Disqus - Friends of Osso

Re: Possible post-expiration pullback followed by further rally...

Kemal_1 — Sun, 23 Nov 2008 17:41:18 -0000

Bad article, IMHO. The author looks for the spot light and does not even get the facts straight. Wachovia is being acquired by Wells Fargo, not JPM.

Don't see C going out of business. Shares might fall to 2. Despite all the bad talk, C has businesses that make money NOW. Citi mortgage is actually profitable since they have many mortgages on their books made 10 and more years ago.

Re: Possible post-expiration pullback followed by further rally...

Kemal_1 — Sun, 23 Nov 2008 18:10:35 -0000

Very conceivable, for the same reason as the 'flux capacitor' triggered SPX rallies. 7 would merely represent a rally back near the break-down area....

Re: Possible post-expiration pullback followed by further rally...

Kemal_1 — Sun, 23 Nov 2008 18:21:46 -0000

I meant 50% retracement from 3.77 close as of Friday and 11.50 breakdown area. At the 7 area C went into a vertical free fall.

Since the LEH failure, no large US financial institution went out of business with a share price of 0.

I bet with you, John Paulson's firm is looking at C. They have a large fund set up to profit from an eventual recovery of the US financial system.

Re: one last time

Kemal_1 — Mon, 24 Nov 2008 16:17:17 -0000

SPX tried to break the downtrend line from the Nov. 4 top. Was rejected.

Should retrace at least 40 points later this week. I am short.

Also initiated 50% short Gold position. Might run up to 850 - 860 if EUR/USD advances to 1.32 at which point I would take full position. Several gaps to close.

Re: Maybe we already put the top?

Kemal_1 — Tue, 25 Nov 2008 10:24:42 -0000

Putting in the head in the SPX reversal formation...

Naz not really 'helpful' to SPX

:-)

Re: Maybe we already put the top?

Kemal_1 — Tue, 25 Nov 2008 17:27:46 -0000

Guys, a report from Sanford Bernstein indicates that hedge fund selling is not yet done. According to this survey, another 200 billion are due in December.

So far, I thought we are about to see a 40 point retracement to close the gap from Monday. Given today's action and information, I think we will see new lows this year. In other words, I join Atilla in his view.

Bill Mc Laren had some interesting comments last week. Must say, I agree with him. You are catching a falling knife if you turn bullish here. The scenario is deflation. Not good for stocks and commodities, good for bonds. That is exactly what you saw today, IMO.

http://www.mclarenreport.ne...

Re: Maybe we already put the top?

Kemal_1 — Tue, 25 Nov 2008 18:04:10 -0000

The key sentence is:

If it does run out to the first of December the price would be much lower.

We have not yet seen the exhaustion move, not even today, his anticipated date. That means the odds are increasing that a (much) stronger move is setting up for next week.

Hedge fund selling, bankruptcy filing of Chrysler...., you name it.

Re: Maybe we already put the top?

Kemal_1 — Tue, 25 Nov 2008 18:19:27 -0000

You are a good reader.

Since the comments were made on Friday, MY interpretation was that he was not completely convinced of Thursday's action as an exhaustion. Why would he look into the future for an exhaustion day?
At any rate, if we see 5 up days in a row (he writes more than 4 up days), the bottom should be in.

Personally, I do not see such a bottom. There should be no gap ups since almost everyone should be totally exhausted and should have lost any believe and trust in the stock market. However, we see up gaps on a daily basis..... Go figure. Still too much bullish cash sloshing around, IMO.

Re: Crash of 1929

Kemal_1 — Wed, 26 Nov 2008 12:03:13 -0000

The market is at a critical juncture here. There is a flag like structure formed over the last two days. Market broke briefly out, made the back test and tried to take off. However, this rally attempt was immediately capped.

Might take another attempt. Let's see.

My basic scenario has not changed. Still expecting a break down in the next week. I am holding my shorts, ready to add if the flag turns out to be successful.

Re: Crash of 1929

Kemal_1 — Wed, 26 Nov 2008 12:18:16 -0000

To my knowledge, NYSE is open only half a day on Friday. I believe it closes at 1pm.

Black Friday's are frequently up days.

Re: Crash of 1929

Kemal_1 — Wed, 26 Nov 2008 12:39:44 -0000

One last comment:

There is an obvious inverted HS formation whose potential is about 120 SPX points. I don't think it will be executed. There probably will be a fake attempt at it. I know many news letter and technical reports point to it. Retail traders are loading calls.

Don't get trapped. The action in the XLF (which is retracing itself back to the neck line of a broken HS) tells me that the inverted HS in the SPX will not work out. Also the money flows into the 10 yr treasuries compete with the SPX. If you are long treasuries, your return will be much higher than long SPX .

Have a nice Thanksgiving week end.

Re: Comment cleaner...

Kemal_1 — Wed, 03 Dec 2008 19:35:33 -0000

Guys, just one comment.

Bond traders usually are more sensitive towards the real state of the economy. They were the first to spot problems with the mortgage backed securities, many months before the first write-downs were taken by banks holding these papers.

Now, look at the following FT article:

http://www.ft.com/cms/s/490...

The markit ITraxx index just crossed 1000, for the first time. That is very significant. The TARP will not help here.

And 2 senators (one is Corker) are looking into the possibility of the automakers filing for bankruptcy. What will happen with their bonds?

Anyone willing to pay up this market?

Re: Building a cause for the next leg...

Kemal_1 — Thu, 04 Dec 2008 12:03:30 -0000

Rising wedge forming....

Re: Building a cause for the next leg...

Kemal_1 — Thu, 04 Dec 2008 12:18:28 -0000

backtest after break-out from rising wedge just completed.

Re: Building a cause for the next leg...

Kemal_1 — Thu, 04 Dec 2008 13:49:48 -0000

Rounding top developing.

Just listen to the oil market, it tells you there is no juice in this economy...

Re: Building a cause for the next leg...

Kemal_1 — Thu, 04 Dec 2008 14:09:59 -0000

I can see $40, maybe (not certain about that ) a brief spike to the 35 area for a few days. That should be it.

Buy a 2010 future contract or long term (2010) USO call in the money in a few days and you will make a good profit at low risk.

Re: Building a cause for the next leg...

Kemal_1 — Thu, 04 Dec 2008 15:26:43 -0000

XLF will not get higher than 12.74, its break-down point in November. Black Friday it was at 12.76. It will first go down to its recent low before one can re-assess its potential.

The Nasdaq is leading and is underperforming... that is one of the tell tales of where we are heading. At the latest tomorrow since there is not just price action to respect but also a time dimension. Turning date is today +/- 1 day.

Re: Comment cleaner

Kemal_1 — Fri, 05 Dec 2008 21:00:01 -0000

Very funny. All it takes is a 4% rally to the plus side in the SPX and three quarter of the people turn into intermediate term bulls.

I continue to be very bearish. We are about to see a huge wave of defaults in the commercial loan and municipal bond areas hitting our country. Hartford Financial Services (HIG) gaining 102% today will give up ALL ofl these gains and more in the next few weeks, probably even this month. All the insurers are major holders of muni bonds. More than 200,000 jobs (probably a strong 'british' understatement) will be cut in the auto industry THIS year. I could go on and on. Anyone telling me that this is all priced in? Do I hear a roaring YES, today's action proves it, let the rally start, death to all bears?

Please have a look at a few technical indicators painting a completely different picture:

http://stockcharts.com/char...

Click on the Nasdaq NYMO at the bottom as well. Anyone willing to bet on a Xmas rally after reviewing these data?
Not me.

Monday saw the start of wave 3 of 5 down. The large gap was its signature sign.

Re: Process of building cause continues...

Kemal_1 — Mon, 08 Dec 2008 02:40:15 -0000

Lawrence_Chiu 2 days ago
Here is what diogenes227 at TT wrote: ( http://www.traders-talk.com...... )
===
If the McClellan Oscillator has lows above lows and the Summation Index is rising, be long.
If the McClellan Oscillator has highs below highs and the Summation Index is falling, be short or flat.
===

The summation index is rising, so does this change your outlook?

The NYMO is just one technical indicator to consider. Personally, I would never rely on only one indicator and one market. I make my decisions based on at least 10 indicators and taking into account bond, commodity and currency markets.
I also would like to be very frank. Changes in market directions are ALWAYS initiated by people relying on fundamental data. It is the action of those people that trigger positive divergence in technical indicators leading to the entry of chart analyzing, technical traders. Fundamentalists are the true pioneers, please take note!

The NYMO (and other indicators) tell me that we are approaching a top, presumably in the first half of next week. There is not much room for further gains in the NYMO, it is clearer on this chart (look at the MACD):

http://stockcharts.com/h-sc/ui

The state of the indicators allows me to estimate the max risk for short positions. The 50 DMA is just under 930 and was last touched September 19. My best guess is that this area will be the max upside we can reach.

On a fundamental basis, next year's earnings for S&P 500 companies are estimated to be between $60 and 70 (by the most optimistic analysts). As you can read on the Birinyi Associates page (Ticker Sense), the SPX tends to bottom around forward P/Es of 10 during severe recessions (such as seventies). That would put us somewhere between 600 and 700, in the best case (since continued downward revisions of earnings might bring us even lower). For big institutional investors, PE information is the most important parameter of stock market valuation and dictates their actions. In other words, don't expect any significant reductions in SPX short positions (as shown in the COT reports) and inflows of new money before we reach 700 at the EARLIEST.

Since 630 is an important technical support level and it is a more likely level to be reached within the next few weeks.

The stock market tends to fall in waves since it has to work itself out of oversold conditions before it can continue to fall. It is one of those periods we are in right now and that also explains the higher lows, As you will soon see, it is only a transient appearance.

Re: ES 917

Kemal_1 — Mon, 08 Dec 2008 20:13:54 -0000

Ok, I have finished by analyses of today's market action. Here is my prediction how it will unfold:

Today's turn at 917 suggests we have completed the formation of a bearish flag. It is about 100 SPX points. Break-down should be at approx. 825, giving us a 725 target on the SPX. I expect that target to be hit next week. This is a new low in this bear market and should be the end of wave A (for EW followers). The wave count would be completed with this new low. In addition, we should have positive divergences on the MACD and the NYMO, a perfect set-up for a multi-month wave B rally to at least 1107.

If this scenario indeed plays out, I expect a down gap that will not be closed tomorrow. In that case, I will keep all my shorts and not cover at 850 or whatever Atilla's idea was. I will wait until we reach 730.

I further expect the EUR/USD to reach 1.17 and the 10 yr yield 2%. Gold should make a new low just under 680, all by next week.

Good luck everyone.

Re: ES 917

Kemal_1 — Mon, 08 Dec 2008 20:20:54 -0000

Thanks rjo, fits my scenario. And thanks also for the explanation of the break-out in the T bills a few days ago (due to mortgage hedging). Very informative.

Interested to read more of your comments.

Re: ES 917

Kemal_1 — Mon, 08 Dec 2008 20:25:07 -0000

Seems I misunderstood you. The time frame may be too short, but I still expect a new low in interest rates this year (10 yr), might go even lower next year, which might be supportive for a stock market rally.

Re: ES 917

Kemal_1 — Mon, 08 Dec 2008 20:30:28 -0000

No, I would not have enough time. My wife would kill me..... ;-)

Re: Possibility to test 925 today

Kemal_1 — Wed, 10 Dec 2008 12:33:55 -0000

Would agree with Atilla, there is more upside potential at this moment, possibly up to SPX 980 (if you draw a large flag with bottom line at Nov 21 and Dec 5 lows).

Make sure you have enough cash to place shorts at 925 or even 980.

Fundamentally, I know that THIS week, the conservative investors, which placed short bets in the July to September time frame by using SPX puts and Dec futures are COVERING ahead of expiration week. They are deep in the money and this is just mechanical covering. It does not imply they are bullish. These investors will renew their bets in March contracts beginning of January.

Re: Possibility to test 925 today

Kemal_1 — Wed, 10 Dec 2008 13:27:29 -0000

The next few minutes are critical. SPX broke out of the small flag structure. Backtest is underway. If flag fails, bears will take over control.
Let's see.