Perhaps, just perhaps, the fact that “if you look back over the year, you will see the historical validation of the first trading day of the month having an “upward bias. We saw rallies on the first trading day of the month in January thru June. In July the market did not rally until the third day. And in September we saw an up day one and day a down, despite a hugely oversold market”
We saw this as a severe test, as did many chartists of the cash indices reacting in an oversold market.
Initially we saw a stronger summer, and a fall that led to more downturn. We may have actually seen a bottom instead this summer, followed by highs and ending last week UP, an unusual occurrence
To lead our discussion, an understanding of FACT vs. DESIRED FACT:
http://abcnews.go.com/Entertainment/wireStory?id=11542570
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WE believe Treasury Inflation Protected bonds (TIPS) remain a good investment, linked to the consumer price index, and yields are currently less than with a 10 year Treasury.
However, Treasuries, which pay no interest worth beans, are in a bubble.
For example a ten-year tip means annual inflation needs to rise only above 1.6% for TIPS to generate a better return.
With all the talk on” deflation” TIPS continue to sell, and we recommend them as a cash position alternative.
It is also interesting to note that short sellers were not aggressive this summer, despite the market weakness.
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We use high/low/open/close as a fundamental of our option and day trading, and it’s an important part of both candlestick charting where, for example, there are many types of single candles, each telling a different aspect of he battle just waged.
Point and figure will show where the stock is on a 1-minute increment, and enough minutes at looking at a minute and one begins to see cycles.
At the same time the trader using Pn F charting on a daily sheet is only seeing the close of the prior day, and if there has been no defined large movement, not even seeing the nuances of a move. This eliminates the noise. If trading to identify a trend, use point and figure charting. And remember:
1. Use 1 minute, 5 minute, 1 day and 1 week settings to get even more “feel” for the move of the market, without noise, and make changes on your charts from standard 3:1 ratios to 2. /. 50 just to see how the same chart can look differently from views of it.
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I am copying over an article that well explains one view of excessive borrowing; much of what the GOP uses part of now, despite having left us with the last three Republican Presidents leaving massive deficits. Within the article, however, are the basic premises of “something to do”. Please remember as the Pee Party and the GOP have only told us what is wrong, but in no way have offered any suggestions on what else to do, except renew the tax exemption for the rich, and tell us we are raising too much debt.
Perhaps now that we have” won the war” in Iraq some of our massive spending there, all for naught, will reduce our deficit.
More likely we will use it to “win” the war in Afghanistan.
For the greatest country in the world we have never won a war without allies.
Here’s the study:
The New Republic: The One Way Out Of The Recession
by William A. Galston
The New Republic - August 26, 2010
William A. Galston holds the Ezra Zilkha Chair in the Brookings Institution's Governance Studies Program, where he serves as a Senior Fellow. He is also College Park Professor at the University of Maryland. He is the author of eight books in the fields of political theory, public policy, and American politics.
Average Americans are noticing what wise economists have been arguing for quite some time: Bubble-driven economic downturns differ qualitatively from standard business-cycle recessions. Not only do they go deeper; GDP takes longer to rebound, and job creation proceeds more slowly.
The mechanism is straightforward. As the value of assets used as collateral collapses, so does borrowing. This depresses consumption, and the real economy dips, making it much harder for businesses and households to service the debts incurred during boom times. Household consumption remains sluggish until debt is reduced to a level that can comfortably be serviced out of current income, a process that cannot proceed without an increase in the household savings rate. The larger the debt overhang, the longer it will take to work off the excess.
As recent as the late 1990s, total household debt stood under $5 trillion, roughly 90 percent of disposable income. After a decade-long borrowing binge, debt peaked in late 2007 at about $12.5 trillion—a stunning 133 percent of disposable income. According to the latest report from the Federal Reserve Bank of New York, the total had declined to $11.7 trillion by the first quarter of 2010, a reduction of $812 billion (6.5 percent) from the peak. During the same period, not surprisingly, the household savings rate rose from 2 percent to more than 6 percent.
While these are sizeable changes, there is good reason to believe that the process of household debt reduction is still in an early stage. Writing for the Center for American Progress, Christian Weller points out that total debt now stands at 121.7 percent of disposable income, still higher than at any point before the second quarter of 2005. In an analysis published in May of 2009, the Federal Reserve Bank of San Francisco suggested that the household debt/disposable income ratio might well have to fall much farther, to around 100 percent, a process that could take much of the decade, even if the household savings rate were to rise to 10 percent.
This extended deleveraging would have a substantial effect on the economy. The FRBSF estimates that it would reduce annual consumption growth by three-fourths of a percentage point from the stable-savings baseline, which would "act as a near-term drag on overall economic activity, slowing the pace of recovery from recession."
This is exactly what we’re now seeing. In a superb piece, The Washington Post’s Neil Irwin gets outside the Beltway and beyond its stale arguments to probe the real reasons companies aren’t hiring. His conclusion is worthy of extended quotation:
Many Democrats say the economy needs more stimuli. Business lobbyists and their Republican allies say it needs less regulation and lower taxes.
But here in the heartland of America, senior executives say neither side’s assessment fits.
They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of unbroken prosperity of the quarter-century that preceded the financial crisis. . .
They see Americans for years ahead paying down debts incurred during the now-ended credit boom and adjusting spending to match their often-reduced income.
"It’s a different era," says Daryl Dulaney, chief executive of Siemens Industry, which has 30,000 U.S. employees who make lighting systems for buildings and a wide range of other products. "Our hiring and investment decisions have to be prudent and reflect that."
A different era ... How long will it take our policy makers and political parties to absorb the implications of that stark, undeniable phrase? When they do, they will realize that we have only two strategic options: Either we accept years of sluggish growth and high unemployment, or we shift to a new model that mobilizes the record level of private capital now sitting on the sidelines for public investments that will boost economic activity and employment in the short term, and economic productivity and growth in the long term, while generating rates of return sufficient to interest investors.
This is why we need a national infrastructure bank as the linchpin of a public investment strategy driven by economic analysis rather than congressional politics. Rather than bridges to nowhere, we need a bridge to the future. It’s time for hide-bound appropriators to get out of the way. [Copyright 2010 The New Republic]
This follows well the Floydian premise that “everything has changed”. Unemployment will stay high because companies make more money with fewer employees.
It will stay high because we are spending less money, the Global top 50 companies hold VAST amounts of cash from their restructuring, and many of the jobs lost are simply not going to be replaced.
We are perma bulls. Again, we believe each of the following stocks, energy related, that we own, are hugely going to benefit:
1. Exxon Mobil (XOM)-undervalued-BUY
2. Chevron (CVX)-strong on natural gas-BUY
3. Conoco Phillips (COP)-a Buffett holding on the forefront of new discoveries
4. NFG-National Fuel Gas-serving oil to the NE
5. ITC-a major infrastructural move to the changing of the grid.
Each of these are accumulate, and each are “close your eyes and hold” stocks.
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We will become bullish if and when the Dow tops 10,609 and holds. There is the same necessary trend line in the S&P500, where we must watch to see if 1040 is breached. If 10,609 is not reached we simply have a rally, and if S&P500 hits 1040 we have headed back to downside oblivion.
The NASDAQ we see as having the greatest potential for breakout. Tech stocks have taken a massive beating, and as we watch, we see lots of news that can trigger upswing:
1. Oracle, (ORCL), which we own just bought Sun, and has only upside, but is down.
2. HP, who are idiots for letting the CEO go, just paid huge premiums for a company that has never made a dime.
3. Google is now being sued by the state of Tx on their search engines
4. Intel continues to make brilliant moves
5. Apple is a good buying price, and held up well during the downturn.
This document is being written on an ipad, a completely ingenious piece of equipment that sells despite downturn
St. Louis Fed Reserve Bank of St. Louis President James Bullard has said “instead of pledging to keep rates near zero percent, that we should resume purchase of Treasury securities if prices begin to fall. He sees us as closer to the Japanese deflationary period, and that by doing so inflation will go away”.
As usual, this is another guy that never had a real job. Human psychology enters the picture and blows their quantitative analysis. WE see inflation as the greater issue, and its’ why we are out of Treasuries and into TIPS.
“Everyone you talk to thinks the dollar is going to collapse because of all the federal spending. Dumb. If the dollar were going to collapse, the bond market would be dropping and yields would be rising.”
It will take some time to unravel the world’s (not Obama’s) debt bubble. Most of this world debt is denominated in dollars. As the debt collapses there is no way to amortize the write off of the debt, and as credit card holders fail we see even more of the issue. Some banks are accepting 30 cents on the dollar for bad credit card debt. Trust me, credit card debt with the banks will be the next crash.
We are still strong believers in community banks reviving as the public finally realizes they have been raped multiple times by the big banks, and our investment in QABA-
Study this: http://www.etfexpert.com/etf_expert/2009/06/etf-expert-first-trust.html
Buy QABA and keep buying it.
Gold and Silver are on a run again. We bought in again at the right time, taking good profits, and entering again on the upswing. Gold could reach 1289.00. Watch for any close below 1225 as a bottom and a time to watch. We would sell at 1289 area, or at least reduce exposure.
With Silver we are very bullish. SLV is a good buy, even up 14% from our buy, and PAAS (Pan American Silver) we bought in on the upswing at 24.70, both call option and stock. We will continue to hold Silver, which we think has more strength short term than gold, and is more undervalued.
Deflation may well occur, and if so, it’s a good thing. Those with CASH will win.
It will end the debt bubble, and likely follow with a period of hyperinflation, making our situation seem even direr.
We consider this an excellent time to be investing in equities, as the majority pull out, and while we watch for a potential upside to the Fib retracement at 10,776.
And lastly, learn the lessons of life and trading:
1. Question all authority
2. Question all facts. Most are false
3. Have a basic “lack of respect” so you can see through the bullshit piled on you by the journalists and politicians
4. Question yourself or any “anti Obamer” as what should be done that is not being done, or better yet, what their plan is. I am always most amazed as we badmouth all that we do, but have no solutions.
5. Take nothing seriously.
Be Well and Do Good. Take Prudent Risk.
Floyd at Blue Chip Options
