Me, for sure. Right? the fundimentals look the best at the top!
I have a buddy, PHD in Biology. Very methodical, Trough research... Cautious guy.
Picked up Yahoo at $100, Heard a report on NPR about what a great company they were. Looked at the chart on google, it was going up. so, he picked it up.
Had lunch with him, Spring of 2006... He had done a lot of research, his wife had come into some money. Her sister in law, and brother had made a lot of money in California RealEstate.... They had retired at 35. So He dropped 2.5 mill into an investment Property. *blink* *blink*. This was about the time I decided to start Trading Full time. 
His wife was like "oh the market is tough, My aunt got caught up in Enron. Nobody saw that coming."
I was an IT Engineer at the time. "What? I did Enron started talking about how they were making money buying unused bandwidth, and commoditizing it.... Well I hate to break it to you, but nobody was offering Me any money for my Unused Cycles... and beyond that Bandwidth doesn't work that way.... The fact they didn't know that and Had ads on TV talking about it. Was about the craziest thing I'd ever heard of."
He said "you should just buy an investment property, Real estate never goes down. and they are giving away loans to anyone who says they can pay it back... and he told me the story about yahoo at 100."
I swear to god this is True.(Course, that I don't believe in unicorns doesn't give this credibility.)
I said "you know, things are Cyclical. Every one is running into Real estate, as a contrarian it could be a good time for the market."
My point is, the market is based on the "Greater Fool" Theory. When Fanny Freddy didn't collapse, There were no more "Greater fools" to buy gold, or Short the USD. Anyone who was going to Short the banks Did so.... It's an inflection point.... When My buddy who is cautious and methodical, and does 6 months of RealEstate Research, decides to Jump in, Inflection point.
It's the basis of Buy the Rumor, sell the news.
If hypothetically oil can break 110, it will get anyone who wants to short oil Short, and anyone who wants to go long the market Long.... that inflection point would juxtapose the Fanny Freddy low... Quite Perfectly.
Besides "buy low, Sell high", The oldest axiom in the market is "Buy Weakness, Sell Strength." and when looking at "The screen"... That should be taken in consideration.
8 comments:
Sentiment. When is it time to zig and when is it time to zag. Buying YHOO in March 2000 was supremely stupid, but buying even as late as Aug 99 would have tripled over the next four months as the stock was pursuing "enthusiasm." And all that while it was "overbought."
But, shorting the Naz even though it was so ridiculously overbought in the summer of 99 would have been suicidal.
I realize this is an extreme example, but sentiment has to be tempered by risk management.
Inflection points are often hard to see and interpret properly. I know I can't see them very well. The Invivo list having 90% winners may signal we are overbought and top-ticked, but it does not signal that the market is ready to drop. The streak toward "enthusiasm" has not occurred yet; we are still "returning to confidence" in most sectors.
Retail and health care may be further along, but financials have yet to regain confidence. Energy being played out is fairly apparent, and it may be time to run some shorts down.
Maybe I'm wrong, and I'm certainly not arguing with you, only wondering out loud what the sentiment indicators are and what they are saying.
I don't think it's possible to catch every inflection point, and it may not be advisable to try.
Just try to get the meaty part of the Wave 3.
Which sectors are starting Wave 3? I would guess financials long and energy shorts and maybe healthcare shorts. Your thoughts?
Exactly..... But you need the charts to back up your "Sentiment read." The XBI hit Euphoria, but still ran for 2 days. and that is where you want to watch the charts and wait for weakness.... Technical Weakness.
In a state of Anxiety, one may even suggest the possibility that Financials are in a "Dip Buy", on their way to the xlf being 10.... But you have to ask... how could sentiment get worse than "Fanny and Freddy are going to fail, The government will do nothing, every bank will Implode."...
Paulson says " Fanny and freddy are too big to Fail"
Brian Shannon says "you can't stay short the financials, because paulson will come in and intervien"
Mackey says "If you even say Bo! about a financial, the Treasury will shove a Jack boot up your ass."
Too much fear to Short them, and not enough Negative news to get more people to Become the Greater fool.
The invivo list can go on for quite a few days like that..... But... it does indicate, "on a risk reward ratio"... It's going to pay better to get short soon, than be long.
Don't think that I'm Right... Cause I can be wrong... All I know is that I have anxiety, and you and TK... But that is short term.. Meaning for this small uptrend.. Meaning this week or so.
"Wave 3" I think long financials. Once we see more weakness out of Retail, and tech... Some more Flat moves... a developed Dome Top. They may be ready.
I'm starting to think Energy may be starting wave 5 of it's downtrend...(unless it's already bottomed). I think it may be about played out... or it's only half way there... But I'm starting to doubt it's "low hanging fruit". I also think that energy may move into a Broader "Bear Flag" Between Now and When the market Retests... It has sold off quite a ways, and there should be a chance for it to show us a Monthly "Lower High"... But was 120 oil it.... that was a retrace of 30% of the Decline.??
Retail and Tech are either in Subttle warning, Prepariing for the Overt one, or are in Dip buy, about to go to Euphoria....
TK said... Tech built such a strong base, it's hard to see it try and come straight back down... Tech and Financial... I swear still have some upside... Which suggests to me, that this upmove in the indexes has some space to go.
I'm not playing Possum here, I actually don't know, and just throw out possibilities....Probabilities.
if I can come up with a few possibilities and then when the day starts, I can hopefully figure out where we are, during trading.
And
Tradewell, who has her 'A' game on, Says we may get a slight pull back or a Neutral day... That makes me nervous... But my anxiety, says we are in anxiety.
Financials could run for 2 weeks... But when you look at the charts, they look ripe for some form of break out move.
Assuming(like a fool), financials have bottomed, and that "it's not different this time" and that the Rotation chart is correct, The next decline should Bottom Retail, and Tech.... will that happen at q3 earnings? mid october. Or when Xmas Sales comes out Thanksgiving. Thanksgiving.... Because at that point, Retail Bears may run out of reasons to sell?
NFP is the week after this one, The End of the month money comes in this comming Friday. There are 7 weeks between now and Quarter 3 earnings, and 2 NFP. We could be at 11K in 2 weeks, If we go up for most of this week, that means we could hit 11-10500K in 4 weeks... What will we do for, the additional 3 weeks... or will we go lower? Barry says 10,000, yamada says 10300... Shrug...
I think the 2 NFP between now and then will determine how low we go.
and some stuff may be determined by news flow.
USA is leaving Iraq (supposedly, in 2011).
That's the Sunday surprise :)
Up day tomorrow. I'm optimistic, for some reason.
I have too many stocks ready for a break out... seemed inevitable... I do like your idea of a neutral day, or slight pull back...
how about a "double Top"? this week?
I'm a bit nervous.... Funny, did you see some of the friday volumes. KSS traded 2.5 million shares.... that is like 1/3 normal volume.
Everyone will be on vacation this week. Some nice complacancy is what the doctor will order... into some fall Fear.
What if they just come back from vacation on tuesday... and sell the market.... Summer is over... Sell it.
Or just the opposite. After the holiday, everyone comes back ready to push this baby up. The volumes have been low all last week.
"Sell in May and go away, until Labor Day" or something like that (I just made that up!)
I'll go with TW for an up up day tomorrow. Hang Seng is up 2.6% as I type this. Folks will start to get more nervous later in the week, but thats EONS from now.
I think Asia capitulated, and that 10% up day was the reversal.
No idea how that will affect us....
Tony, we have to Retest.... HAVE TO...
but we did sell off to 11300, could be a retest.... but I doubt it...
But... sounds like you are working out of Anxiety and into Denial... Sounds like Fun.... Me too... Let me know when you want to say Yipee outloud.
:) This game is getting fun.
Good day, y'all!
My Friday shorts are doing great :) (So that's what that optimism was)
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