Oct 18, 2010

Short-term: 3 yellow, 1 red – still overbought
Int-term: 2 green, 2 yellow – uptrend still in place
Stock targets: 75% swimming, 18% neutral, 7% sinking – still extremely one-sided

Updated the indicators for yesterday because market today is dropping. Unfortunately, the intermediate term indicators are now lagging so they don’t seem to be signalling. Maybe the market will drop enough for the short-term indicators to signal a trading bottom. And market breadth and sentiment is still extremely one-sided – which is a contrarian indicator. A slight deterioration over the last couple of weeks but nothing that is a signal. I wouldn’t short this market – but I wouldn’t buy dips unless something changes.

On the currency side, which has driven most of this upswing over the last six weeks, the euro is now extremely giddily overbought. Wouldn’t surprise me if a wave of bad eurozone news dominates the news cycle for a few weeks. Perfect time to manipulate the news cycle for it.

Oct 8, 2010

Short term: 3 yellow, 1 red – overbought. nothing new
Int term: 2 green, 2 yellow – uptrend continues. nothing new
Stock targets: 77% swimming, 16% neutral, 7% sinking

It looks like there is now some stability in extremis. The number of newly deteriorating stock charts is now balancing the number of newly improving stock charts. At these extremes of one-sided opinion; what this means is that the market is moving from bullish to complacent about the underlying macro scenario (declining dollar, Fed easing and monetizing debt, etc) that has driven the recent rally.

You can see that in three “volatility” charts – VIX (the current month); VXX – a short-term VIX futures ETN, and VXZ (a medium-term VIX futures ETN). DO NOT buy any of these under any circumstances if you are a retail investor. They are a derivatives fraud for anyone but a hedge fund.

Now on the low end and heading into complacency — but nowhere near extreme enough to go contrarian

Impossible to separate out what is permanent value decay from VIX changes – but it’s easy to see how those who have been short-term short have been slaughtered over the last 2 years.

Despite the market action, longer dated VIX futures are still pricing in some volatility.

A very weird mix for a completely manipulated market. An Alice in Wonderland bear market. Substitute recovery too. Works just as well.

“I’m sure I’ll take you with pleasure!” the Queen said. “Two pence a week, and a bear market every other day.”
Alice couldn’t help laughing, as she said, “I don’t want you to hire ME – and I don’t care for a bear market.”
“It’s a very good bear market,” said the Queen.
“Well, I don’t want any TO-DAY, at any rate.”
“You couldn’t have it if you DID want it,” the Queen said. “The rule is, bear market to-morrow and bear market yesterday – but never bear market to-day.”
“It MUST come sometimes to “bear market to-day,”” Alice objected.
“No, it can’t,” said the Queen. “It’s bear market every OTHER day: to-day isn’t any OTHER day, you know.”
“I don’t understand you,” said Alice. “It’s dreadfully confusing!”

Oct 6, 2010

Short term: 1 green, 1 yellow, 2 red — hugely overbought. nothing new
Int term: 2 green, 2 yellow — uptrend to continue. nothing new
Stock targets: 79% swimming, 15% neutral, 6% sinking — everything going up. fundamentals and valuation and stockpicking no longer matter. nothing new

Nothing new in the indicators. I don’t expect them to signal a top in timely fashion here. They will signal a decline but in all likelihood only after it has chewed thru quite a bit of downside. In the meantime, there is no expectation of anything other than continued asset inflation and currency debasement. We are clearly in an asset bubble here. Cash is crap and in particular the dollar. Personally, I much prefer rolling any profits into things which the Fed cannot destroy — gold, food, ammo. And international and commodities are still the investments of choice. On this rally. keep tax consequences of decisions in mind. This rally is inflation. Paying taxes on inflation is pure theft. Don’t get into a pure trading or momentum situation where you have to sell something and pay taxes simply because of short-term price changes. don’t chase.

Quarterly Update

Here is the summary update of individual stocks mentioned over the last quarter

Date US Ticker Price Current Price % Change
9/16 TSM 9.96 10.24 2.8%
9/16 AMX 49.78 54.09 8.7%
9/16 CAJ 45.30 47.42 4.7%
9/16 SCBFF 30.04 29.23 -2.7%
9/16 NVS 55.34 57.22 3.4%
9/16 BTI 73.56 74.76 1.6%
9/16 ABV 120.91 125.07 3.4% + $2 div
9/16 TSCDY 20.27 20.48 1.0%
9/16 NSRGY 52.01 53.80 3.4%
9/16 LVMUY 26.52 28.96 9.2%
9/16 BRGYY 85.65 92.84 8.4%
9/16 CEO 187.67 196.64 4.8%
8/23 NEMFF 3.81 5.01 31.5%
8/23 MCP 15.34 29.60 93.0%
8/23 ACAZF 5.75 5.89 2.4%
8/21 LUK 20.37 23.82 16.9%
8/2 RIG 50.68 64.50 27.3%
7/24 FCN 35.80 34.87 -2.6%
7/12 PVD 42.86 63.55 48.3%
7/9 ATK 64.19 73.80 15.0%