Deception and distribution

Healthy markets behave differently. What we are witnessing currently is a correction at work. There is going to be more selling in this. The strength which you witnessed yesterday is deception. It is being driven by narrow group of stocks. The moves do not have volume. Many of the 3rd and 4th stage breakouts are tempting for rookie speculators, but that is how stock act later in rally, where they attempt to breakout and when enough pigs pile on, they reverse. Why because they are being distributed to gullible late stage rookies.

Bill Miller as a Contrary Indicator

Coming in to this year the sentiments are too uniformly bullish. You have more people becoming bullish rather than bearish. Bill Miller is latest example of this. What was he doing since July, buying his yacht. Now he wants to buy stocks.

The CEO Bought a Yacht?
Then it's time to sell.
By Daniel Gross
Updated Tuesday, Aug. 15, 2006, at 5:36 PM ET

Bill Miller has compiled an astonishing long-term record as manager of the Legg Mason Value Trust. He is one of the only big-time mutual-fund managers to have beaten the S&P 500 for 15 years running. But as Barron's reported on Saturday, his streak is in danger. Through yesterday, according to Morningstar, the fund was down 10.14 percent, compared with a 2.78 percent gain for the S&P 500. Miller has clearly been the victim of some bad luck and poor stock selection. But Barron's offered an alternative theory why Miller is flagging: This summer he bought a humongous yacht.

When someone who's supposed to be looking out for public shareholders is instead mulling over wallpaper samples for staterooms, it's time to sell. The yacht has long been the classic indicator of someone who has so much money that he doesn't need to make any more. Unlike a jet, which can speed busy executives to their offices efficiently, a yacht has no useful purpose. And who has time to play with such an over-the-top toy? Someone who doesn't work weekends figuring out how to make money for other people. A classic 1940 investment book, aimed at debunking the practices of Wall Street, was called Where Are the Customers' Yachts? Today, you should ask: Where are the shareholders' yachts? If you look at the recent record of CEOs who have become yachtsmen, it's clear that when they buy a boat, it's the shareholders who usually get soaked.

Check out Power & Motoryacht's list of the 100 largest U.S. yachts, connect them to the CEOs or chairmen of publicly held companies or mutual-fund managers who own them, and then see how their companies and funds have performed since the vessel was acquired. (For the consumer-porn voyeurs out there, the magazine also compiles a list of the largest yachts in the world.)

I think he being a value manager should be buying INTC, AMD, WFMI.

Global Markets
World markets were partying in 2006. Some markets like China, India, Russia had a blowout year. When you see moves like that you should be worried. Look at what has happened to those markets since new year. Every single world market is in early phase of correction. Just go through all the world market indices.


Sentiment Indicator
There are number of simple market and sentiment indicators I track regularly. Most regular readers are aware of some of them and I have talked a lot about them in the past. All of them are in correction zones.Here are things I track on daily basis:

• Number of stocks up 100% plus in a year
• Number of stocks down 50% plus in a year
• Number of stocks up 300% in 2 years
• Number of stocks up 50% plus in a month
• Number of stocks down 50% in a month
• Number of stocks up 25% plus in 65 days
• Number of stocks down 25% plus in 65 days
• Number of stocks breaking out 5% or more on high volume
• Number of stocks breaking out 10% plus on high volume
• Weekly gain or loss in IBD 100 stocks
• Weekly gain or loss in IBD 200 stocks
• Weekly % gain in top 2% momentum stocks

All of them are at levels associated with correction. Many of them are deteriorating indicating more selling ahead. Speculators who do not use sentiments are sooner or later killed by the wrath of the market. Every single of my personal sentiment indicator is showing weakness ahead.

Narrow moves. Creepy moves.
The indices and individual stocks show narrow moves. Since the Monday after Thanksgiving the market has essentially churned at same level. Individual stocks might show strength but below the surface there is lot of distribution going on.




Conviction is important.It is not a time for long term commitment. What you see in all the indicators and indices is one night stand by few short term speculators.
A move up by markets and stock with significant volume and atleast 2% plus move in one of the indices to upside is what will make me change my current readings. Then we will be in blowout phase and you can party like crazy.

Stock of the day

GD,General Dynamics Corp (Google  Yahoo  Earnings BW  Chart) 

General Dynamics Corporation provides information systems and technologies; land and expeditionary combat vehicles and systems, armaments and munitions; shipbuilding and marine systems, and business aviation. General Dynamics has four primary business groups: Information Systems and Technology; Combat Systems; Marine Systems and Aerospace, and a small Resources group



Sector With Opportunities:
Investment brokerage may offer some long opportunities for the swing traders.

AMPL,Ampal-Amer Israel Cl A (Google  Yahoo  Earnings BW  Chart) 
AMTD,TD Ameritrade Holding Corp (Google  Yahoo  Earnings BW  Chart) 
BSC,Bear Stearns Companies (Google  Yahoo  Earnings BW  Chart) 
CLMS,Calamos Asset Management (Google  Yahoo  Earnings BW  Chart) 
COWN,Cowen Group Inc (Google  Yahoo  Earnings BW  Chart) 
ETFC,E Trade Financial Corp (Google  Yahoo  Earnings BW  Chart) 
GS,Goldman Sachs Group Inc (Google  Yahoo  Earnings BW  Chart) 
KBW,KBW Inc (Google  Yahoo  Earnings BW  Chart) 
KHDH,Humboldt Wedag International Ltd (Google  Yahoo  Earnings BW  Chart) 
LEH,Lehman Brothers Holdings Inc (Google  Yahoo  Earnings BW  Chart) 
LTS,Ladenburg Thalmann Finl (Google  Yahoo  Earnings BW  Chart) 
MER,Merrill Lynch & Co (Google  Yahoo  Earnings BW  Chart) 
MKTX,Marketaxess Holdings (Google  Yahoo  Earnings BW  Chart) 
MS,Morgan Stanley (Google  Yahoo  Earnings BW  Chart) 
NMR,Nomura Holdings Inc Ads (Google  Yahoo  Earnings BW  Chart) 
OXPS,Optionsxpress Holdings (Google  Yahoo  Earnings BW  Chart) 
SCHW,Charles Schwab Corp (Google  Yahoo  Earnings BW  Chart) 
SEIC,Sei Investments Company (Google  Yahoo  Earnings BW  Chart) 
TRAD,Tradestation Grp Inc (Google  Yahoo  Earnings BW  Chart) 
TWPG,Thomas Weisel Partners Group (Google  Yahoo  Earnings BW  Chart) 
VDM,Van Der Moolen (Google  Yahoo  Earnings BW  Chart) 


You don't have to speculate everyday.