Thursday, November 24, 2011
Monday, April 4, 2011
Wednesday, January 19, 2011
Saturday, January 15, 2011
Banknifty - which way will it go?
Chart pattern (example) for the bullish view:
S&P500 also had a massive fall from 1210+ to 1010 from April 2010 to July but subsequently it made a smart recovery against all odds/sentiments climbing the proverbial wall of worry.
Chart pattern that supports bearish view:
US banking index made a peak in April 2010 and then tanked back to the point where it broke-out. Subsequently, it just underperformed S&P500 and just consolidated for next 7-8 months
So we'll keep watching which way Banknifty goes!
Thursday, January 13, 2011
Sunday, January 9, 2011
Saturday, January 8, 2011
Will chart of HDFCBANK give a clue as to what Nifty will do next?
Thursday, January 6, 2011
Tuesday, January 4, 2011
Monday, January 3, 2011
Text book Double Bottoms rarely work
Here's an example which shows that the second bottom is typically lower than the first one by a few points - just to take out the stops for lucky longs that got in during the first bottom
Friday, December 31, 2010
Thursday, December 23, 2010
David Rosenberg's - TEN REASONS TO BE CAUTIOUS FOR THE 2011 MARKET OUTLOOK
Source: https://ems.gluskinsheff.net/Articles/Breakfast_with_Dave_122310.pdf
1. In Barron’s look-ahead piece, not one strategist sees the prospect for a
market decline. This is called group-think. Moreover, the percentage of
brokerage house analysts and economists to raise their 2011 GDP
forecasts has risen substantially. Out of 49 economists surveyed, 35 say
the U.S. economy will outperform the already upwardly revised GDP
forecasts, only 14 say we will underperform. This is capitulation of
historical proportions.
2. The weekly fund flow data from the ICI showed not only massive outflows, but in aggregate, retail investors withdrew a RECORD net $8.6 billion from
bond funds during the week ended December 15 (on top of the $1.7 billion
of outflows in the prior week). Maybe now all the bond bears will shut their
traps over this “bond-bubble” nonsense.
3. Investors Intelligence now shows the bull share heading up to 58.8% from
55.8% a week ago, and the bear share is up to 20.6% from 20.5%. So
bullish sentiment has now reached a new high for the year and is now the
highest since 2007 ― just ahead of the market slide.
4. It may pay to have a look at Dow 1929-1949 analog lined up with January
2000. We are getting very close to the May 1940 sell-off when Germany
invaded France. As a loyal reader and trusted friend notified us yesterday,
“fighting” war may be similar to the sovereign debt war raging in Europe
today. (Have a look at the jarring article on page 20 of today’s FT —
Germany is not immune to the contagion gripping Europe.)
5. What about the S&P 500 dividend yield, and this comes courtesy of an old pal from Merrill Lynch who is currently an investment advisor. Over the
course of 2010, numerous analysts were saying that people must own
stocks because the dividend yields will be more than that of the 10-year
Treasury. But alas, here we are today with the S&P 500 dividend yield at
2% and the 10-year T-note yield at 3.3%.
From a historical standpoint, the yield on the S&P 500 is very low ― too low, in fact. This smacks of a market top and underscores the point that the
market is too optimistic in the sense that investors are willing to forgo yield
because they assume that they will get the return via the capital gain. In
essence, dividend yields are supposed to be higher than the risk free yield
in a fairly valued market because the higher yield is “supposed to”
compensate the investor for taking on extra risk. The last time S&P yieldswere around this level was in the summer of 2000, and we know what
happened shortly after that. When the S&P yield gets to its long-term
average of 4.35%, maybe even a little higher, then stocks will likely be a
long-term buy.
6. The equity market in gold terms has been plummeting for about a decade
and will continue to do so. When measured in Federal Reserve Notes, the
Dow has done great. But there has been no market recovery when
benchmarked against the most reliable currency in the world. Back in
2000, it took over 40oz of gold to buy the Dow; now it takes a little more
than 8oz. This is typical of secular bear markets and this ends when the
Dow can be bought with less than 2oz of gold. Even then, an undershoot
could very well take the ratio to 1:1.
7. As Bob Farrell is clearly indicating in his work, momentum and market
breadth have been lacking. The number of stocks in the S&P 500 that are
making 52-week highs is declining even though the index continues to
make new 52-week highs.
8. Stocks are overvalued at the present levels. For December, the Shiller P/E
ratio says stocks are now trading at a whopping 22.7 times earnings! In
normal economic periods, the Shiller P/E is between 14 and 16 times
earnings. Coming out of the bursting of a credit bubble, the P/E ratio
historically is 12. Coming out of a credit bubble of the magnitude we just
had, the P/E should be at single digits.
9. The potential for a significant down-leg in home prices is being
underestimated. The unsold existing inventory is still 80% above the
historical norm, at 3.7 million. And that does not include the ‘shadow’
foreclosed inventory. According to some superb research conducted by the
Dallas Fed, completing the mean-reversion process would entail a further
23% decline in real home prices from here. In a near zero percent inflation
environment, that is one massive decline in nominal terms. Prices may not
hit their ultimate bottom until some point in 2015.
10.Arguably the most understated, yet significant, issue facing both U.S.
economy and U.S. markets is the escalating fiscal strains at the state and
local government levels, particularly those jurisdictions with uncomfortably
high pension liabilities. Have a look at Alabama town shows the cost of
neglecting a pension fund on the front page of the NYT as well as Chapter
9 weighed in pension woes on page C1 on WSJ.
1. In Barron’s look-ahead piece, not one strategist sees the prospect for a
market decline. This is called group-think. Moreover, the percentage of
brokerage house analysts and economists to raise their 2011 GDP
forecasts has risen substantially. Out of 49 economists surveyed, 35 say
the U.S. economy will outperform the already upwardly revised GDP
forecasts, only 14 say we will underperform. This is capitulation of
historical proportions.
2. The weekly fund flow data from the ICI showed not only massive outflows, but in aggregate, retail investors withdrew a RECORD net $8.6 billion from
bond funds during the week ended December 15 (on top of the $1.7 billion
of outflows in the prior week). Maybe now all the bond bears will shut their
traps over this “bond-bubble” nonsense.
3. Investors Intelligence now shows the bull share heading up to 58.8% from
55.8% a week ago, and the bear share is up to 20.6% from 20.5%. So
bullish sentiment has now reached a new high for the year and is now the
highest since 2007 ― just ahead of the market slide.
4. It may pay to have a look at Dow 1929-1949 analog lined up with January
2000. We are getting very close to the May 1940 sell-off when Germany
invaded France. As a loyal reader and trusted friend notified us yesterday,
“fighting” war may be similar to the sovereign debt war raging in Europe
today. (Have a look at the jarring article on page 20 of today’s FT —
Germany is not immune to the contagion gripping Europe.)
5. What about the S&P 500 dividend yield, and this comes courtesy of an old pal from Merrill Lynch who is currently an investment advisor. Over the
course of 2010, numerous analysts were saying that people must own
stocks because the dividend yields will be more than that of the 10-year
Treasury. But alas, here we are today with the S&P 500 dividend yield at
2% and the 10-year T-note yield at 3.3%.
From a historical standpoint, the yield on the S&P 500 is very low ― too low, in fact. This smacks of a market top and underscores the point that the
market is too optimistic in the sense that investors are willing to forgo yield
because they assume that they will get the return via the capital gain. In
essence, dividend yields are supposed to be higher than the risk free yield
in a fairly valued market because the higher yield is “supposed to”
compensate the investor for taking on extra risk. The last time S&P yieldswere around this level was in the summer of 2000, and we know what
happened shortly after that. When the S&P yield gets to its long-term
average of 4.35%, maybe even a little higher, then stocks will likely be a
long-term buy.
6. The equity market in gold terms has been plummeting for about a decade
and will continue to do so. When measured in Federal Reserve Notes, the
Dow has done great. But there has been no market recovery when
benchmarked against the most reliable currency in the world. Back in
2000, it took over 40oz of gold to buy the Dow; now it takes a little more
than 8oz. This is typical of secular bear markets and this ends when the
Dow can be bought with less than 2oz of gold. Even then, an undershoot
could very well take the ratio to 1:1.
7. As Bob Farrell is clearly indicating in his work, momentum and market
breadth have been lacking. The number of stocks in the S&P 500 that are
making 52-week highs is declining even though the index continues to
make new 52-week highs.
8. Stocks are overvalued at the present levels. For December, the Shiller P/E
ratio says stocks are now trading at a whopping 22.7 times earnings! In
normal economic periods, the Shiller P/E is between 14 and 16 times
earnings. Coming out of the bursting of a credit bubble, the P/E ratio
historically is 12. Coming out of a credit bubble of the magnitude we just
had, the P/E should be at single digits.
9. The potential for a significant down-leg in home prices is being
underestimated. The unsold existing inventory is still 80% above the
historical norm, at 3.7 million. And that does not include the ‘shadow’
foreclosed inventory. According to some superb research conducted by the
Dallas Fed, completing the mean-reversion process would entail a further
23% decline in real home prices from here. In a near zero percent inflation
environment, that is one massive decline in nominal terms. Prices may not
hit their ultimate bottom until some point in 2015.
10.Arguably the most understated, yet significant, issue facing both U.S.
economy and U.S. markets is the escalating fiscal strains at the state and
local government levels, particularly those jurisdictions with uncomfortably
high pension liabilities. Have a look at Alabama town shows the cost of
neglecting a pension fund on the front page of the NYT as well as Chapter
9 weighed in pension woes on page C1 on WSJ.
A very thought provoking & straight from the heart post from Dr. John Hussman (A good Christmas read)
For starters Dr. John Hussman is a long/short hedge fund manager who is both geographically and intellectually far away from any cheap Wall Street Fund managers/analysts.
His claim to fame?
He has called last few major/crashes to almost the last day/week. And not just that - he has beaten 99% of Fund managers over the last 5 years as per Bloomberg (http://www.thecapitalgoldgroup.com/2010/11/u-s-stocks-drop-amid-irish-bailout-fund-raids-in-insider-trading-probe/)
Here's a year end post from Dr. John Hussman
http://www.hussmanfunds.com/wmc/wmc101220.htm
Its somewhat complicated read - esp if you are reading Hussman's post for the first time but if you make it a habit of reading his every Monday evening (IST) post, this summary would be a very good guide to what could come in 2011.
His claim to fame?
He has called last few major/crashes to almost the last day/week. And not just that - he has beaten 99% of Fund managers over the last 5 years as per Bloomberg (http://www.thecapitalgoldgroup.com/2010/11/u-s-stocks-drop-amid-irish-bailout-fund-raids-in-insider-trading-probe/)
Here's a year end post from Dr. John Hussman
http://www.hussmanfunds.com/wmc/wmc101220.htm
Its somewhat complicated read - esp if you are reading Hussman's post for the first time but if you make it a habit of reading his every Monday evening (IST) post, this summary would be a very good guide to what could come in 2011.
Sunday, December 19, 2010
If you are looking for a topping out of world markets -- two very important indices to watch for
You got it right - the mother of all indices! US Banking Index. It never happens that world markets will top out without the US Banking index - where all the mess started off back in July 2007.
US Bank Index has underperformed S&P500 for the last few months and it has just started rallying - trying to take out resistance around 51. To me the writing is on the wall - If KBW Bank Index does manage to take out the resistance level then don't look for a top in S&P500 or any other world markets very soon!
The next one is Topix Japanese Banking Index, which is down 90% from its 1992 levels! It recently hit an all time low in November!
#############
Update on 22nd Dec
#############
One more picture -- the Japanese Index from 1984-2010
BTW -- As of this morning (22nd Dec) in US markets, US Bank index has made a 6 month high crossing the 51.XX resistance. It looks like it can go up another 7-8% before it meets next resistance at 56-57 range.
Wednesday, December 15, 2010
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