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#1 DrStool

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Posted 13 December 2002 - 10:19 PM

Busted! (12/13/02)
Nobody makes money from forecasts except forecasters. Traders and investors make money by following trends and recognizing when trends are changing direction. Doc uses cycle analysis and cyclically based indicators to do that. The indicators are sensitive, and they begin sending signals in the early stages of top formation. When Doc was screaming "Sell the news! in early November, that's what he saw. Now we are beginning to see the signs of confirmation of the reversal. Doc discusses those signs, as well as the short and intermediate term outlook. He warns bears to be both patient and nimble.

Doc also looks at the long term and sees a low of 570 on the SPX and 657 on the Nas in June of 2004.

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#2 Hoodwinked

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Posted 13 December 2002 - 10:34 PM

If a bear is smart, If a bear is clever, he plays the swings, to the streets displeasure :wink2:

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Posted 14 December 2002 - 12:03 AM

Doc, let's assume based on today's FEED the Fed rolls all the 28 day repos to 7s by the first week of January. Gman is desperate and knows he can get more bank for the buck for his FEED if he can roll 'em higher and force any fidgety pension fund managers to chase by selling bonds to buy stocks BEFORE year-end than after, due to fund managers' desperation to avoid missing anything that looks like a new bull market by year-end.

We have a 3 due up. I'm betting he rolls that to a 7 and throws in a multi-day auxiliary repo on the to hold the fort for his 7 the following week. By doing this he can propel total FEED to new highs around year-end. I just can't imagine the stock market railing to rally in such a scenario...at least short-term.

The good part is the Bushies' weak dollar policy, which is idiotic, is limiting Gman from hurting us with coupon passes. It's much easier to buy coupons with a strong dollar policy by the treasury. That means should Gman roll to 7s across the board, that should mark THE top(finally) wherever it is. What a perfect fakeout it would be if all the jamming forced the major averages to new recovery highs before collapsing.

There is one way out for Bush to probably get elected in 2004: Keep the strong dollar, have Gman stay until 2006 no matter what, immediately after March 31, tell Gman to drain the repos, collapse the market, break the October lows to induce a big-cap selling washout, in the process get the long-end a full 50 basis points below the triple-bottom comprised of the 1998, 2001, 2002 lows so that EVERYONE is eligible to refinance again, now with GSE money creation back in gear and cash generated by capitulation, rejam the repos and get the strongest bear market rally since its inception...reaching its peak, you guessed it, in November 2004.

But will Bush think of that? Probably not. He will try to keep the market at current levels at any cost and it will cost him. He doesn't realize the market doesn't have enough ammo to sustain itself till 2004.

#4

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Posted 14 December 2002 - 01:00 AM

He warns bears to be both patient and nimble.  

Doc,

The MoGauge chart in Anals shows big drop followed by rise back to top and then another big drop. The selling we are seeing now is due to first drop or the second one? If it's due to first, would that rise produce a year-end rally and then down?

#5 mjkst27

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Posted 14 December 2002 - 01:00 AM

Tasty anals, Doc. Nice work.

To my semi-trained eye, the DOWn chart looks like it wants to take a major crapola, and like soon. Maybe the Azz-crack chart too. But definitely the DOWn.

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Posted 14 December 2002 - 02:40 AM

Heard they thawed out Abby Jo Blowin' from her cyrogenic chamber to declare the new bull market. Better have that cyrogenic chamber handy since it may be a long while before the the real next bull market starts.

#7 DrStool

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Posted 14 December 2002 - 08:25 AM

anitaag-

Although there appears to be a relationship, Doc wouldn't suggest using the MoGauge for purposes of market timing. It helps establish general context, for sure, and sometimes can tell us what to be alert for when there are massive events like the ones we've seen in the last two years. Ditto for the Feedometer.

The only way to time the market is by reading the market. The stock market is its own indicator. Everything else is interesting but, for trading purposes, of no use whatsoever.

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#8 DrStool

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Posted 14 December 2002 - 08:38 AM

Likewise, entre, looking at the Feed chart, it seems that massive Feeding may not always work to jam the stock market. Without enough willing greater fools, it seems the market will simply refuse to cooperate. Whereas other central banks may have no problem jamming their own markets, the Feed has its problems with that here. The whole world is playing the US market. This ain't Korea.

The opening line in the Anals was a joke about forecasting, which Doc does every night, of course. The constructing of long range scenarios is interesting and fun. It's half the reason for the existence of message boards. :wink2: But it's a worthless exercise for trading purposes. For that, all we need do is identify the cycle phase we want to trade and follow it until we see the signs that it is beginning to turn. Short 'em high, and cover low!

If, on the other hand, our purpose is to be pissed off about how the Fed is managing the world, (which all stoolies are) then forecasting is paramount! :lol:

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#9 Guest_yobob1_*

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Posted 14 December 2002 - 10:03 AM

I still think we exit the year with the Dow nearer to 8000 than 8500. Q1 could be a beary bad quarter for da bulls. I expect it to come unglued after the "yippee it's a new year bump", that fails quickly. Of course we're going to have all those companies beating severly deflated estimates by a penny. Somehow I think this is less important this time around. I think the focus of the CB's is going to be forced towards the forex arena leaving equities more on their own. Japan is increasingly being squeezed by the dollar and subsequently the Chinese. One of the possibilities in this hand of poker are the Japanese, holding tons of US paper simply saying, prop up the buck and slam the yen or we start dumping and drive your rates much higher. This seems a low probability. I'm not sure the Japanese know how to play hardball at this level. What I think will happen is the weakness of equities will send money running for cover driving the yields lower and lending support for Uncle Buck.

I don't think the US govt. has changed it's dollar policy materially. The markets may be rushing to judgement. What we may be seeing is the fact that the ESF can't function without a Treasury Secretary who is the only one authorized to direct it and answers only to Shrub for authority. We don't have a Tresuary Secretary until Congress approves the appointment weeks from now. Shrub may have erred in clubbing O'Neil prematurely. This could also go a long way towards explaining gold's actions.

If this is the case do things get beyond controlability beforehand? If gold gets through and holds above $354 then the answer is yes. If not then I think they can regain the reins and the dollar will recover to the 104-108 range, which is what I expect. We may have a new range on gold in the $330 -$350 scope, but I question even that for now.

I'm sure you've read Noland by now and seen the extremes the mortgage business has gone to in order to keep the bubble expanding. I think the game has run out and there is going to be increased scutiny of the mortgage business. It's fooled me before, and could easily fool me again, but my bones are telling me we are hitting some kind of a wall here. There's a whole different feel to people right now. Less wide-eyed optimism and more furrowed brows.

I can tell you this for sure, the local RV dealers have placed a huge bet on a big surge in sales. Inventories have never been higher. If it doesn't happen by March or April panic will ensue, especially by those undercapitalized.
IMO this is another mal-adjustment caused by cheap credit. It doens't matter if the money cost is zero if the product doesn't sell.

And finally we have all those people running out of unemployment benfits at the first of the year. Lay-off anouncements rose in the final quarter as previously predicted and I expect acceleration in that trend in Q1. Look for it in conjunction with Q1 results. Locally we are starting to see more announcements and the help wanted sections will almost fit on a napkin. If it weren't for the real estate section and the trustee sales notices(12 pages per week), the paper would be out of business. Between job losses, pay / hour cuts, and year three of declining net worth, the consumer is going to be very hard pressed to consume.

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Posted 14 December 2002 - 12:54 PM

Doc, what worries me is not just ordinary FEED, but a complete increase across the 28 day repos. Throughout November we went from 2s to 5s. Granted going from 5s to 7s isn't as big of a jump, but those Wall Street money managers have every incentive to close the year out strong if given the FEED money. A lot of them need a rally to keep their jobs.

If trading volume wasn't 85%+ institutional and individuals had a much bigger slice of the pie, the FEED would have a much less chance of being effective.

Also, the longer the market remains weak short-term, the more the Fed jams in response, which can lead to more of an overshoot to the upside. If the big boys have enough FEED and they see shorts' stops above the August SPX and Dow highs, you can bet they'll make a run for them into year-end. With enough FEED the impossible becomes possible. Sometimes we are so focused on trying to predict markets we miss the way they think. They don't try to predict the market. They determine where they want the market to be by a certain time and try to "pin" it there with the manipulation methods they have at their disposal.

#11 DrStool

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Posted 14 December 2002 - 02:53 PM

The Feed only goes to the Gang of 22, not to the massive mental institutional portfolio sphincter market or the worldwide hot money speculating and hedging community. I do not agree that the Feed has the power to move the market for more than a day or a day and a half. It is too small a force to maintain the market at a given level. In the trading rooms of The Gang it's all about hot money. In and out. Hit and run. Sure they can pop it for a day when they are flush with Feed but only if they think they will have someone to unload on. That's it.

This market is the whole world's market. This is not Korea. Every time the Feed jams, sellers appear out of the woodwork like billions of termites within a day and a half. The Feed cannot reverse the powerful secular forces of the greatest bear market in the history of the world to jam the stock market higher.

They are pumping like mad for sure, but the stock market is not the raison d 'etre. They have more urgent problems. Furthermore, in this risk averse environment, the Gang of 22 will be content to park the cash in safer short term parking places. The Gang members are, if nothing else, master technicians. The bottom is falling out. They know it, and they are not going to jam a hopeless cause. It's a matter of self perservation.

So I'm happy tonight. I'm not worried...

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Posted 14 December 2002 - 03:37 PM

Doc, wouldn't it be in the Gang of 22's best interest to utilize the FEED now knowing they can sell high to those 25 year old hedge fund managers who are afraid of missing a new bull market by year-end...especially if they manage to pop the August highs? The more the market rises, the more desperate those fidgety fund managers will be to buy, not less, provided it's before year-end.

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Posted 14 December 2002 - 03:48 PM

maybe afraid of "missing the rally" is not as accurate as afraid of being "underinvested for the rally".

I mean the money manager who sees the market rise when he is "only" 60% invested in stocks and fears for his job security as a result. If the Gang of 22 sees they can take advantage, they will make those fund managers sweat. The Gang of 22 makes its money and strands the fund managers at the top. But the fund managers don't care since they keep their jobs and it's not their money anyway. The real bagholders will be the fund shareholders.

Once Jan 1 rolls around, this window of profit for the Gang of 22 closes. The Fed no doubt knows this, so it is jamming enough to make it worthwhile for the Gang of 22 to go for it. Any 28 day repo from here on out won't expire till 2003. Very timely.

#14 Hypertiger

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Posted 14 December 2002 - 04:57 PM

Yes Doc, the downward pressure on the markets is 24/7, the Jam can only produce short term bounces at key times. It has the effect of smoothing the drops and prolonging the duration of tops. Gives the TA's head aches. But the FED will never be able to prevent the market from reaching it's final destination... oblivion.
"We are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money (at the request of the consumer) we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon." --Robert H. Hemphill, Atlanta Federal Reserve Bank,1938...

#15 Takachi

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Posted 15 December 2002 - 11:28 PM

Doc, many thanks for the caution on HUI and gold in the suctor watch.

Looking at energy, it seems the short term and 10/13 is or is about to rollover. Yet NG is again up strong tonight and oil is projected possibly over $30 per barrel based on whats happening in Venezuala. Is there still a second wind in that upswing on the chart or do you see it beginning the down phase? Maybe you could say a word or two tomorrow AM?

Tanks Doc.





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