Babak's Journal

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There will probably be an increase in demand because Mom+Pop brokerage accounts will now be able to hold actual gold (although a similar vehicle has existed for more than 15 yrs-CEF) by that I mean that brokers now have an incentive to sell gold to get commissions. But I don't think this will be have a huge impact at all because the big boys have all been able to buy in futures mkts. But perhaps I'm biased since I'm really only interested in gold shares not bullion.

ps major mkt indices cracked out of their wedge thanks to yesterday's declines
 
Was it Snow on the dollar? or was it Bessie on the field? or was it al-Qaeda ? or was it the bombings in Israel? or the cod yield off the Grand Banks? or that Greenspan sneezed? or that McTeer didn't?

Well, the market cracked out of its wedge formation Monday and the media is on the hunt! Something must be found to explain the market's action. Ohhh, it can't be that a top was long overdue! The truth is out there and by Golly they will have at it if they have to interview the last analyst, economist, pundit and CEO left on this planet.

The wedge is broken. I wanted to repeat that. The market has been making a wedge formation for a while now. Its been there on all the major indices. And it has been there for almost all sectors. This is an important point. Perhaps the most important one I can make now. If you want go back and read when I quoted from Edwards+Magee) re wedges

The retail sector I think was the first to really fall off, last week. Sadly, I missed it because I was focusing (apparently too much) on the transports.

McLellan Osc. went from positive to negative. In a long term study (written about in Encyclopedia of TA) a simply trading system which went short when it crossed from + to - and long when it went from - to + would have beat buy and hold. Interesting. This ofcourse has cause the Summation indices to curl into a potential top and exit their screaming ascent trendline.

The transports have broken down and formed a clear double top (as mentioned before). I think there is more to come. Partly because the BP% notched down 5 points.

The pharmas also broke down in a big way. For me, that came out of left field. I wasn't watching it and kinda kick myself for missing it. I'm looking at charts from PFE LLY MRK JNJ ABT MDT WYE (ETFs like IYH and XLV) and wondering what I can do the next time to not miss out. The only clue that I can find is the high BP% reading in the sector. But even that was hardly flashing red. Curiously, the biotech sector has been incredibly strong (BBH). It has been the highest RS , closely tied with gold shares sector. As well, the Lowry folks have been pointing to it as good longs. Personally, I'm a little wary because when I look at their charts, it looks great, but for volume.

The new high-new low ratio has put in a CLEAR top now and all that needs to happen to validate it is a continuation down for the reading and the market along with it. Monday was also a possible 90% down day (I think...dgabriel?)

I watch MMM for clues as to the Dow. Notice how it broke in mid April while the Dow continued to go up. I think where 3M goes, so goes the Dow, sooner or later, if only because of its weight and clout. Well, right now it has retraced a bit from its fall to 121 but it has done so on decreasing volume and formed a bear flag. Ominous sign for the Dow indeed (IMO).

Also, another sentiment reading points to a topping here. I'm referring to the Hulbert Nasdaq newsletter sentiment index. According to Mark Hulbert over at MarketWatch, the reading is 61.5% and in its historical context does correlate with tops. What would have terrified me would have been if the Nasdaq had rallied and people would have been skeptical and yawned. That would mean to me that this thing may be for real. But when everyone jumps on the bandwagon, apparently afraid to underperform the market....that's a bear market rally.

So what is my prognostication? I think this pic sums it up in a thousand words:

grizzly.jpg


Finally, I remembered an annecdote that Marty Schwartz tells in his book about being long one day when the market was not "cooperating". He was so distraught that he got up on his desk and did a rain-dance singing "I'm too long...I'm too long". I guess he didn't know what else to do or maybe just lost his marbles for a few seconds. Anyway, the other traders see this and go long also. The market turns around and he not only saves his hide but makes a bundle.

Now I'm not saying to always be adamant in your conviction, no matter what. But I have noticed that just when you are about to puke, the market turns. Recently, as I mentioned, I did puke (my index shorts) but now I'm beginning to realize that just when you are at the maximum level of pain....that's just when things turn.

I hope you get my drift because my motto is still ....
 
I caught a segment on CNN's in the money titled 'Stock Whiz Kid'. Could you resist a segment like that? Turns out its about Chris Lahiji who has read all the annual reports of ALL public companies:

8.jpg


and who started a 'fund' (actually just a list of picks online) called the Lahiji Tiny Fund where he picked 100+ micro-caps which since Nov of last year they are up 75+%.

Anyway, with all this attention and the 75+% performance Chris, like all 19 year olds, thinks he is the Chosen One. On his site you can read his immediate reaction to the CNN interview. I saw the same interview and I don't think the interviewrs were 'dickwads' but asked some good questions.

For me it was interesting for a couple of reasons. First, it has been a long time since CNN or CNBC etc. have done similar stories. People just don't brag about returns and thumb their noses at pros anymore. They are too busy trying to explain to the wife why they can't have a vacation this year or ever because they lost all their money on XO Communication or some other 'sure shot' investment.

Second, Chris, has been lucky to catch the updraft of the bear rally that began in Oct 2002 and was also lucky enough to pick turkeys. As we all know, they are the specie of birds to fly highest in a tornado. He owes most of his performance to REDF. Nuff said.

The other interesting thing for me was that when I went to Chris' website and his list of picks, there were not one, not two, oh hell! there were a handful of known SCAM OTC BB stocks. I don't know if Lahiji has actual money on these POS but I hope that no one does as these will either go to zero, get delisted or get into trouble like EUNI recently.

Anyway, I'm sure that Chris means well and will do just fine with his life. I'm just as sure that he doesn't know, what he doesn't know.

Now for some serious stuff. Jim Grant is making some bearish noises regarding bonds and last week Jim Rogers in an interview with FT was saying that he's started to short long bonds! The Fleckmeister is also going negative on bonds. Wow!! That is scary! These guys are very smart and when they mention the same thing you gotta listen. Also, TLT LQD have been going parabolic, not the sort of ascent that has longevity.

In a similar way, anything with a yield has been chased in this market. Preferred shares, converts, etc. are hitting new highs every day (look at the list!) on the NYSE,. And utilities are getting bid up like they were the sexiest internet infrastructure names in the 90s. The utilities specifically look very strong (chart wise) but when I look under the hood, it doesn't look pretty. I'm watching the sector and hope that it continues to float up in the same way it has next week. I'll be looking to short it either using XLE or UTH. As well, there are some great looking shorts within the sector, such as NI.

The transports sector has managed a feeble bounce (XAL as well). I'm very bearish on the airlines and will be pushing that side further. I kick myself for not buying a little of CEA/ZNH as I mentioned in a previous post. The illiquid nature of them scared me a bit. Anyway, some transport stocks are forming bear flags (YELL, ROAD, JBHT, HTLD) and will take another stairstep down IMO.

The gold sector: I'm glad I'm out. Gold does not look good and neither does the gold shares. I will be watching to get back in, especially the SA such as DROOY and HMY since the rand seems to have put in a top.

Kass and others are making some bullish pronouncements on Japan and recommending EWJ as a way to play it. Seems interesting to me since they have put in a large downward wedge and apparently broken up. However, I can't persuade myself to take that trade since I'm so bearish on the US market (I think the US will fall and take international indices down with it).

Speaking of int'l indices. The European indices (except FTSE) are in terrible shape! I don't think this portends well for those with a bullish stance.

Sentiment readings are a bit confusing right now. The AAII apparently got spooked enough to move away from their extreme bullish opinions. However, this can be still interpreted as a contrarian sign (and therefore bearish) as on the charts graphing the AAII readings, an extreme reading has been now put in place (just like all other major market tops).

Right now we are in a fog. Is it a bear mkt rally? is it a cyclical bull? what the hell is it? Well here is an article that I hope gives us some perspective:

http://www.thestreet.com/comment/onthelevel/1252749.html

It was written at the height of another 'foggy' moment in the markets. Of course, in hindsight those levels on the charts seem crystal clear.
 
Your "journal" is the funniest thing I've read. you've been crying sell for well over a month and a half, even as the market continued to go against you. And you finally turned neutral (as I predicted) at 950 S&P. And when you turned neutral, the market dropped. Then you went bearish again, and the market has risen since.

You're 100%!! That's 100% WRONG EVERY time.

The question is: when will you finally admit you're wrong, and continue to be wrong.

My big problem with you is your inability to take account for your bad calls. At least admit your mistakes.
 
Quote from Jesse J.:

Your "journal" is the funniest thing I've read. you've been crying sell for well over a month and a half, even as the market continued to go against you. And you finally turned neutral (as I predicted) at 950 S&P. And when you turned neutral, the market dropped. Then you went bearish again, and the market has risen since.

You're 100%!! That's 100% WRONG EVERY time.

The question is: when will you finally admit you're wrong, and continue to be wrong.

My big problem with you is your inability to take account for your bad calls. At least admit your mistakes.
More...

Hey Jesse, Did you forget? Look below.

05-05-03 11:46 PM
Dow DEFINITELY looks good to 9000
After extensive analysis, I am SURE the Dow will rise to 9000 in the next few weeks.

I am so sure avout this, I am willing to stake my reputation on it.

That's right, I will leave ET if it doesn't happen.

JJ


__________________
 

My record speaks for itself. It's clear on the 2nd page of this thread I called 950 S&P, and the jury's out on whether Dow 9000 comes. We'll see. But at least I take responsibility for my calls.

 
Quote from Jesse J.:

But at least I take responsibility for my calls.
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Good, hit the road, it's been a few weeks. Jury's in. No 9000 yet. Live up to your word.
 
Babak,

All your analysis is a great read, you seem to gather a lot of sentiment and sector data and read a lot of market commentaries. Would you mind sharing with us your favorite sources of info especially for sentiment and "big picture"fundamental data ? What is your daily research routine like?
 
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