally. It is but another reason I think the upside is limited.

Monday, June 8, 2009


Well, gang, it happened. I had my first sighting of premium gasoline top 3 bucks at the pump this morning with a 30 cent spread over regular. Any wonder why I remain positive on oil and oil stocks?

Today's column was on energy and I want everyone to take particular note of the oil chart priced in the basket of currencies that make up the US Dollar Index. In other words, oil priced in a combination of Euros, British Pounds, Japanese Yen, Canadian Dollars, Swiss Francs and yes, the critically important Swedish Krona. :-p

A lot of talking headery has been dedicated to telling the public that commodities are strong because the dollar is weak. In the words of Col. Sherman T. Potter, "horse hockey!" Crude oil is rising whether you price it in the currency basket (sans US dollar), or any of the component parts (well, I did not check Krona). It is even rising when priced in Brazilian Reals so it is fairly safe to say that crude is rising a heck of a lot faster than the dollar is falling.

I repeat what I have been saying ever since the first expert invoked the D-word many months ago. Rising bonds meant no deflation. And now rising commodities mean no deflation.

Friday, June 5, 2009

Site with Coppock

Here is a site that puts out a decent explanation of the Coppock Curve.  FWIW



 - Toby on Rockstar Supernova

Thursday, June 4, 2009

View from Pershing

Some disjointed observation at this show for registered investment advisors

1 - Put a wig on one of the guys here and he is Bernie Madoff.  Omen?
2- I heard from a connected soul that he could tell who was a broker. They were the ones walking around in a death march as the model of the business has left them in the dust. Their businesses are dying as they stick to the transaction based view of the world.  Customers changing? Seems so.
3- Advisors are still fighting last year's battle. "How do we reduce volatility?" they ask. The time to ask that was last year. Now we should be asking how to get more exposure to volatility unless of course, you still think a depression is coming.
4- Asset allocators are still making judgment calls as to when and how to reallocate their portfolios. I feel an article welling up inside about applying technical analysis to the process - not in timing any item in the portfolio - to let the market decide when it is time to reallocate. Sorry, can't let that cat out of the bag. Wouldn't it have been great NOT to shift more money into stocks last year as they continued to become a smaller portion of the portfolio? Hello falling knife.

Yield Curve

I am far from a yield curve expert but it did seem that the flat and inverted curves we saw did indeed forecast the recession. And now, we hear that the curve is at a record spread from short to long end. Is that really true?

I could not get the chart to work here on the road but it seems to me that the spread was the same in early 2004 as the market settled into a nice correction in a true bull market.

Can someone weigh in on what it really means? Not that a steep curve is good for banks but the whole spread thing being at a record.

Now off to Publix to buy some toothpaste before heading to the Pershing conference. They confiscated my half-used Tom's of Maine toothpaste at the airport.  

Wednesday, June 3, 2009


I am off to the Insite 2009 (Pershing) conference for registered investment advisors in thunder-stormy Ft. Lauderdale. I look forward to posting some observations on the state of that industry and the psyche of their clients. Should be fun.

Poppycoppock - the post

OK, here is my take on the now abused Coppock Curve. First, a definition:

The indicator is designed for use on a monthly time scale. It's the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average. When the result is negative - assumed to be significantly negative - and then turns up we get a buy signal. It is not designed to give sell signals.

Keep in mind that this is a very long-term indicator and it cannot EVER catch the bottom. The math will not allow it to do that. Therefore, it is quite possible that we are indeed seeing a major bottom form.

Now let's take out heads out of our....ivory towers and put them back in the real world. Any money manager who misses a 30-40% rally gets fired. Plus, even though the signal fired, there is no accounting for a decent correction.

So, use this indicator as just another bit of evidence that we are not going to Hades in a handbasket but for making money, caveat emptor.

I seem to recall writing back in November that while there may be a lower low it won't be all that much and investors buying then would be quite happy in a year or two.

Tuesday, June 2, 2009


I just had to get that title up there. There has been so much written on this obscure indicator that I have to comment - once I figure out its subtleties.

Also, the press and chat room are jumping all over its bullish signal. I am wondering about a contrarian spin.

More when I finish work on my paying job.

Monday, June 1, 2009

Even today, still a bear

Still a bear? After a breakout? Or better yet, calling it a breakout means I've capitulated to the rally.

Tricky call. More likely it is another short-term event that we have to take one at a time.

Remember when the market broke 875? It went up but not by much. May was essentially flat after the initial rally.

And now it breaks the next range at 930. I can see another 4-7% rally (to 982 - 1007) but I just cannot see this as a bull market that will last. Take two clunkers out of the Dow and of course everyone is happy. They will put in two stocks that have a chance to make some gains.

So, we take it range at a time. I'll keep my bearish opinion while I play the long side. It is the difference between what you think - and everyone is free to think whatever they want - and what you do. Your bank account does not care what you think.