Are we there yet? Difficult if not impossible to say in this mess but I believe we are close.
The Dow Transports completely collapsed last week taking out the prior low benchmark set on 3/10/08 at 4398.97. The transports have held up relatively well until free falling on Thursday. Recall, according to my interpretation of Dow Theory that the Tra
nsportation average gave a bullish signal on April 3rd -- closing at 4999.33. The Dow Industrials gave no such signal and has remained in Bearish territory since November 21, 2007 w/ a 12799 close. Dow Theory has therefore been bearish since November 21st of last year regardless of the Transports divergence the past several months. Of course the Industrials continue to do their part by setting another new low Friday at 10325.38. Dow Theory is firmly entrenched in a downward primary trend.
Nevertheless some of these moves are so extreme that I'm actually betting on a huge rally soon (possibly even next week) that'll carry the DJI above 11,000.00. Are you an idiot? Sometimes I am, but I'm not crazy and I'm well aware of what's going on in the world. Remember I watch the markets basically 6 hours per day. Sure it makes me sick, just like the guy busting his ass who is watching his 401k turn to dust. Part of what I do is reading the tape. The tape is telling me that fear rules. Fear is out of Control! It's insane and taking over like an epidemic. Like in that episode in The Twilight Zone when the neighborhood in middle America thinks they are being invaded by aliens. Claude Akins starred in it. People essentially lost their wits and started acting like Barbarians because they were afraid of the unknown. These hedge funds are run by a bunch of monkeys who are losing their shirts. These men and women, it turns, out do not really know what they are doing and are now completely out of control. It is clear that they will now sell anything at any price without giving it any thought whatsoever. Part of it of course is forced liquidation, but a large part of it is fear, and the inability to think independently.
A couple of facts: 1) traders will look over the rescue plan this weekend and come to the realization that the government will do what it has to to break this credit jam. This didn't happen back in the 30s. In fact back then, Andrew Mellon, the Fed Secretary did everything wrong and almost single handily led the country down the road to depression. That's not going to happen today. 2) Libor is at around 4.5%. Give me a break. If this credit clog was as bad as the media is saying it would be a lot higher -- probably around 15% or so. 3) There are lots of bargains out there. Citi and Wells are basically in a fight for the honor of buying Wachovia. What's up w/ that. I thought Wachovia was a bust. 4) Buffett is putting big $ into financials (enough said). 5) Banks are indeed lending $ to qualified borrowers. 6) 3 month t- bills are yielding .05%. The Vix is over 45. People are in a frenzy and essentially pricing in Armageddon. 7) The world isn't coming to an end.
Yes the economy will slow. Yes we are in a recession. Yes there are more job losses on the horizon. However, exports and manufacturing activity is still doing ok. I'm not going to get into all the pluses and minuses here - I'm just saying that the markets have over reacted to the down side with fear, panic and negativity thus throwing out the fundamentals and facts.
Just look at these charts.
A super oversold chart of the Composite Index - see circled indicators. Wow!
SPX weekly reads like the world is coming to an end. Insanity rules!
Cramer is super bearish. He's a very emotional ape who is always wrong at turns. I thought this was supposed to be the year of Nat Gas. Oh well.
Stocks below the 200d sma. Incredible.
SPX monthly fell off a cliff. When was the last time it was this negative? Look how far below the BBand std deviation it is?
I bought a bunch of cheap OEX calls on Friday.
Look, I'm not saying that a bull market is about to begin. It's going to take the market time to regain its confidence and shake off the fear and shock we experienced. I'm just saying that I believe a massive rally to the upper BBand on the daily chart is highly probable.
nsportation average gave a bullish signal on April 3rd -- closing at 4999.33. The Dow Industrials gave no such signal and has remained in Bearish territory since November 21, 2007 w/ a 12799 close. Dow Theory has therefore been bearish since November 21st of last year regardless of the Transports divergence the past several months. Of course the Industrials continue to do their part by setting another new low Friday at 10325.38. Dow Theory is firmly entrenched in a downward primary trend.Nevertheless some of these moves are so extreme that I'm actually betting on a huge rally soon (possibly even next week) that'll carry the DJI above 11,000.00. Are you an idiot? Sometimes I am, but I'm not crazy and I'm well aware of what's going on in the world. Remember I watch the markets basically 6 hours per day. Sure it makes me sick, just like the guy busting his ass who is watching his 401k turn to dust. Part of what I do is reading the tape. The tape is telling me that fear rules. Fear is out of Control! It's insane and taking over like an epidemic. Like in that episode in The Twilight Zone when the neighborhood in middle America thinks they are being invaded by aliens. Claude Akins starred in it. People essentially lost their wits and started acting like Barbarians because they were afraid of the unknown. These hedge funds are run by a bunch of monkeys who are losing their shirts. These men and women, it turns, out do not really know what they are doing and are now completely out of control. It is clear that they will now sell anything at any price without giving it any thought whatsoever. Part of it of course is forced liquidation, but a large part of it is fear, and the inability to think independently.
A couple of facts: 1) traders will look over the rescue plan this weekend and come to the realization that the government will do what it has to to break this credit jam. This didn't happen back in the 30s. In fact back then, Andrew Mellon, the Fed Secretary did everything wrong and almost single handily led the country down the road to depression. That's not going to happen today. 2) Libor is at around 4.5%. Give me a break. If this credit clog was as bad as the media is saying it would be a lot higher -- probably around 15% or so. 3) There are lots of bargains out there. Citi and Wells are basically in a fight for the honor of buying Wachovia. What's up w/ that. I thought Wachovia was a bust. 4) Buffett is putting big $ into financials (enough said). 5) Banks are indeed lending $ to qualified borrowers. 6) 3 month t- bills are yielding .05%. The Vix is over 45. People are in a frenzy and essentially pricing in Armageddon. 7) The world isn't coming to an end.
Yes the economy will slow. Yes we are in a recession. Yes there are more job losses on the horizon. However, exports and manufacturing activity is still doing ok. I'm not going to get into all the pluses and minuses here - I'm just saying that the markets have over reacted to the down side with fear, panic and negativity thus throwing out the fundamentals and facts.
Just look at these charts.
A super oversold chart of the Composite Index - see circled indicators. Wow!
SPX weekly reads like the world is coming to an end. Insanity rules!
Cramer is super bearish. He's a very emotional ape who is always wrong at turns. I thought this was supposed to be the year of Nat Gas. Oh well.
Stocks below the 200d sma. Incredible.
SPX monthly fell off a cliff. When was the last time it was this negative? Look how far below the BBand std deviation it is?
I bought a bunch of cheap OEX calls on Friday.
Look, I'm not saying that a bull market is about to begin. It's going to take the market time to regain its confidence and shake off the fear and shock we experienced. I'm just saying that I believe a massive rally to the upper BBand on the daily chart is highly probable.
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