This is becoming a regular gig:
Today’s show is Kudlow & Company, CNBC today at 5pm. We are scheduled to be on from 5:00 to 6:00 pm, plus or minus a few minutes.
Topics for discussion will include Bird Flu, Retail Sales, Real Estate, I’m thrilled to be with Marketwatch’s
Herbert Greenberg, whom I have read for years. John Rutledge, as will Cult of the Man-Cow founder Noah
Topics for discussion will include Bird Flu, Retail Sales, Real Estate,
I’m thrilled to be with Marketwatch’s
As a follow up to our discussion "Cull the herd," there are some short term technicals that are actually positive for the market. The RM column I wrote is tentatively titled "Enjoy the Rally but Cull the Herd."
Here are the positive data points:
Despite the up/down action this week, the Technicals favor an upside bias over the next month or so. There are numerous reasons for this.
Most of the major indices are above their upwards sloping 50 and 200 day moving averages: The Russell 2000, DJIA, the Dow Transports, the NYSE, The S&P400 midcaps. The notable omission is the NDX, which remains just below its downward sloping 50 day. This is the most basic of trend indications.
We also see a continually expanding margin debt – whichb is a net positive for equities short term. When this measure gets to extremes, it’s a warning sign – but we are not close to those levels yet. Studies have shown that as margin debt expands, it helps to fuel bull markets. Once the market turns south, however, it rapidly dries up, adding to the downside momentum. This remains a bullish factor, at least for now.
Sentiment is also on the side of the Bulls. Ignore the anecdotal evidence and stick with the actual data. Nearly 30% of Market advisors now read Bearish, and that tends to be the level where in Bull markets, we get rallies (its different in confirmed cyclical Bears).
Further, noted technician Stan Weinstein observed this week that Public short selling is at a very high 8.3%, while NYSE Member Short Selling measures “an unbelievably low at a reading if 40.3% (which is the lowest reading since mid-September 2001, which was registered in the immediately after the 9/11 tragedy).” That combination of the public shorting while the smart money chooses not to have historically led to market advances. And, we are still in the seasonally best period for equities.
Of course, in the rest of the column, I get into where the data is mixed and why things will likely turn negative. Bit for those of you who complain I never discuss the positives, well, there they are.
UPDATE: March 3, 2006 9:22am
I had crossed posted this at RM, and a reader reminds me that I wrote:
"However, in tomorrow’s column (tentative title: "Enjoy the Rally but Cull the
Herd"), I note that, on the other hand, the more recent technical data is rather
positive. Here’s a preview of some of the data that explains why starting next
week, I believe the market goes up . . . " (emphasis added)
Talk about lucky timing!
If you haven’t already, I strongly admonish you to go read Jesse Eisinger’s column today:
Here’s the money quote:
"The shorting life is nasty and brutish. It’s a wonder anyone does
it at all.
Shorts make a bet that a stock will sink, and nobody else wants
that: Not company executives, employees, investment banks nor most investors.
That’s why most manipulation is on the other side; fewer people object when
share prices are being pumped up. For most on Wall Street, the debate is whether
shorts are anti-American or merely un-American.
Yet in all the paranoia about evil short-sellers badmouthing
companies, what is lost is how agonizingly difficult their business is. They
borrow stock and sell it, hoping to replace the borrowed shares with cheaper
ones bought later so they can pocket the price difference as profit. It’s a
chronologically backward version of the typical long trade: sell high and then
Go forth and read . . .
It’s a Tough Job, So Why Do They Do It?
The Backward Business of Short
WSJ, March 1, 2006; Page C1
UPDATE March 2, 2006 10:32am:
See below for more text