Market comments for Nov. 23rd

Well we did go below 11.000 on the Dow this morning, as the Put to Call ratio had suggested it would on last Friday, but it quickly went back above it. It took a barrage of blasts by North Korea into South Korea to drive all world markets lower, but whatever the event, the markets will be under pressure for at least another 40 days. The Nasdaq has also gone below the psychological 2500 level and currently is around 2489, down 42 points today. The S&P 500 is also down to the 1180 level. Tax related selling is full in force right now as well. Insider trading this morning shows an imbalance of Insider Selling dollars versus Insider Buying. One company to note is TRW and 5 Insiders have sold $490 million dollars of stock this morning. Home Depot (HD) had 3 Insiders who sold $173 million dollars of its stock and Cinemark (CNK) had one Insider sell $177 Million of its stock this morning. Contrast this to 3 Insiders buying AIG stock for a total of $45 million (this could be a fed easing investment) and Live Nation (LYV) had one Insider Buying $45 million in its stock.

Market summary for June 22, 2009 and comments

Today the market dropped on the Dow 202 points closing at 8,339, while the Nasdaq closed down 61 to finish the day at 1766 and the S&P 500 closed below 900 for the first time since May 27th, closing at 893. The Volatility Index closed at 31.17 after hitting a high of 32.05 earlier today. The Put to Call ratio closed at 0.92 while Gold closed at 923, down 12 dollars/ounce. The signs have been there for weeks since the Candlestick pattern on June 5th showed the first sign of market reversal, and then was confirmed again on June 15th, as I wrote in my post on both days. Both the Dow and the S&P 500 are now below the 200 day Moving Average again.

Meanwhile, contributing to the market decline today was this little tidbit: World Bank Says Global Economic Recession to Deepen from Bloomberg news. And I quote, "The world economy will contract 2.9 percent, compared with a previous forecast of a 1.7 percent decline, the Washington- based lender said in a report today. Growth will be 2 percent next year, down from a 2.3 percent prediction the bank said."

Also in the article was this: "The World Bank cut its forecast for the U.S. this year, calling for a 3 percent drop in the world’s biggest economy, after predicting a 2.4 percent contraction in March.

Japan’s gross domestic product will shrink 6.8 percent, more than the previous prediction of a 5.3 percent decline, the lender said. The euro area’s economy may shrink 4.5 percent, compared with the previous estimate of a 2.7 percent contraction.

Global trade may drop by 9.7 percent, compared with a March forecast of a 6.1 percent decline.

I do expect the Dow to go below 8,000 and the S&P 500 to go below 840 as well. Options Expiration for the Quarter in June 30th and I do not know what the effect of that will be on the market.

One other piece of news I thought was relevant was this gem: "Insiders Exit Shares at the Fastest Pace in Two Years." I have been saying this was one of the reasons I thought the market was headed down and wrote so on many occasions. I receive 2 reports daily on Insider Buying and selling from J3SG.com and for months it has shown the dollar amount of Insider Selling far exceeded the dollar amount of Buying for any given day. I had posted the theory, how can things be really getting better in the economy if so many Insiders who have most likely lost money like the rest of us, are selling their company stock. If they saw Green Shoots and recovery wouldn't it make sense to be buying more shares of their company stock? Anyway, read the "Insider Exit shares at the Fastest Pace in Two Years" article and conclude what you will. I am still holding my ETF Ultra Shorts Triple pay of the Small Caps, symbol TZA, as well as the Ultra Short Triple lay of the Financials, symbol FAZ.

The market should just be in the beginning phases of a eventual retreat to 7,300 lows or lower by the end of October.

Was yesterday's market rise an anomaly or did it mark a market turning point?

That seems to be the big question of the day for investors large and small. I took a look at my usual data sources and came to the conclusion that not enough is really known yet to fully answer the question but, indicators are strong that we bottomed on Thursday. Here's some facts.

Volume yesterday was higher than the day before when the market dropped 444 points. The volume was the highest in over a month. The Put to Call ratio on Equities rose 3 days in a row, to near yearly highs for a 3 day period. This suggests a reversal in trend to me. However, the volume was not convincing as to whether we reached that climax called "capitulation". Insiders were Buying yesterday in large numbers. With over 200 companies reporting Insider Trading yesterday, over 175 companies reported Buying by Insiders, verses only 25 Insiders reported Selling.

As I have stated a number of times, we can still go lower and may go down as low as 7,000 on the Dow. Whether we were at 7,500 or 7,000, we are for all practical purposes at the bottom. However, this may be an unusual time and the signs of capitulation may look different this time, compared to past analysis. For one thing, there will not be the heavy buying many expect. The reason is quite obvious, there isn't a lot of cash ready to come into this market. Confidence has been damaged, most likely for good. It will not return for a very long time. So any market rise will be tempered by some selling into any rally. Fear is still the dominant emotion, and not until greed finds its way back again, will this market rise and then only slowly. It most likely will get knocked down on any substantial gains. So don't expect the Dow to go over 10,000 again, anytime soon. We are talking years in my view. And the reason compounding this will be the continued bad news around unemployment and the usual cutting of revenue and earnings estimates by companies for a long time to come. Some companies are in denial and not taking appropriate cuts given such a dramatic occurrence in the credit markets, Wall St. and now Main St. It is to their peril if they ignore the facts and the indicators of what is coming over the next year.

I am convinced that money can be made by buying ETF Indexes and trading them as stocks. When the Dow, S&P 500 and Nasdaq all are near bottoms, it is wise to buy Ultra Pro shares of these indexes. Similarly when the market rises and nears the recent highs of 9,500 on the Dow it is recommended to sell them and buy the Ultra Short ETF's at the same time. I will continually give buy and sell signals of these ETF's over time so check here if you own any.

As I said on Thursday, I sold my SP 500 ETF Ultra Short shares, symbol SDS, as well as my Dow ETF Ultra Short shares, symbol DXD. I also bought the SP 500 Ultra Pro shares, symbol SSO at the same time.

President-Elect Obama will announce his team in the coming week or two and that should give some confidence that we have a group of smart, capable and experienced people going to be assisting our new President, immediately when the transfer of power happens on Jan. 20th.

In the meantime, think about what you are grateful for in the midst of the worse financial and economic crisis since the Great Depression and give thanks this coming Thursday. Think of those suffering in silence and pray for them. Think about how you are going to help contribute to a better America. The place to start is where you live and look around at your neighbors, your churches, your local government and your local businesses. You can make a difference and you will make a difference. It only depends on whether you choose to help or not.

Happy Thanksgiving week to you all.

Post Market analysis Nov. 13, 2008

The market did what I had expected it to, it went down below 8,000 and quickly bounced back up and the market closed up about 550 points to 8,800. This was simply amazing. There are several pieces of information which tells me that the market is not ready to go lower at this time.

The first piece of data was that the Volume today was significantly higher than yesterday and ending on a high note, which is a good thing. Secondly, the ratio of Insider Buying to Insider Selling was significantly higher today. This has not been the case for weeks. Also there seemed to be a positive reaction when it was announced that Sen. Chris Todd said there were no votes from Republicans in favor of a rescue for the Auto makers. I do not agree with the Republican rejection of a bailout. I have clearly stated a number of conditions for a bailout, the first being GM files for bankruptcy and the shareholders lose their investment, management loses their jobs and their is a government oversight of the company with conditions favoring more environmentally responsive measures.

Getting back to the market. We will stay between the low of 7,965 to the recent high of about 9,700. To make money you will need to play the range and when the Dow Index approaches either end of the band, take an action to buy or sell. I tried to sell my Shorts but failed to do so. I should have had an order in that executed without my need for a manual trade. I learned my lesson and it won't happen again. I also was preparing a trade to Buy an Ultra Long ETF of the S&P500, symbol SSO, but I didn't make it in time. Lesson learned, move on. :yeah:

My take on today's market action and looking forward.

Today the markets confirmed what I have predicted last week. I said the rally last week was a Bear market rally and not to be fooled by jumping back in. I suggested buying Ultra Short ETF Funds such as DXD and SDS. Both are up now. In the case of SDS which is a short on the S&P 500 closed Friday at $89.89 and closed today at $104.75. That is a $14.86/share gain for a 16.5% gain. When I asked readers to buy this it was at $87.55. Overall it is up now 19.6%. Looking at DXD, which is an Ultra Short Fund of the Dow, it closed Friday at $79.31 and today closed at $86.20/share. That is a gain of $6.89/share for a 8.7% gain. I recommended buying this Fund at $70.50/share. It is up now 22.2%. Normally I would sell these with these gains, but the market closed at near the lows and I believe we are in for another drop tomorrow. We have gone below the recent lows on the Nasdaq, which is not a good sign for those wanting a rally. Also, the ratio of Insiders Buying is overshadowed by Insider Selling, in terms of actual dollars.

There are no good news stories on the immediate or near term horizon, and in fact, there was one negative news item today, as Hank Paulson, Treasury Secretary, announced he is changing the actions he had announced regarding the TARPS (Troubled Asset Rescue Plan which Congress finally approved prior to the election) "because the facts on the ground require a change in strategy," he said. This did not give confidence to the market. Many now believe he has not foreseen some of the current problems and has lost some credibility with the market. The markets function based upon confidence levels of investors and there appears to be less and less each day.

We are getting close to the 8,000 level and without some encouraging news in the days ahead, I fear we may take a run at the real market bottom, which I have said since September, is at about 7.300 on the Dow. If we do go there, that will be capitulation and we should not go lower.