Posts filed under “Markets”

Mark Hulbert on CNBC

Kudos to CNBC for their guest selection this morn:

My colleague Tony Dwyer was on, discussing his expectations for 12% or so growth. Tony notes that this makes him an outlier — one of the more bullish strategists on Wall Street, which is somewhat ironic. He and I have discussed the 2nd derivative of earnings — the change in year over year SPX earnings growth % — which he disses, but TD otherwise did a fine job.

Later in the show, Mark Hulbert came on, to discuss (by coincidence or clever counter-programming?)  year over year SPX earnings growth %.

Note that we have covered this fairly extensively, most recently here (How to Use Earnings as a Buy Signal) and here (Earnings and Subsequent Market Gains).

I agree with the thesis, which was put forth by MIT and Rochester profs, validated by Ned Davis Research, and reported by Hulbert — but not neccessarily the reasoning.

Why? The academics look to weak earnings as an eventual spur to interest rate cuts; I prefer to think in terms of sentiment

"The key to this lies with psychology: Perception versus reality. When year-over-year earnings % improves from awful to merely bad, the headlines [will still be] extremely negative. But this is the earliest part of any recovery, and no one — at least, almost no one — [will have yet] recognized the changing character of the economic cycle. Hence, even though the mood is palpably morose, that’s when you gotta buy ‘em: Not only when everyone hates ‘em, but when we see quantititative proof of the cycle turning."

I still think that’s the right explanation; But if you go back and test the quant data (as NDR did), the reason doesn’t really matter. Consider interest rate cuts as a reflection of a very specific sentiment — the Fed’s worries — which may be the ultimate sentiment indicator in the market.

Category: Markets, Media

WANTED: August 13, 1979 Business Week

I am looking for a good (relatively clean) copy of the August 13, 1979 Business Week magazine. If anyone has located one of these, please contact me with sales information. Here’s why: Hanging on my office walls are several infamous magazine covers from days gone by. On the flip side, I tape a chart of…Read More

Category: Markets, Media

Want to Be a Trader?

Category: Investing, Markets, Rules

Political Futures, Revisited

Category: Markets, Politics

How to Use Earnings as a Buy Signal

Category: Investing, Markets

Presidential First Year and Market Performance

Category: Markets, Politics

VIX Needs a Friend

Category: Markets, Trading

Citibank Axes Technicians

Category: Finance, Markets

Chart of the Week: 10 Week Moving Average AAII Bullish Sentiment

Category: Markets

Granville Predicts 2005 Dow Crash

Joe Granville is a very well regarded technician (now in his 80s) who has had some terrific calls in his career, and a few duds  as well. On Bloomberg, there was a story on his most recent commentary, but I cannot seem to find it now; It more likely got moved than disappeared for nefarious reasons.

Anyway, Joe just got Bearish big time. Here’s an excerpt:

"Joseph Granville, who accurately forecast in 2000 that U.S. stocks’ bull market would end, is at it again. He expects the Dow Jones Industrial Average to suffer its biggest annual loss this year since the Great Depression.

“We’re in the critical portion of a coming collapse and the market’s screaming to get out,” said Granville in an interview from Kansas City, Missouri. “Everyone’s bullish. There’s going to be a tremendous surprise and it’s going to be to the downside.”

"Granville, publisher of the Granville Market Letter since 1963 and a technical analyst for almost 50 years, also foretold a stock-market decline in 1976. He misfired in 1982 and 1995 by calling for losses before share prices surged.

The 81-year-old analyst expects the Dow average to retreat to at least 7400 by year-end. The forecast amounts to a plunge of 31 percent. The last year in which the benchmark fell that much was 1937, when it lost 33 percent.

As a technical analyst, Granville predicts the market’s direction by using criteria such as trading and price patterns, rather than earnings and economic growth. He started developing his stock market theory at what was then E.F. Hutton & Co., a New York-based brokerage, from 1957 to 1963."

That bodes well for my 2005 forecast, as Joe tends to be early. I’m still looking for one last strong move up — Dow 11,700, Nasdaq 2600 — before it all heads south. Note that also gives me the opportunity to stay long if the uptrend remains in tact.

One of the key mistakes to avoid – call it the peril of predictions — is to  never marry a forecast, especially your own. People wrap up too much ego in what is essentially educated guesswork. If you start with the assumption that your prediction is going to be wrong, its real easy to reverse yourself when necessary . . .

If you are interested in learning more about Granville,start with this article — Just Like Old Times as Joe Granville Yells `Sell’ — it gives some background on him if you are unfamiliar with his work.

Some more background on Granville:

Timing the Market
http://www.vectorvest.com/research/timingthemarket.htm

Joe Granville, father of the On  Balance Volume (OBV) and its analysis
http://www.paritech.com/paritech-site/education/technical/indicators/strength/onbalance.asp

Bibliography of Published Books
http://www.amazon.com/exec/obidos/search-handle-url/index=books&field-author=Joseph%20E%20Granville/104-3776013-8226334

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UPDATE: March 18, 2005  7:09 am
Mark Hulbert provides the details on Granville’s track record. Not impressive (unless you are a fan of the Black Swan event . . .)

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UPDATE: I still cannot find this anywhere, but a friend captured the text. Here it is for your enjoyment:

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Category: Markets