Nasdaq Composite vs. Rydex Internet Fund: Uh-oh…
By Michael Panzner - March 27th, 2009, 12:27PM
Nothing gets the speculative juices flowing like the internet sector. By the same token, when traders are piling into the shares of this group, it can signal that equity markets, especially technology shares, are ripe for at least a short-term pullback.
With that in mind, the latest reading on the total assets of the Rydex Internet Sector Fund (RYIIX) — at $63 million, it is the largest amount since the fund was first set up in April 2000 — should give the bulls cause for concern.
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Rydex data source:
http://www.rydexinvestments.com/products/mutual_funds/info/navs_historical.rails
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March 27th, 2009 at 12:54 pm
The divergence between XLF and QQQQ over the last two years is quite stunning. It’s hard for me to believe that QQQQ doesn’t have a lot more work to do on the downside.
March 27th, 2009 at 12:56 pm
Barry, you obviously didn’t get the memo. Everything is okay now! Tim Geithner solved all of our problems. “buy buy buy!”
March 27th, 2009 at 12:56 pm
A) I agree w/ you that in the short/medium term, price risk is to downside. Especially stocks with high valuations and strong dependency on massive growth (such as internet stocks)
however,
B) I really see no correlation w/ peaks in rydex fund assets. I hate to call you on this, because on the whole I respect your opinion, but I’m afraid you’re trying to cash in on popular (negative) opinion of “internet stocks”, and as a result you’re pretty much blowing hot air here.
Sorry Barry – calls ‘em as I sees ‘em!
March 27th, 2009 at 12:57 pm
Pretty tough to draw many conclusions from this. 6 historical peaks are flagged, 3 of them were followed by pretty big drops. I guess that’s your point about “not infallible”……
March 27th, 2009 at 1:04 pm
Well, that flies contrary to Doug Kass’ “generational bottom” call.
March 27th, 2009 at 1:07 pm
the obvious momentum chasing is occurring daily. managers need to maintain first quarter performance before the downtrend can resume. that squares with the high protection being maintained with the counterintuitive high put/call ratios being exhibited with such a strong tape. -10 is much easier to swallow for the public than the early march -25.
March 27th, 2009 at 1:08 pm
Might there be a wager of a steak dinner???
March 27th, 2009 at 1:09 pm
Doug Kass is a good trader – but just like myself, he’s prone to hyperbole.
there is very little evidence that 666 is a “generational bottom”.
if it is – we are the generation of “the beast”. fitting perhaps.
March 27th, 2009 at 1:16 pm
guidepostings @ 1:09
I think that Kass is more of a value investor than a trader. I also think he tends to be early in calling major turning points. So maybe, for example, the final bottom occurs in June at the 625 level; if that were to be the outcome, Kass’s call wouldn’t be so bad.
March 27th, 2009 at 1:21 pm
he has been predominantly a short fund manager with a keen eye for fair value. you have to be an excellent trader to outperform the reciprocal performance of the market year after year.
March 27th, 2009 at 1:25 pm
Kass made a great call no doubt, but he also got very bullish on July 26th 2008 (By Doug Kass
“It might sound ludicrous, but I think that the U.S. equity market has bottomed for the year.” ), and tried to snag the bottom again on Sept 4th ’08 (“Kass: I’m Sprouting Bull Horns” – right before the market crashed). And let’s not even talk about his very public “buy banks” (specifically WFC at $26) call this January.
I’m not taking away from Kass’ awesome call, but let’s keep things in perspective.
March 27th, 2009 at 1:28 pm
he also said to buy citi around 20 and put them away for safe keeping. he compared it to gm in the 70′s.
you make enough calls – you are bound to be wrong from time to time.
March 27th, 2009 at 1:37 pm
@ guideposting – very true, but Kass (much like Cramer) has made multiple bottom calls during this bear market and is now being carried out of the stadium on his teammates’ shoulders.
I’d be really interested to see if Kass (primarily a short seller) had decent returns last year. Based on his Real Money articles it looks like turning bullish in early September could have ruined his entire year.
March 27th, 2009 at 1:39 pm
@everyone Re: Kass
you need to follow him on twitter. assuming he ain’t lying in his twitter posts, he is definitely a trader. http://twitter.com/DougKass
March 27th, 2009 at 1:43 pm
Michael Panzer said
… it can signal that equity markets, especially technology shares, are ripe for at least a short-term pullback.
reply:
—————
It’a about frickin’ time. I’ve been cash for 2 days now. I’m ready for another generational bottom I can trade off of. Come on, shorts. Do something sick. Mo morals become situational in inverse proportion to the percentage of cash I am holding.
About Kass; Thanks, all, for the insight. I looked him up earler today and read some stuff that complemented my view of markets in general. I’ll keep the weaknesses in perspective. I had heard his name before but usually I don’t pay much attention to big names in the investment community. While most probably know far more about the mechanics of trading, I prefer to seek my own counsel when it comes to the actual trade … as all here also do, I’m sure.
March 27th, 2009 at 1:44 pm
ndmaster @ 1:39
Maybe you’re right. Or maybe he’s both.
Where’s the dividing line between “trader” and “investor”, anyway, in terms of average holding periods? I don’t know. But certainly, IMHO, a holding period of 6 months would qualify one as an investor rather than a trader.
March 27th, 2009 at 1:46 pm
DH@ 1:43
“I’ve been cash for 2 days now. I’m ready for another generational bottom I can trade off of”
I’m detecting a bit of sarcasm there.
March 27th, 2009 at 1:47 pm
Doug Kass was early by a few days. Only LEFTBACK called the bottom in real time on this very blog. Ha ha.
RYDEX Internet funds are a favorite of Johnny Retail. This is indeed a cause for concern. This one is going to blow in less than two weeks. Alcoa reports April 6 to kick off the Q1 earnings season. Some time between now and that week is probably a good exit point.
I doubt if the bottom drops out today, nobody wants to be short this weekend in case of another Hail Mary.
March 27th, 2009 at 1:54 pm
bottom schmottom. a great analogy was posted a few weeks ago. “we’ll be at the bottom when the kids in the back seat of the car stop asking “are we there yet?”" we are going through simultaneous bubble bursting. asset bubbles (stocks and housing) credit and debt bubbles and consumer spending bubbles. bubbles ALWAYS go back to where they started. the gov is just prolonging the pain process, trying to avoid a catastrophe. i believe the s+p will retrace to at least the 1994-1995 levels if not more. that puts it around 450.
March 27th, 2009 at 1:57 pm
DL Says:
March 27th, 2009 at 1:46 pm
DH@ 1:43
“I’ve been cash for 2 days now. I’m ready for another generational bottom I can trade off of”
I’m detecting a bit of sarcasm there.
reply:
——————-
While I don’t have any use for oil thieves, naked shorts, or criminals who know how to scam the system, I’m not holier than thou most of the time. I’m here to make a buck and I cashed out Wednesday at the close. A generational bottom in a couple of weeks will do me just fine. I still have a wet toe experience and a 2008 problem to fix up. With a little luck I think both problems will be solved this year if we all just work together.
March 27th, 2009 at 2:00 pm
@harold: bottom schmottom.
I agree. But it does keep us all amused and we can even have multiple bottoms on the way to the NADIR. The real bottom of a bear market is usually unannounced and may not be noticed for several days or weeks. Keep in mind that aggressive reflation might lift the floor above 450, but single digit P/E seems like a good endpoint.
March 27th, 2009 at 2:02 pm
Those who’ve always wanted to see Leftback’s bottom have now done so.
March 27th, 2009 at 2:03 pm
I’ve always been in favor of avoiding catastrophe; anyone have a time machine handy?
March 27th, 2009 at 2:05 pm
DL,
I was incensed at those bastard shorts Wednesday for fucking with me at the wrong time. I’m not as young or as good looking as my picture makes me appear. I had planned to hold out for a couple more days, but their excellence at crashing a market that should have been on meth that day surprised me. I need to be a little conservative so I cashed out a few percent earlier than I had hoped. Thus my interest in another respectable market bottom asap.
March 27th, 2009 at 2:19 pm
dead hobo @ 2:05
“I’m not as young or as good looking as my picture makes me appear”.
I’m positively crestfallen.
(And I guess I’m one of those bastard shorts).
March 27th, 2009 at 2:20 pm
@Chief:
Well, that flies contrary to Doug Kass’ “generational bottom” call.
perhaps you should read his article @ thestreet.com today. He said to raise cash, though hasn’t changed his call.
guidepostings is right on a few things.
1. Kass is most certainly a trader, not a value investor, and he is normally short
2. You make enough calls and some are wrong. (sort of like that new high by 1 pm call eh?)
Apparently lots of folks who come to TBP don’t get that (#2) for some reason. Just seems like any chance to bash a guy like Kass people like to jump all over it. Perhaps the people that are doing so would like to post results and their own calls in real time so we can also make sure everyone knows when you are wrong… because you eventually will be.
I don’t know Doug Kass, don’t talk to him ever, but I’d put all my money on the fact that when he made long calls last year he put stops on them and let the market take him out before too much pain. I know this happened to him with a short position he initiated on TLT too early last year. He was way ahead of the downturn, for those of you posting his bullish calls, you might also like to review all the times he was on Kudlow getting ripped apart by asshats like Jerry Bowyer when he was very bearish. Or maybe you’d like to recall his Barron’s article last year when he made the short call on BRKA, and then talked about all the other shorts he had on. Doug Kass is pretty damn impressive IMO, I bet Seabreeze did fine last year both in relative and absolute terms.
RE: single digit p/e
most here seem to think the only way to single digit p/e is the S&P @ 450, what if the market just stays flat and thus as earnings improve the p/e goes to single digits. This is a possibility as well. I suppose it would be important to consider this as part of an overall investment game plan. After all, you might be waiting forever for that 450 handle if you only see it one way.
March 27th, 2009 at 2:28 pm
DL Says:
March 27th, 2009 at 2:19 pm
dead hobo @ 2:05
“I’m not as young or as good looking as my picture makes me appear”.
I’m positively crestfallen.
(And I guess I’m one of those bastard shorts).
reply:
—————-
Well, get at it! Make yourself some money. It’s got nowhere to go but down. Be the first. I’ll take it over on the upside in a few weeks. Then, have at it again after it tops out. We can do this together. Why chisel pennies on a day trade when you can make the big bucks on a cyclical trade.
BTW, that’s my most recent portrait. I can’t remember if, at that moment, I was singing or yelling at someone who may or may not have really been there, or if I was just coughing something up. I think it captures my inner soul pretty well.
March 27th, 2009 at 2:33 pm
@ dead hobo,
How did you get that picture on there anyway? I see TPC and some others with Icons as well. How do you do it?
March 27th, 2009 at 2:36 pm
ben22,
Use Google and query WordPress and picture. You’ll find it. It’s not too hard to figure out. It’s stored at a separate site that integrates with your user ID at all WordPress sites, or so it appears.
March 27th, 2009 at 2:41 pm
WRT bottoms, I have a question for those who care to respond:
Is it possible that the market bottom in the indices is not identifiable or predictable because the various components are experiencing coming face to face with their own bottoms? All in distinct timeframes.
HH says:
“we are going through simultaneous bubble bursting. asset bubbles (stocks and housing) credit and debt bubbles and consumer spending bubbles. bubbles ALWAYS go back to where they started.”
How simultaneous is all of this? I looked at KOP the other and saw that it was trading at a P/E of 2.28. Seems like it met its own bottom and turned around. (a neat trick)
http://www.google.com/finance?client=ob&q=NYSE:KOP
March 27th, 2009 at 2:47 pm
“Predictions are hard, especially about the future.” (Yogi Berra)
“…what if the market just stays flat and thus as earnings improve the p/e goes to single digits…”
you’d need your predictions adjusted for both inflation and risk, among other things, like climate and international terrorism and the aging of China’s populationa and the political stability of Eastern Europe and Russia’s birth rate and Japan’s saving rate and North Korea’s missile launches and sunspots and immigration levels and congressional legislative initiatives and presidential legislative initiatives and the health of the members of the Supreme Court and the zeitgeist of the blogosphere and accounting rules and oil discoveries and gold discoveries and the price of green ink and on and on and on…
Generational bottom? sounds like something you’d find in a nursing home.
March 27th, 2009 at 5:08 pm
@kwabena,
If the claim is that sharp runups in RYIIX tend not to be sustainable, and are often followed be a near-equally sharp drop, I can get on board with what.
But if the claim is that it implies NASDAQ is going to drop, I agree with you that there appears to be little correlative evidence of that.
March 27th, 2009 at 5:14 pm
personally, I like the negative numbers on the left-scale, shows a sense of humor/wry wit..
March 27th, 2009 at 5:55 pm
I was on stocktwits when Doug Kass called “the bottom” at 7552. “The low is in for the year”. We all know what happen two weeks later 6485. That’s a 14% difference in my book, but hey what do I know.
March 27th, 2009 at 6:03 pm
Oh Barry, Barry Barry… You are forgetting your Stats 100.
There is no statistical proof of correlation. The number of UFO sightings is at an all time high, does that automatically mean aliens exist. Come on.
March 27th, 2009 at 11:01 pm
My favorite part about that chart is the -1000, -2000 :lol:
That shows that at least the charts are getting more realistic :mrgreen:
March 27th, 2009 at 11:41 pm
just a guess, but I wonder if Panzner is short the market now…
thats one of the weakest correlation graphs I’ve seen in quite a while – as whammer points out, 6 peaks, 3 ups and 3 downs afterwards – the disclaimer that its not infallible is unnecessary – the r-squared must be pretty close to zero
regarding one of the other points made above – I saw this stat on another site:
“TrimTabs is reporting a $10.7 billion outflow in equity mutual funds during the week that ended Wednesday. Barring a better interpretation, this means the [retail] public is using this rally to dump stocks.”
March 28th, 2009 at 12:22 am
“TrimTabs is reporting a $10.7 billion outflow in equity mutual funds during the week that ended Wednesday. Barring a better interpretation, this means the [retail] public is using this rally to dump stocks.”
I hope it’s not because they need the money.
Historically though the public is notorious for selling at the bottom or selling when they should be buying so that could be contrarian. They also tend to sell at break even.
Fading the public is not necessarily a bad idea and lately the mood among them is getting decidedly negative (not just doom and gloom but screaming for the bad news to stop) based on what I’ve read so that bears watching