Market Monitor | stockbee

8/08/2007

Market Monitor

  • There are lot of encouraging signs. back to back 300 plus days on 4% breakout indicate buyers as well as short sellers active in the market. Part of the move looks like short squeeze, part of it bargain hunting.
  • Volatility is a big problem, but if this positive trend continues, it should subside in few weeks.
  • For aggressive traders going long here is not a problem. For more cautious traders another few days would offer clearer picture.
  • Overall the process of bottom formation has started and there are lot of stocks bolting out of gate. The Episodic Pivot list had so many good buy opportunities yesterday.

14 comments:

F. said...

Fed says primary focus is inflation so of course treasuries, yen, and credit spreads reverse. This strength in stocks is related to the unwinding of these recent trades. It was fairly predictable. I agree that as volatility collapses, this will embolden the bulls once again. We could see new highs by September.

Credit spread jumps won't have the same effect on stocks in the future as the worst has probably been priced in. I believe the next problem the market faces will be the effects of higher borrowing costs on EPS. This may be 1-2 quarters away. What do you think?

F. said...

The pundits are often wrong--those looking for a soft Fed. Bernake and ECB already stated in the spring the inherent risks in the credit bubble. You would think they would have factored in subprime risks of a melt-down into their longer term forecast...which is exactly what the Fed said yesterday.

Dan said...

Noob Entry strategy question -
Hey, so yesterday i was monitoring a few stocks including Nile, ELON, and GMCR. All of which had a large pop.

At this point how do you figure out the best entry price for these stocks...do you wait for the next decline and then 4% increase and get in then? Or am I over thinking it and just buy in with a stop to protect yourself?

I'm mostly in cash right now but with yesterday's jump getting that feeling of "missing the boat" :)

thanks for your time.

Pradeep Bonde said...

Forget Fed and Pundits, lets look at numbers, if the market stabilizes here and if 65 days ratio turns in few weeks, that will be extremely bullish.( my intra day readings for today already show significant improvements)

Because it would show that for all the dire scenarios about credit crunch, the market just dipped 7-8%. So Mr Market in its infinite wisdom considers the problem to be minor blip. That will be extremely bullish. IMHO.

F. said...

Dude...everybody's numbers, no matter how you slice the market, are bullish today. The key was not to buy today but 2 days ago at the bottom. You are late if you are buying today.

This is an unwinding of a trade (yen, treasuries, etc.) and some overdue shortcovering.

Pradeep Bonde said...

Dan

EP's are best bought on day of EP.

F
I am talking about multi month scenario not current action.

F. said...

Oh ok, thanks for the clarification. jJst saying you might take some heat in the near future if you are buying today. Carry on!

Pradeep Bonde said...

F
I am on trading holiday. Busy in India trying to explore possibilities and modalities of setting up a fund.

F. said...

That is awesome. Looking for a daytrader to help smooth out the equity curve? J/K...

hector said...

f.
In the face of its self-inflicted credit problems, Bernanke gave Wall Street some much-needed tough love on Tuesday.

The FOMC offered a token nod to "tighter credit conditions", before reminding professionals for the bazillionth time that the greater policy issue is still inflation. As difficult as the credit crunch may be for some, it stems from poor choices made by professionals who should have known better. Unlike his predecessor, Bernanke remains intent on letting the marketplace heal such overindulgences on its own, and isn't predisposed to tempting further moral hazard.
n economics and ethical theory, the term moral hazard may be used for any situation where a person or organization does not bear the full adverse consequences of its actions.
dk report

Lending and debt

Rescue operations carried out by governments, central banks, or consortiums of financial institutions can encourage risky lending, if lenders know that in case of serious problems they will not have to take losses. Similarly, if governments know that inability to pay creditors will lead to yet more loans (to prop up finances), then they are less likely to have sound financial policies.
Mortgage lending and securitization

In the financial sector, moral hazard has been cited as a potential issue in lending when those with the best knowledge of the risks pass these risks on to third parties, as in the mortgage loan market when securitizing pools of mortgage loans. In the 'traditional' mortgage market, banks and other lenders retained the risk of lending to customers, who were frequently already customers of the same institution. In mortgage securitization, banks 'sell' the loans to investors, and may lose the incentive to maintain the same risk/reward profile and quality standards.[5] This same moral hazard can occur in any lending market where risks are transferred to third parties after origination.

hector said...

f.
also, let me remind you, according to the Fed, theres almost no inflation( if you believe them). And they let you know when we had a recession 6 months later after it passed. Look numbers, not words

F. said...

"also, let me remind you, according to the Fed, theres almost no inflation( if you believe them)."

I don't know where you got this statement from. Clearly the Fed acknowledges the upside risks of inflation around 2%.

"Look numbers, not words"

I disagree here too. The Fed is especially careful in how it words its statments. I suggest you read every Fed trascript from 1994; I have. You will learn a lot about the type of speculation and politics in which the Fed engages. The Fed's word moves the market and can set the trading tone for months. Also, I don't know what numbers you're talking about.

hector said...

f.
amazing, you dont even know what inflation is( if you really follow the Fed,they dont count housing, energy, ect....maybe tomatoes) so most of the numbers are bogus. or maybe your are talking about 'core inflation',nothing but lettuce and tomatoes inflation pretty much. They took every thing out that really impacted inflation...how housing and fuel can increase double digits and dollar purchasing power decline 33 % since 2001 and have 2% inflation? Wheres M3?

F. said...

I agree with what you're saying about how the PCE reflects a limited number of goods and services targeted towards individuals and consumed by individuals. However, this is the only type of inflation that matters in the great scheme of things. As long as the average American can buy their underwear, toiletries and other non-luxury, locally produced items at relatively stable prices, they won't panic and start bidding up hard assets to hold the value of their money. It's all psychology and the Fed has worked hard to build its credibility.

However, in the monetary supply inflationary boom/bust cycle, rises in resource prices like oil and gold tend to spill over into consumer goods and THAT's where the perceived danger lies. We haven't seen much of a spill-over effect for different reasons. The Fed does not expect to see a spill over (I don't think anybody does) but they are acknowledging the historical risks to consumer prices as oil and gold remain relatively high.