US - Market Direction 01 (May 08 - Jul 08)

[winston]

Long weekend.

People dont want to have a big position before the long week-end.

Having said that, the good traders would have sold out of their positions a few days ago.

I actually think that they will use the thin volume to push up the market today.

[kennynah]

w : i doubt anyone would be keen to go LONG now...if anything, shortists may jump in when the TA on SP500 has clearly broken down.... options traders will be happy to short options to gain 3 days of theta...

[kennynah]

end 23may08

wah liao eh.....sums it up...

DOW down 146 (3 days out of 5, of triple digits losses) closed @ 12,480
SP500 down 18 @ 1,376
Nazdaq down 20 @ 2,444 (another omnimous figure)

before i go any further...let me be candid first about my approach to this...

1) I am not trying to irritate anyone with my postings
2) I am not trying to be clever nor to claim credit
3) I am posting so that I can get my act together (as a form of focused discipline)
4) I will refrain from predicting, bcos you wont see me hanging around here if I could
5) I will say it as I see it, so as to be as objective as I can be
6) If I mess up with an interpretation of any TAs, please, please correct me immediately...and I will buy kopi, barlendy, wine, clothes, KTV session, etc...as long as you take the next round.

ok...let's proceed....

SP500

a) immediately challenging MA50 at 1372
b) already broke down of the Fibo support at 1378
c) today session is represented by a very dark and long candle and altogether, 3 long long dark candles in 5 days
d) it opened in the negative and stayed progressively more negative throughout the session and ended at almost intraday low
e) on 1st trading day, what is known as a "hanging man" signaled a trend reversal, which was more than confirmed in the next 4 sessions (soory, blocked by my arrows)

all these above, seem to be shouting out loudly into my face, saying that SP500 is really very weakened. there had not been any significant buyings to keep this index afloat for this entire week.

now, we all want to hope that there will be a rebound...but that can be a dangerous proposition... it will happen, I guarantee you that with my life....but when it happens, it happens, and not a minute sooner. neither you nor i can dictate that... so, let the chart do the talking and we walk along...never against.

i am not seeing it right now, how any prospective bull can find a buy signal, to LONG this index (of cos, specific counters can always defy index movement). if anyone can see the rainbow somewhere in this gloomy chart, please post here...





DOW


vomit blood...only need to see ONE TA that summarises this index

a) Not only did it initially successfully brokeup of MA200 and stayed up on Monday
b) it tanked right down for the next 4 sessions and
c) clearly crossed downward of the MA50 support

if anyone dares to buy this index, he/she is very brave...since the picture cannot get any more bearish, except to paste a picture of a bear on it.



so, until we see a buy signal, which can only be factually seen and not predicted. we should recognise the enemy for what it is... an ugly bitch...right now.

[winston]

I think the selling in the past week were due to the traders lightening up on their position before the long weekend. If the selling continues into next week on high volume, then I would be a bit more afraid.

The trading on Tuesday, would be a good indication of things to come.

Having said that, there has been a nice rebound since the lows in February / March. A lot of people are asking themselves, "Why am I in the market in view of so many bad news?".

And the shortists are salivating again..

So back to square one again:-
1) Keep a higher level of cash
2) Continue to buy puts
3) Clean up the watchlist of stocks to buy
4) Stay focus and discipline

( I need to always remind myself of these things )

[winston]

Incredible Shrinking Buybacks
David Fried, Buyback Letter 05.20.08, 5:00 PM ET

Last year proved to be a huge repurchasing dog pile as companies jumped into the buyback spending spree in record numbers. According to Standard & Poor's, S&P 500 companies bought back a record $589 billion of their own stock in 2007, up 36% from the $432 billion in 2006--and more than four times the $131 billion in stock buybacks during 2003.

For some perspective, that $589 billion put toward buybacks is more than double the $246 billion in cash dividends that S&P 500 companies paid last year.

Ten companies doing mega-billion-dollar buybacks spent a combined $148 billion on repurchases (all in billions): Exxon Mobil (nyse: XOM - news - people ), $31.8; Microsoft (nasdaq: MSFT - news - people ), $21; IBM (nyse: IBM - news - people ), $18.8; General Electric (nyse: GE - news - people ), $12.3; Hewlett-Packard (nyse: HPQ - news - people ), $11.8; Home Depot (nyse: HD - news - people ), $10.8; AT&T (nyse: T - news - people ), $10.3; Transocean (nyse: RIG - news - people ), $10.2; Pfizer (nyse: PFE - news - people ), $10; and Cisco Systems (nasdaq: CSCO - news - people ), $10.

Buybacks in the fourth quarter of 2007 alone were $142 billion, 24% above the fourth quarter in 2006. This is the third largest expenditure of all time, ranking behind the $172 billion spent for third-quarter 2007 and the $158 billion for second-quarter 2007. Over the past 13 quarters, since the buyback boom began in fourth-quarter 2004, S&P 500 companies have spent some $1.44 trillion on stock buybacks, compared with $1.56 trillion on capital expenditures and $721 billion on dividends.

But booms can't--and don't--continue forever.

While 2007 may stand as an awe-inspiring record, that torrid pace cannot last. And there are signs that it has slowed. In the fourth quarter of last year, buybacks declined 18% from the previous quarter, the largest quarter-to-quarter decline in more than five years.

Although the buyback spending spree was undeniably popular and became standard operating procedure for corporations, it was not necessarily good for every company that undertook it. Remember the advice your mother probably told you a million times during your childhood? "Just because your friend is jumping off a cliff doesn't mean it's a great idea for you to do it!"

Everyone's mother had a different version, but they all came to the same conclusion: Before you act, judge for yourself whether your actions would be right for you.

A few of today's CEOs and boards of directors might have been better off taking that maternal common-sense advice than simply following in repurchasing lockstep with their corporate brethren. In the fourth quarter of 2007, financials accounted for about 13% of all buybacks, down from an impressive 29% of all buybacks in the first quarter of last year.

Would it further surprise you to know that when financials were buying back all that stock, they weren't necessarily making a good investment, at least in the near term? According to data compiled by SNL Financial, shares repurchased by 41 banks and financial service firms have lost more than half their value, while another 147 institutions have seen values drop 25% to 50% below the average repurchase price. And of the more than 600 financial services companies that bought back their own stock last year, it was a losing investment for all but 90 of them.

In fact, a number of cash-strapped banks have essentially reversed their buybacks and have now made plans to offer new shares to raise capital. For example, Washington Mutual (nyse: WM - news - people ) said it would issue $7 billion in stock after spending $3.3 billion on buybacks last year, and Lehman Brothers (nyse: LEH - news - people ), which in January authorized repurchasing 100 million shares, also plans to issue new stock.

Financial firms were caught off guard by the liquidity crisis caused by defaults by subprime borrowers, and the $109 billion they spent buying back their own stock in 2007 limited their ability to respond to that liquidity crisis. Many companies that have not reversed their buybacks have drastically reduced the pace.

Nobody expects the buyback boom to continue unabated, especially those who track it. Howard Silverblatt, senior index analyst at Standard & Poor's, expects buyback activity to continue at a high but not record-setting pace for 2008, as corporations and investors show continued concern over economic and liquidity problems.

Sure enough, there are far fewer new buybacks being announced as the economy slows this year, compared with what we saw in 2007. Already in the first quarter, stock buybacks dropped to their lowest level in five quarters, to $136.3 billion, according to TrimTabs.

Still, there have been a few big buyback announcements from companies like Qualcomm (nasdaq: QCOM - news - people ), Amazon.com (nasdaq: AMZN - news - people ), Verizon Communications (nyse: VZ - news - people ), Dell (nasdaq: DELL - news - people ), Cisco and Genentech (nyse: DNA - news - people ).

It does appear, however, that companies are increasingly looking to raise funds through equity issues instead of debt, and to conserve cash by scaling down on share buybacks.

[kennynah]

W :

<<So back to square one again:-
1) Keep a higher level of cash
2) Continue to buy puts
3) Clean up the watchlist of stocks to buy
4) Stay focus and discipline>>

well...it can be boring work...but u know it's part of it... thanks for sharing.

to add on your points...
1) i try very hard to make ups and downs work for me...so i usually have little concept of increasing cash level beyond the necessary level
3) clean up watchlist to add on stocks to "short" or "put"

[blid2def]

<<So back to square one again:-
3) Clean up the watchlist of stocks to buy

3) clean up watchlist to add on stocks to "short" or "put"

As I was sharing with K, the interesting thing is - the watchlists may actually be the same (or quite similar) also. For example, if the "bullish" watchlist is filled with counters making new highs, showing patterns, etc. then the market top & correction means these watched stocks could top, or their patterns could fail. So some effort is saved in screening. Just add new alarms for "breakdown" to the old alarms for "breakout".

[kennynah]

this is especially true for both of our watchlists... bullish counters become candidates for bearish movements..abd vice versa..

[winston]

Coming Week: Double-Dip Days
05/24/08 by Joanna Ossinger

Watch out for the "W" economy.

No, it's not about President Bush -- it's the idea that the U.S. will have two economic dips, with stagnation or even recession each time. Some people say we're only in the first of those dips now.

The Federal Reserve meeting minutes from last week showed that policy makers are concerned about inflation. With oil prices breaking $135, and other commodities, such as food and metals, also at highs, it doesn't look as though consumers are going to get much relief anytime soon.

"I think the fact that the last rate-cut vote was that close surprised people," says Vinny Catalano, chief investment strategist at Blue Marble Research. "The tone of the minutes" was more hawkish than might have been expected, and "the concern is there regarding inflation -- which we know was on their minds, but it's a little more so than we thought."

"I don't think the Fed has to do anything to lower inflation," says Ethan Harris, chief U.S. economist at Lehman Brothers. "They just have to wait for the weak economy to do the job... inflation usually peaks in the middle of a recession."

The first-quarter preliminary gross domestic product figure will be released on Thursday in the holiday-shortened week ahead. The advance figure was 0.6%, creating a positive surprise for markets that had guessed the U.S. economy would be entering a recession already. Many observers expect that number to be revised upward again; market-analysis group Briefing.com is looking for 1%.

But now, some economists are looking for weakness in the second quarter, and then again early in 2009.

The economic dips that form the "W" will include one that's going on right now, and "one at the beginning of next year, when the tax rebates stop stimulating the economy," Harris says.

Catalano thinks the worst is yet to come.

"It's a lopsided W," Catalano says. "I think it's going to be a full-blown, bad recession into next year." He cites the deep woes in the housing market, the credit crunch and consumer strain as combining with inflation to pack a vicious punch at the start of next year.

Some market observers don't believe things are so tough.

Wendell Perkins, chief investment officer at Optique Capital Management, which has $1.4 billion in assets under management, doesn't foresee a recession at all.

"Things are tough, but they're not that bad," he says. The stock market in particular is "the most attractive we've seen in 20 years."

But those percolating problems could still have a huge impact down the road.

Nigel Gault, chief U.S. economist at Global Insight, says "the worry is that things may get worse in coming months as we see more pass-through from these high oil prices."

"There's no single price that is some sort of threshold at which the impact suddenly changes," Gault says. "But the higher the oil prices, the higher gas prices go, the bigger the squeeze on the consumer and the more the economy will be affected."

In terms of the consumer, economists are watching a conundrum, according to Harris: "One of the big puzzles in the U.S. economy is, how is it we have such horrible consumer confidence ratings and consumer spending has only slowed moderately?"

Some answers may come this week. Consumer confidence data will be released by the Conference Board on Tuesday and by the University of Michigan survey on Friday, and data are expected to remain weak. But the Department of Commerce will bring out data on personal consumption and expenditures as well. Any surprises in those reports may help resolve things in one direction or another.

New-home sales data for March come out from the Census Bureau on Tuesday. With recent numbers showing prices falling and inventory still surging, things aren't looking good for the sector.

"I think it's been a mistake for people to take their eye off the housing market," Harris says. "There's a sense that we'll forgive any bad news, and things will get better. The reality is that the housing market has been much worse than expected, and this is still the key headwind for the economy."

Most of the earnings news in the week will be about the retailers, which naturally depend on consumers as their lifeblood. On the high-end side, Williams-SonomaWSM releases results on Thursday, and TiffanyTIF comes out Friday.

If customers are getting squeezed because of higher gas and food prices, those upscale retailers might suffer before some of the discounters. It will be interesting to compare their results with those of Dollar TreeDLTR, which reports on Wednesday, as well as the numbers from Big LotsBIG and CostcoCOST, which are slated for release on Thursday.

Clothing stores are on the earnings docket, too, with American EagleAEO and Men's WearhouseMW on Wednesday, and J. CrewJCG and Wet SealWTSLA on Thursday.

[kennynah]

the lesson learnt...and constantly learning...and after all these years....is that this is a effing non-stop process... better burn that into my thick skull... always keep cultivating the habit of staying liquid-like...

the process of being very flexible and whatever views we hold on sunday, can change come monday and again moderated on tues, and so on...

so, based on last week's performance, i am bearish bias now...come end of monday, after witnessing some econ data and comms prices...who knows...i keep my options very open...and stay open....

i have both Long Calls and Puts...so, depending on what signals i get, i act accordingly...

i realise this is talk is like no talk...but for traders, we will understand each other...