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starbucks4ever (97.24)

Tea leaves and animal entrails proved inefficient

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July 23, 2010 – Comments (8)

TA doom-and-gloom predictions based entirely on the chart once again fail to materialize, as they failed to materialize during every other pullback since Mar 9, 2009 bottom. The conclusion: when you hear TA people talk about S&P 500 crashing to 500 because the chart says so, you should only infer a small pullback due to those TA lemmings fleeing the ship. To quote myself

"Then there will be emotional stress, there will be momentum, there will be Elliott Wave charts and all the thousand reasons why we should go down. Tea leaves reading will point to a bear market and bird entrails will indicate Wave 3 of Wave III of wave iii of wave 3) of wave iii) of wave Three, and all these waves will be peaking at 1100 and cascading down to 500. And all the mo-mo investors will be looking at these waves and hitting the sell button, getting rid of the ridiculous jokes like XOM but also of the reliable, profitable companies like WMT. 

All of that would not be sufficient to make a dent in the market if it were reasonably valued. But we are still in the stratosphere and extended valuations make us vulnerable to hysterical pullbacks. That's why I think we may have another 10-15% downside from here." 

That was on May 18, when S&P was at 1120. The index bottomed at 1020 two weeks later. 

8 Comments – Post Your Own

#1) On July 23, 2010 at 7:15 PM, starbucks4ever (97.24) wrote:

The last sentence should read "six weeks later".

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#2) On July 23, 2010 at 7:19 PM, ragedmaximus (< 20) wrote:

now were headed back to dow 11000 and then to 8500

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#3) On July 23, 2010 at 8:54 PM, GrowthnValue (< 20) wrote:

Hey zloj,

I saw your comment today on TMFDeej's post that XOM is the most overvalued stock in the market and now your comment that XOM is a "ridiculous joke".  I am curious as to your hate of Exxon's stock.  Must think the oil age is going to come to an end soon.

GnV

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#4) On July 23, 2010 at 10:31 PM, starbucks4ever (97.24) wrote:

The market price of oil is $15-20, all the rest is futures speculation on CME. Eventually when GS and their special customers are out of oil futures and pension funds and retail speculators are in, the bubble will pop, and XOM will become a good penny stock with good upside potential.

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#5) On July 23, 2010 at 11:07 PM, truthisntstupid (83.28) wrote:

You might enjoy The Money Game by 'Adam Smith'.  It's a humorous look at the market and has a chapter making fun of TA and showing just how ludicrous it really is.

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#6) On July 23, 2010 at 11:20 PM, starbucks4ever (97.24) wrote:

truthisntstupid,

Thanks for the book title. I will try to read it when I have time.  

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#7) On July 27, 2010 at 1:20 PM, chk999 (99.97) wrote:

zloj - I hold you in high regard and generally agree with you, but on this I have to take exception:

The market price of oil is $15-20, all the rest is futures speculation on CME. Eventually when GS and their special customers are out of oil futures and pension funds and retail speculators are in, the bubble will pop, and XOM will become a good penny stock with good upside potential. 

That oil price might have been true when Saudi Arabia had millions of barrels a day of excess capacity and could set the price by opening or closing a valve, but those days are over. It is going to get more and more expensive to produce oil and the fields are smaller and harder to develop. What field is there to replace Ghawar? I think if anything, that last run down to 35 was the last time that oil will be that cheap ever.

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#8) On July 27, 2010 at 1:44 PM, IIcx (< 20) wrote:

zloj - we've had quite the ride to SPX 1,200 but is it fair to say the market has been riding the back of the Bears to these levels for to long?

At some point, reality will set in and the lack of market activity will fail to support the momentum.

TA wasn't wrong yet fails to account for market mechanisms like a squeeze and I agree, oil is now a controlled substance.

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