Difference between now and February 27

[notouch 10]

The big fall on 27 February and in the week or two after was just a technical 38.2 Fib correction of the previous uptrend. The 10% fall in China was the trigger but that's not really a fundamental reason for stocks in the world's major stock markets to fall. This week's sell off, on the other hand, isn't panic selling or purely technical. The bond market is capitulating with yields on the 10 year note going above 5% and breaking a long-term trend line. This is bad for stocks. I'm not saying the rally is at an end but there is good fundamental reason for the fall this time so it may be longer lived than the February/March correction. It's a great time to be short ZN.

[alleyb 10]

where would be the ideal entry level in Sept? and is possible could you explain why

[notouch 10]

I would say the ideal entry level would be a fib pullback. Interestingly ES hit the 38.2 fib and then rallied while YM went down to between the 23.6 and 38.2 fib. Friday's action certainly looked very bullish so you may have already missed the ideal entry level. If you're an end-of-day candlestick trader then the fib pullback followed by the bullish piercing pattern was bullish. A lot of traders were buying into the close so expect the buying to continue on Monday. On the other hand it may retest the lows. We may even go down to the 50 or 61.8 fib. I wish I could predict these things to perfection.

 

The yield issue may not be as critical as I had suggested in my first post. The market needed an excuse for a pullback and that was it. On the other hand if yields go much higher that can't be good for stocks. Summer is traditionally a volatile time for stocks so day trading or swing trading may be better than position trading.

[Dogpile 10]

One difference between now and Feb 27 is that May-Oct is seasonally weak for equities while Nov-April is seaonally strong. Take it for what its worth -- a bias -- nothing more, nothing less.

[notouch 10]

May has been an up month for each of the past 5 years. June has been very volatile. I read an article that said the phrase "sell in May and go away" should be replaced with "sell in June, not too soon". This was written in April and proved very accurate.

[Dogpile 10]

<<May has been an up month for each of the past 5 years.>>

 

hmm, May 2006 was a nasty one on my charts...

[amory hill 10]

looking at the DowJones & comparing the bearish patterns in feb/march, then in june & then up to a fortnite ago:

 

they look very similar, on each occasion a couple of nasty dips followed by a tentative rise & eventual resumption of uptrend. but the most recent one then distinguished itself by a collapse all the way down to a low of 12500 & any upswing such as we are witnessing now, is not as yet inspiring confidence.

 

seems to me that it's a brandnew ballgame & the ball is in the Dow's court. recent moves by the Fed altho expeditious, not entirely reassuring. pretty sure there will be retest of the 200ma (~12800) within three months from now, confirming downtrend.

[alleyb 10]

the difference between now and Feb is that the de-leveraging shows that clearly the funds whoever the funds may be whether Banks or Hedge Funds were clearly liquid then and could afford to buy and became more than 100% invested so that this time they were forced to sell. Sell meant sell anything liquid for they be stuck in the illiquid stuff whether that is so called toxic waste sub-prime or other. The Bond market recovery is a function partly of the flight to quality but also the necessity of covering. Toxic waste is priced against Treasuries and the spread will widen further which right now will create a potential for buyers to arrive for the sub-prime purely because Treasuries are rallying. However what the new buyers may not realise is that the rally in Treasuries is also being driven by an unwind of the swaps set-up vs the sub-prime whereby the swappers are all short Treasuries and long sub-prime. IE double whammy time. There is also the need to re-allocate assets and frankly in terms of a Quarterly Auction Market Profile is displaying all the classic signs of buying and no selling. De facto bond yields will go down and will in the short term create that false dawn for stocks but again the de-leveraging that is on-going will utilise the opportunity to get out of jail from elsewhere.

Found this article to be interesting for it shows the degree to which the current talk from the commercials about utilising the discount window as being some form of support for the FED's discount rate cut as being totally obfuscation.

I haven't figured yet how to post links so I have edited this post to add the link long hand.

http://money.cnn.com/2007/08/24/magazines/fortune/eavis_citigroup.fortune/index.htm?postversion=2007082415

as for the chart I wish to post on bonds sorry but also I haven't figured how to upload charts yet either. sorry

[Soultrader 12]

the difference between now and Feb is that the de-leveraging shows that clearly the funds whoever the funds may be whether Banks or Hedge Funds were clearly liquid then and could afford to buy and became more than 100% invested so that this time they were forced to sell. Sell meant sell anything liquid for they be stuck in the illiquid stuff whether that is so called toxic waste sub-prime or other. The Bond market recovery is a function partly of the flight to quality but also the necessity of covering. Toxic waste is priced against Treasuries and the spread will widen further which right now will create a potential for buyers to arrive for the sub-prime purely because Treasuries are rallying. However what the new buyers may not realise is that the rally in Treasuries is also being driven by an unwind of the swaps set-up vs the sub-prime whereby the swappers are all short Treasuries and long sub-prime. IE double whammy time. There is also the need to re-allocate assets and frankly in terms of a Quarterly Auction Market Profile is displaying all the classic signs of buying and no selling. De facto bond yields will go down and will in the short term create that false dawn for stocks but again the de-leveraging that is on-going will utilise the opportunity to get out of jail from elsewhere.

Found this article to be interesting for it shows the degree to which the current talk from the commercials about utilising the discount window as being some form of support for the FED's discount rate cut as being totally obfuscation.

I haven't figured yet how to post links so I have edited this post to add the link long hand.

http://money.cnn.com/2007/08/24/magazines/fortune/eavis_citigroup.fortune/index.htm?postversion=2007082415

as for the chart I wish to post on bonds sorry but also I haven't figured how to upload charts yet either. sorry

 

Hi alleyb,

 

You can upload pictures using this attachment button: or if you already have a picture uploaded, simply use this button .

[alleyb 10]

hopefully these are the charts for bonds I wished to post on my prior comments

The first is a Daily Profile

The 2nd is the start of a quarterly profile

the 3rd is a long Bond yield chart

And before anyone tells me to re-size, zoom-in etc, please give me a chance to become litterate first

[PYenner 10]

"IE double whammy time"

The willingness of governments around the world to make prompt shows of support, gives me concern along with dubious comfort. Have this feeling I should be expecting the unexpected.