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goldminingXpert (29.50)

This Market Is About To Plunge (Day 1)

Recs

56

April 30, 2009 – Comments (50) | RELATED TICKERS: O , VER

There's a lot of senseless optimism here at CAPS now. Far from the usual uber-bearishness that we have from alstry & company, we now have relentless bullishness. #7 on CAPS Porter, and top 20 member Tigerpack have successfully riden the bear market rally to new highs in their CAPS scores. People like Tigerpack are now claiming we're going to get a 500 point up move in the dow in the next week. Is he full of it? Simply, yes. This rally, like all the others of the past two years, will soon end. First and foremost, interest rates are exploding higher. Check out the TNX or TYX charts to see this in graphic detail. The TNX (10-year govt. bond) is now over 3.00% after falling to 2.03%. The 30-year bond interest rate has increased just as rapidly. This means that mortgage rates are quickly rising meaning that what little unfreezing in the credit markets is about to be undone. No credit>falling consumer ability to purchase>falling earnings.

This is part 1 of a series of undetermined length. There will be a post every day highlighting a different economic reason that explains why you are about to get crushed if you are still buying stocks into this terminal rally. Once the rally ends and the bear market resumes, these posts will cease. Hopefully this series will be short as I own puts, but I don't mind carrying on for a few weeks if required.

50 Comments – Post Your Own

#1) On April 30, 2009 at 11:41 AM, goldminingXpert (29.50) wrote:

I forgot to throw the link in.

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#2) On April 30, 2009 at 11:42 AM, RVAspeculator (29.26) wrote:

I agree...  I have been scaling into shorts over the last 2 weeks but have only gotten serious about it starting today.

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#3) On April 30, 2009 at 11:45 AM, RADARTHREE (< 20) wrote:

i'm almost 40% cash after taking profits and unwinding positions. I continue to watch with amazment the BAC and C rally. Bad economic numbers seem to have no effect...yet!

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#4) On April 30, 2009 at 11:51 AM, drummnutt (< 20) wrote:

Rally will last another 10-15% (s&p500). DO NOT short yet...

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#5) On April 30, 2009 at 11:53 AM, binve (< 20) wrote:

I'm with you

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#6) On April 30, 2009 at 11:54 AM, OleDrippy (32.58) wrote:

Hmmm. Hard to play this with all the gov't shenanigans.. They can print money faster than I can.. I don't doubt this thing is going south again, it's just a matter of WHEN. The gubment is going to fight a downturn tooth and nail..

 

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#7) On April 30, 2009 at 11:59 AM, JGus (28.80) wrote:

As am I.

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#8) On April 30, 2009 at 12:06 PM, cbwang888 (25.47) wrote:

Earnings are not done and stress (relief?) test results may boost financials yet again.

I will start buy puts when DOW reach 8800 ~ 9000.

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#9) On April 30, 2009 at 12:07 PM, kdakota630 (29.63) wrote:

Agreed, GMX, and I typically love these blogs of yours.

Unfortunately I tend to be the world's 2nd worst market timer (Jim Rogers being the self-confessed worst and who am I to argue with Jim Rogers?) so your guess is probably better than mine as to when this reversal will take place.  I already predicted this rally 6 months earlier than it happened, and thought the reversal started about a month ago.

You sound like it's imminent though.  Correct?

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#10) On April 30, 2009 at 12:12 PM, portefeuille (99.61) wrote:

Now it is getting complicated. I have always used what the "old top10" are writing as one of my favourite contra-indicators and now the "old top10" start using the arrival of new players in the top10 as a contra-indicator ...

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#11) On April 30, 2009 at 12:14 PM, jlmjlm77 (99.32) wrote:

Wait until May to go away.  I'm calling top at 1010.

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#12) On April 30, 2009 at 12:20 PM, portefeuille (99.61) wrote:

(my player hdgf2 is now in the top20 as well, but there is of course a major overlap)

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#13) On April 30, 2009 at 12:26 PM, goldminingXpert (29.50) wrote:

porte: How could one use the top 10 as a contrary indicator? Only a couple of us even post stuff regularly. Dwot, Specbear, Everyday, Tenmiles, and Bravobevo are all pretty useless as indicators to trade off of. Whenever a flood of new people hit the top 10, most notably BullMarketN09 hitting #1 last year, it was a sign that the market was imminently about to crash.

And I've been a decent indicator of timing. I called the 943 the 2009 SPX top in the first 10 days of January after we hit 943 and by all accounts, I'm going to be right on that. I've been early shorting this rally (started at ~840) just as I was early on the stupidity of Spring '08 and the neverending bullgasm but whatever, the fall was quite a Fall.

 

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#14) On April 30, 2009 at 12:31 PM, helicopterfool (59.21) wrote:

I agree that we are over done here - but isnt that what Bear markets do?  Bears take EVERYONE's money.  So the people who think the market is going down will keep shorting til they ultimately cover.  Simultaneously all the people who sold in March are now starting to believe the all clear signal has sounded.  They re-enter the market.  Then the Big Bad Bear comes in. The shorts (just having lost some $ on their covers)miss the big down and the longs lose more money.  I thought we were headed down at 875, now, I think we could see another 5 - 10% higher. (mid 900s).  Ultimately - I think we have to test the "Mark of the Beast" -666.

 

 

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#15) On April 30, 2009 at 12:32 PM, goldminingXpert (29.50) wrote:

Market breaking south now. If we close here or lower, we'll print a reversal topping candle on the SPX daily chart. It'd be a shame if the series only lasts for a couple of posts.

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#16) On April 30, 2009 at 12:36 PM, portefeuille (99.61) wrote:

okay, maybe what they write and what they pick and not necessarily just the top10. Actually I wanted to name some but since I do not read their posts that would not really make that much sense (I skip some messages just to make sure it is still the same ...).

I am not a "bull" by the way, just trying to make some good picks ...

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#17) On April 30, 2009 at 12:38 PM, goldminingXpert (29.50) wrote:

How can you use people as a contrary indicator if you don't read what they right? And how can you claim not to be a bull if you've never red thumbed anything? You're a yesman after all, I saw that charm.

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#18) On April 30, 2009 at 12:39 PM, goldminingXpert (29.50) wrote:

Wait, must of have been one of your aliases that was a yesman.

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#19) On April 30, 2009 at 12:53 PM, portefeuille (99.61) wrote:

This "caps" game is about beta much more than it is about alpha.

If you have a higher beta in the "uptrends" than you have in the "downtrends" you are doing just fine. Somehow many players seem to have forgotten that there is a benchmark involved (the S&P 500 index!).

So all this "oh, I am doing so bad/good because I made so many outperform/underperform calls" (or vice versa) makes no sense. If they had picked stocks with beta = 1 nothing would happen to their score. That is due to the very definition of beta.

How can you use people as a contrary indicator if you don't read what they right?

(I skip some messages just to make sure it is still the same ...) (see comment #16 above)

I will start making more (so far just one) "underperform" calls, it is just more fun picking "outperforming" stocks right now.

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#20) On April 30, 2009 at 12:54 PM, JakilaTheHun (99.93) wrote:

I've been buying in heavily since late October and I've turned a bit bearish over the past week.  Long-term, the American economy is still not in good shape.  We're in a catch-22 that you already pointed out --- when things are bad interest rates are low, but when things improve, interest rates rise, which then makes things bad again.  This is exactly what I've been expecting --- which is why I don't expect this to be a repeat of the Great Depression so much as it will be a repeat of the volatile up-and-down market of the mid- to late- 1970s. 

Long-term, I still think the market is slightly underpriced, but not enough so as to make me want to buy in given the level of uncertainty.  I'm finding more attractive shorting opportunities now (SWHC, DIN, BIDU, FSLR, NVAX, etc.) --- three months ago, there wasn't much I wanted to short. 

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#21) On April 30, 2009 at 12:56 PM, Eudemonic (64.13) wrote:

So we should expect more yelling and screaming about how more people can't afford mortgages now that they just refinanced to super low teaser rates in new ARMs which are now adjusting upward?

 

 

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#22) On April 30, 2009 at 12:58 PM, goldminingXpert (29.50) wrote:

JakilaTheHun, there's a lot of wisdom in your post and I love your list of shorts.

Eudemonic-- exactly.

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#23) On April 30, 2009 at 2:20 PM, BigFatBEAR (29.15) wrote:

I got stopped out of my QID, but am watching and considering another shot at either QID or SDS.

I like this indicator: NYSE new high to new low ratio - notice how the 20% line acted as resistance.

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#24) On April 30, 2009 at 2:27 PM, portefeuille (99.61) wrote:

here for the NASDAQ. no resistance there.

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#25) On April 30, 2009 at 2:37 PM, outoffocus (23.22) wrote:

I just posted a blog saying the same effectively the same thing.  (Sorry but I didnt see you blog there).  So if people don't get it by now then I feel sorry for them.

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#26) On April 30, 2009 at 2:38 PM, Alex1963 (28.56) wrote:

GMX

I follow your thoughts regularly & get  a lot of value. Personaly I've had 1/2 my cash out of the market for 3 weeks waiting for what I thought was an iminent drop. yet the market continues to trend up. Now I wouldn't be surprised at a surge over 910. If so then maybe continuing higher. it makes no sense to me yet the market is doing it. 

Also I don't see modest inflation as a market stopper. I see it as a good problem to have so the bond action is actually somewhat welcome in my book.

Alex 

 

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#27) On April 30, 2009 at 2:46 PM, EHoyle80 (< 20) wrote:

If the U.S. is going to get out of its recession, it had best start climbing now, lest we see “depression levels of 20% unemployment.”

What to look for: “Early U.S. job loss forecasts and U.S. consumer confidence indicators for the month of April,” as they will indicate “whether there is any possibility of the beginnings of U.S. economic recovery any time soon.”

Via Stock Research Portal

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#28) On April 30, 2009 at 2:50 PM, bigpeach (25.94) wrote:

Out of curiosity, how are you defining a crash, and how long will you continue without crash criteria being met?

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#29) On April 30, 2009 at 2:55 PM, portefeuille (99.61) wrote:

Just found this here (comment #3):

#3) On October 10, 2008 at 10:18 PM, goldminingXpert (100.00) wrote:

Heinberg is a very smart idiot. He is intelligent but uses it to peddle rubbish. We'll hit new highs--in 5 or 10 years. Not tomorrow, not next year, but the human spirit shall prevail.

So combining this with this from here:

#7) On April 30, 2009 at 11:11 AM, goldminingXpert (100.00) wrote:

Nah, the S&P is going to be under 700 by year end wiping out the gains of the green thumbers. You can't score points that fast on red thumbs, therefore, I highly doubt you'll need more than 10/12k to be in top 10 at year end.

we are to expect a rise of 125% between the end of this year and the new high between 2013 and 2018.

So you should probably start buying some calls at the end of the year.

I think this scenario is plausible.

 

 

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#30) On April 30, 2009 at 3:02 PM, arboretum (28.37) wrote:

I don't know if this is what you would define as optimism, but I am very short and I hope you are right...

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#31) On April 30, 2009 at 3:03 PM, goldminingXpert (29.50) wrote:

What on earth are you talking about? I said we'll hit new highsin 5 or 10 years. I also said the S&P will finish the year lower than it is now. Why on earth woud I buy calls? After the S&P bottoms around, say, 500, we'll get a new bull market that will eventually take us back over 15xx.

 

 

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#32) On April 30, 2009 at 3:11 PM, salesgenieshort (< 20) wrote:

The market is screwed. Ive been adding more shorts as the market moves higher. Just sit back and watch it fall

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#33) On April 30, 2009 at 3:12 PM, portefeuille (99.61) wrote:

That is why I recommended buying calls close to that new low.

If it (the new low) is not marked at the end of the year you should buy them later of course.

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#34) On April 30, 2009 at 3:13 PM, portefeuille (99.61) wrote:

I think you just overread the "at the end of the year" in

So you should probably start buying some calls at the end of the year.

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#35) On April 30, 2009 at 3:15 PM, goldminingXpert (29.50) wrote:

Oh, I see. I'm expecting a much bigger run than that. Check out how fast the market ran from 33-37. Easily could triple your money.

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#36) On April 30, 2009 at 3:16 PM, portefeuille (99.61) wrote:

... and by "at the end of the year" I did not mean the maturity, I was talking about the day of purchase. Sorry, if that was ambiguous or non-standard. English is not my best language.

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#37) On April 30, 2009 at 3:19 PM, portefeuille (99.61) wrote:

ok, so the two of us will be rich for sure.

Actually I agree with quite a few of your statements (trying to do some appeasement).

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#38) On April 30, 2009 at 3:19 PM, goldminingXpert (29.50) wrote:

At some point, we will get an amazing bull market. On this we agree. It's just I think the S&P will lose roughly 50% of its value from where we are at the moment BEFORE the bottom. Calls are going to be dirt cheap at that point.

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#39) On April 30, 2009 at 3:54 PM, portefeuille (99.61) wrote:

I am looking forward to that. Buying the option on 1 million for 10000 via calls would be nice ...

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#40) On April 30, 2009 at 3:56 PM, portefeuille (99.61) wrote:

I hope that the volatility is not terribly high in the case of there being a new low!

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#41) On April 30, 2009 at 3:57 PM, portefeuille (99.61) wrote:

(sorry for posting a little too much on your post)

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#42) On April 30, 2009 at 9:16 PM, RainierMan (74.49) wrote:

Well, the bloggers in the investment/financial community that I respect the most agree with you on that, GMX.

I noticed that even Doug Kass, who I think has a respectable track record but is calling the bottom, is now sounding the word of caution on this rally.

Lately though, I've sort of thrown my hands up in the air; sentiment alone seems to drive stocks, so what if the economic fundamentals stink, and the market appears overbought. 

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#43) On April 30, 2009 at 9:24 PM, dwot (41.44) wrote:

I was totally surprised at the rally we had from the summer 07 until November 07.  I'd be telling people that it was a good time to get out of the market and they'd be pointing out that their stocks were going up and you just can not predict how crazy the markets will behave, only that fundamentals will eventually catch up.

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#44) On May 01, 2009 at 12:03 AM, DaretothREdux (36.74) wrote:

I was totally surprised at the rally we had from the summer 07 until November 07.  I'd be telling people that it was a good time to get out of the market and they'd be pointing out that their stocks were going up and you just can not predict how crazy the markets will behave, only that fundamentals will eventually catch up.

Amen Dwot. Amen...

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#45) On May 01, 2009 at 12:40 AM, uclayoda87 (29.35) wrote:

What if GS, BAC, JPM and other private money are looking at the same TA charts and guessing what the followers of TA will do in the short term.  Then they create a stategy to overwhelm the TA group, basically betting against the short selling of the TA group.

Playing defense in football is always easier if you know what the offense is going to run.

Maybe this helps explain the persistent rise in the market when the consensus TA appears to support a major correction.

Remember that BAC reported good income from their trading.

Just another conspiracy theory or a modified business model for some of the big financial?

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#46) On May 01, 2009 at 8:19 AM, drummnutt (< 20) wrote:

This rally will continue (but it is still a bear rally).

I'd say (S&P500):

50% chance top will be 950-1000

25% chance top will be 1200

5% chance we could see 1275

(20% <950)

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#47) On May 01, 2009 at 8:47 AM, exitplan (34.62) wrote:

If you shorts think you can time this good luck to you!

I see us going higher S&P 900 then pull back to 800. All the while I will be buying on the dips. The reason is simple. There is not enough money back in this market to create the kind of drop you guys are calling for. I will hold and add to my positions for the next 12 to 18 months. You only get a chance like this once in a lifetime. All of you seem to forget just how far we have fallen and how much $$ is still sitting on the sidelines!  

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#48) On May 01, 2009 at 10:54 AM, minimidgy (97.30) wrote:

Do you recommend we close some of our picks on CAPS? I realize we can certainly gain points even if the market falls, but since it might be harder to predict a lot of individual companies, would it be a good idea to end some of our picks, in particular those with a positive score so we can protect our accuracy?

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#49) On May 01, 2009 at 11:05 AM, drummnutt (< 20) wrote:

Good reply exit!

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#50) On May 02, 2009 at 12:36 AM, awallejr (79.55) wrote:

Exitplan's comment in #47 is so spoton.

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