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Unfilled Gap Down Finally Appears?


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#1 wndysrf

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Posted 17 January 2003 - 05:05 PM

Mark’s Market Commentary – January 17, 2002

Everybody knows the story about the beaten housewife. The one who takes repeated punishment day in and day out. She always comes home. She always fixes dinner. She always complies with his sexual requests.

But one day while he’s at work, she packs up the station wagon, empties his bank account and takes off, never to be seen again.

The Unfilled Downside Gap.

Now I think it has become clear that tech behemoths like MSFT and IBM are now slow-growth cash cows who will probably do no better than Coca-Cola (KO) or Phillip Morris (MO). Could be that the MSFT “dividend” now brings into focus how absurd these valuations are, and that 35% growth rates are a thing of the past.

Unless, of course, you are operating a Chinese Internet company.

The Spin Houses were in full damage control mode after the close yesterday. Never before have I seen such Hope Hysteria screeching out of the Financial Media Circus:

The following headlines were posted at TheStreet.com 3 hours after yesterday’s close:

Microsoft to Pay Dividend!!

Ebay’s Profits and Revenues Soar!!

Juniper Posts Solid Quarter!!

Sun Sees Improvement at the Margin!!

Homebuilders Post Strong Results!!

MSFT said “no improvement in IT spending”, and it’s retiring to the pasture of a widow and orphan no-growth dividend stock. Stock was smoked $1.75 in after hours, down nearly $3.00 today.

EBAY posted good numbers, but at 14x sales and 65x earnings? How many others are going to be able to make a living running on-line swap meets when the consumer stops spending?

JNPR, the second string Network Soap Actress star, battling that bloated, overweight CSCO called Oprah, was down 5% after hours.

SUNW lost $2.3 billion on sales of $2.8 billion and gave up on giving midquarter conference calls. Yet “pro-forma” earnings were reported as “even”, beating the street by 2 cents. What a colossal fraud.

Yes, they were probably correct about the homebuilders, and given that they have the lowest P/E ratios in the universe, they certainly can move much higher. I’ll give them that one.

Several have been mentioning the possibility of this break starting a “3rd of a 3rd” wave down which is sharp and swift. How could this happen?

Consider this: There is the possibility that the psychology is clearly in the “Now, More Than Ever” zone. What does that mean?

Bullishness is at an all time high. All new money available for the stock market has already been spent by the hopers. At the same time, another high which failed to take out the August highs will prompt anxious sellers who missed the 2001 and 2002 highs to get out now.

For the speculators, every dip will be bought, relentlessly.

For the short sellers, who have been repeatedly squeezed, every gap down will cause them to cover immediately.

Now, More Than Ever, the majority of the short term traders will be either covering or buying fresh long positions, precisely at the wrong time. And the long term hopers will start selling. Notice how the VXN and QQV fear gauges actually went down during mid-day.

Buddha describes the psychology in light of the bullish hysteria pumped out by the hordes of bullish Wall Struck anal cysts:

“History tells us that the ones truly wasted and torched in the last great Bear of the 30s were those who climbed in too early after large selloffs in what they believed to be the ultimate bottom. They actually lost more than those who sat on top of the heap in ‘29. It was their denial and 'can't get any worse' attitude that cemented their fates. Unfortunately, the next leg down needs to feed off of “Now, More Than Ever” attitudes. Without buyers coming in right now and all through last week’s media festival for the bulls, you just don't create the seeds of panic, disbelief, disillusionment and despair that are the hallmark of Japanese investing now and trading in the last great supercycle bear of the 30s.”

“To me this heavy positioning in Call buying for retail at such an obviously overbought juncture shows the incredibly destructive influence of the 24/7 financial media. The 'Buy Now!' argument at the top of this Bear Rally is an obviously cynical ploy for both the distribution of overvalued junk stock and the attempted levitation of a dying Market of Paper. A collapsing Pyramid Scheme. Criminal hookers and pimps for the power elite, universally bullish at a critically dangerous time in the market when the committment of professionals is down. They really need to be rounded up and incarcerated.”

“Clean out some room down in Guantanamo Bay. Who cares about Al Quaeda? They are nowhere near the threat to national security that this shill operation out of C.N.B.C., FOX and all the rest. These people are participating in the highest of crimes and the most outlandish of swindles. Cage the ApeWoman beneath the hot sun of a Cuban sky, no visitors for A.Cohen except members of the gorilla clan over in the Havana Zoo. Let Rukeyser do his show from behind bars on Marine Island down there and then see how cute his monologues are. Let him call out each one of his weekly guests to take the walk of shame upon introduction. You see this guy come out in a stripped Hanoi Hilton outfit complete with ball and chain. "and now this weeks guest, a stellar past performer in Gruntal Capital Management..." The round table that goes on in the early part of the show can be a videoed inside a lock down unit in the compound where the CIA and FBI are using psychological torture to grill the 'experts'. Mike Holland will be tied to a rack in an attempt to stretch the truth out of him. Mary Farrel will be locked in a room with large Carribean vipers until she comes clean. Pompous country-clubber Liz Ann Sonders will be subjected to sleep deprivation and repeated bra snapping.”

Today's Action

After the big gap down on the open, I was worried that we would smoke down about 70 points on the Nasdaq and everybody would be grabbing shorts. However, today I got the distinct feeling that that nervous shorts were covering and taking quick profits, and the dippers were lining up for the 50-day bounce.

If another rally commences, then we have something different going on than the infamous “Wave 3” decline. Otherwise, I think we are still headed lower in the intermediate term, despite the big TRIN reading today. I think Da Boyz were propping it up all day to keep the usual flatline controlled burn for OE.

Waiting For The Bounce

What will we do when we reach the next major low? Which strategy will produce the highest returns?

Buddha recommends buying the worst junk possible:

“An excellent example of PigMen Trading Theory and Practice 101. Buy the hugely trashed 2002 items that are now loathed by retail after the long burn. In fact, the best trades this year will be in waiting for good bottoms in the indexes and then loading the boat with wide stops on these single digit losers. BoarMen are counting on retail not coming back to their old favorites after being kicked repeatedly in the balls by them following the 2000 Prom dance. Telecom and these screamers should be excellent swing plays off any index cratering come mid 2003 and better risk/reward than attempting to short so many stocks that just seem to Orange Julius repeatedly, squeezing participants to the max, depriving them of their sleep, disturbing normal sexual cycles and interrupting otherwise sound marriage relationships.”

Blackmailed Bagholders

Meanwhile, the Emerging Debt Bagholders may not get the “round trip” they hoped out of Argentina. Argentina is now blackmailing the IMF by suddenly withdrawing on a promise to pay a $680 million loan payment to the InterAmerican Development Bank (IDB) on Wednesday.

“The IDB default was another major breach of trust by a government that already suffers globally from its dismal track record of breaking contracts and deliberate rule breaking. Argentina undoubtedly understands that if there is a full blown Argentine default on multilateral debt, IMF member countries will have to eat the losses and IMF bureaucrats will have to formally enter them on the books.”

Argentine officials have gone to the same school as Cheat Street anal cysts and strategists:

“It’s a government that plays false with bank depositors by freezing their accounts and forcibly converting dollars inot devalued pesos, cheats foreign investors by abrogating their contracts and wheedles loans from multilateral institutions that it doesn’t repay.”

In the coming week, financial press will be closely monitoring IMF-Argentine deliberations.

Model Portfolios

Looks like former bear turned SuperBull Barton Biggs is off to a bad start:

Chief Strategist Biggs to retire from Morgan Stanley (MWD) by Michael Baron Barton Biggs plans to retire from his post as chief global strategist with Morgan Stanley (MWD) later this year. Biggs will continue to work as a consultant to the company, and he also plans to lead Traxis Partners, a new firm that will manage a hedge fund portfolio for Morgan.

And of course, we have been documenting his “Tech Wreck” Barron’s 2003 Roundtable Portfolio, which is now down by 6.85% in the first week since the January 10 start date!!

ApeWoman’s portfolio is now down 22.9% since January 12, 2002.

The “I Dare You” Short Portfolio is up 14.7% since October 22, 2002. Thanks to AutoZone’s pummeling.

The other 2003 portfolios will be posted later this quarter.

The Girlfriend of the Week is your basic Psycho Chick who suffers from the wild mood swings documented here repeatedly, similar to the spectacular directional changes in the likes of QLGC, KLAC, and MCHP.

……………………..

Position Summary:

Half short on WHR at $56
Half short on INTU at $49

New half long on HMY at $16

We are 44% short, 32% long, 24% cash.

Half Short:

MBI at $50
KLAC at $41
CYMI at $39
NVLS at $35
INTC at $18
MSFT at $56
WHR at $56
INTU at $49

Quarter Short:

FRE at $68
LEN at $56
COCO at $40
NCEN at $28


Half Long:

GG at $11
HL at $4.55
BGO at $1.31
PAAS at $5
DROOY at $3.35
GLG at $9
GSS at $1.72
WHT at $1.05
KGC at $2.35
HMY at $16

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The Weimar Run: Bullphoria!!!!

#2 Guest_alex_*

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Posted 17 January 2003 - 05:21 PM

Speaking of MS, the latest thing they are peddling are so-called "protected-principle-offerings" funds (PPOs), tied to the SPX, similar to variable annuities. MS did four offerings in the past month, and I hear they were well-subscribed by PCS clients rushing to get in on 3.5% "guaranteed" returns (they pay a 15% premium over par on maturity 4-5 years out). Gives you a clue what kind of market returns the so-called smart money is anticipating from the broads over the next half-decade.

#3 The End

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Posted 17 January 2003 - 05:35 PM

Slight change. Kept all shorts but, bought a couple of feb. spx calls at 900, just in case we bounce to 920ish.

Have a safe and happy weak-end stoolies.
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

#4 Ned38

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Posted 17 January 2003 - 05:42 PM

Also stayed short.

Charts look like Maria-------------------violated

#5 Takachi

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Posted 17 January 2003 - 05:49 PM

more Bearx and uncovered 1/2 my ryvnx (it was uncovered from open to 25.41)

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Posted 17 January 2003 - 05:50 PM

Re: Girlfriend Of The Week
Wow I used to mess around with her (QLGC). I must have been drunk! It must have been dark! But damn, I did have a good time. I'm guess I should be glad I'm in bed with XLNX now. I used to give QueerLogic my dong. Now I go down on XLNX.
(Madame Dung doesn't mind at all, in fact, it makes her happy. She wants me to do both more! :wink2: )

#7 Drano

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Posted 17 January 2003 - 05:52 PM

Riding on Mobster's coattails, covered ADTN short and went short BSX. Covered partial position QQQ and will re-enter next week. I've just gotten tired of round-trips on these shorts.

Waiting for GILD, EBAY, and Pile's pigpile.
Of course I'm caustic!

#8 PileDriver

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Posted 17 January 2003 - 05:58 PM

Drano, one more for the "Pig Pile"

MKSI

whoo, hooo.

Tossed DISH out of bed today for a 10% dong gain. Not bad in a down mrkt.

My next shorts as soon as they sport some "wood":
MKSI
NTAP
XLNX
FISV
KLAC
BGEN
CMVT

#9 PileDriver

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Posted 17 January 2003 - 06:02 PM

Mark, speaking of psycho chicks good thing I dumped QLGC @ 39 for a 5% gain the other day - phew, that was a close one. What a psycho!

One more gap down on her and it'll be a Hat Trick Gap. :lol:

#10 Hypertiger

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Posted 17 January 2003 - 06:14 PM

Looking at the mainstream they are all walking aroung dazed...

A good barnburner... Tuesday should be a slaughter fest...

For someone...
"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...

#11 PileDriver

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Posted 17 January 2003 - 06:29 PM

Looking at the mainstream they are all walking aroung dazed...

A good barnburner... Tuesday should be a slaughter fest...

For someone...

no surprise to us Stoolies - we saw it coming from a mile away :lol:

#12 machinehead

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Posted 17 January 2003 - 06:39 PM

The full moon occurs at 5:49 a.m. eastern time, Saturday morning. This is the negative phase of the lunar cycle, and it sure showed during the latter part of this week.

On the other hand, the new moon on Feb. 1 (also at 5:49 a.m. on a Saturday morning -- is this some kind of cosmic joke?) looks fairly bullish when coupled with end-of-month seasonality.

The real question is what happens next week during the transition time -- a further sickening swoon, or a quick upside reversal? No strong opinion here. But there are people at the Federal Reserve and 1600 Penn. Ave. who really do care.
"GOLD -- it's not just for misers anymore."

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"Three humps and a dump." - anotherone, 21 SEP 2004

"No gold was harmed in the making of this movie." - Bizarro Greenspan

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#13 Hypertiger

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Posted 17 January 2003 - 06:40 PM

from 2000 miles away...
"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...

#14 summoner

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Posted 17 January 2003 - 06:55 PM

KACHING...glad to see most of the clan here at stoolville making some long awaited coin...closed my ibm jan 100 puts for 50% gain,o/w still holding all other shorts....let your winners run...stalking bsx again, cant believe i missed elx falling off the cliff...oh well, cheers to stoolville, back at ya tuesday ...took the entire week off to play in the bear s den..lol
" I' ve got a left handed hook and a right handed hook, the pros are gonna love me, I'm amphibious"

Charles Shackelford
NC STATE UNIVERSITY

#15 sweefraapp

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Posted 17 January 2003 - 07:10 PM

This could go a few different ways. Other indexes have similar set ups.

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