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#1 wndysrf

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Posted 03 January 2003 - 04:57 PM

Mark’s Market Commentary – January 3, 2002

First of all, I want to thank all Stool Pigeons for the Mark To Market contributions. This year, I intend to be a little more aggressive with trading ideas so you guys get your money’s worth. Short and hold last year was a mistake, unless you were lucky to hit the right stocks. No more round trips.

Seems that I caused somewhat of a firestorm here about my sudden long recommendations from last night.

I will repeat:

Squeeze avoidance will be the key to surviving the bear market after it is down 40% already. Remember, during a bear market rally, it is much easier to stop long position losses, since stocks seem to run unabated to the upside, and pullback slowly. So in a sense, for part time traders, it is actually safer to stay in cash and go long on the hysteria explosions, since selling for a profit is usually pretty easy.

But caution must be exercised when we have 4 up days in a row. Then all long positions must be closed to avoid a sudden reversal.

But sudden reversals from the highs during this bear market have been rare. In fact, large downside gaps on the broad market are non-existent. Runaway upside gaps are common.

And since nobody knows whether or not a 50% bear market rally is in progress, its better to go long on these hysteria squeezes and wait and see. So what if you stop out at a $1 loss? It’s better than eating a sudden $3 lost profit on a short position when the buying splurge happens.

Think of it this way. Why not grope for the breasts each chance you get a signal? Will she let you go all the way? Maybe. Maybe not. A few times you might get your hand slapped away. Very rarely, you will get slapped in the face. But eventually, you will hit a home run. And the way this bear market has been acting, one out of five times is guaranteed to be a giant winner.

So the strategy for this year will be to avoid having more than 50% of the portfolio short, unless we get some extreme readings like a sub-20 VIX, a double +1500 TICK, or anything else that resembles an exhaustion top.

I will use the spare cash to either buy more gold longs, or trade the Supermodel Screamers.

The Hallmark of this bear market is that only 15% of the stocks really get smoked down uninterrupted like Angelina Jolie. The rest are either bid up into Outer Space like PNRA or FRX, or we have Charles Manson – style followers who refuse to give up on a stock. Incredible recoveries and round trips after a stock should have been beaten down for good. Dogs like JC Penney (JCP) which get whipped up at the lows, only to have James Jones followers resurrect this thing from the dead.

What other bear market have you seen which contained so much hysteria? What reason is there to believe that it will stop now?

There is no end to the Liquidity Madness. There is no end to the 6000 desperate fund managers throwing borrowed money at the tape in order to “catch up”.

There is no end to the constant motion-chasing.

There is no end to the exponential increase in speculation.

There is no end to the wild news spinning and hysterical “earnings reaffirmations” like we heard from Lowe’s and Black and Decker today.

What is it? Do these companies all employ Michael Ovitz and Dick Morris as public relations consultants? Why is a stock price so important?

Because the Stock Market is the economy, and all the Matrix Agents are still working furiously to keep this paper daytrading, mortgage brokering, real estate flipping, arbitraging, Kopin Tan options trading economy afloat.

There is no end to FEED accomodation, tax cut ideas, massive government spending intervention in the economy, or any of the other machinations necessary to “prop up” the U.S. economy.

I will be operating under the assumption that the current liquidity and spending Bubbles will extend far beyond our imaginations.

Did everyone see the FEED fail to rollover some Repos today? Think the market will sell off from here? Bet there is a giant $25 billion 28-day FEED on Tuesday when Bush makes his speech about the Iraq war and the stimulus plan.

Just look at the new record sales today reported by Toyota and BMW. The amazing “beat by a penny” results by P.F. Chang’s (PFCB), the current fad restaurant where desperate white men go to meet some Asian Exotica.

The MTV Spring Break continues unabated.

Doug Noland is looking for “the next shoe to drop”. Unfortunately, he must not be an avid fan of MTV, where he can view hundreds of tattooed punks walking around in hightops with the shoelaces untied and the tongues hanging out. Those shoes have been predicted to drop for years, but they keep hanging on. And those guys who favor these shoes continue to attract Victoria’s Secret model girlfriends.

Squeeze Watch

As we saw with QueerLogic last October, island bottoms are extremely dangerous for shorts. Keep an eye on McDonalds (MCD). This stock retested the breakdown area today, and fell apart. Will it fail? Or will they announce an acquistion of Hooters waitresses for all company owned stores on Monday? Go long if it jumps the gap.

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Technical Lesson

As I warned yesterday, the homebuilders could be set up for a massive squeeze. Many had sharp explosions off the tip of a triangle. However, many times, the first move off the triangle tip formation is usually the false move, and the real direction is the other way. If the homebuilders would have followed through, we would have gone long on these stocks. But instead, it appears that the breakout yesterday was a false move. KB Home (KBH) is an example:

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Another one to watch carefully is Toll Brothers (TOL). If it punches through $22 on a big volume break, we are long. Otherwise, this one might fail. Jobs report anyone?? Foreclosure announcements? Oh, I forgot. The Bureau of Labor Statistics was just shut down. Can’t let those unemployment numbers get out there.

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Another such move can be found in Lowe’s (LOW). This one broke off to the downside, then suddenly reversed the other direction. This was a classic “shakeout”, and the stock was destroyed today.

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Today’s Action

As usual, the Supermodels were catching bids today. The telltale morning spike is always a warning of a maniacal squeeze at the end of the day. I will post the cumulative NYSE TICK graph later this weekend when Astrikos posts it. The daily TICK today spent most of the time above the zero line, so it is extremely likely that we will have an all time record high cumulative TICK for the past 12 months.

That means temporary exhaustion. Huge amount of energy pushing the tape today, but it went nowhere.

What I expect next is a two day pullback. If the rally is over, we will come down on some serious volume. If the volume is anemic, then another run for the 925 area on the S & P is in sight. That rally should start on Wednesday, the day after Bush announces his stimulus package.

Girlfriend of the Week

Who else can we pick tonight but Buddha’s ApeWoman? Thanks to Optional at Clearstation for the photo.

Everyone make sure to watch Wall Street Week tonight. I will be taping it.

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Position Summary:

Covered some losers from yesterday.

Full long position on QQQ at $25 closed for minor profit.
Full long position on SMH at $24 closed for minor profit.

Daytraded long on CYMI and NVLS for $1.00 each. Sold in mid-afternoon.

We are 46% short, 22% long, 24% cash.

Half Short:

LOW at $42 Covered half at $36
INTU at $53
C at $38
TGT at $34
MBI at $50
JPM at $25
AMGN at $52
IBM at $80
ROST at $44

Quarter Short:

FRE at $68
CFC at $49
KBH at $49
LEN at $56
TOL at $27
BBBY at $35 Covered at $36
COCO at $40
KSS at $66
NCEN at $28
NYT at $45 Covered at $47
WSM at $27 Covered at $28
LOW at $42

Full Long:

GG at $11

Half Long:

BGO at $1.31
HL at $4.10
PAAS at $5
DROOY at $3.35
GLG at $9
MDG at $16
GSS at $1.72
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#2 wndysrf

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Posted 03 January 2003 - 04:59 PM

Note how the TICK spent very little time below the zero line.

The cumulative TICK will probably blow through new highs. We'll post that chart as soon as its available.

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#3 PileDriver

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Posted 03 January 2003 - 05:12 PM

I'm just playing the obvious turn points, ignoring all the crap in between.

last significant IT turn DOWN: 12/2/02 = BEARX (still in IT downtrend)
last significant ST turn UP: 1/2/03 = dong a few screamers :lol: (still in ST uptrend)

Like SG says, I'm not gaming the crap in between.

My screamers: DISH, BEAS, ESRX, QueerLogic (excellent pop insurance)

Shortfolio built and waiting in the wings for full deployment once this Monkey Rally concludes.

Thanks Mark for showing me the way to indulge in groping during the bear rallies.

#4 wndysrf

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Posted 03 January 2003 - 05:12 PM

Note the Nasdaq TRIN index.

Closed at .20 yesterday, .58 today.

All buying power confined into 1 out of 10 stocks. Which ever is moving the fastest.

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#5

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Posted 03 January 2003 - 05:17 PM

Hi! Here is how I see it. POG is finally getting a well deserved
facelift and looks poised to bust through resistance @ $354.50

In an environment with stable gold prices, miners have stable
profit margins. However, as gold rose by $66 last year and
looks set to push even higher, the miners' profit margins grow
in relation to the appreciating gold price. That's why I don't
really pay that much attention to the technical aspects when I
see gold soar. The underlying asset, gold, is being reevaluated,
the miners' stock prices get bid up, but valuations (PEs)
remain the same. Gold stocks are not getting more expensive
as long as gains in their stock prices are matched by a rising
gold price. Gold stocks and the physical metal are good for two
more things: a safe haven and protection against imploding fiat
currencies. Gold is the only asset which is not anyone else's
liability and therefore the best way of preserving your wealth.

By the way, did anyone see the move in silver today? It broke
through resistance @ $4.75 - $4.85 to settle @ $4.87 (+0.08).
It can't be stressed enough how important that is for gold bugs.

So when will be the Day of Reckoning and gold takes out
$354.50? When that happens the skies are clear until we
reach the next resistance at $372. That's a 5% move. The
miners are leveraged 3:1 which would boost them on average
15% taking the HUI to 180 in round numbers. I guess $354.50
has to be overcome before the HUI can clear 155.

By the way... scrambled to buy back gold today as the
spike got under way and HUI hovered around 146 :grin:

Don't panic I tell myself! Enjoy the ride!
http://www.trending123.com/_hui.htm

#6 wndysrf

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Posted 03 January 2003 - 05:21 PM

Buddha checks in after the close:

"Market wants to go higher. I look for spike action up early next week based on seasonals, cycle readings and repeated discounting of Bush idiocies. It will run only temporarily in the direction of easiest, quickest money and news stories will be fronted to encourage piglets to climb into the muddy pen and fornicate amongst themselves. Note the prop job over last hour as discussed. Its called putting Max Factor on the Boar face, tweaking some of the bristles, maybe a little eye liner over the lifeless pig orbs, even a black spandex garter stretched from Hog's belly to rear legs. The doji looks like a mere pause in Pig digestion. No real Methane expulsion until this farm animal swills down some more slop and does some more rutting."
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#7 PileDriver

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Posted 03 January 2003 - 05:27 PM

ooh, looks like they're hoping on 'em in afterhours already. Next week should finish it off with a "bang" :lol:

#8 wndysrf

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Posted 03 January 2003 - 06:06 PM

StockChart's NYSE Record High % and Nasdaq Record High % are now in Record territory.

Both have exceeded the tops put in on December 2.

The Bullish Percentage Indexes are lagging though.

Top will be confirmed when Bullish Percent reaches December 2 highs.

Only a few days away.
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#9 Direwolf

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Posted 03 January 2003 - 06:15 PM

Mark...I agree with your analysis...perhaps another small jam for 1-3 days...FEED on the GW stimulus crap....wait for BPI to confirm...then, fire away, lock 'n load.....SHORT 'em to ZERO......direwolf

#10 DrStool

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Posted 03 January 2003 - 06:29 PM

I want to echo Mark in saying thanks for supporting Mark and The Stool! Since Wednesday, 15 of you have responded most generously by thanking Mark for giving us his unique insights into the market and for entertaining us. If you would like to contribute this month, the links will be available until this Sunday. For more info, click here.

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#11 The End

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Posted 03 January 2003 - 06:37 PM

fibo. turn dates:

1/7=89days from the oct low

1/13= 144 days from the august high

1/14= 1597 days (-1) from the 98' low

1/16= 377days(-3) from the 01' high

Looks like 1/7- 1/16 will be the high. G-d forbid it's the low.


Sorry about my post of F.z's song lastnight. It won't happen again.
NONE of what I type, should be taken as financial advice.

And when you loose control, you'll reap the harvest that you've sown
And as the fear grows, the bad blood slows and turns to stone
And it's too late to loose the weight you used to need to throw around
So have a good drown, as you go down, alone
Dragged down by the stone.


--Waters

#12 Jorma

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Posted 03 January 2003 - 06:42 PM

My dream scenario. Drive up thru Wed. and get the 13 wk cycle up phase over in 7 days. Fat chance. It will never be that easy. Still, one can hope.

Talk about easy. Buy the gold stocks on their early morning dip and sell at 3:40. Wish I would have done it more.

Holding a core of gold stocks and some trusty BearX. Can't bring myself to dong junk. I'm afflicted with an odd sort of ethics.

War is the last great hope of the incompetent to order the unwilling to attempt the impossible.
William Eastlake 'The Bamboo Bed'

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The Treasury

could burn down

We jammin still

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#13 wndysrf

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Posted 03 January 2003 - 07:03 PM

Another potential squeeze play.

The more of these I see, the more I want to switch over to the long side.

The next QLGC?

The next NXTL?

The next YHOO?

Here's one in an unlikely area. Everybody who shorted the last 10 trading days is now underwater. Even the guys who shorted on the last few days of the big slamdown are getting paranoid.

Your favorite drug store.

user posted image
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#14 brian4

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Posted 03 January 2003 - 07:15 PM

Pay attention to those Fibo dates posted by END-he is right-we finish the pop and begin the holy mother drop (wave 3 down). I have been preaching the last few nites to those who are avoiding POG until there is a pullback-I said there would not be one and compared todays Gold market to Nazquacks spike run-those who shorted got killed-those who waited for an entry point never got one. Today proved my point-look Joe Sixpack hasn't even turned on to POG yet but he will SOON-Golds entire market cap is about the same as Cisco Systems-think about it! We are only scratching the surface-yesterday and today I bought April 10 calls on GG for $3.20 and $3.40 the stock closed today just under $13.- so for an average of thirty cents I control 3,000 shares until April expiry (the calls closed at $3.90). POG is dirt cheap here-BUY IT! By the end of next week I will be 100% short-the after market action today signals a big upmove Monday, Tuesday that is when to sell your calls and get short-the 40 and 80 week cycles are pointing down now so look for a hard turn down on the Fibo dates-this next leg down will set new lows and be very NASTY and relentless! Trade Safe!

#15 plantigrade

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Posted 03 January 2003 - 07:47 PM

Isn't she a hoot ? :huh:

(stunning Dr Moreau transformation gif (0,87 kB) available on demand)

(Apologies to all gorillas)

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