Buying on Dips
- Thread starter ravi1967
- Start date
AN ANALYSIS OF DOW/NASDAQ AFTER CLOSE ON THURSDAY 29TH JUNE 2006
- FROM AN EQUITY ANALYST IN USA
DOW + 217 on 2250 net advances
NASDAQ COMP. + 63 on 1800 net advances
SHORT TERM TREND Bullish
INTERMEDIATE TERM TREND Bearish
STOCK MARKET ANALYSIS:
We have been saying that we would move back to a short term
buy signal if the S&P 500 closed above its previous peak of
1256.16 which would give a high above a previous high on the
charts. It certainly did that today and it did it on solid volume.
We aren't going to give buy parameters for the SPY or QQQQ
right now because, in spite of the strength on Thursday, there are a
few caveats. First, the put call ratio was quite low by recent
standards and even though this indicator has had its problems
lately, readings below .80 have tended to occur near short term
tops in recent months. Today it closed at .65. We may look at the
SPY and QQQQ on a pullback.
We are also a bit concerned that the market has had a tendency
to drop off in the days after a Fed rate hike, if it has rallied prior to
the hike. In addition, some indicators have moved to a short term
overbought status. Some were attributing the rally to a change in the Fed statement
that accompanied its expected rate rise and certainly the market
jumped just at the statement was released. We looked at the
wording and indeed there were some changes, but it looked
substantially the same. Some said that there was a hint of a pause
in the rate increases, but they have better eyes that I do. Perhaps
there was relief that the FOMC meeting was over without any
negative surprises.
We think that the rally was a combination of the recent oversold
condition and the end of quarter influence that frequently causes a
lot of portfolio adjustments by institutions. For instance, a number
of managers may have had a lot of cash on hand from selling into
the recent decline and felt the need to be fully invested for the
impending quarterly reports. Many have mandates to be 100%
invested at all times. Regarding the intermediate term, we haven't reached the 50
level on the five week RSI that will be required to generate a buy
signal. Today it closed at 46.86. Another rally tomorrow could do
it. Once these signals are generated, they tend to be good for
several weeks. Stay tuned.
NEWS AND FUNDAMENTALS:
First quarter GDP was revised upward to a final read of 5.6%.
This was in line with expectations. The chain deflator, which
measures inflation came in at 3.1%, this was less than the expected
3.3%. Initial claims came in at 313k which was higher than the
expected 310k.
On the stock front, McDonald's was upgraded by Merrill Lynch
and gained 5%. Faro Technologies and Monsanto beat estimates
and rallied 19% and 8%. Nasdaq Stock Market was upgraded by
Thomas Weisel and jumped 8%.
On the negative side, Advanced Auto Parts guided lower and
sank 17%. American Greetings, Micron Technologies and Red Hat
came up short on earnings and lost 13%, 6% and 8%.
BOTTOM LINE:
Our S&P and NASDAQ intermediate term systems are on a
sell signal as of June 7, 2006 at 1256 on the S&P 500. Mutual
fund investors are currently 100% in cash.
Short term traders in the SPY and QQQQ are in cash. Stay there
for now.
For new subscribers, the QQQQ and SPY are exchange traded
funds or Spiders. The former mimics the Nasdaq 100 and the latter
mimics the S&P 500. ---- Additionally, an m.i.t. order means
"market if touched" It means that your order becomes a market
order if the price is touched.
- FROM AN EQUITY ANALYST IN USA
DOW + 217 on 2250 net advances
NASDAQ COMP. + 63 on 1800 net advances
SHORT TERM TREND Bullish
INTERMEDIATE TERM TREND Bearish
STOCK MARKET ANALYSIS:
We have been saying that we would move back to a short term
buy signal if the S&P 500 closed above its previous peak of
1256.16 which would give a high above a previous high on the
charts. It certainly did that today and it did it on solid volume.
We aren't going to give buy parameters for the SPY or QQQQ
right now because, in spite of the strength on Thursday, there are a
few caveats. First, the put call ratio was quite low by recent
standards and even though this indicator has had its problems
lately, readings below .80 have tended to occur near short term
tops in recent months. Today it closed at .65. We may look at the
SPY and QQQQ on a pullback.
We are also a bit concerned that the market has had a tendency
to drop off in the days after a Fed rate hike, if it has rallied prior to
the hike. In addition, some indicators have moved to a short term
overbought status. Some were attributing the rally to a change in the Fed statement
that accompanied its expected rate rise and certainly the market
jumped just at the statement was released. We looked at the
wording and indeed there were some changes, but it looked
substantially the same. Some said that there was a hint of a pause
in the rate increases, but they have better eyes that I do. Perhaps
there was relief that the FOMC meeting was over without any
negative surprises.
We think that the rally was a combination of the recent oversold
condition and the end of quarter influence that frequently causes a
lot of portfolio adjustments by institutions. For instance, a number
of managers may have had a lot of cash on hand from selling into
the recent decline and felt the need to be fully invested for the
impending quarterly reports. Many have mandates to be 100%
invested at all times. Regarding the intermediate term, we haven't reached the 50
level on the five week RSI that will be required to generate a buy
signal. Today it closed at 46.86. Another rally tomorrow could do
it. Once these signals are generated, they tend to be good for
several weeks. Stay tuned.
NEWS AND FUNDAMENTALS:
First quarter GDP was revised upward to a final read of 5.6%.
This was in line with expectations. The chain deflator, which
measures inflation came in at 3.1%, this was less than the expected
3.3%. Initial claims came in at 313k which was higher than the
expected 310k.
On the stock front, McDonald's was upgraded by Merrill Lynch
and gained 5%. Faro Technologies and Monsanto beat estimates
and rallied 19% and 8%. Nasdaq Stock Market was upgraded by
Thomas Weisel and jumped 8%.
On the negative side, Advanced Auto Parts guided lower and
sank 17%. American Greetings, Micron Technologies and Red Hat
came up short on earnings and lost 13%, 6% and 8%.
BOTTOM LINE:
Our S&P and NASDAQ intermediate term systems are on a
sell signal as of June 7, 2006 at 1256 on the S&P 500. Mutual
fund investors are currently 100% in cash.
Short term traders in the SPY and QQQQ are in cash. Stay there
for now.
For new subscribers, the QQQQ and SPY are exchange traded
funds or Spiders. The former mimics the Nasdaq 100 and the latter
mimics the S&P 500. ---- Additionally, an m.i.t. order means
"market if touched" It means that your order becomes a market
order if the price is touched.
HAI READ THIS :- REPORT APPEARED ON 28TH JUNE 2006
Bearish Sentiment Climbs
The latest results of the Investors Intelligence newsletter-writer survey are as bearish as they've been since October of 2002. 36.3 percent of respondents are bearish, up from 35.6 last week.
As a Bloomberg story which quotes Ticker Sense's own Paul Hickey explains, this isn't necessarily a horrible sign.
Analysts such as Hickey, who try to predict stock moves based on statistics such as price patterns and volume, often track investor sentiment as a contrarian indicator. A rise in bearishness or a decrease in bullishness may be signs that stocks are poised to advance because investors who view the market unfavorably may have already sold shares.
After all, the low point of October 2002 turned out to be the harbinger of a bull market and economic boom.
Bearish Sentiment Climbs
The latest results of the Investors Intelligence newsletter-writer survey are as bearish as they've been since October of 2002. 36.3 percent of respondents are bearish, up from 35.6 last week.
As a Bloomberg story which quotes Ticker Sense's own Paul Hickey explains, this isn't necessarily a horrible sign.
Analysts such as Hickey, who try to predict stock moves based on statistics such as price patterns and volume, often track investor sentiment as a contrarian indicator. A rise in bearishness or a decrease in bullishness may be signs that stocks are poised to advance because investors who view the market unfavorably may have already sold shares.
After all, the low point of October 2002 turned out to be the harbinger of a bull market and economic boom.
HI Ravi
When all are bullish, its a sure sign of bearishness. And when all are bearish, that a sure sign of bullishness.
In another post there was an explanation of number of buy( more in bear phase) and sell (more in bull phase) signals in bullish and bearish phases. We don,t know when signal comes for change and hoe it is detected.
Second one is not yet conclusive but first one is ok.Everybody was bearinsh so that is a bullish sign. Today it should be bearish. It gells well with another ideas Buy when they are selling and vice-versa. Also sell high, buy low.
Pankaj
When all are bullish, its a sure sign of bearishness. And when all are bearish, that a sure sign of bullishness.
In another post there was an explanation of number of buy( more in bear phase) and sell (more in bull phase) signals in bullish and bearish phases. We don,t know when signal comes for change and hoe it is detected.
Second one is not yet conclusive but first one is ok.Everybody was bearinsh so that is a bullish sign. Today it should be bearish. It gells well with another ideas Buy when they are selling and vice-versa. Also sell high, buy low.
Pankaj
Psst! Wanna Sell Your Car?
By Rich Smith (TMFDitty)
When buying a new car, you can count on two things:
That new car smell.
That new car (and its smell) will lose up to 25% of its value the minute you drive it off the lot.
Ordinarily, a financial writer will use such a statistic to encourage you to avoid investing in depreciating assets. Physical objects such as cars lose value over time. Investments in land, housing, stocks, and bonds increase in value over time. But I will argue that car buying is a lot like stock investing. Stay with me through this lesson on intrinsic value (and just a few more car references).
Stock-car pileup
Between May 9 and June 13, the Nasdaq lost 12% of its value. Dow and S&P 500 stocks fared almost as poorly, with those indexes falling 8%. The monthlong selling spurt vaporized sizeable chunks of companies from A (Apple Computer (Nasdaq: AAPL)) to Z (Zhone Technologies (Nasdaq: ZHNE)). Here's a sampling of companies that declined during that time:
Company
Change
Apple
(18%)
Boeing (NYSE: BA)
(12%)
Caterpillar (NYSE: CAT)
(18%)
Dow Chemical (NYSE: DOW)
(14%)
ExxonMobil (NYSE: XOM)
(11%)
Ford (NYSE: F)
(7%)
Zhone Technologies
(19%)
If you owned stock during the dread month of May, you probably felt sick to your stomach as your portfolio's value plunged. You might even have beaten yourself up over not having "sold in May and gone away," as the market pundits predictably remind you every year. And although the markets have perked up since their June 13 lows, the (low) single-digit gains we've seen since then have done little to ease the pain.
It's at times like these -- when you're staring at a stock portfolio still tinged heavily red -- that you might want to remember the new-car-buying experience. (Still with me for this analogy? Good.) One fine day, you stroll over to your local Toyota dealership and plunk down $20,000 on a new car. You drive it home, and no sooner have you parked it in your driveway than your neighbor, Clyde, walks over and offers to take the car off your hands for $15,000. You're shocked. You're disgusted. You're enraged.
Sure, the Kelley Blue Book says your car is now worth $15,000, but that doesn't mean you're going to let silly old Clyde have it for that price. It's a perfectly good car. It'll probably last you 10 years or more, assuming you don't decide to trade it in. If Clyde wants to buy an hours-old car for $15,000, let him find some other sucker.
Price vs. value
I know there are big differences between stocks and cars. Stocks, on average, have been increasing in value at roughly 10% annually for the past century. And cars depreciate in value as newer models hit the market, but does that new car of yours really lose 25% of its value in a day? No way.
The same thing goes for your stocks. As Warren Buffett wisely once said, "Price is what you pay. Value is what you get." Whether it's a car falling 25% or Apple falling 18%, the value of the asset doesn't necessarily change just because the price tag does.
Every asset has an intrinsic value. A car's value consists of its ability to get you from Point A to Point B reliably (and without guzzling too much gas). A stock's value consists of the ability of the underlying business to generate cash flows -- profitably -- for the foreseeable future. How much Wall Street is willing to pay for a stock -- or how much Clyde is willing to pay for your car -- has absolutely nothing to do with worth.
Stocks on sale
So don't fear a falling stock market. You are no more obligated to sell your stocks than you are to sell your car. On the contrary, if you bought your stocks prudently in the first place and knew what they were worth when you bought them, you might even want to buy more when the price falls. Lending an ear to Mr. Buffett once more, we hear him advise us to "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."
By Rich Smith (TMFDitty)
When buying a new car, you can count on two things:
That new car smell.
That new car (and its smell) will lose up to 25% of its value the minute you drive it off the lot.
Ordinarily, a financial writer will use such a statistic to encourage you to avoid investing in depreciating assets. Physical objects such as cars lose value over time. Investments in land, housing, stocks, and bonds increase in value over time. But I will argue that car buying is a lot like stock investing. Stay with me through this lesson on intrinsic value (and just a few more car references).
Stock-car pileup
Between May 9 and June 13, the Nasdaq lost 12% of its value. Dow and S&P 500 stocks fared almost as poorly, with those indexes falling 8%. The monthlong selling spurt vaporized sizeable chunks of companies from A (Apple Computer (Nasdaq: AAPL)) to Z (Zhone Technologies (Nasdaq: ZHNE)). Here's a sampling of companies that declined during that time:
Company
Change
Apple
(18%)
Boeing (NYSE: BA)
(12%)
Caterpillar (NYSE: CAT)
(18%)
Dow Chemical (NYSE: DOW)
(14%)
ExxonMobil (NYSE: XOM)
(11%)
Ford (NYSE: F)
(7%)
Zhone Technologies
(19%)
If you owned stock during the dread month of May, you probably felt sick to your stomach as your portfolio's value plunged. You might even have beaten yourself up over not having "sold in May and gone away," as the market pundits predictably remind you every year. And although the markets have perked up since their June 13 lows, the (low) single-digit gains we've seen since then have done little to ease the pain.
It's at times like these -- when you're staring at a stock portfolio still tinged heavily red -- that you might want to remember the new-car-buying experience. (Still with me for this analogy? Good.) One fine day, you stroll over to your local Toyota dealership and plunk down $20,000 on a new car. You drive it home, and no sooner have you parked it in your driveway than your neighbor, Clyde, walks over and offers to take the car off your hands for $15,000. You're shocked. You're disgusted. You're enraged.
Sure, the Kelley Blue Book says your car is now worth $15,000, but that doesn't mean you're going to let silly old Clyde have it for that price. It's a perfectly good car. It'll probably last you 10 years or more, assuming you don't decide to trade it in. If Clyde wants to buy an hours-old car for $15,000, let him find some other sucker.
Price vs. value
I know there are big differences between stocks and cars. Stocks, on average, have been increasing in value at roughly 10% annually for the past century. And cars depreciate in value as newer models hit the market, but does that new car of yours really lose 25% of its value in a day? No way.
The same thing goes for your stocks. As Warren Buffett wisely once said, "Price is what you pay. Value is what you get." Whether it's a car falling 25% or Apple falling 18%, the value of the asset doesn't necessarily change just because the price tag does.
Every asset has an intrinsic value. A car's value consists of its ability to get you from Point A to Point B reliably (and without guzzling too much gas). A stock's value consists of the ability of the underlying business to generate cash flows -- profitably -- for the foreseeable future. How much Wall Street is willing to pay for a stock -- or how much Clyde is willing to pay for your car -- has absolutely nothing to do with worth.
Stocks on sale
So don't fear a falling stock market. You are no more obligated to sell your stocks than you are to sell your car. On the contrary, if you bought your stocks prudently in the first place and knew what they were worth when you bought them, you might even want to buy more when the price falls. Lending an ear to Mr. Buffett once more, we hear him advise us to "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."
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