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wndysrf

Sudden Recoil

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Mark?s Market Commentary ? February 28, 2003

 

Everyone in Los Angeles knows about the ?sudden recoil?. The L.A. dating scene is a mirror image of today?s stock market, where thousands upon thousands are keenly focused on only the very best looking women. These women have become terrified, and if one accidently makes eye contact with a strange man, she instantly recoils in order to avoid encouragement. The sweater is immediately folded over her spectacular breasts. Any jewelry remotely resembling a wedding ring is flaunted into full view. She immediately turns her back on the crowd, and her head lifts in a sniff of disapproval. And she walks away, to widen the distance from the vulture crowd.

 

The guys keep approaching her, and won?t give up. And she constantly recoils, making her even more desireable. And she puts even more distance in between herself and her stalkers.

 

Trading EBAY and YHOO have been no different.

 

The short sellers have been attacking, but then are given the ?sudden recoil?. The shorts cover, then reload on the next down move. Another recoil, and higher prices. The chart watchers and momentum chasers pile on, and the shorts make another attempt.

 

How high will YHOO go? How about EBAY?

 

Smells like March Madness all over again, only this time it?s the Internets instead of the Supermodels. We won?t get any downside pressure until the Internets break off southbound.

 

Other than that, there is little news to report. It seems like we are following the same pattern over and over. The liquidity bubble refuses to burst. There are no redemptions hitting the hedgefunds or mutuals yet. No sense in betting on any major downmove until there is some type of catalyst to shake these longs loose.

 

Unfortunately, the time has come where I really have nothing to add. The sideways action in the market is making fools out of the daytraders. With respect to the long term trend, I don?t think we will get much movement to the downside as long as so many HedgeHogs are out there shorting the Nasdaq with complimentary Repo Blasts from Al Green, and as long as the market ignores bad news.

 

There are still plenty of stocks hitting new highs every day. No major downmove will happen until the broad market breaks off, where all stocks move down together.

 

Buddha made an announcement yesterday that he is going to be participating less in the Arena. I don?t blame him. I myself might consider writing only a couple of times a week, or posting only when I have something funny to say. If I can?t think of anything, I feel like an extension of Doug Noland?s Ongoing Nightmare where he keeps saying the same things over and over, yet nothing changes.

 

I have also been a little unnerved at the censoring of other?s opinions who happen to trade on the long side once in awhile. Going long once in awhile removes ?traders block? and should be practiced from time to time by short sellers so they don?t get too married to one direction only.

 

I myself have refrained from commenting on short term market direction in fear of being ostracized, which could be a dangerous environment for those who may want to sidestep Al Green?s Life Support Operations when they appear.

 

I am becoming more convinced that the way to play the Bear trend safely is to buy the bounces, and short only when a downtrend is confirmed by a simple 50-day average failure or MACD crossover, and cover earlier rather than later.

 

But anyway, this is my column, but not my site, so I have to respect and obey our proprietor.

 

Anyway, I?ll post when I can, or when I have something funny to say in order to keep you entertained. Otherwise, I?ll continue to lurk?..

 

No girlfriend of the week. Sorry, but I?m too exhausted to continue today.

 

Buddha's parting words for the day kind of sums it up:

 

"No more time spent monitor hugging. No big collapse until liquidity dries up. Until then borrow and spend is the name of the game for the Bushites and other Texas flim flammers. They will deficit spend this thru their terms, what do they care? Their replacement of 'L.Ron' Hubbard on the econ team with a new deficit advocate is an indication of their committment to the money press."

 

"The only thing that trumps this a 10 Sigma event that basically seizes the machinery. No amount of WD40 lubricant will then bail the fiscal policy. But without it I think we continue to see radical short squeezes off temporary lows and zero moves towards capitulation. The individual investor is essentially like a shell shocked patient just off the front from Verdunne. He has become unresponsive, irrational and is balled up in a corner, mumbling incoherently. He is no longer a factor and has divested himself of any sanity or responsibility to next of kin or family lineage. He has been successfully mind washed and is content to wave to wife, daughter and ship's officers from the tail end of the Titanic as they row away from the catastophe. I would not underestimate the far right's ability to wage perpetual war and finance it with perpetual deficits that get continually rolled out into the future."

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WS

The one certainty is Change Happens: There will be plenty of inspiration for your brilliant mind before long; and since your take is fundamentally creative anyway, I think you need not fear the Noland Nightmare. Good energy to you..

IC

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Its a Log Jam.... *hic* ;)

 

One of these days Alice.......

 

 

 

bear.gif

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take it from a VietNam era boomer: every day of peace is a blessing. Let's hope our blessing lasts through this weekend, at the very least. There are very dark clouds out there, but they only hide The Light momentarily (something like that from The Book of John).

 

'been a long week, stoolies. pax.

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Your post today brought the following quote to mind.

 

"Markets can remain irrational longer than you can remain solvent."?

 

--- John Maynard Keynes

 

As I have no idea what the markets will do in the short term,

I shorted and held from about Jan 2001 to Jan 2003.

 

As I think the market will continue to decline over the next several years

(despite major bear rallies) I've now shorted since Jan 2003

and am holding.

 

All via leap puts.

 

I suppose the drawback for a trader would be the complete lack of the daily action "rush" and "drama".

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Hi Mark. There have been many times when I have gotten to the point you are at. Since I haven't been here long I cannot comment on your trading style, but here is what I did.

 

I started out as a daytrader but got really burned out on the constant ups and downs. It just didn't fit my personality. Some people have no problem with the roller coaster, and in fact thrive on it. Good for them, but it just isn't for me. I prefer a longer term approach. I think we all know what floor this elevator is going to stop on, and it is many floors below where we are now. So I decided to establish my short positions and then just let them ride. I'm not worried about these gyrations. I know what floor the elevator stops on, and I want to be along for as much of the ride as possible. And I want to enjoy the ride as well! Otherwise, what is the point?

 

Of course, from time to time it makes sense to go long, and that is what I use the VIX and other tools for. That only makes sense.

 

But IMO a longer term strategy can eliminate a lot of the pressure and frustration that comes from watching the market every second. We are all different, and what works for one person may not work for another. Maybe your body is telling you something?

 

Doug Noland is great because he updates us on the current situation. Sure it is a broken record sometimes, but when I first read his stuff, that broken record allowed me to catch up very quickly on what was going on. Consider the first-timers. They may not read all the old posts. The last one is the starting point for many.

 

I have enjoyed your posts and look forward to them in the future, but do whatever you think is best. Personally, I think the best is yet to come and when the woosh starts your posts will be in great demand. Don't quit right near the finish line.

 

JMHO

 

I always enjoy reading your posts. Personally they have never been redundant to me. I'm not bored.

 

Good luck.

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I agree - what a bleh market. No action, no excitement. Well, I did get yet another relative (4 and counting) to switch over a portion of their holdings to physical at market close yesterday so it was nice to have their first day with gold be a positive one.

 

Here's the action that caught my eye - more statistical wizardy from the Commerce department in their magic 100% increase in the 4Q GDP from 0.7% to 1.4%.

 

Real exports of goods and services decreased 4.4 percent in the fourth quarter, in contrast to an increase of 4.6 percent in the third.  Real imports of goods and services increased 7.2 percent, compared with an increase of 3.3 percent.

 

  Real federal government consumption expenditures and gross investment increased 11.2 percent in the fourth quarter, compared with an increase of 4.3 percent in the third.  National defense increased 11.4 percent, compared with an increase of 6.9 percent.  Nondefense increased 10.8 percent, in contrast to a decrease of 0.3 percent.  Real state and local government consumption expenditures and gross investment increased 1.6 percent, compared with an increase of 2.2 percent.

 

  The real change in private inventories added 0.24 percentage point to the fourth-quarter change in real GDP, after adding 0.58 percentage point to the third-quarter change.  Private businesses increased inventories $24.7 billion in the fourth quarter, following increases of $18.8 billion in the third quarter and $4.9 billion in the second.

 

So there you have it. Exports sucked but luckily they were offset by higher defense spending. We all know that investments in defense spending have a super ROI. And let us not forget the ever powerful stimulant of retail inventories piling up! Even after a pared down ordering cycle to accomodate a lackluster buying season, crap still bent the warehouse shelves. Of course that not exactly the same spin the Wall Stool Journal put on the 1.4% upward revision....

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We continue in the contracting triangle (spx). No change in my Position.

 

This will end soon enough stoolies.

 

Don't pay any attention to me. I am a parent. :blink:

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I agree - what a bleh market.  No action, no excitement.  Well, I did get yet another relative (4 and counting) to switch over a portion of their holdings to physical at market close yesterday so it was nice to have their first day with gold be a positive one.

 

Here's the action that caught my eye - more statistical wizardy from the Commerce department in their magic 100% increase in the 4Q GDP from 0.7% to 1.4%.

 

Real exports of goods and services decreased 4.4 percent in the fourth quarter, in contrast to an increase of 4.6 percent in the third. ?Real imports of goods and services increased 7.2 percent, compared with an increase of 3.3 percent.

 

? Real federal government consumption expenditures and gross investment increased 11.2 percent in the fourth quarter, compared with an increase of 4.3 percent in the third. ?National defense increased 11.4 percent, compared with an increase of 6.9 percent. ?Nondefense increased 10.8 percent, in contrast to a decrease of 0.3 percent. ?Real state and local government consumption expenditures and gross investment increased 1.6 percent, compared with an increase of 2.2 percent.

 

? The real change in private inventories added 0.24 percentage point to the fourth-quarter change in real GDP, after adding 0.58 percentage point to the third-quarter change. ?Private businesses increased inventories $24.7 billion in the fourth quarter, following increases of $18.8 billion in the third quarter and $4.9 billion in the second.

 

So there you have it. Exports sucked but luckily they were offset by higher defense spending. We all know that investments in defense spending have a super ROI. And let us not forget the ever powerful stimulant of retail inventories piling up! Even after a pared down ordering cycle to accomodate a lackluster buying season, crap still bent the warehouse shelves. Of course that not exactly the same spin the Wall Stool Journal put on the 1.4% upward revision....

Excellent quote. As always "the devil's in the details".

 

It shows why GDP is certainly Gross and Domestic, but anything but a useful Product.

 

By counting all economic activity as of equal value (private vs gov't) and an increase in inventories as positive FDR's New Steal clowns hoped to convince people that the economy was improving during the 1930's.

 

In fact, GDP as defined is not too different than the non-sensical production measures used in the late Soviet Union.

 

Given the collapse of exports, the rise of imports, and the massive budget-busting rise in non-productive gov't expenditures, I'm now convinced more than ever that the correct long term position is short stocks and long commodities.

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DeepBlue,

 

Playing it smart. I too have no problem waiting. We've got all the time in the world until the inevitability hits. :lol:

 

When it finally does pick up again, it'll happen so fast those who are not on board will be too shell-shocked to do so.

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I have also been a little unnerved at the censoring of other?s opinions who happen to trade on the long side once in awhile. Going long once in awhile removes ?traders block? and should be practiced from time to time by short sellers so they don?t get too married to one direction only.

 

I myself have refrained from commenting on short term market direction in fear of being ostracized, which could be a dangerous environment for those who may want to sidestep Al Green?s Life Support Operations when they appear.

What Mark, you mean this isn't the Fox Network (fair and balanced)?

 

Seriously, however, I think Doc's apology this morning was sincere...

 

I don't think Doc wants to kill the goose that continues to lay the golden egg here...

 

Let's all try and give the guy a break, he works hard, and he's passionate about his work, sometimes a bit too passionate, perhaps...

 

I will continue to post my thoughts here, and if the thought police zaps em, I'll be gone... but frankly, I'm not as bearish as I was last year. Doc might not like it but I can't help but call 'em as I sees 'em, but like SG, I could always be wrong...

 

I encourage you to continue your fine writing, even if you do go long for periods or hedge your shorts... I'm pretty sure even though Doc might not relish it, he's probably open minded enough to let it pass...

 

We've had a pretty horrible week here, and emotions have run high... This is no fun at all here when ANYONE suggests that there is only one way to play this game, and that doing anything but OUR method is WRONG...that's the beauty of it, there's more than one way to succeed... It serves no useful purpose to try and shout down other people with ideas different than ours... At the end of the day, what were the results? The results or lack of them speak volumes...

 

End of Rant... Have a great weekend all...

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Trading EBAY and YHOO have been no different.

 

The short sellers have been attacking, but then are given the ?sudden recoil?.  The shorts cover, then reload on the next down move.  Another recoil, and higher prices.  The chart watchers and momentum chasers pile on, and the shorts make another attempt.

 

How high will YHOO go?  How about EBAY?

To each his own, but I've found that chasing "new highs" can be as dangerous as chasing "new lows." You might eventually be right as far as the long-term direction. But, the question is: will you run out of money first? Personally, I prefer to short stocks that are weak. Sure, you don't get in at the absolute top. But, you also aren't forced to sit through the torture of holding onto your short position as the stock rockets higher. Just my observations. Good luck with EBAY and YHOO.

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