Because the number of shares above their 50 day moving average has fallen back so much that rather sooner than later, stocks become so oversold that the market will bounce
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Friday, 27 February 2009
Bounce
Why do I think we’re closer to a bottom than a top?
Because the number of shares above their 50 day moving average has fallen back so much that rather sooner than later, stocks become so oversold that the market will bounce
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Because the number of shares above their 50 day moving average has fallen back so much that rather sooner than later, stocks become so oversold that the market will bounce
Sphere: Related Content
Too early to go long again
I just got a call from my friend Marc, my favorite gold bug. If we already can get in again, because gold is going to 2500 USD/oz. And sooner or later he will be right. But not necessarily now.
I think it’s a good thing to have an eye on the following:
* Gold ran away from other precious metals. Silver, platinum or palladium, you name it.
* Mining shares went up, but in a much lesser extent than the price of the metal. And with the first correction of the price of the metal, the shares of these companies went down too.
So whoever wants to build positions again, I only can tell you, be careful and stick with your discipline, whatever system you’re using to base your decisions on.
We stick with our renko system and prefer to wait.
I think it’s a good thing to have an eye on the following:
* Gold ran away from other precious metals. Silver, platinum or palladium, you name it.
* Mining shares went up, but in a much lesser extent than the price of the metal. And with the first correction of the price of the metal, the shares of these companies went down too.
So whoever wants to build positions again, I only can tell you, be careful and stick with your discipline, whatever system you’re using to base your decisions on.
We stick with our renko system and prefer to wait.
Capital One Financial
Pessimism is still l’ordre du jour.
Shorting too.
It is so crystal clear: stock exchanges open up positive and during the day everything is sold. Only just before the close you can have some modest come-back as computers and algorithms take over. How long will this go on?
I wish I knew, but I don’t.
Last November we had a liquidation tsunami caused by trapped funds. This time it is something else: the new way of ‘investing’ in stocks is by shorting them.
But there is a thought I want to share: if everybody is short, than the rally will wipe out a lot of bears.
As an example we mention Capital One Financial (ticker: COF).
COF went from 7 USD to 14 USD in 2 days. Yes folks, that’s 100%. That’s a short squeeze.
Now, this is too fast, as we all know. And shorters are ready to short it again.
Where would you step in? Professionals try to short near resistance levels. Typically a moving average. In this category the 20- and 50-day moving averages are very popular.
Sphere: Related Content
Shorting too.
It is so crystal clear: stock exchanges open up positive and during the day everything is sold. Only just before the close you can have some modest come-back as computers and algorithms take over. How long will this go on?
I wish I knew, but I don’t.
Last November we had a liquidation tsunami caused by trapped funds. This time it is something else: the new way of ‘investing’ in stocks is by shorting them.
But there is a thought I want to share: if everybody is short, than the rally will wipe out a lot of bears.
As an example we mention Capital One Financial (ticker: COF).
COF went from 7 USD to 14 USD in 2 days. Yes folks, that’s 100%. That’s a short squeeze.
Now, this is too fast, as we all know. And shorters are ready to short it again.
Where would you step in? Professionals try to short near resistance levels. Typically a moving average. In this category the 20- and 50-day moving averages are very popular.
Thursday, 26 February 2009
A sweet spot
Can you pass me the sugar please?
Sugar was one soft commodity not participating in the sell-off of mid-2008. Capitulation only came last winter.
But now sugar is making a spectacular come-back.
As Dresdner Bank writes:
Sugar prices are close again to the 4-month high recorded at the start of February, at 13.37 US cents a pound. Numerous market observers have revised their forecasts of an expected deficit on the sugar market this year downwards, some quite significantly. Sugar broker Czarnikow or the consultancy Kingsman expect a market deficit of more than 10 million tons. This week, India, the world’s second largest sugar producer, lowered its forecast for sugar production in this crop year (October to September) by 1.5 million to 16.5 million tons. This would mean a fall in production of about 10 million tons in comparison to last year. As India is also the world’s largest sugar consumer, this has huge implications on the market balance.
Sugar was one soft commodity not participating in the sell-off of mid-2008. Capitulation only came last winter.
But now sugar is making a spectacular come-back.
As Dresdner Bank writes:
Sugar prices are close again to the 4-month high recorded at the start of February, at 13.37 US cents a pound. Numerous market observers have revised their forecasts of an expected deficit on the sugar market this year downwards, some quite significantly. Sugar broker Czarnikow or the consultancy Kingsman expect a market deficit of more than 10 million tons. This week, India, the world’s second largest sugar producer, lowered its forecast for sugar production in this crop year (October to September) by 1.5 million to 16.5 million tons. This would mean a fall in production of about 10 million tons in comparison to last year. As India is also the world’s largest sugar consumer, this has huge implications on the market balance.
Stampede
Everything is drama. Especially now analysts learn how to be bearish. Short recommendations from newsletter writers can be found everywhere and investors cannot wait piling on short positions.
A stampede of the bears.
In good times we learn: buy the dip. In bad times it should be: sell the rally.
But there is no rally coming.
The only thing we hear are the drums whispering: sell-sell-sell.
If we look to the monthly chart of the S&P500 wit a 20 period moving average added, we observe that the S&P500 is more than 50% below it’s 20 month moving average.
We just know there will be a return to the mean, as an invisible rubber band has now stretched this index further to the downside than ever before.
What is especially tricky with this bear market is the fact that there were no entry points for going short.
A stampede of the bears.
In good times we learn: buy the dip. In bad times it should be: sell the rally.
But there is no rally coming.
The only thing we hear are the drums whispering: sell-sell-sell.
If we look to the monthly chart of the S&P500 wit a 20 period moving average added, we observe that the S&P500 is more than 50% below it’s 20 month moving average.
We just know there will be a return to the mean, as an invisible rubber band has now stretched this index further to the downside than ever before.
What is especially tricky with this bear market is the fact that there were no entry points for going short.
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