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IBDvalueinvestin (98.50)

Be extremely careful buying today's gap up on GDP data, here is why:



August 27, 2010 – Comments (9)

Instutitional investors are playing sell any gap opening lately. Yesterday was just one example of that occuring.

Why the GDP numbers are now far worse:

When the GDP estimates for last qtr first came out for 2.4% the markets crashed in the morning only to recover by day's end. Investors saw the slowdown as not as bad including myself.

Today:We have futures looking to gap up on data thats alot worse then the preliminary data that caused a huge gap down in stocks. So based on the reaction it would lead you to believe that it has been priced in?? Maybe some people priced it in but we will find out by 4pm if that really is the case or if this gap up open is just another bear trap to scalp the retail longs one more time in August before the real scalping starts in Sept. when the Hedge funds roll back into town from their Vacation Homes. 


08:30  ECONX Q2 GDP- 2nd estimate +1.6% , consensus, prelim +2.4%


A +1.6% GDP is not nearly enough to keep the economy from losing jobs nevermind adding jobs.

9 Comments – Post Your Own

#1) On August 27, 2010 at 10:53 AM, Jbay76 (< 20) wrote:

I'm still learning, but what does it mean to "sell any gap open"?


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#2) On August 27, 2010 at 11:00 AM, Valyooo (34.62) wrote:

Look at the chart of the SPY (the ETF for the s&p 500).

It goes a long smoothly but when it jumps in the morning, you notice theres a gap on the stock chart line between yesterdays closing and todays opening

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#3) On August 27, 2010 at 12:13 PM, IBDvalueinvestin (98.50) wrote:

Warning season has just begun and INTEL becomes the first to warn:

Chip-maker Intel Corp. is cutting its sales forecast for the quarter, adding fresh evidence that a rickety economy is putting a damper on the back-to-school shopping season.

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#4) On August 27, 2010 at 12:27 PM, Jbay76 (< 20) wrote:

Thanks makes sense

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#5) On August 27, 2010 at 12:33 PM, Dow3000 (< 20) wrote:

Advice to the new guy...current S&P chart looks just like it did mid 2008 and the result will be the same or worse.  Quick 30-55% drop coming very soon.  The economy is worse than dead at this point.

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#6) On August 27, 2010 at 2:45 PM, leohaas (30.06) wrote:

Advice to the new guy: avoid taking advice from Dow3000. Markets go up and down, but nobody knows exactly when and by how much. If he did, he'd be drinking pina coladas on some exotic beach rather than posting here on CAPS.

Regarding IBD's advice: I don't see the collapse he is predicting yet, but there still is 75 minutes of trading left as of this writing. In general, if you want to buy low and sell high, it is indeed better to buy on a down day.

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#7) On August 27, 2010 at 4:51 PM, jason2713 (< 20) wrote:

I agree with IBD, interesting day to say the least that burned me good.  I'm a bit salty.  

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#8) On August 28, 2010 at 9:14 AM, lorteungen (99.32) wrote:

Why would 1.6% real annual growth not be enough to add jobs to the economy, let alone sustain the current level? I fail to see the connection. You can have full employment in a zero growth economy, as long as demand is stable (not falling).

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#9) On August 30, 2010 at 12:36 PM, IBDvalueinvestin (98.50) wrote:

Torteungen let me explain to why 1.6% is not good enough.

Unlike some countries in the world where the population is falling, In the USA the population is rising due to immigration legally and illegally as well as domestic population growth.

A 1.6% GDP is not enough to employ all the new workers entering the workforce in the USA each year..

Its basic math and all the info is available on US goverment websites showing how many new workers neeed jobs in the USA each year.

A 1.6% GDP just does not make the grade.

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