Mike Panzner writes:

Regardless of your long-term views (mine, as it happens, are bearish), it’s hard to look at the accompanying chart and not feel like the market is setting up for some sort of corrective bounce.

As of now, the S&P 500 index is about 35% below it’s 200-day moving average, which is not far below the one-day gap of 39.65% seen on November 20th — just before the market staged a 5-day, 19% rally — as well as the record differentials hit during the Great Depression, which also proceeded powerful upside reversals.

Category: Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

65 Responses to “S&P 500 index vs. 200-day moving average”

  1. leftback says:

    Agreed. It would be an eerie replay of history if we had a March rally under BHO, just like the one under FDR.

  2. scorpio says:

    i think the generational double-top seen on that chart trumps any historical “over bot, over sold” relationships. we just havent seen something that ugly before. the real question is why it’s shown up. while there will be rallies, non-trader types should batten down the hatches for the long haul

  3. Andy Tabbo says:

    Great chart.

    Nice additional technical indicator. I can’t disagree that we’re setting up for a real snapback rally, and the complete lack of seasonal rally has been astounding. Stocks have a strong tendency to do well between November and May, and right now we’re lower than in November! Perhaps the credit deflationary spiral will overpower “seasonal cycle patterns,” but that would be surprising. After a total collapse into November, to not be able to muster a good Spring Rally would actually surprise me.

    I guess what we really need to trigger it is a bearish “event,” similar to the BSC takeunder, the LEH bankruptcy, or the Citi nationalization in late November. I don’t think we can get a strong rally until we get that bearish event that causes the capitulation.

    Wonder what it will be? GE taking the dirt nap? Eastern Europe defaulting? Warren B. doing a secondary?

  4. efrltd says:

    Doesn’t mean much! The faster the fall, the bigger the spread will be. It’s just arithmetic.

    It’s just the average over almost all the period of this decline. Certainly the average is higher; the fall prices were higher than now. But we already no that don’t we

  5. schoolsout says:

    little off-topic, but anyone seen the puts on GE?

    http://market-ticker.denninger.net/archives/846-Here-It-Comes-GE.html

    “Take a look at that folks. That’s a snapshot of today’s volume for June GE $2.50 PUTs.

    That’s over 52,000 contracts traded today, controlling 5.2 million shares.

    They were purchased for about 30 cents, which means that the price has to be under $2.20 for them to go “in the money”.

    This is a bankruptcy bet on General Electric by the third week of June.”

  6. cliffynator says:

    After staring at that chart long enough, I thought I could see a resemblence between the current double-top and the triple-top/sideways pattern from about 1965-1975. If we were to repeat history on a larger scale, I’d say it’s looking like “Summer of ’69″ (apologies to Bryan Adams).

    Also, I’m bothered that the MA fell off without the upward spike that normally preceeds it.

  7. DL says:

    Sure, the gap between the SPX and the 200 DMA won’t persist indefinitely, but it’s worth bearing in mind that the 200 DMA has a lot of momentum behind it. One possible scenario is that the SPX plateaus around the 650 region while the 200 DMA continues to decline. The point is that the market doesn’t necessarily have to move up; it would be sufficient for the 200 DMA to come down instead.

  8. Andy Tabbo says:

    efrltd Says:
    March 3rd, 2009 at 12:30 pm
    Doesn’t mean much! The faster the fall, the bigger the spread will be. It’s just arithmetic.

    Um…that’s the point of that chart efrltd. It’s illustrative of a market that has fallen very fast…markets that move very rapidly lower tend to set up for vicious snapbacks. He’s trying to show the severity of this decline relative to other periods of time.

  9. Schoolsout – I saw those puts as well. Sometimes big money hedge funds sell puts like that at the peak of fear in an effort to goose returns, but it was enough to scare me away from calls on GE. I was looking at the leaps (which have also been active) but that $2.50 put scared me straight.

  10. leftback says:

    http://www.marketwatch.com/news/story/China-mulls-buying-oil-foreign/story.aspx?guid=%7BA6F2ADE4%2DA000%2D425F%2DB889%2D1272DE932964%7D&dist=hplatest

    China mulls buying oil. This makes a lot of sense to me, especially as I am long oil and short the 10-year…

  11. globaleyes says:

    TOO BIG TO FAIL should be replaced by TOO BIG TO SUBSIDIZE – especially since many of these companies have been receiving subsidies long before the word “bailout”became so commonplace.

  12. Clem Stone says:

    When i squint at the data from 1932 it appears that the stock mkt maybe dropped an additional 20-30% from “here” before a rebound. Or to put it another way, it looks like SPX could go to 450 before a bounce and still look similar to the 1932 version. Whatever, that chart is definitely not screaming “immediate bounce” in my ear.

  13. Clem Stone says:

    I should add that the chart doesn’t exactly make me want to load up on puts either.

  14. JustinTheSkeptic says:

    I get a kick out of anyone who suggests that this market in any way corrolates to anything pre-1929… Put those goofy suggestions away. Either you haven’t read enough about what is going on, or your subject to myopia…

  15. Winston Munn says:

    The chart just makes me want to get loaded.

  16. JustinTheSkeptic says:

    I ment “post.”

  17. I just don’t get anything out of the included chart. We are “oversold” I know but what else do you got?

    Look at this chart: http://dshort.com/charts/bear-markets.html?four-bears

    What does it tell us? It tells us we are having the worst recession since the great depression. Now show me where it says this is the bottom or not the bottom? I just don’t see it. The fundamentals are all awful still. Why try to call a bottom at this point? If there is a big bull market coming you will have plenty of time to jump in once it starts.

  18. W T F says:

    I could see a “corrective bounce” if there were some degree of uncertainty or debate concerning leading indicators or future S&P earnings. However those factors are so decisively negative now. What fundamental catalyst(s) exists for a market bounce?

  19. JustinTheSkeptic says:

    I say fold the game up and let’s go swimming! If we are lucky we might drown!

  20. MRegan says:

    The GE put action underscores the notion that this period (2007 to 2010) will be known as the Time of Revelations. What has been feared, hidden, suspected, covered up and discounted will be revealed. The truth corrodes the material used to keep it hidden.
    Nicholson was right: We can’t handle the truth.

    @Justin

    Agreed, the comparisons and ‘paralleling’ are of limited use. There is no doubling back. In the 30s the US was (unbeknownst to all) on the brink of the large buildout to meet demand for a manufacturing base…
    I do recommend elaboration over scoffs.

    @Clem Stone- seems like there was huge insurance mogul of that name out of Chicago- any relation? And if so, any notions on XL’s future direction.

  21. cvp says:

    BR, I’m a long-time reader. I’ve gotten a lot of info from your blog and enjoy your appearances on CNBC. Never commented before. I have a neophyte’s question for you and/or others on this blog more knowledgeable than I. How useful is reliance on technicals during economic and financial crises that are unprecedented? It’s my understanding that tech analysis is based on past performance, yet currently we’re in outlier territory, i.e., there’s a disconnect. Hence, my question. thx all.

  22. DL says:

    Winston Munn @ 1:44

    On booze, or on stocks?

  23. greg says:

    As Secretary Treasurer, is Geitner allowed to respond, “well that question had so many things wrong with it I won’t even waste my time addressing it….next.
    Is Rangel in the mob? Sounds like he’s in the mob.

  24. Winston Munn says:

    @DL

    Roll another one
    Just like the other one….

    You know, from up here DOW 36,000 doesn’t look all that far away….

  25. Winston Munn says:

    DL,

    I stuck quite a few toes into the water yesterday, a little early but not bad (the DOW -200 level). I tried to judge longterm value versus downside risk combined with price-to-book and decided that X, UNP, and MEE were all worth a play at the levels they were trading.

    Viva Le Bounce!

  26. Ethel-to-Tilly says:

    @cvp: re technicals – the basic relationships represented by the technicals – what happens when an equity gets overbought and oversold, how it traces and responds to its moving averages and support/resistance and all the rest don’t fundamentally change just because we are in “unprecedented” times. What’s different is the amount of exogenous events that affect the market in crises like this. Normal technical behavior pretty much assumes “normal” economic activity in that the chart behavior tends to behave on its own momentum unless something comes along to stop it (think Newton’s law of physics about an object in motion staying in motion, etc.” During times of economic strength, the market would pay less attention to exogenous events (except for the big things like war and natural calamity of course) – in times of crisis when people are more emotional and driven by fear, events and speeches and rumors, etc. become more important factors in market behavior. So, in the absence of exogenous events, there is really no difference in what technical analysis will tell you about the market – it’s just that a preponderence of exogenous events during times of crisis will tend to override the technicals – even if only temporarily.

  27. ben22 says:

    Doug Kass is bullish. See his article @ the street.

    I’m saying bullish as in he’s calling a bottom it seems to me, though I did not see him on CNBC yesterday.

    I’m a big Doug Kass fan so I take this as, at the very least, something to take note of.

    He also hints in this article that something big could be coming, but from Summers this time. It is a little odd that he has been so hush hush so the reaction could be something powerful.

    What does everyone think? My thought is that if we get an announcement by him that the market likes you could see a monster rally.

    I think calling bottoms is just a waste of time, and I don’t think we are at the bottom yet, but Kass is a smart guy and he predicted a lot of this a long time ago much like BR and some others so when he says this sort of thing I think it is important and I guess in time we will all see.

  28. cvp says:

    Ethel-to-Tilly, thanks for your thoughtful response What I infer from your explanation is that less weight should be placed on technicals currently, due to exogenous events “exaggerating” negative emotions about markets and the economy, which lead to hair-trigger responses. Perhaps a better guide for investors right now is to make investment decisions based on 1) fundamentals and 2) an understanding of the likely effects of group sentiment->behavior on investment decisions aka “anticipating the anticipations of the anticipators”.

  29. Mike in Nola says:

    I’d lke to know what Barry thinks. Since he hasn’t opined on this, maybe he is recovering from tripping the light fantastic with the other celebs.

  30. cvp says:

    I need to correct my previous statement from “an understanding of the likely effects of group sentiment->behavior on investment decisions” to “an understanding…on investment _outcomes_.”

  31. Ethel-to-Tilly says:

    @cvp – I’m finding that I am relying on technicals for my decisions just as much as ever – I don’t trust fundamentals at all, especially anything that is going forward – just be prepared for unpredictability if Geithner says something stupid or whatever, that isn’t, of course, predicted in the charts (and won’t be predicted in the fundamentals, etc. either). But, except for the exogenous events sometimes driving the markets in unpredictable short-term ways, both up and down, analysis from a technical perspective is not any different now or less valid then in less crisis-filled times. the same analysis that tells you if a something is going to go higher in a bull will tell you if something is going to lower in a bear. A lot depends also on your own trading time frame – whether its short enough that the exogenous shakeups will unduly affect your trade or not.

  32. ben22 says:

    Sentiment indicator:

    Google internet search yesterday:

    Dow 7,000 1.69 million results

    Dow 6,000 2.22 million results

    Dow 5,000 4.02 million results

  33. miamiocean says:

    I’m looking into setting up a small discount online broker account with some of my tax refund. This will be my first venture into the wild and woolly world of individual stock investing (outside my retirement account and some mutual funds).

    Even if the market were to bottom out with the Dow approaching 3500, it seems to be a good time to start planning some strategic buys now with the Dow hovering above 6500. If (and no one knows) some of the company stocks I am watching were to approach 2000-2001 min price levels, I would be buying in a heartbeat, even if I thought their prices would fall way below that level.

    My 401k is down almost a full 61% from the peak in 2007. At least what I would have had invested there would be if I had not moved my positions to money markets in Sep 2008. I am thinking that I may be gradually shifting those assets back to mutual funds sometime between Aug-Oct this year. My target positions to trigger that move are getting close – but aren’t there yet. The Dow has seen a 4000 point drop since I moved my positions. If the Dow gets to 6000, as a rough guesstimate, I would re-evaluate and consider slowly re-investing in mutual funds again.

    At that point a further 2000-3000 point drop in the Dow probably wouldn’t bother me. It was the potential for sub-par 2-3% stock market gains over 5-10 years which had me concerned about the buy and hold strategy back in September last year. I just didn’t see how my 401k could recover in 15 years with less than 7-8% annual gains and that would be just to get back to where I had been in 2007. If this is a secular bear market which began in 2000, then history would suggest that it may be another 8-10 years before the stock market experiences another secular bull market.

    At any rate, those are my rambling thoughts and inexperienced assessment from my reading blogs like this and many others.

  34. jbruso says:

    I don’t think this is an environment for technical analysis. I don’t pretend to know even a fraction of anyone on this board, but it seems to me any index needs at least 1 of 2 things for growth, earnings or a good story. We don’t have either right now. Terrible earnings and no good story about what the economy looks like in 5 years. So, that leaves us with fundamentals… 450 S&P?

    BTW, thanks in large part to Barry’s blog, my 401k is up, not down over the past 2 years.

  35. miamiocean says:

    p.s. I am not using the Dow as my trigger for investing or not. Just using it as a broad assessment of a trend. I am trying to focus on the fundamentals of the company stock and the potential for future dividend earnings. I don’t know anything about the technical assessments based on moving averages and such.

  36. cvp says:

    @ benn22 – ha ha. nice! How about “Dow x,xxx when” as another indicator?
    @ Ethel-to-Tilly – That’s interesting, and yes trading time frame is a factor for me – quite short – days or hours. And as a follow-up my last post, it seems that an investor can use technicals for trading even if he/she is suspicious of their intrinsic worth as predictors precisely because said investor knows that so many others will base their decisions on technicals — technical analysis has gained such legitimacy among inst and retail investors that a norm exists for investors to respond to the technicals. Thus an agnostic like me can respond to the technicals (or more correctly, behave in concert with the believers) and profit. N.B. I like the idea that there seems to be room for social psychology and sociology (not just cognitive psychology) in modeling investment behavior.

  37. Ethel-to-Tilly says:

    @cvp – especially for short-term, technicals are a must (in my opinion) – the 3 day S&P dive we just completed was totally predicted by the S&P failing at resistance a 3d time at 780 and then failing to move back up past 751 after it broke the Nov low. I made over 40% return on FAZ in 3 days just playing the support/resistance lines. That intrinsic worth of technicals as a predictor if you know what to look for has not changed. However, if during that time Bernanke or somebody said something earth-shattering, the whole thing could have blown up in my face. And so I got out quick as soon as the S&P came to rest at 700 before anybody opened their mouth. The shorter time period you’re in, the better the chance of the technicals working and dodging the exogenous.

  38. I’m a big Doug Kass fan so I take this as, at the very least, something to take note of.

    Kass: Kill the Quants, Punish the ProBears

    “Most investors (who are long-biased), and indeed the very U.S. stock market as a whole, are disadvantaged in a market dominated by momentum-based quant funds and by ultra bear ETFs, both of which prey on a weakening hedge fund industry riddled by redemptions and by a community of individual investors whose confidence is badly broken.”

    Blaming the messenger much?

  39. ben22 says:

    @ CVP

    I should look for that, would be interesting.

    @ Dr. Kenneth:

    1. That’s not the article I was talking about.

    2. Hardly, Kass is primarily a short seller himself and actually wrote several pages last year about how the blame the shorts for Bear, AIG, etc. was silly. This, if you read that whole article, is something clearly different he is talking about.

    I’ve got no problem calling people out when they make dumb statements or are consistently wrong but if you pay attention to Doug Kass as much as I do those things are extremely hard to find on a regular basis.

  40. CyHastings says:

    ben22 Says:
    March 3rd, 2009 at 3:29 pm

    He also hints in this article that something big could be coming, but from Summers this time. It is a little odd that he has been so hush hush so the reaction could be something powerful.

    What does everyone think? My thought is that if we get an announcement by him that the market likes you could see a monster rally.
    ————————————————-

    What do you think Summers could announce that would produce a “monster rally”?
    Not trying to ping you on this ….but let’s face facts….

    What can he say??

    More bailouts/nationalization?? We’ve seen how the markets like that.

    No more bailouts/nationalization?? Goodnight C, GE, AIG….don’t forget to turn out the lights.

    We. Are. Screwed.
    Steve Barry has this EXACTLY right in my estimation.
    DEBT.

    Until the deleveraging happens…..and it hasn’t even fucking Started yet…..Nothing will get better.

    Sorry man. Please don’t take personal.

    I just fail to see how anything Summers…or anyone else…could say that suddenly would unleash the bulls at this point.

    Short term rallies/bounces….most certainly….but it looks like those are even getting weaker and weaker these days. The market is running out of excuses to rally.

    That light at the end of the tunnel seems to be attached to a locomotive.

  41. CyHastings says:

    Fed = Barney Fife after Andy took his bullet.

  42. ben22 says:

    @ Dr. Kenneth,

    Not trying to be rude but I see why you might not like that Kass article, according to your trading screen the only things working for you are those ultrashorts, looks like mine. lol.

  43. CyHastings says:

    Off topic…..but who don’t like to gossip….
    :)

    I’ve read in several sources that Summers is a Grade A Douchebag.
    On a Rumsfeld Douchebaggery level….major league.

    Very very arrogant, intolerant of outside opinion, pigheaded, elitist ass…..

    At least that’s what I read.

  44. cvp says:

    @ CyHastings – I don’t know if those are such unusual qualities in academic economists, esp if they’re Ivy League, esp if they’re Harvard… :)

  45. cvp says:

    @Ethel-to-Tilly – good point w/your example, and congrats on the return. As I said above, I’m a neophyte re technicals, but agnostic (probable causal relationship). However, I’m also open-minded about it. Will continue to investigate. Thanks for your answers this afternoon and continued success in this crazy trading environment.

  46. ben22 says:

    @CyHastings

    CyHastings:

    Let’s not say it’s been that cut and dry on every announcement because that just isn’t true. The market once rallied on a Bear take-over and other things we now collapse on right? As for debt I have been on this board agreeing with Steve Barry for months now so it’s not as if I’m some super bull here or that I even agree with Kass, just a different perspective than 99% of the responses here.

    There is another solution that nobody seems to talk about which is the option of the Fed blowing another bubble by inflating our way out of this as a solution (which I am betting on heavily btw), which of course helps solve that debt problem and while anyone thinking hates that approach, it’s probably the way we go. I mean, it’s not as if the stimulus was the end of govt. spending on this problem. They will throw as much money at this as needed.

    As for what Summers could say, maybe I didn’t write that well enough, I’m looking for the market reaction to it is what I’m saying. He still carries a lot of respect, can’t really say the same for Bernanke or Timmy. Further, this could be some sort of global arrangment, which outside of all the central’s printing, we haven’t really had yet.

    You seem to think that we need good news to rally, I think we need a positive reaction to bad news, that would be much more of an indicator for me.

    All that I’m saying is that I, and a lot of others, come to this board for sentiment more than anything, to see what other people are thinking and doing, and my god is it bad right now. To me, this feels just as bad as November. See my google figures above. We are at the other extreme, at least it feels that way, from where we were October 2007 though.

    To finalize I’m very negative on the global economy but with all that money, and probably a lot more on the way I think an asset price rebound is in the cards real soon. Unlike Kass, I just don’t think we are at THE bottom yet. I was looking for the S&P to bottom at 600-625, just my own guess at where we end up.

  47. CyHastings says:

    Heh. Haaaarvard….

    “Academic Economist” = “Military Intelligence”??

    Weren’t the “academic economists” the folks who developed the very financial instruments which are now bringing the world economy to it’s knees??

    I’m afraid my faith is gone. So my instinctive reaction is cynicism rooted in fear.
    It wears thin even on me.
    :/

  48. Andy Tabbo says:

    I thinking the capitulative bottom will come with GE or an Eastern European default…maybe Russian default. Remember, the powerful rally will not come on some sort of good, positive development. It will only come once every weak long on the market finally, and once and for all, swears off stocks and sells. This normally happens on some event that causes a final flush.

    In terms of the larry summers chatter…

    Here’s the deal…this guy Geithner is SO Bad and instills SO little confidence, that any change will seem like a lightening bolt. He is clearly in WAAAAY over his head. Timmy is a No.2 type….I’m not sure how Obama can dump him so soon with embarrassing himself totally…maybe Geithner suddenly gets some “family” issues that take away from his ability to be Tsy Secretary….

    Summers may be a grade A douchebag and a terrible economist, but Mr.Market will take an a-hole that commands some prescence over little Timmy Geithner who looks like he’s just filling in for someone….

  49. leftback says:

    @ben22: Agreed with you on most points, kiddo. They will keep printing and pumping until the patient shows signs of life. Sentiment is indeed so bad that even less than apocalyptic not-so-bad-as-we-expected news could be the trigger for the rally.

    Jobs are the only number that matters at the moment. The minute we even see a moderation in the previously accelerating RATE of job losses, we will probably see some kind of bear market rally.

    Sorry to repeat myself but I continue to watch the gasoline price as an index of the ongoing battle between the forces of inflation and deflation. As long as we don’t slip below the lows in $gaso, then we have a good chance of some price stability, thereby escaping the clutches of the dreaded deflationary spiral. Of course, once an economic recovery begins, even a modest one, commodity inflation is likely to become a problem. Long energy, short the 10-year.

  50. CyHastings says:

    I hear ya Ben and I understand.

    You, and everyone else here, is Far ahead of me when it comes to the markets.

    I come here to hang out with the smart kids.

    I do agree. Sentiment is awful.
    But does not, at some point, the contraindicator simply become the indicator?
    Sentiment is awful because the world economy appears to be cratering.

    All I’m suggesting is that looking for rallies right now seems like a bit of a snipe hunt.

    I’m 30/30/30 SDS/QID/TBT…the rest in gold.
    Waiting for the reality bus to drop it’s load on Wall Street.
    I owe both BR and SB a very nice steak dinner++.

    But it’s not fun watching everyone around me getting gutted.
    The pain on Main Street is spreading rapidly.

    And I’m not getting a good sense of Competence and Clarity from our new appointed leaders.
    Honestly…O is scaring me badly. I voted for the guy based on Competence. Nothing else really.
    I know it’s early….six weeks is nothing….but Gheitner….WTF…Gheitner??
    Puke.

    Sorry man….rambling.
    Coming off a 12hr coffee jag….
    Cheers

  51. The Woodsman says:

    BEN22 I like Doug Kass as well and Helene Meisler(sp) But Doug called 7552″the low of the year” a week and a half a go on Stocktwits. I could keep calling Santa Claus is here too if I wanted until he arrived. WTF

  52. Andy Tabbo says:

    CyHastings. I don’t mean to repeat myself for others here or to state something you might already understand, but there’s a few crucial things one should understand about markets, trends and news.

    The “news” always follows the “trend.” The “news” does NOT cause the trend. At major peaks everyone is very bullish and the news is universally positive. At major bottoms, everyone is gloomy and all the news is real dark. Sentiment extreme is THE MOST important factor in determining “peaks” and “bottoms.”

    Take for instance Gold….

    In March of last year, when gold was hitting 1000+, and the U.S. Dollar was going to ZERO, bullish sentiment, according to market vane, was 95%. That is the highest level of bullish sentiment I have ever seen and was the most obvious sell signal one could imagine. Because, who is left to buy? Where’s the next buyer coming from? When everyone is already long and has purchased, then there’s no other direction but DOWN. Similarly, gold hit 85+% bullish at its most recent peak…a clear warning sign for all longs.

    So to your question “does not, at some point, the contraindicator simply become the indicator?”

    The answer, is NO. Sentiment being “bad” is not itself a sure sign of an imminent bottom stocks, but its alert to traders to be on the look out….I’m waiting for a moment of event-driven pessimism to become very bullish the stock market.

  53. leftback says:

    @AT: Thanks for another clear and concise lesson – you would make a good teacher. Only one who understands a thing deeply is best able to explain it in its simplest terms.

    I made a nice gain shorting gold from ~ $985. Just watching from the sidelines now.

    Employment reports ahead – a source of event-driven pessimism if ever there was one.

  54. TrickStar says:

    AT – I’ve been thinking that event would be earnings season. Q4-08 AND Q1-09. Of course, there will undoubtedly be some unexpected news as well, but who knows. I still think we’re in for a 20% sucker in the next 10 days or so. Remember in early January all the news was HORRIBLE and the cat bounced like crazy.

  55. TrickStar says:

    Oh – and I think when the Q109 earnings arrive, reality will set in and the full year ’09 earnings estimates will again be downward adjusted. Those adjustments will warrant a 500 to 550-ish S&P. Just a hunch. Meantime, optimism will leak back in a few times, because our generations just aren’t used to such extended periods of bad news; suckers rallies will ensue, and those brave enough to surf the big waves will make a little beer money.

  56. ben22 says:

    @Woodsman,

    yeah, you are right, but Doug is a lot more convicted on this one. Faber possibly described something interesting in his latest today saying we had a fake rally at the end of 2007 after a pretty rough quick drop so perhaps we are seeing the reverse now. I didn’t necessarily buy into Faber but it’s something to think about and isn’t too far fetched. Don’t know why I’m making excuses for him (Kass) but I just thought it was something to discuss, what he is saying.

    Even if this were just a trade I must say, I made a killing on a few select stocks back in November and while the market has made new lows and those stocks have come back down too, many of them are still WAY above where they were on 11/20 or 11/21.

    @LB,

    I thought you might agree, you and I have seem to have a very similar investment strategy right now. Where is Karen to back me up???

    @AT,

    Did you read Faber’s latest today? There were some interesting points made about capitulation in it. Also, thanks for saying what I was trying to for Cy, I’m looking at sentiment like you are. Finally, if GE doesn’t cause the next big one down I’d put money on AXP causing something like that. when you have to pay people to stop using your stuff you’ve got a biz problem. I’d probably rule out BAC, C, or GM b/c everybody already knows the deal there. What could be a killer is a problem at a big tech or some other places that, while the stocks have dropped big, solvency issues haven’t so much come into question.

    Lastly, can anyone believe Greenburg and this lawsuit? Is he f*cking serious? My memory isn’t so great but I seem to recall him being ousted for the giant illegal shit he was doing as CEO. What goes around comes around pal.

  57. ben22 says:

    a quick thought on p/e

    I’m starting to think it’s more likely that instead of the S&P collapsing to the 500 level or something based on a single digit p/e projection on earnings I think it’s more likely that p/e drifts to single digits based on the market staying lower longer and corporate earnings improving. so maybe we stay in a 600-750 range for a long time.

    b/c of credit being tight and the consumer saving the recovery doesn’t look robust and will drag on for a time therefore stock picking will be key. Overall market may look like it doesn’t move but certain companies will thrive.

    L shaped.

  58. Mike in Nola says:

    Re: Larry Summers

    This gives me a lot of confidence in his financial acumen.

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aouPA5ltirhk&refer=exclusive

    And it looks like he trumps Volcker based on the stupidity still coming out of the administration with the lead story being yet another version of the good bank – bad bank scheme. That scheme is like a zombie itself: won’t die.

  59. scorpio says:

    obama needs to dump both summers and geithner soon. they’re like an anchor around his neck with all this incomprehensible bail-out activity. wont work. the wall st firms and banks will have to eat their own cooking, their over-levered balance sheets are the only structures large enuf to take the loss. meaning corporate bonds, bank debt is going to get hit hard. soon. and deservedly so.

  60. ben22 says:

    just eyeing this chart if we were to mirror the last two times the 200 day looked like this it would imply a rally to around 1150?

    it looks like at these levels it tends to snap back to +20-25%.

  61. Andy Tabbo says:

    ben22: When this whole wave from oct2007 finally completes, we will probably see the most severe rally in the history of the stock market. I’ve got three major wave count objectives (assuming 944 completed the major degree Wave Four): 625, 595, 553. They average out to 590…so as we approach the 600 level, which I’ve talked about for many months now….I will become quite bullish…..

    tread lightly on that FXI….I’ve read “academic” literature on bottoms that suggests it’s better to be 3 months LATE to the “bottom” than 3 months early….I actually try to be there at the bottom….just passing on what the statisticians might suggest…..

  62. usphoenix says:

    Earnings. Market psychology. Brain F***ks. Choose your poison. I choose earnings as the closest thing to what’s really happening, as I think BR did recently.

    @jbrusco: correct. earnings.

    @cvd: correct. But you’ve been so correctly prolific it’s hard for me to backtrack. I was off-site for a while.

    Summers statement: That makes so much sense, it’s really scaring me. O is gaming the market?????? But he may have run out of bullets. Everyone seems to be catching onto the afternoon boosts.

    @Ben22: Inflating. Agree.

    Things are going too fast for me. And the insights are making

    me blind.

    @AT: event driven pessimism. Cool. I like that. Kind of like reality-based eh?

  63. John R says:

    BEWARE OF FALLACIOUS FARTING CHART READERS –
    This is what I call a chart farter. One who comes looks at data on a chart and farts out a theory. If you look closely at the index (http://stockcharts.com/h-sc/ui?s=$SPX&p=D&b=5&g=0&id=p83980107458), it is obviously the standard deviation from the 50 DMA that governs snap-backs and resistance.

    OH, BUT look how this compares to the 200 DMA! Look at the St. Dev. from the 200 MA!

    Yes, and if you compared it to the 300 DMA, your “analysis” would even more dramatically call for a reversal!

    If you go by the 5o DMA, you have a case for a reversal at about 640 to 600 on the $SPX, depending upon velocity.

  64. ben22 says:

    @AT,

    Yes, I keep thinking in the back of my mind that FXI would see 17 again so I have a buy order set up in increments on the way to that, if I don’t get them I’ll probably end up on that 3 months late side. Can’t wait to see what GE does the rest of the week. Have enjoyed your comments on it lately.

    John R.

    Yeah, a lot of people were on here talking about how it’s real dangerous to base anything on ma’s just a month or two ago, or basing any investments only on ma’s. I didn’t look at it but some ta people use a longer monthly moving average. I know that Richard Suttmeir (sp?) was using it as an indication of a multi-year bear market, I think he was using the 120 month moving average.

  65. ben22 says:

    AT,

    Have you ever tried, or have you seen others try to apply wave theory to earnings or an earnings cycle? I had this thought that there might be waves that could be applied to that as well as the corresponding p/e ratio’s. I know basically nothing about EW though so I could be wrong.

    Gold getting closer to 900.