House of Cards ready to fall

E

eagle488

The rest of 2006 will be flat to down. Then January will come and the real sell off begins. I dont need to rehash the reasoning, you can go to www.safehaven.com and you will find a list of articles with a lot of technical facts/opinion.

The one thing I have not read yet in any blogs is the margin interest. I have looked through the NYSE website and I am under the belief that more margin is being used now then at any other time in history. It appears very similiar to the year 2000. Even the slightest fear will bring down the market now and it will be worse then May. You will see folks running to sell out of their positions because they are overleveraged.

The only thing holding it up now is the fact that people are clinging on to gains into the new year and will sell once January hits.

I am currently short Apple and going to research some obvious shorts right now. I see a lot of plays in puts that would be good as well.

I say the S&P500 and DJIA issues will fall about 10-12% on average. The Nasdaq issues will probably go anywhere from 20-30%. The S&P100 will fair well, but will probably still have a loss of about 6%.

I can only find a few stocks that would probably be good longs. Only a very few. The large cap value issues do appear to be VERY overbought as well and trading above their normal P/Es.
 
The rest of 2006 will be flat to down. Then January will come and the real sell off begins.

Eagle, perhaps you are right, perhaps not. However it now appears, to me anyway, that the probability of a Fed rate increase early in the new year is quite high. I believe that the Fed's hands are tied and that it will be necessary to boost the interest rate to stem the slide in the dollar. It is likely that the reason given will be that the economy is strong enough to withstand the rate increase and that inflation is the culprit. The real reason, i believe, will be unvoiced concern over the dollars' weakness and a fear that foreign central banks may be tempted to cut their losses by dumping dollars; thus causing further weakness. Whether Bernanke will succeed in calming their fears and talking the central banks into supporting the dollar remains to be seen, but i think it quite likely that he will not succeed in this and that a rate increase will be forced upon us early in the year, inspite of negative consequences for the US economy. Bernanke is between a rock and a hard place. I hope i am wrong. I don't think i am.
 
You may or may not be right, but here's a somewhat interesting chart obtained by overlaying images of

SPX (Fuzzy blue)
NYSE Summation index (Green)
SPX Bullish Percentage Index (Red)

from stockcharts.com

The x axes don't align exactly and the colours are a bit odd, but you can get the general idea.
 

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Quote from eagle488:

The rest of 2006 will be flat to down. Then January will come and the real sell off begins.
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I think the selloff begins now...starting with the 7-8% in Thailand today. Oh well, to each his own.
 
dood. that's absurd.

prior to the 1929 crash, it was COMMON for bucketshops to offer 10:1 margin

i highly doubt that people are more leveraged (margined) now than they were then

do you have facts to back up your assertion about margin?
 
Quote from piezoe:

However it now appears, to me anyway, that the probability of a Fed rate increase early in the new year is quite high.

Another opinion:

http://www.rgemonitor.com/blog/roubini/167155/

I believe that the Fed's hands are tied and that it will be necessary to boost the interest rate to stem the slide in the dollar. It is likely that the reason given will be that the economy is strong enough to withstand the rate increase and that inflation is the culprit. The real reason, i believe, will be unvoiced concern over the dollars' weakness and a fear that foreign central banks may be tempted to cut their losses by dumping dollars; thus causing further weakness.
More...


http://www.rgemonitor.com/blog/roubini/167408/
 
Quote from whitster:

dood. that's absurd.

prior to the 1929 crash, it was COMMON for bucketshops to offer 10:1 margin

i highly doubt that people are more leveraged (margined) now than they were then

do you have facts to back up your assertion about margin?
More...

Agreed. Margin is probably less now for individual traders. Although there are alternative investments like hedge funds and private equity. But, it is not the strong argument for the bear case.

The strongest argument I have is the fact that Thailand is down 7-8% today, and India was down 9% last week in 3 days.

I do believe that the US will be the strongest market right now. I am bullish the US market versus other countries. But hey, when VIX is 10%, it is the cheapest way to hedge. Markets are all correlated...more so now than 10 years ago according to the MSCI research.
 
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