Bullish Information

[Jim Nickerson]

Re: Bullish Information Re. Another bullish "signal."

http://www.financialsense.com/Market...2007/0322.html

3/22/07

IBD Follow Through Day Moves Market Into "Confirmed Rally"

BY MARTIN GOLDBERG, CMT

Wednesday’s rally brought about an Investors Business Daily (IBD) follow through day thereby putting the market in “confirmed rally” mode. IBD’s word on the stock market as of Tuesday evening was, “market in correction.” But with Wednesday’s action, the benefit of the doubt moves from the bears to the bulls all within a single day. In recent years, the IBD method has been as good as any in predicting the intermediate term position of the stock market. Also relevant is the fact that what they consider to be leading stocks are acting well. While a cynic can throw several rationales at the recent action of the stock market, one trades against IBD’s method at their own significant risk. With regard to IBD, when you find a hot guru, it pays to follow his advice. Trading against the methodology of the hot guru can be both demeaning and expensive.

Further support for bullishness just now.

[Jim Nickerson]

Re: Bullish Information Re. 9 to 1 up days in volume

MARK HULBERT
Nine to one
A rare and bullish technical event occurred Wednesday, Mar 21, 2007

http://www.marketwatch.com/news/stor...7C268E%7D&dist=

In an interview, Professor Aronson told me that recently, he and the students in a class he teaches at Baruch tested the statistical basis for Zweig's confidence in double 9-to-1 signals. They did not differentiate between such signals that were accompanied by intervening 9-to-1 down days and signals that were not.
Professor Aronson told me that he and his "class used data from the beginning of 1942 through fall of 2006, and we looked at what happens in the stock market in the 60-trading-day period following a Zweig double 9-to-1 signal, versus what happens the rest of the time. In those 60-trading-day windows, the S&P 500 index (SPX : SPX1,436.11, +1.57, +0.1%) produced an average annualized return of over 22%, on the assumption that an investor entered the market on the close the day after a double 9-to-1 signal was triggered and held until the end of the 60th trading day later. In the non-signal periods, in contrast, the return averaged 4.5% annualized. The difference between these two average returns is statistically significant." (Professor Aronson told me that these calculations do not include dividends.)

The last time a double 9-to-1 signal was triggered was June 29 of last year. An investor who bought the S&P 500 at the close on June 30 and held for 60 trading days realized an annualized gain of 19%, remarkably close to the 22% average that Professor Aronson found going back to 1942.

If one is bearish, this article is worth reading.

[Jim Nickerson]

Re: Bullish Information Re. DJI P&F bullish reversal.

Richard Russell 3/21/07 http://dowtheoryletters.com/

In speaking of the DJI point and figure chart:

The pattern had taken the form of a head-and-shoulders top. From the looks of it, the Dow had been working on the right shoulder of the pattern. The Dow broke down to the 11950 box, but wait -- the latest action is a rally (row of Xs) to the Dow 12450 box.

This is a clear bullish reversal to the upside, and it puts the Dow in position for an attack on the high. With my PTI at a new record high yesterday and obviously higher today, the odds tip toward new highs in the Dow and many of the major stock indices in the days ahead.

By the way, leading the D-J Averages is the D-J Utility Average, which closed at a new record high today. A new high in the Utility Average is a major plus for the stock market. Classically, the Utility Average tends to top out BEFORE the rest of the market or sometimes simultaneously with the major averages.

[Jim Nickerson]

Re: Bullish Information

PETER BRIMELOW
Why Sullivan isn't worried
Commentary: Chartist editor says bull market's still alive and well
By Peter Brimelow, MarketWatch
Last Update: 12:01 AM ET Mar 19, 2007

http://www.marketwatch.com/news/stor...A4849B%7D&dist=

But Sullivan doesn't expect this. He thinks March 14, when the Dow lost 136 points before recovering to finish ahead 57, was a "key reversal day," and that the storm has passed.

Why is Sullivan so sanguine? His "models" are proprietary indicators they are presumably extrapolations from his stock-picking method, a variant of relative strength, sometimes summarized as "Buy high, sell higher." But he also offers a number of rationales.

One is that, although Sullivan acknowledges the subprime mortgage market is "a very real concern," he also says flatly that it's getting "too much attention."

Nice to know.

Another Sullivan rationale: Recent market volatility has to be put in perspective. He writes: "Although volatility has returned, it is nowhere near the levels of 2000. We activate our hotlines whenever the market as measured by the Dow rises or falls 1% or more. Back at that time, we were doing hotlines almost on a daily basis."

Prior to March 13's 242-point down Dow, he writes, "there had not been a single-day decline greater than 2% in over 980 trading sessions." And he adds that "on a point basis, it was the seventh-largest one-day decline in the history of the Dow. But on a percentage basis, it doesn't even qualify in the top 250 worst performances. Since 1950, it would rank as the 37th biggest single-day flop."

Sullivan also prints a list of the top 10 worst single-day percentage declines in the Dow since 1950. He concludes: "As you can see the stock market recovered nicely with every period producing gains 60, 90 and 120 days after the drop."

Sullivan's Actual Cash Account portfolio is currently 95% invested.

[bart]

Re: Bullish Information

Bart, I'm curious if it is the timing of this announcement that can have effect on the market. What time did that announcement occur? Does it coinicide with the dramatic midday reversal yesterday? Does GS, or C, or whoever the PPT operators involved are buy the market upon announcement of the TIO before the auction takes place? Are my questions moot because I'm misunderstanding something?

You're tracking pretty well with how I view the area.

My best answer is that I don't know. More often than not, the initial announcement is time coincident with the start of a move in my experience over the year or so that I've been tracking TIOs... and sometimes it's not.
All the initial public TIO auction announcements occur around 10 PM EST, and results are announced just after 11 PM EST... but the Treasury site does make mention of non public announcements to the banking system one day early.

In this case, it appears to me (opinion only - no facts) that the various trading desks that got part of that $17 billion waited until the markets were close to breaking below recent lows and then started buying, so as to get an additional effect from short covering.

[Pervilis Spurius]

Re: Bullish Information

Bart, I'm curious if it is the timing of this announcement that can have effect on the market. What time did that announcement occur? Does it coinicide with the dramatic midday reversal yesterday? Does GS, or C, or whoever the PPT operators involved are buy the market upon announcement of the TIO before the auction takes place? Are my questions moot because I'm misunderstanding something?

[bart]

Re: Bullish Information

There was a $17 billion 7 day US Treasury hot money injection (TIO) today that also likely had something to do with the markets behavior.

TIO page
http://fms.treas.gov/tip/index.html

My daily page, including TIO charts
http://www.nowandfutures.com/daily.html

[Jim Nickerson]

Re: Bullish Information

2/27/07 and 3/5/07 were 90% down days in volume and points on the NYSE as defined in studies by Paul Desmond (for more info search iTulip for Paul Desmond).

3/6/07 was a 90% up day in volume and points on the NYSE. As I understand Desmond's works, such 90% days (called either "panic selling" or "panic buying" days are significant). A panic buying day following panic selling days are historically good entry points for being long the equity markets. Generally panic buying days as happened on 3/6/07 do not follow so quickly on the heels of panic selling days as occurred on 2/27 and 3/5. However, similarly close days did occur back last summer, and turned out to be quite indicative of an excellent time to be long the US equity markets.

Over the weekend, I received a "freebie" special report from Lowry's Reports (that is Desmond's firm: Lowry’s Reports, Inc. 1201 US Highway One – Suite 250 North Palm Beach, Fl. 33408)

One of the many unique indicators on our Lowry onDemand website is the percentage of Lowry stocks trading above their 10-day moving averages. This indicator has proven to be very helpful for our clients in measuring the short term extremes of market selectivity. Its accuracy in identifying worthwhile intermediate buying opportunities from time to time has also been especially helpful. That is, a number of significant buying opportunities have been identified in the past after periods of market weakness have caused the percentage of stocks above their 10-day moving averages to drop below 10%.

For example, as a result of the recent intense stock market drop beginning on February 27th, the 10-day % indicator dropped from its early-February’07 peak of 84.6% to a low of just 3.77% on March 5th, reflecting a deeply oversold market condition. The table below lists all similar cases since 1990 in which the percentage of stocks above their 10-day moving averages has dropped below 10%, and the resulting market action, as measured by the DJIA, over subsequent 2 weeks, 3 months, and one year periods:In summary, since 1990, there have been 18 cases in which the percentage of stocks above their 10-day moving averages has dropped below 10%. In 78% of those cases, the market was up an average of 2.98% in the next two weeks. In 94% of the cases, the market was anaverage of 8.9% in the next 3 months. And, in 94% of the cases the market was up an average of 20.1% in the next 12 months.

support@lowrysreports.com. Contact if you wish subscription information.

Another advisor I follow, Dan Sullivan, The Chartist, wrote Tuesday 3/13/07:

With all of the widely followed indexes closing at or near their lows of the day there is a distinct possibility that the May 5th lows where support is in evidence will be taken out in tomorrow's early going as the market probes for an effective bottom. With our models in a positive territory as they have been since 04/08/03, we remain steadfast in the bullish camp.

http://www.decisionpoint.com/TAC/TODD.html

We were quite pleased with the final result on Wednesday. We thought there was a good chance for the market to hold the closing lows of March 5, but when the Dow was down 135 points intra day, we

strongly considered hiding under the bed. As it turned out, the lows did hold and what we ended up with was a high volume reversal. There are no guarantees in this business, but that normally has bullish implications for the next several weeks. The next task for this market is to close above the levels of March 12. This will give us a pattern of ascending highs and ascending lows or an upward zigzag on the daily charts. We noticed another interesting point today. The EEM which is the ETF for emerging markets shows good relative strength versus the S&P500. It didn’t come close to its March 5 low. Upon further investigation, we found to our surprise, that the EEM tends to lead theS&P.

My interpretation from these observations and comments are that what began with the big down day back on 2/27/07 may not be the "beginning of the end" just yet.

Last edited by Jim Nickerson; March 15, 2007, 07:10 AM.

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[DemonD]

Re: Bullish Information

Jim, you mentioned the p/e ratios above. The US broader market is closer to that 18. Okay actually let me get the number.

As of 1/31/07, the P/E ratio of the S&P 500 right now is 16.9. I obtained this information from looking at the vanguard 500 fund detailed webpage from vanguard.

Here is a pdf file that looks at the p/e of the s&p 500:

http://www.systemsandforecasts.com/A...onth/Nov02.pdf

highlight:

The 25 year P/E average of the S&P 500 is 17.78, the 50 year average is 16.48. The
level on June 30, 2002: 36.99.

This confirms more or less what I believe about the market. It's pretty much at fair value, without any reason to buy (nothing cheap) or sell (nothing really overvalued).

Your shanghai index looks like a definite sell. The Hong Kong Index looks like a mild sell.

I would say US companies would be a sell, but for the fact that so many companies that are multi-national and take advantage of of deflated wages of non-US countries.

Also Jim it's not like I've made hundreds of thousands of dollars. My total net worth is under 6 digits. Like many people I have made good and bad investing decisions, but on the whole I'm ahead and I find I get better at deciding when to buy and sell as I gain experience. I firmly believe now is NOT the time to sell stocks unless you are holding stocks that are real-estate related, and of those I own absolutely zero.

[Jim Nickerson]

Re: Bullish Information

just be patient guys. With the current bull run in stocks, I feel like I truly understand the axiom of "The best time to get in is before the bubble."

And this of course is why diversification is so important... if you were diversified into stocks in 2004, you would be sitting pretty now. I see 2007 as similar to either 1998 or 1999, although I wasn't investing then so I don't know if the p/e ratios are there. The point is that putting new money in now is risky, very risky, but if you are in then by all means STAY in while the dumb money moves into the market.

JK I think you are right to wait for a big pullback. I'm seriously annoyed that my limit orders for a certain mining company did not go through (i set the order at 2 cents below the lowest price), and now that company is up 19% in just two weeks based on commodity prices. Some oil companies i've been tracking are also up a good 5-15% in the past month after the pullback and now runup in oil prices. I think it's good discipline to stick to a price point that you want for a stock, and if it runs away from you, then let it go. There are so many stocks out there it's worth it to wait for what you want to come down to your level. It may be a little "safer" but you're more likely to keep your money that you do have and when the stock you want drops into your buy zone you will feel much more comfortable, and plus assuming the company's fundamentals are okay, will be much more profitable.

In the meantime I'm not paying a 20% premium on any stock, and I'm still looking for my exit point from the market in the next 6-18 months for some of my stock positions.

DemonD,

Some days I wish I didn't know you. I keep trying to figure out whether or not you are young and foolish and I am just an old fool.

I certainly am in no way prepared to tell you that you are wrong, my fear for my own sake is that you may well be correct. Just be careful out there, and if you ever get to feeling, "I cannot believe I have made so much money via my genius" or however you see it, it could be wise to lighten up.

[Jim Nickerson]

Re: Bullish Information

i feel the same way, jim. the most bullish piece of information i know [re equities] is that i'm bearish. at least, that's how it feels. i keep seeing things i've been intending to buy -- bhp, sgf and so on -- going up without me, because i've been waiting for the big pullback. if i get so tempted that i actually go long, i'll post it in the "bearish information" thread, so you can go short.

I'll be watching.

I was just reading Chinese Market Mania by Mike Hewitt 2/24/07 http://www.safehaven.com/article-6990.htm in which he makes comments on the small investor in the Chinese Shanghai market (P/E 33 vs. Hong Kong ~18) In Shanghai retail investors control 60% of the shares, in Hong Kong institutional investors control 70% of daily transactions. In Shanghai, the "A" shares index has gone up 200% in 16 months.

The exuberance is seen across the board, including those companies with poor business operations and/or financing. Tianjin Global Magnetic Cards jumped 137% after it failed to report quarterly earnings last April. Shanghai Haixin Group shares doubled over the next two months after its CEO was under investigation for "irregular activities". Shanghai New Huangpu Real Estate rose 111% in five months after the company was linked to a major corruption scandal involving the Shanghai pension fund. The Industrial and Commercial Bank of China, considered to be nearly insolvent only a few years ago, was at one point the second largest bank in the world behind Citigroup. It appears that for the time being, any news is being regarded as good news.

Many investors believe that luck and confidence in that the government won't permit share prices to collapse are more important than fundamentals. A 61-year-old retiree who gave her name as Miss Hou admitted that she didn't know how to choose a stock and purchased those companies who's names sound lucky. Let us hope that Miss Lou is in the minority.

[JN emphasis]

I am sure I am less capable than Greenspan in recognizing bubbles, so what is going on in China could not be a bubble, could it?

[DemonD]

Re: Bullish Information

just be patient guys. With the current bull run in stocks, I feel like I truly understand the axiom of "The best time to get in is before the bubble."

And this of course is why diversification is so important... if you were diversified into stocks in 2004, you would be sitting pretty now. I see 2007 as similar to either 1998 or 1999, although I wasn't investing then so I don't know if the p/e ratios are there. The point is that putting new money in now is risky, very risky, but if you are in then by all means STAY in while the dumb money moves into the market.

JK I think you are right to wait for a big pullback. I'm seriously annoyed that my limit orders for a certain mining company did not go through (i set the order at 2 cents below the lowest price), and now that company is up 19% in just two weeks based on commodity prices. Some oil companies i've been tracking are also up a good 5-15% in the past month after the pullback and now runup in oil prices. I think it's good discipline to stick to a price point that you want for a stock, and if it runs away from you, then let it go. There are so many stocks out there it's worth it to wait for what you want to come down to your level. It may be a little "safer" but you're more likely to keep your money that you do have and when the stock you want drops into your buy zone you will feel much more comfortable, and plus assuming the company's fundamentals are okay, will be much more profitable.

In the meantime I'm not paying a 20% premium on any stock, and I'm still looking for my exit point from the market in the next 6-18 months for some of my stock positions.

[jk]

Re: Bullish Information

As long as I maintain my opinion about this, the market will likely continue higher.

i feel the same way, jim. the most bullish piece of information i know [re equities] is that i'm bearish. at least, that's how it feels. i keep seeing things i've been intending to buy -- bhp, sgf and so on -- going up without me, because i've been waiting for the big pullback. if i get so tempted that i actually go long, i'll post it in the "bearish information" thread, so you can go short.

[Jim Nickerson]

Re: Bullish Information Re. The World

Dan Sullivan, who is a long-time newsletter writer, in The Chartist, 02/22/07 http://www.thechartist.com/ (for subscription information) has been unflinchingly bullish since April 2003. He remains so now and puts forth his reasons.

The bottom line is we are in a world wide stock boom.
.
.

There is nothing more bullish than a market which continues to overcome one apparent obstacle after another i.e. climb a wall of worry. The slowing economy, $60 oil, subprime mortgage meltdown and the prospect of single digit profit growth in the coming quarters has not slowed investor enthusiasm for this bull market. Every pullback is greeted with renewed buying. This is evidenced by the fact there has not been a single down day on the S&P 500 of greater than 2% in the last 983 trading days. In fact, since the last S&P bottom on June 13, 2006, the largest single day loss was 1.36% on November 27, 2006. Furthermore, since the recent January 5 low in the Dow and S&P, the small and midcaps have become the leaders. Since January 5 the Russell 2000 has gained 6.6%, the S&P Midcaps SPDR 8.6% vs. the Dow gain of 2.75%. Historically, a market which sees the small and midcaps stronger than the large caps is representative of a healthy bull market.

We all know that trees do not grow to the sky. Which begs the obvious question, how much upside does this bull market have in it? There is no way to tell in advance of the fact how long the current uptrend will continue. However, there are no signs of a potential top or even a correction at this point. Experienced investors realize that the market can always turn on a dime. The name of the game is to have the odds in your favor and at this point of the cycle, the odds continue to favor the upside. The advance/decline line, which is just three trading sessions off of its bull market highs, has historically topped out ahead of the overall market, while the Utilities, which are just fractionally under their historic highs, often have a greater lead time than the A/D Line. As previously mentioned, the midcaps, which have come to the fore and are now leading the parade, bodes well for the market as well as the performance of the NASDAQ, which has broken out into higher ground. Add to this the impressive performance of the Value Line Geometric which is only 5% away from record high territory and you have a market in which there is participation all across the board. The high-low differential which is a ten-day moving average of new highs vs. new lows is near its highest level in over two years. Our advice for long term investors and traders is to continue to maintain current positions. Bottom line, we are in a bull market which has further to run until we see evidence to the contrary.

Having read Sullivan off and on over the years, these arguments are not atypical of his assessments. He is a momentum invester, "buy high and sell higher" a stategy that has worked well for him most of the time, though as I recall his "indicators" had him out of the market in 1999 as it went hyperbolic, but over the cylce, I expect he did okay.

The weekly NYSE adv-dec line was at its high for the week after Friday's close.

I sit here thinking whether or not I should buy into his arguments, which I personally think have some validity, but I am not going to go long anything now. As long as I maintain my opinion about this, the market will likely continue higher.

[Jim Nickerson]

Re: Bullish Information Re. Maund on Gold

http://www.safehaven.com/article-6963.htm Clive Maund 2/21/07

This is a couple of days old now, but he thinks the commercial traders are facing two options, either cover their short positions or face annihalation.

At the time of writing [2/20/07] gold has been temporarily capped again at the critical $680 level, but the strength of today's advance, with gold up over $20 in the space of a few hours, provides ample illustration of the disarray in the Commercials' ranks. Put yourself in their position, would you be willing to put your head on the block to save your compatriots from a wipeout? - probably not. It will be a case of every man for himself and so we may witness - are already beginning to witness - the rare spectacle of the Commercials in a state of blind panic.

The sudden $22 rise in gold today is believed to be the result of the onset of an unseemly scramble by the Commercials to cover their short positions. It's anyone's guess what will happen when the key $680 level is decisively overcome - all hell could break loose. It could quite closely resemble the scene when someone yells "fire!" in a crowded theatre.

Today's close (Friday) $GOLD WAS 686.70, so perhaps Maund will be proven correct, so far he seems to be.