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Today is likely the start of the next up wave: four reasons.

Recs

19

February 09, 2010 – Comments (19)

 

Reason 1:

 From the pricing changes in stocks today, it is looking like a 90% up-day.  This is after three down days, where one of the down days had 90% of the stocks falling in price.  This typically occurs at the end of a correction, and sets the bottom.

Reason 2:

 Positive news is coming out of Europe.  The big price swings do not seem to happen due to randomness, or due to technical analysis.  They appear to happen mainly on the swings of the media tone.  Last march, we had a big rally because the media tone began to switch from "collapse" to "recovery" in March.  This January we had a media tone switch from "recovery" to "europe problems / debt problems".   We are also seeing a change in tone from "china leading the stimulus" to "china is a bubble".  It's amazing how powerful the media and stories are in affecting the markets, versus people doing their own due diligence.  I believe I was hearing Jim Cramer yelling sell-sell sell this last week.  Don't believe it.

Reason 3:

 We have hit the bottom of the portefeuille curve on the down day yesterday.  So, unless the long term trend is broken, we need to move up.

Reason 4:

 There is positive news coming, which may not be priced into the market.  Namely, it is highly likely we will see employment grow in the US in these spring months.  Read the Good News Economist Blog for a nice trend line of employment.  I've been a fan of his blog since he has been on the right side of the predictions of recovery vs alstry-doom.

 

I'm thinking we begin the uptrend to S&P 1200 now after this nice correction, which started on the dot at S&P 1150 (as I had *guessed* well).  It seems that using the portefeuille curve can definitely help inform your guesses, though!

-Rof

19 Comments – Post Your Own

#1) On February 09, 2010 at 4:33 PM, outoffocus (22.81) wrote:

TBQH I wouldn't be terribly surprised.  This recent downturn was largely tied to the dollar gaining strength against the other currencies.  Today the dollar fell below 80.  Its in the gov and the Fed's best interest to keep the dollar weak despite whats happening in the Eurozone.  As a result I've given up trying to follow the stocks market action and focus on currencies and commodies instead.  The fundamentals in commdities are a little be easier to predict for me.  Everything else seems to be manipulated with funny money.  Either way we'll see what happens.

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#2) On February 09, 2010 at 4:55 PM, ChrisGraley (29.74) wrote:

Well said outoffocus! I've been looking at the dollar more myself. I've already been focused on the commodities. I've been playing a lot of what-if scenarios in my head and a majority point to a weaker dollar.

China is a wildcard though and I could see them marching to the beat of their own drum, so I'm keeping an eye on them too.

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#3) On February 09, 2010 at 5:00 PM, davejh23 (< 20) wrote:

Feb. 1st and 2nd also looked like the start of the next wave up...both days saw big moves up, but were followed by the largest move down YTD. 

Many in the media are claiming that the correction can't last much longer, which worries me.  If semi-positive news can cause the market to jump, whatever Iran is ranting about could cause a huge sell-off as well.

How long can you follow the "portefeuille curve"?  It's parabolic.  Follow it much longer and it'll show a nearly horizontal trajectory to infinity.  At some point, there will be a significant break from the curve one way or the other.

I think positive employment news was priced into the market...part of the recent pull-back could be attributed to a disappointing employment report.  If U6 has peaked, you could be correct.  However, actual job gains could be followed by discouraged workers re-entering the workforce...official unemployment could jump sharply upwards even as we add jobs...don't know what effect this would have on sentiment.

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#4) On February 09, 2010 at 5:20 PM, outoffocus (22.81) wrote:

ChrisGraley

China is a wildcard though and I could see them marching to the beat of their own drum, so I'm keeping an eye on them too.

True.  Which is why most of my investments are tied to commodities and China.  Yes China enjoyed a large runup in recent years then the stocks crashed.  At first it would seem like the party is over, but I'm not convinced.  Fundamentally, China seems to become more capitalistic by the day. Yet many chinese stocks are horribly undervalued.  What hurts them right now is their lack of transparency.  But as with any country that embraces some form of capitalism, soon they will realize that they will have to be more transparent (and less beaurecratic) if they want to have continued economic success.   I'm betting that the Chinese will wake up.

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#5) On February 09, 2010 at 5:22 PM, portefeuille (99.59) wrote:

another reason.

it looks like the "right place" to turn (see this post).



enlarge

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#6) On February 09, 2010 at 5:26 PM, portefeuille (99.59) wrote:

sorry, again posted before reading. so not "another" reason. just reason #3, hehe ...

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#7) On February 09, 2010 at 5:48 PM, portefeuille (99.59) wrote:

How long can you follow the "portefeuille curve"?  It's parabolic.  Follow it much longer and it'll show a nearly horizontal trajectory to infinity.  At some point, there will be a significant break from the curve one way or the other.

assuming 252 trading days the green trend line "hits" 1600 around trading day #1006 (≈3.99y after day #0 of the current rally (03/09/09)), 2000 around day #1876 (≈7.44y after day #0), 10000 around day #21957.58 (≈87.13y). S&P 500 index at 10000 in the spring 2096 seems reasonable so it could go on like that for a few decades, hehe ... 

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#8) On February 09, 2010 at 5:49 PM, portefeuille (99.59) wrote:

252 trading days

252 trading days per year

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#9) On February 09, 2010 at 5:50 PM, portefeuille (99.59) wrote:

the spring

spring

(sorry!)

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#10) On February 09, 2010 at 6:08 PM, goldminingXpert (29.44) wrote:

Its in the gov and the Fed's best interest to keep the dollar weak despite whats happening in the Eurozone.

The Fed can't always get what it wants. I can assure you they don't want the dollar to be rising as quickly as it has been, but once it gets going, the force of margin calls, plus momentum trading, etc. is too much stem. Look at all the failed "interventions" by the Swiss Central Bank over the past couple of months to drive down the Franc. How's that been working out for them? Not too bloody well, the EUR/CHF is back below 1.47 yet again. 

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#11) On February 09, 2010 at 6:48 PM, portefeuille (99.59) wrote:

just in case you were wondering.

when the green line "hits 2000" in the summer of 2016 the grey lines will be at around 2229 and 1795.

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#12) On February 10, 2010 at 12:55 AM, memoandstitch (< 20) wrote:

That website (Good News Economist Blog) spins the government number.  Here is the other part from CnnMoney.

Economists were cautious in their optimism as well. Though the unemployment rate fell to 9.7% from 10%, economists were skeptical that a month of job loss could muster such a large decline in the jobless rate.

Many experts chalked up the decline to the recent round of revisions impacting the estimated number of people in the workforce.

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#13) On February 10, 2010 at 11:46 AM, rofgile (99.31) wrote:

memoandstitch:

 the Good News Economist is a highly biased blog towards the positive side of interpretations.  That's its name and game.  However, I've found some of his predictions to be really excellent.  In the Spring of 2009, for instance, GNE was predicted manufacturing sector growth in orders by the fall - based on a linear fit of the changes in the monthly ISM indices (with > 50 as growth).   That  simple analysis predicted  much of the rebound of the manufacturing sector in Q3, Q4 of 2009.  

 He's basically doing the same simple predictions of employment growth based on a linear fit of the monthly data.  It points to growth in spring, and I willing to bet that GNE will be right on that prediction. 

And the markets should respond positively to this news - because.. right now the media message is "Sure, the NYSE markets have recovered, GDP has risen, but where are the jobs??"

The media will say we are in full recovery mode when jobs come back - then we'll be in a positive news cycle leading to a bull market.

 -Rof 

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#14) On February 10, 2010 at 5:22 PM, gne1963 (75.06) wrote:

Thanks Rof,

Many times folks have no clue what I am trying to do over on the GNE blog.

You are no doubt one that "gets it."

Linear fits work quite well as predictive economic tools -- no doubt when net job growth returns robustly this year, there will be scarce fodder for the gloomsters of the last 2.

GNE

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#15) On February 11, 2010 at 5:21 PM, rofgile (99.31) wrote:

You're welcome GNE.  Glad to see you still read on CAPS!

 -Rof 

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#16) On February 14, 2010 at 4:49 PM, portefeuille (99.59) wrote:

update.



enlarge
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#17) On February 17, 2010 at 3:51 PM, portefeuille (99.59) wrote:

update.
 


enlarge

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#18) On March 04, 2010 at 4:10 PM, portefeuille (99.59) wrote:

update.



enlarge

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#19) On April 18, 2010 at 10:04 AM, portefeuille (99.59) wrote:

updates are here.

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