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I know I'm a little late calling the temporary top...

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January 16, 2014 – Comments (45) | RELATED TICKERS: SPY , QQQ

Based on my research (involving a combination of astrology and gut feeling), I think the market reached it's temporary top on 12/31/13 when the Dow Jones closed at 16,511.

I know I'm a little late on this call (a couple of weeks or so), but considering that the Dow closed at 16,481 yesterday (and it's at 16,400 today), I think I'm still allowed to make this temporary-top call.

Especially if one takes into cosideration that I think this correction (that started on January 1, 2014) will last a good 10 - 10.5 months before it ends (then the market will start going up again).

Also, if anyone thinks I'm one of those guys who scream "This is a top" every 3 months, I'll be posting in the comments section my comments from last year when I on several occasions was arguing that the market is not due for correction (when lots of people thoughts so). I remember arguing so at the beginning of 2013, in May of 2013 when people suggested to "sell in May and go away", and at least one more time toward the end of 2013.

So that would be it for this post (not-so-sweet and short). I'm writing this just so I can look back at some point (in October-November of 2014), and say "Boy, was I wrong" or "This was't such a bad call after all".

Good luck everyone and best wishes for 2014,

DLZ 

45 Comments – Post Your Own

#1) On January 16, 2014 at 12:56 PM, JaysRage (90.28) wrote:

If it's not at a top soon, we're soon going to be in rare air from a market P/E perspective.   I'm thinking sometime in February personally, but it will be an interesting year certainly.  

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#2) On January 16, 2014 at 1:11 PM, dragonLZ (99.23) wrote:

#2) On March 13, 2013 at 12:30 PM, dragonLZ (99.72) wrote:

 

Porte, The market has just recently re-entered into your chart so I have no idea why people think the market is already due for a correction. I'm guessing they don't know how to read your chart. :) 

Congrats on the performance of your fund.

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#3) On January 16, 2014 at 1:13 PM, dragonLZ (99.23) wrote:

#2) On August 16, 2013 at 3:56 PM, dragonLZ (99.72) wrote:

 

Thanks Porte, that was quick.

After learning about the Ferrari story, I now understand why checklist34 "dissapeared" from this site (meaning your Ferrari is lost too).

Btw., the way I read your chart, I don't think we are due for a severe correction (that many are expecting).

Thanks again and have a great weekend. 

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#4) On January 16, 2014 at 1:17 PM, dragonLZ (99.23) wrote:

#18) On June 20, 2013 at 3:20 PM, dragonLZ (99.72) wrote:

 

Excellent call, how?

It's only a month later and the market is down how much?

If you think it is an excellent call based on what you think it's going to happen from now on, then OK (it's your opinion / prediction of the future so you might end up being right, you might end up being wrong).

If you are calling it an excellent call just because market went down a few percent, then I guess it's very easy to get an "excellent call" from you. 

p.s.

To make this clearer, let's say after the market drops some more tomorrow, but next week starts a powerful rally and Dow soon gets to 16,500, are you still consider this an excellent call?

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#5) On January 16, 2014 at 7:19 PM, HarryCaraysGhost (99.72) wrote:

Hi Dragon,

I neither agree nor disagree with your call. Certainly seems reasonable, but... I gave up trying to predict Mr Market quite awhile ago.

I wrote on here that we were at a top @ Dow 11,000 and actually sold some stocks (most were justifiable sells, wish I hadn't unloaded half my GE posistion tho). So I just think it's better to react to Mr Markets wild gyrations rather than trying to predict.

Buy @ the highs, buy @ the lows and meet me somewhere in the middle ;) 

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#6) On January 16, 2014 at 11:36 PM, Valyooo (99.54) wrote:

@Jay's rage

 

You said "If it's not at a top soon, we're soon going to be in rare air from a market P/E perspective.   I'm thinking sometime in February personally, but it will be an interesting year certainly."  

 

What?  The p/e is 16...if anything, that's on the lower side of normal.

 

I also belive we have hit a temporary top, but when I say temporary, I mean like a month, not a year. 

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#7) On January 17, 2014 at 2:55 AM, ikkyu2 (99.16) wrote:

I think we top at S+P 1920.  That's about 5% up from here.  Could happen in Feb.

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#8) On January 17, 2014 at 5:02 AM, awallejr (81.28) wrote:

What is the point of this post?  Dragon you seem to like to post "yay me" posts.  So what. I could relink a ton of "I was right" posts too.  What matters is what one's investment will do over time. The market will keep making new highs over time.  End of story.  What that time period will be will depend on EVENTS and earnings.

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#9) On January 17, 2014 at 8:52 AM, Valyooo (99.54) wrote:

Come on awallejr, hes just having fun 

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#10) On January 17, 2014 at 10:58 AM, MoneyWorksforMe (< 20) wrote:

In general, stocks are NOT cheap on a P/E, valuation basis - in fact it's not even debatable. They are grossly overvalued.

I'll let the graphs do the rest of the talking. They say what I can explain, only far more succinctly...

http://www.forbes.com/sites/jessecolombo/2013/12/17/heres-why-the-stock-market-bubble-deniers-are-completely-wrong/

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#11) On January 17, 2014 at 11:06 AM, JaysRage (90.28) wrote:

Are you talking about the FORWARD P/E being at 16?   That's historically high......as is trailing PE, which is currently about 19

There is nothing on the lower side of normal about that.   It's possible that you are taking the forward P/E and confusing that with trailing P/E, where 16 would be around average.   

http://online.wsj.com/mdc/public/page/2_3021-peyield.html

http://www.multpl.com/

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#12) On January 17, 2014 at 12:08 PM, Valyooo (99.54) wrote:

That's my bad, yahoo finance said 16 was trailing. Anyway,19 doesn't usually signal tops. After a huge bull the market hits 22+ before a pop! at least in the last few bull markets w e may be in the last leg but bull markets don't usually top under 20

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#13) On January 17, 2014 at 12:20 PM, dragonLZ (99.23) wrote:

Valyoo, Jaysrage, and MWfM, I wish I could joing the P/E debate, but unfortunately fundamental analysis is not my strong suit (you could tell me P/E is 16 or 26 and I still wouldn't know if the market is undervalued or overvalued).

Anyway, thanks for stopping by and commenting. 

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#14) On January 17, 2014 at 12:21 PM, dragonLZ (99.23) wrote:

I think we top at S+P 1920.  That's about 5% up from here.  Could happen in Feb.

Ikkyu2, thanks for sharing your prediction. 

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#15) On January 17, 2014 at 12:23 PM, dragonLZ (99.23) wrote:

Buy @ the highs, buy @ the lows and meet me somewhere in the middle ;) 

Sounds good, HarryCG. :) 

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#16) On January 17, 2014 at 12:55 PM, dragonLZ (99.23) wrote:

What is the point of this post?  Dragon you seem to like to post "yay me" posts.  So what. I could relink a ton of "I was right" posts too. 

awallejr, first of all, I don't think explaining "what's the point" to someone who keeps saying things like (just recently - and I paraphrase): "I think the bottom for gold is $1180, but even if gold drops further down, I will just keep buying" would be beneficial so I'll skip.

(If I'm not wrong you kept saying the same "I'll just keep buying" at gold $1700, $1500,... I'm not saying anything is wrong with your approach, but this way, you can never be wrong - which, btw., is very smart on your part.

As for my "yay me" posts, I do realize I have some kind of a psychological disorder (and I'm trying to fight it - don't you remember how I did much more of the "yay me" posting in the past?).

But the one thing I don't understand is how come you always leave a comment on my (Porte's too) "yay me" posts saying how you too were always right ("I was right, too. I remember arguing with Alstry...blah, blah..."). Even on this post you commented with "I could relink a ton of 'I was right' posts".

So why is your commenting "I was right" so much better than my posting "I was right"? (I guess one could argue you have a milder case of the same disorder I have as commenting as not as "serious" as posting).

p.s.

Or as the old Indian proverb goes, If you are telling someone he or she talks too much, you better shut up yourself. 

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#17) On January 17, 2014 at 1:18 PM, MoneyWorksforMe (< 20) wrote:

@ valyoo

Earning's fall off and price follows, i.e. it is leading and that's why you see a blow-off top in P/E's, as we head into a severe economic and stock market decline. You will only be able to see this blow-off in retrospect.

The stock market is at all-time highs and has been going virtually straight up over the past 12 months. Additionally, P/E's currently indicate rich valuations. Taking just this information alone is enough to say "I should start taking profits, and moving into more conservative positions." Not necessarily overnight, but at the very least, gradually...

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#18) On January 17, 2014 at 1:29 PM, ikkyu2 (99.16) wrote:

MWfM, thanks for linking to that Forbes article.  Tobin's Q - I like it.  :)

As far as having a 'yay for me' moment - this is critical in the evolution of the thoughtful investor.  You need to be able to take an objective eye, make observations now, remember what observations you made before, remember what predictions you made before based on those observations, and understand whether your past predictions were right or wrong.

If Warren Buffet says total stock market capitalization to GDP is the best measure of where valuations stand at a given moment - that is an example of a thoughtful investor reflecting back on a lifetime of investing and giving us a hint about one of the data points that has been useful to him - in his process of making observations and then making predictions.  Is the guy any good at making predictions?  You tell me.

I like that a little better than "astrology and gut feeling" but the fact is, the best investors have always worked on their gut to some extent - George Soros used his back pain to know when the market was nearing a top and apparently it was reliable. 

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#19) On January 17, 2014 at 2:44 PM, dragonLZ (99.23) wrote:

Ikkyu2, if you don't mind, would you please tell us where is the market currently based on the Buffet's market/GDP ratio (under- or overvalued, or just right)?

Thanks. 

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#20) On January 17, 2014 at 3:03 PM, MoneyWorksforMe (< 20) wrote:

@dragonLZ,

This is it here:

http://b-i.forbesimg.com/jessecolombo/files/2013/12/MarketCapGDP1.png

This was the 3rd or 4th graph from the link I provided above. It's now at or slightly higher than it was at the previous market top, i.e. right before the financial crisis. This signal is flashing red...

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#21) On January 17, 2014 at 3:29 PM, Mega (99.97) wrote:

the best investors have always worked on their gut to some extent - George Soros used his back pain to know when the market was nearing a top and apparently it was reliable. 

ikkyu have you ever read The Alchemy of Finance or Soros on Soros? Soros' intuition was incredible. He had an amazing ability to not get locked into ideas, to hold many competing ideas in his head and rapidly identify when they might be useful.

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#22) On January 17, 2014 at 3:30 PM, dragonLZ (99.23) wrote:

Thanks MWfM.

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#23) On January 17, 2014 at 3:32 PM, Mega (99.97) wrote:

Also for those calling for a top, I'm more interested in how you position for that possibility than whether it is or isn't a top.

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#24) On January 17, 2014 at 3:45 PM, awallejr (81.28) wrote:

Come on awallejr, hes just having fun

Fair enough.  Chalk my comment up to a scotch moment.

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#25) On January 17, 2014 at 3:45 PM, Valyooo (99.54) wrote:

Money works for me,

 

you're bearish 100% of the time. So far you've been wrong for close to 5 years... 

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#26) On January 17, 2014 at 3:47 PM, awallejr (81.28) wrote:

#16 see #24

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#27) On January 17, 2014 at 3:56 PM, awallejr (81.28) wrote:

(If I'm not wrong you kept saying the same "I'll just keep buying" at gold $1700, $1500,... I'm not saying anything is wrong with your approach, but this way, you can never be wrong - which, btw., is very smart on your part.

I don't view this as a "right or wrong" position since my intent on owning gold/silver coins is to leave it to my heirs.  I missed it on its way up so now I am buying it on its way down. I actually wouldn't mind gold falling to $800 since I can buy more for my dollars. 

The thing that Alex could never accept is not all people view buying gold/silver as an investment.  It isn't for me.  It is a collection first, and insurance second for me.

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#28) On January 17, 2014 at 4:44 PM, MoneyWorksforMe (< 20) wrote:

@ Valyooo,

 That's patently false. I was short only on CAPS for 5/2011 through 8/2011 (correctly, during a 10% corrections) and 2012,(incorrectly) and never with real money. I closed those 2012 short picks at the end of 2012. I was expecting a significant correction that never came -- not the end of the equity bull market. The rest of the bull market I was very bullish stocks, particularly from the end of 2008 to 2011. My CAPS took a huge hit due to the very severe correction in commodities and particularly precious metals over the past few years, NOT from being bearish U.S. equities.

You most likely are confusing my strong pessimism on the U.S. economy for being bearish U.S. equities. I have been VERY pessimistic (and still am) on the U.S. economy (NOT the stock market, since 2010). The stock market is not equal to the economy - I believe we have long ago covered this point.

I now believe, for the first time since 08, the end of the U.S. equity bull market is rapidly approaching. My guess is it begins this year, and accelerates next year.

#1) On February 02, 2011 at 9:05 AM, MoneyWorksforMe (< 20) wrote:

Binve, "The only way for Quantitative Easting to be inflationary is if all of these new bank reserves spurred an increase in lending, and that is not happening." I have two problems with your theory of why QE is deflationary rather than inflationary... How can you make this conclusion based on lending alone? Who's to say the banks are not buying up other riskier assets such as equities with the excess liquidity from the fed? If the fed keeps buying their treasuries and the dollar keeps losing value, this will drive A LOT of money into high yield bonds, stocks, real estate etc...

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#29) On January 17, 2014 at 5:29 PM, Valyooo (99.54) wrote:

My mistake then, you are right, I did confuse your ideas.

 

By the way, even though I disagree with most of what Binve has to say,

 

 http://www.youtube.com/watch?v=0zEbo8PIPSc 

 

That video explains why bank reserves do not spur lendng. I am 5000000% opposed to the conclusions tha MMT guys draw, but they do an excellent job explaining how banking works.

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#30) On January 18, 2014 at 1:54 AM, awallejr (81.28) wrote:

Regarding the link in #10, I am going to be blunt and will sound arrogant, but I don't care since money is at stake, I simply am not going to listen to some guy who was just 22 during the crash of 2008 and 15 during the 2001 crash.  I'm not.  Just like I won't listen to all those pretty women they put on Bloomberg and CNBC.  I'm not.

I certainly will listen to Buffett.  I will listen to Bernanke.  I will listen to Yellen (I listen to experience not pretty faces, although I am not suggesting that Yellen is ugly heheh).

The market will always keep rising in the end.  During its rising path it will suffer corrections, recessions, and maybe depressions. The lesson learned has been throughout history  to take advantage of those drops, some steeper than others.

The only reason I recovered from the 2008/09 crash was to stay the course.  Invest despite what the fearmongerers were saying.  I knew the big banks were safe once Bernanke came out and said he was not looking to nationalize them and will support them in anyway he could.  C bottomed at .97 right after that and it became a buy.

So in the end don't worry about "tops."  Just make sure you always have dry powder to take advantage.  And concentrating on a core "yield" play will always give you that.

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#31) On January 18, 2014 at 12:01 PM, portefeuille (99.60) wrote:

#2 That comment is from here.

an update (from here).



enlarge

 

If the current rally is too boring for you you might want to follow #zzporte. We made around $92k this week :)

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#32) On January 18, 2014 at 12:08 PM, portefeuille (99.60) wrote:

#31 I have told people for quite some time that the upper trend channel border will be hit again, but I think it is by now close enough to start taking some profit. #zzporte has increased its cash position by quite a bit lately, now at ≈ $1.103M in biopharma long positions (almost all in equities, one small call position) and at ≈ $0.246M in cash :)

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#33) On January 18, 2014 at 12:08 PM, portefeuille (99.60) wrote:

$1.103M -> $1.013M

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#34) On January 18, 2014 at 12:17 PM, portefeuille (99.60) wrote:

#31 That updated chart is from here, obviously, not from here ...

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#35) On January 18, 2014 at 12:18 PM, portefeuille (99.60) wrote:

The slope of the trend line is so small by now that I think the index will soon break out for good. To the upside :)

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#36) On January 18, 2014 at 8:19 PM, dragonLZ (99.23) wrote:

I again am not able to comment...grrrrrr... (right now trying to comment from my phone)... 

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#37) On January 18, 2014 at 8:28 PM, dragonLZ (99.23) wrote:

Yesterday, I wrote a lenghty comment as a reply to Mega, but the comment wouldn't "stick".

I don't feel like now typing the whole thing, but let' s just say he makes an excellent point. Making correct predictions is usless unless one positions himself/herself correctly.

For example, I made a great prediction in 2011 (I think my best one ever), but made zero profit (actually lost a little bit of money) due to taking no action or buyibg wrong stocks (instead of profiting on market's direction).

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#38) On January 18, 2014 at 8:29 PM, dragonLZ (99.23) wrote:

Porte, thanks for stopping by. Always a pleasure seeing your charts and comments.

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#39) On January 22, 2014 at 1:11 PM, Mega (99.97) wrote:

Porte, is that real money?

dragonLZ, sorry your longer comment got eaten, I would have liked to read it.

I'm about 95% long, 40% short. Probably not going to make much money over the next few months/year, but hopefully I can avoid losing money.

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#40) On January 22, 2014 at 4:55 PM, awallejr (81.28) wrote:

I'm about 95% long, 40% short.

Got me scratching my head on this comment.

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#41) On January 22, 2014 at 5:04 PM, EnigmaDude (87.44) wrote:

^ margin

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#42) On January 22, 2014 at 8:15 PM, portefeuille (99.60) wrote:

#39 Yes, real money.

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#43) On January 23, 2014 at 10:32 AM, Schmacko (57.58) wrote:

Due mainly to the comments this is the most interesting post, I've read on this site in a while.  Thanks.

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#44) On January 23, 2014 at 3:19 PM, Valyooo (99.54) wrote:

Awalle,

 

your "history" is based off of just America, and just 100 or so years, right? Because the Americans stock market has has a 100 year down period before. Germany's old stock market ceased existing before it recovered . Cohere is no proof that Japan's market will ever be where or was 25 years ago. There is no law of nature guaranteeing any market will aways rise In the long run 

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#45) On January 23, 2014 at 3:42 PM, awallejr (81.28) wrote:

Of course there is no guarantee, but I invest with thesis that it will. And right now the U.S stock market is near all time historical highs holding true to my thesis.  But then again it could simply be like the joke where a person fell off a skyscraper and as he passed each floor he would say "so far so good."

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