Bullish Information

[Jim Nickerson]

Re: Bullish Information

Just to point out the possible idiocy of being bullish on anything to do with US equities, here is a link to a post by Ambrose Evan-Pritchard that should serve as a record to how bad things are in the US just right now. http://www.telegraph.co.uk/finance/c...-tumbling.html Thanks to pythonicow for link and Rumsfeld for initially posting article on tulip.

[Jim Nickerson]

Re: Bullish Information

Several data points that I have noted in the past 7-10 days.

For the weekending 7/2/10, Barron's reported an OEX put/call ratio of 0.56. That is the lowest I have recorded going back to Nov 1999. At 3/6/09 that ratio was reported as 0.66, and at the interim low around 11/21/08 it was 0.87.

Staying with OEX daily data obtained from http://www.cboe.com/data/mktstatall.aspx

The 10-DMA of the OEX ratios hit 0.70 on 7/8/2010. In my data back to October 2002, that was the lowest reading. The previous low was about a month before the March 2009 equity market lows and was then 0.71.

I have no inclination to bet a whole lot on these two extremes in OEX, but time will tell us whether the extremes may have marked/been associated with an interim low in the equity indices.

There have certainly been times when breadth indicators were more oversold, but on 7/2, the 10 day advance-declines were at a generally significant low level. The same was noted with the McClellan NYSE and Nasdaq oscillators. Oversold, but less so than back on 5/27/10.

On 7/7 an 7/13 the NYSE up volume and up points were 90% positive. This (90% up days) has been denoted as "panic buying" by Paul Desmond. On 7/8 and 7/9 the NYSE had 80% up days in volume and points. Such back-to-back 80% up days has been attributed some bullish significance by Desmond.

One proprietary service I use, decisonpoint.com, has a daily report on various ETF's and indices that represent market sectors. These indices or ETF's move from "sells" to "neutrals" to "buys" based on various mechanical signals produced by the price action using Carl Swenlin's models. Recent action (buy signals) in some of his indicators has prompted me to enter some long positions, despite reasons of a more fundamental nature not to be long that might be bouncing around in my brain case.

In 2009, I watched index and ETF after index and ETF in Swenlin's daily report go from sell to neutral to buy, and did nothing because of my fundamental bearishness. Mostly I pay attention to John Hussman's and David Rosenberg's commentary, and those two guys have remained steadfastly bearish throughout the move from the 2009 lows.

Another guy I have read for a number of years has been Dan Sullivan who publishes The Chartist Newsletter. Sullivan has a certain reliance upon the technical behavior exhibited by the markets and that reliance influences his entry and exit in the market. Currently he is out of the market--100% in cash. In a newsletter of his that came out tonight he wrote, "With our models in a negative mode, our advice is to remain in cash. As you know, we follow the price action of the market, not the economy, talking heads, or politicians. Our next move will be a “buy,” the only question is when." JN emphasis.

Now I am sure some would consider Sullivan's approach "crazy;" "some" might be of the ilk of Hussman and Rosenberg. But it is a fact, I believe a fact, that the market does not always behave the way various seers think it should. That is one point that supports my use of technical analytical aids. The technical indicators of Swenlin and Sullivan's methods got people into the market updraft coming out of the March 2009 lows, when those who are governed by fundamental assessments, or those looking mainly at the economy or listening to talking heads largely missed the move. To each his own.

I'm not suggesting anyone who reads this is wrong if he/she has no bullishness in their bones. Actually I like being bullish when no one else is.

[Jim Nickerson]

Re: Bullish Information

HOW MANY ARE BULLISH ON US EQUITIES RIGHT NOW?

There has been little fundamental support that my pea-sized brain has recognized since the March 2009 lows, yet anyone stupid/smart enough to be long since then has or should have made some rather serious gains.

There are a number of technical "things" that have made me buy some long and +200% long positions over the past week or so. I don't know that I can think of all of them right now, but I'll try to put them into this post at least with some links.

From Barron's on 7/10/2010 some comments by Paul Desmond from Lowry's Reports. I just saw this tonight, so it has had nothing to do with my personally opening some long positions. http://online.barrons.com/article/SB...el_article%3D1

WHILE THE HEADLINES HAVE been foreboding, Paul Desmond, president of Lawry Research, a technical advisory firm, has remained decidedly upbeat. Last week's market action "said the correction is over and we are in the remainder of a bull market," he says.

Desmond watches demand for stocks in an effort to determine the market's direction. Since April he has seen a broadening of demand, with an increasing number of stocks advancing versus the number of stocks declining.

While volatility may be greater as hedge funds and electronic traders jump in and out of the market, the upward trend of the market should continue for awhile. We're a year and a half into a bull market and there are no early signs that a top is around the corner. So Desmond believes this bull has one and a half to two years to go.
"The risk of loss is about as low as you get in the stock market and investors ought to be heavily invested at this point," he says.

Even more contrarian is his suggestion that investors should pile into mid-cap and small-cap stocks, because they will outperform. One reason for small cap outperformance is simple: The law of small numbers makes it much easier for a small company's shares to double than for a large-cap stock to do the same.

Another reason small-caps should do well is that they are among the most depressed equities right now. Everyone is fearful and hiding in blue chip stocks, Desmond notes. While large-cap stocks hold up better in bear markets, they have underperformed in bull markets in the past 70 years.

These days you can't get much more contrarian that than right now.

From the last few days Mark Hulbert has commented:

"It would appear that the stock market has built up enough momentum to keep the rally going for a while longer." http://www.marketwatch.com/story/mar...egs-2010-07-14

Last week the stock market had its best week in a year.

And yet you'd never know it by reviewing investment advisors' outlooks: At the end of the week they were collectively no more bullish than they were at the beginning.


Their skepticism in the face of the rally is a bullish omen, according to contrarian analysis.

http://www.marketwatch.com/story/sen...eek-2010-07-13

And here is a comment I ran across in Think Tank over at Big Picture by Peter Boockvar, a stategist at Miller Tabak who posts almost daily in Ritholz's Think Tank

Dear Short Sellers, it’s me Boockvar, pronounced without the C. Some think I’m Mr. Bear, I prefer Mr. Realist (reflation trade bull in March ‘09). I’m writing now to say be very, very careful here into year end (2011 a different story with plenty of concern). Combine a settling down of European credit stress with potentially a better than feared earnings season (INTC was impressive), the growing possibility of gridlock in Washington, DC come November (Intrade.com has greater than 50% chance of change in the House), a Fed that wouldn’t know a rate hike if even the Bank of Japan wrote it on Bernanke’s forehead and a very underinvested money management community and we are set up for a big rally (after some backing and filling of the current 7% bounce as we are somewhat overbought short term) over the next 5 1/2 month which may have already started.

I never have commented anywhere on the web except at itulip, but after reading the three comments there http://www.ritholtz.com/blog/2010/07...short-sellers/
I was inclined to register and comment (I am "riodogg')

riodogg Says:
July 14th, 2010 at 11:31 am Were the three preceding comments (admittedly a very small sample) to be representative of the general lack of bullishness, then certainly sentiment on a contrary basis is supportive of a rally in here, now.

Hulbert at MarketWatch has written a couple of articles 13 and14 Jul supporting possibility of runup in here.

Peter, I am with you until proven wrong. Hope we can look back on this and say “good call.”

So far I still have not mentioned what has made me personally seek out some long positions, i.e be more bullish. And because I need to eat, I'll get back to this time permitting (besides whatever moves me ain't that important).

Considering the things that happened today regarding news, I suppose they could provide some boost to whatever else has moved the markets in the past 8-9 days.

Financial reform passed Senate now to Obama.
GoM oil spill capped, I suppose.
Goldman Sachs settles suit for 550M with SEC.

I don't know if any of those are market movers or not. We'll see.

[metalman]

Re: Bullish Information

metalman,

Granville's advice is posted, feel free later to look back whenever you run out of comments and see how his prognotication turned out.

Originally Posted by metalman
will anyone check to see if the recount of granville's record is accurate? doubt it. if he's a 'friend of marketwatch' they'll note the 10 times he was right and ignore the 10 times he was wrong.

let's track his advice... 'to do some buying in the airlines, banks, brokers, and casinos, but keep shorting the oils." reads like a prescription for losing the most money possible in the shortest time. buying banks and casinos at the top of a debt deflation? what an idiot.
metalman,

Granville's advice is posted, feel free later to look back whenever you run out of comments and see how his prognotication turned out.

since aug. 8, 2008...

long airlines...

lost $$$


lost $$$


flat $$$

i don't need to show the carnage in banks, brokers and casinos. ok, maybe casinos... as they also represent the bank, broker casinos...



doh!


double doh!



does this guy granville have any money left? maybe his readers made enough shorting oil... the one call he got right... to buy something to wear...

[FRED]

Re: Bullish Information

Ole Barton was a bit wrong there, wasn't he? Thanks for posting a followup on what was a wrong analysis. The longer I live, the less I believe you can "buy" what anyone who runs money has to say about market direction: unless by chance the market is in a bull run, and then their continuous "buy side" recommendations work.

Jim, you got it!

Editorial content that sells a product is not the same thing as editorial that develops a long term investment thesis, even though they may at times read the same way.

[Jim Nickerson]

Re: Bullish Information

Bear in mind: MAY 31, 2008 One Bold Analyst's Latest View: Worst Is Over for Economy, Stocks

Now, Mr. Biggs, 75 years old, believes the worst is over for the economy and for the stock market. While the market is likely to move sideways for the rest of 2008, he says there will be no recession -- and with the remaining poisons purged from the system, stocks should move upward next year.

Ole Barton was a bit wrong there, wasn't he? Thanks for posting a followup on what was a wrong analysis. The longer I live, the less I believe you can "buy" what anyone who runs money has to say about market direction: unless by chance the market is in a bull run, and then their continuous "buy side" recommendations work.

[Slimprofits]

Re: Bullish Information

Bear in mind: MAY 31, 2008 One Bold Analyst's Latest View: Worst Is Over for Economy, Stocks

Now, Mr. Biggs, 75 years old, believes the worst is over for the economy and for the stock market. While the market is likely to move sideways for the rest of 2008, he says there will be no recession -- and with the remaining poisons purged from the system, stocks should move upward next year.

[Rantly McTirade]

Re: Bullish Information

To be fair, I believe Biggs has a nice chunk of his own money that he runs alongside his clients.

[Jim Nickerson]

Re: Bullish Information Re. Biggs: worst of recession over?

http://www.bloomberg.com/apps/news?p...5Pw&refer=home Bloomberg 1/9/09

U.S. investors are looking ahead, and they like what they see, say Barton Biggs and Robert Doll.

The 21 percent rally in the Standard & Poor’s 500 Index since Nov. 20 reflects speculation the worst of the recession is over, according to Biggs, managing partner at hedge fund Traxis Partners LLC, and Doll, chief investment officer for BlackRock Inc. Equities will probably keep rising, they said yesterday on Bloomberg Television.
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“Sometime around the middle of the year there’s going to be pretty conclusive evidence that the economy has stabilized,” Biggs said. “That’s what the stock market is now looking forward and seeing, and that’s why I think that this rally carries further.”
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He also favors companies in less-developed countries. “The growth opportunities will be in emerging markets,” he said. “They are considerably cheaper then developed markets.”
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Recession Nadir
Doll said the worst of the recession is probably over after more than $1 trillion of bank losses froze credit markets in 2008. U.S. gross domestic product may have contracted 4.35 percent in the last three months of 2008, according to the average estimate of economists surveyed by Bloomberg.

“The fourth quarter that just ended is likely to be the worst of the recession,” said Doll. He said Nov. 20 probably was the bottom for the stock market.

Both these guys run other people's money.

[BiscayneSunrise]

Re: Bullish Information

Jim,

I think the reason why the bearishness indicator is still so low is because it had been at record low levels for so long it will take some time for it to creep back up. Also, people are beginning to understand the implications of things we talk about here and are genuinely worried.

Having said that, the market has a mind of its own and is now in bonafide rally mode.

I am paraphrasing Investors Business Daily now but they are saying, forget 2008, forget everything you think you know and what you think should happen. The market is in a confirmed rally. That is the fact.

Short term, almost certainly, but the market for some reason is ignoring the current data and pessimism and is headed up.

[Jim Nickerson]

Re: Bullish Information

http://www.investmentpostcards.com/2...009/#more-3568

David Fuller: 10 tangible reasons for a rally
“I have listed and illustrated 10 tangible reasons for a rally (no cheerleading here), and also discussed a crucial missing ingredient.

1. Governments have flooded the system with liquidity. It takes time for this to filter through to the economy but it will reach the stock market more quickly.

2. Interest rates are at record lows for the US and UK, both short-term and long-term, and heading lower elsewhere. This is an ideal background for stock market recoveries.

3. Valuations are much improved, despite legitimate concerns over the earnings outlook for at least the first half of 2009. Equity yields are competitive with government bond yields, despite the near certainty of more dividend cuts than increases over the next six months.

4. Corporate bond yields peaked in October and November and have fallen significantly. They have also begun to improve their performance relative to government bonds.

5. Various measures of investor/advisor sentiment reached extreme lows in October.

6. The VIX Index peaked in October and is trending lower.

7. Commodity indices have fallen significantly, lowering inflationary pressures. Historically, equities have done best in disinflationary environments.

8. In many countries, the financial sector is showing strength relative to the broader indices. This is a key lead indicator.

9. Levels of cash are at record highs.

10. Most broad stock market indices show some evidence of base formation development. This is less clear for the DOW, but can be seen for the FTSE 100, DAX, SX5E, FSSTI and NKY, to mention a few of many.

“In conclusion, technical evidence remains more conducive to a stock market rally rather than another slump. Over the last three weeks we have repeatedly mentioned the December reaction lows. They need to hold to remain consistent with our expectations for a ranging stock market recovery extending well into Q1 2009.

“The crucial missing ingredient for stock markets to date has been confidence. Nevertheless that could change in January, given the high levels of cash held by most institutional investors. If stock markets languish in the New Year, as many expect, there will be little reason for investors to reinvest in the stock market. However, if stock market indices surprise the bearish consensus and start to break upwards rather than downwards from their trading ranges, institutional investors will be under increasing pressure to participate. Failure to do so would put them at a competitive disadvantage in terms of 2009’s performance.

“Lastly, if the global economy does not show evidence that the recession is ending by Q3 2009, in response to the stimulus programmes, stock markets will be susceptible to a significant retracement of gains achieved during the first half of the year.”
Source: David Fuller, Fullermoney, December 30, 2008.

My emphasis.

It is interesting and perplexing to me that this week's AAII sentiment poll of Bulls 24.0%, Bears 54.7% is the second lowest number of Bulls since 7/11/08, when it was 22.2%, after which there was at least a 60-point SPX rally to 8/15, and 7/11 was at a bottom to that point.

The third lowest number of Bulls in AAII was 24.4 and that was on 11/21/08, which so far has been the bottom, and since then there has been a 25.75% SPX off its intraday lows of 11/21. So with a 190-point SPX rally, the AAII Bulls are at a near low since the SPX peak of 1425 at the middle of May, 2008.

It is unusual to see such overall bearishness in a sentiment indicator after what so far has been an impressive rally from 11/21.

Though so-called conventional wisdom is that extremes in sentiment tend to be wrong, .i.e, maximum bearishness often occurs near market lows and vice versa for big bullishness, occasionally the sentiments in the polls are correct.

Currently II sentiment in tied 38.5%. In July 2008, II bullishness reached a low going back to July, 1994 (based on a report I copied). So despite a 60 point rally from that II low in Bulls, any investment advisors who stayed bearish over the five week rally of 60 points (I'm using weekly closing prices of SPX for these numbers) were proven quite correct into the Nov. 21 lows, and this same observation applies to the AAII poll.

Regarding breadth the equity markets are very overbought to my interpretation and for whatever that is worth. Charts of the major indices all look quite positive to my interpretation.

Volume accompanying the recent up moves has sucked.

My bottom line: I don't know WTF of any significance is to occur over the next say 4 weeks. I think there should be a pullback in here, but I am not selling my long positions or entering short positions, but that could change quickly between now and the next few days. Actually, if I had had all the data available only after the markets closed Friday, but before they closed Friday I would be happier being out of most if not all of my long positions.

[Jim Nickerson]

Re: Bullish Information

This is probably not pertinent, but it is a bit of indication of how bearish some are, as of yesterday when the DJI closed at 7552.29. 90% of those responding apparently thought the DJI would continue its decline.

Personally, I too think it will continue to decline, but I am positioned for it to go up to some extent, someday, before it might reach the ultimate low for the current bear market.

The underlining is a happenstance and not for emphasis by anyone.

Yesterday, we asked Bespoke readers how low they thought the Dow would get between now and 2009. The number that received the most responses was 6,000. Of the 675 readers who participated in the poll, 215 (32%) said 6,000 would be the low, 167 (25%) said 7,000 would be the low, and 108 (16%) said 5,000 would be the low. To reach 6,000, the Dow would have to fall another 22% from yesterday's close, and it would be down 57.74% from its record high reached in October 2007.

http://bespokeinvest.typepad.com/bespoke/

Edit: Upon re-reading the question asked: How low between yesterday and 2009?, it strikes me as very short term bullish, I was intially thinking in terms of it asking about the ultimate low. However, recent market behavior has punished anyone with the slightest bullishness outside of day traders who have gotten it correct.

[hellstan]

Re: Bullish Information

Since the intraday lows from 10/10/08 there have already been two rallies of 24% and 20%, but one would have to have been perfect in timing to have gotten those gains, so probably no one did; nevertheless, the rallies did occur. And there seems to me to be a lot of smart people, many or probably all, smarter than I who are looking for a pop upwards in here, and that worries me too.

I am long 50% in one thing or another, posted elsewhere, but I am nervous.

Jim,
At least, a few analysts I follow did catch the timing.
Apart Marc Faber and McHugh, predicting a rally from now (or the end of november) until march, you have
Louis Navellier, who told his subscribers to buy since 3 weeks now.
Had I followed his advice, for instance on FSLR or FSYS, I would be up
25 % and 54 % respectively.
But I did not, because I was too nervous too.

[Starving Steve]

Re: Bullish Information

Just reviewing my portfolio, in the last few months, I have been shifting money away from bonds and into stoxx. The reason for this move has been pathetic yields on bonds and new "improved" yields on stoxx.

If Joe Six-packs like me are turning bullish on stoxx, that has to be a bearish contrary indicator. And Abbey Joseph Cohen's pie-hole is another bearish contrary indicator. Bob Brinker's pie-hole is another bearish contrary indicator. Bill Flannigan's pie-hole is yet another such indicator.

What worries me --- and keeps me up at night--- is Bernankee and his policies. The risk is hyper-inflation, and that can not be good for stoxx.

I am into oil stocks as a value play. But what value would stoxx have if money is competitively de-valued, worldwide? That would just make stoxx a joke.

I am looking to buy additional core gold at $600 per oz, but the PM market may not give me that opportunity. Anyway, I will watch but not buy until the price is right, and right means $600.

[Jim Nickerson]

Re: Bullish Information

The presidential cycle is really hit and miss. This year was supposed to be positive, and I'm not that optimistic. There has to be a major bear rally starting now or anytime soon, though. It's based not only on technicals, poor sentiment but also the plummeting commodities. The same way commodities and especially oil killed the global economy just weeks after peaking, the same way, the incredible slide down will revive some growth, even if only temporarily. I'm looking for a replay of Oct 2002 to March 2003. Now, I hope no new war in 2009.

jacek, I believe more than once you have written, "there has to be a rally." The only thing certain is death, nothing else has to happen.

I don't disagree with you that many things point to the recent action as placing the October lows into being significant as a longer term bottom, but for a bear market that has been based on the collapse of the credit bubble that went on for years, a 12-13 month decline hardly seems to be enough to really cleanse the markets (whatever that means). A big difference between the current October lows and those of 2002, it that the latter occurred 34-36 months AFTER the markets had topped.

Since the intraday lows from 10/10/08 there have already been two rallies of 24% and 20%, but one would have to have been perfect in timing to have gotten those gains, so probably no one did; nevertheless, the rallies did occur. And there seems to me to be a lot of smart people, many or probably all, smarter than I who are looking for a pop upwards in here, and that worries me too.

I am long 50% in one thing or another, posted elsewhere, but I am nervous.