How many folks have left the markets? Where has all the money gone that was not lost. These past few months have no doubt been a traders market and we are likely to see these conditions exist for some time. What I am suggesting is longer term investors (as in 1 – 3 years) are not likely to see returns in the markets as in previous years. Gains will be difficult unless you have shorter term horizons until the new rules of the game are determined. The knee jerk reactions and lack of follow thru is due to no real buyers (or investors) willing to put large sums of money to work. Many hedge funds have or are going bust. They are definitely not getting new money to put to work in these dire times. Many mutual funds have seen huge redemptions. Some of the most famed investors/traders have said they are completely out of the market. With no new money flowing in, that leaves only the traders that dare to tread these treacherous waters. Short term traders zig and zag, never holding on to anything very long. Traders take short term profits to help reduce their risk exposure over time. Traders are happy to pick up nickels and dimes many times over. It appears most left in the water are those that have not sold and have no intentions to do so and the short term traders. This may indicate a lot of splashing is going to occur. Only when traders get a bit tired and wants to take a break will the waters calm, then they will all go splashing again.In the last few weeks we have seen 30- 90 day US Treasury bills trade at a rate of negative interest. Does this mean people are willing to pay for their cash to be held in US Treasuries. Why would anyone be willing to pay to have someone else hold their stash? Is this is a sign of folks are so uncertain or have such fear about the future, they will pay someone to hold their money forever. Appetite for risk over long periods of time have been diminished but have we gotten to a point where no one wants any risk no matter the price?
Alex and Pat is in the Caribbean enduring some pain and suffering. I just spoke to Alex not long ago about some new featurs in the future for the spike group. He sounded in need of a cigar and a glass of wine. I have high suspicion he was partaking in his medication. As for me I intend to take an easy evening of sipping some scotch and watching a movie, a night of just resting the mind and enjoying a quiet evening. The weather here has been nothing but rain and dense cloudy skies. A movie night in the media room sipping a nice scotch seems to be in order.The Big three gets a bail out, or do they? We will see if this occurs or some adjustments to this plan will occur after the new administration comes in. The Auto Unions are calling for a reversal of the plan. The action was choppy as usual for options expiration as the completion of the last FULL trading week of the year come to an end. Next week will be a short trading week as the holidays approach, volume will begin to dry up. We will see if we a continuation of the Santa rally.The group ended the week positive as Ross wins Gold, Susie wins Silver and Peter takes the Bronze.Spike Members, Dennis M, Henry A, Hsin Y, and Rod S wins $20 dollar credits. Congrats to all this weeks winners.I look forward to seeing each ones new pick for next week and look forward to writing SpikeSpeak this weekend.
As we see more and more deterioration in the economy the size of the O’Bama fiscal program continues to grow. Fed actions usually do not have an immediate impact that lasts for weeks on end. It takes upwards of six months for fed rate actions to work their way into the economy and they can take longer during extremely bullish or bearish periods.
Volatility has shown some indications that it is slowing as the VIX fell to slightly under 50. That’s still very high but the trend is showing some positive signs in the last few weeks. Many of the commodities continued to rise today. In a conference call the CEO at CMC indicateed that the new movie, "The Earth Stood Still" appropriately indicated what had happened in the steel industry since October 1. (Trust me I know, this has been the fastest and most severe slow down I have seen In 20 years) The stock rose over 10% for the day. SCHN was downgraded after missing earnings estimates. Their stock price rose over 5.5% for the day. Another sign of markets rallying in face of bad news.
Financial stocks led the market’s gains, with Citigroup rising 11% and J.P. Morgan Chase gaining 13% amid an 11% bounce in the sector.The SP held above the 840 levels yesterday and gapped up today never looking back. The issue now is this sent us right back into short term overbought conditions. Volume was light considering it was a FED day.We now have the 910 – 920 resistance levels we need to clear. If we can continue marching forward then back and fill, the market has a chance to challenge the 1000 – 1050 levels.NH has not expanded yet and likely will not for several weeks or months. However, keep an eye on NL each time the market pulls back. We need these NL to collapse and stay lying on the floor for a rally to be sustainable.The reversion back to average on the weekly charts of the SP is near the 1050 levels.
Despite another bad news day the market held up well and remained above 840 -850 levels on the SP.Bloomberg indicated that 30% of the hedge funds will be defunct by the end of this year, with more to come next year. Hedge funds can delay the payment of redemptions but sooner or later they have to do something. Pressure by the participants forces hedge funds to sell into weak markets, which exacerbates the selling pressure. Concerns caused by the Madoff mess, with losses likely to be in the tens of billions, will provide more reasons for hedge fund investors to get out.
As co-managers of SpikeTrade.com, Alex and I like to select our favorite picks from among those submitted by Spikers and trade them in the week that follows. Please keep in mind that we may trade this pick in a different way from the Spiker who recommended it. Please remember that we, along with Spikers and Spectators who post their picks, are not running an advisory service – we share with you our thinking processes. You are responsible for your own picks, and you must always use good money management.In addition to a Spike pick, we may use this email to share our research into the markets with you and include additional charts in our comments.Kerry
I am here in NY and just retrested from the terrace after taking a nice dip in the hot tub. A campers meeting is about to be under way here at Alex’s slum in NY.The market continues to digest the big run up from Friday and Monday as we discussed. This is encouraging as the market holds its gains while working off its short term overbought condition. Soon we need to see another attempt to move higher and it also holds its gains. NL is being contained and as mentioned on many occasions NH will take some time to expand.
The market pulled back which was not too unexpected after a two day rally of over 20% since Friday. The market consolidating these gains in a narrow range just maybe a positive for a more intermediate term rally.The weekly and monthly charts continue to be oversold and have room to have a much stronger reaction rally within the downtrends. This rally will switch the daily trend from down to up.
The market put together two strong up day and now we sit in short term overbought conditions. The way this market behaves in spite of more bad news and to hold its gains while the overbought situation is resolved will be meaningful. Friday the market rallied in face of the negative news and today the market rallied in face of overbought conditions in the short term. Now the market needs to show it can hold these gains. A few narrow range days just might be what the doctor ordered and then this market may can test the top of the range up near 1000. We broke thru 900 today. This does remain a bear market, but the longer time frames remain oversold and a reaction rally within the weekly/monthly charts can give this market a multi week run to the upside. Something we have not seen most all year.Here is some info on just how difficult this year has been. There are 10,002 US Stock Mutual Funds which Morningstar tracks and none are up on the year. The average performance is -43.63%. There are 2,892 Foreign Stock Mutual Funds they track and none are up on the year. None were down less than -10%, and the average performance was -50.75%.