Tuesday, March 01, 2011

Market comments for March 1st, 2011

The stock market closed up yesterday so many feel we are returning to new highs. It isn't going to happen! In every market drop there are a series of jagged patterns which make one think the market is rising. However you will notice that each move up is a little lower than the previous high and eventually a lower low is formed. I believe we are currently in that pattern. So I predict that we will not return to the previous high but will be going below the most recent low within a week or two as the market continues its decline.

The economic news yesterday was nothing to excite people, but the Fed was most likely behind the rise. Personal Spending was down for January, Also, Pending Home Sales for December were down.

One chart of the Dow for a 3 month period is being posted today. It shows the recent drop and the latest climb the past few days. I expect that the Dow will not return to 12,400 but will instead go below 12,000 in the next week or two, as it begins its expected steady decline.

A Friend and I were looking at the Dow/Gold ratio chart below yesterday, which covers from 1980 to Jan. 31st, 2011. He believes we will return as low a ratio as 1.1 as we were back in 1980. Certainly form the trend starting in 2000, we have continued to decline to a ratio of 8.5-9.0 most recently from a very high ratio. The red dot on this chart is where the ratio was, as of Friday's market close, so we continue to drop in this ratio.

Now yesterday I was asked a question about the reverse split of TZA and what I thought about it. Well truthfully, not much, as as the questioner had pointed out, the value of the ETF remains the same in a reverse split. But it can have a psychological impact on some because they think that the ETF must rise so much more than it did before the split, for them to break even or make a profit from where their average purchase price was. Yes it does have to move up more $ dollars now than before the split, but percentage wise it is exactly the same. So again, I don't worry about it at all.

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Blogger Vic Cebollero said...

What's your take on insider selling selling these days? Seems as though the big boys are moving out in a big way.

12:39 PM  
Anonymous Anonymous said...

I have a question on your remark pertaining to TZA. What would be some reasons why TZA would be reverse split? Do you have any new predictions on where TZA may be trading at as this market withdraws? previously, you remarked on the DOW pulling back below the 6,000 level. Do you still see this on the horizon? and is there any time frame where you see this all playing out? appreciate your comments

1:00 PM  
Blogger Charles Amico said...

Vic, Insider Selling has steadily been increasing of late. But it is nothing compared to what I think will occur. If you are interested in tracking Insiders, try going to this link:
http://www.j3sg.com/predefined/DisplayWeeklySummaryBreakDown-Sells.php and place this all in one line in your URL. This accesses Sellers Summary and you will see a tab on the site to compare Insider Buying. Watch total dollar volume not number of shares when you do.

Anonymous (Tom), It reversed split because the price was low for the stock and it is offset by TNA, which was very high. TNA is the Long triple play ETF of the Russell 2000 and TZA is the triple play Short ETF. Best I have time for now for an answer. I am sure you can do a Google search on Reverse splitting and why they do it which is much more informative than me.

3:16 PM  

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