My dream was that a bunch of people were walking, and we were crossing the border from Illinois to Wisconsin (I knew because there’s this sign with a Jersey cow on it, saying “Welcome to Wisconsin”). We met a guy walking the other way who said “Where are you going”, and I responded “To find the herds and milk the cows”.
When you pick a stock, you really can’t pick one to outperform when everything is going up. So you need to wait for a pullback, and see which ones pull back the least. These are the ones that fewer people were willing to sell. We measure all the herds against the S&P 500 index, right or wrong, that’s the choice.
So here are the herds, and their relative performance to the S&P, based on the last 20 days performance (our pullback started around 20 trading days ago). I sorted them from biggest pullback to smallest pullback.
Now, some folks trade ETFs (I've selected these ETFs because they seem to reflect the behavior of the individual sectors, they are not a smattering of stocks from numerous sectors). I don't as a rule (I do GDX and GLD sometimes). But if you see a sector hasn't pulled back, you may want to go into that sector and see what's a best performer. Like AAPL is pretty good in it's sector.
I ran into ICan's problem of getting columns to line up, so I prepared some excel spreadhsheet images. I hope this works.
8.9 EQ in Japan.
ReplyDeleteICan
@Rock,
ReplyDeleteThanks for the herds report.
Be back later.
ICan
Oh my god, the videos I'm seeing are horrible.
ReplyDeleteAnd the Libyan rebels are screwed now, the world news is going to be flooded with disaster coverage.
Japan Issues Emergency at Nuclear Plant
ReplyDeleteAmazing pictures from Japan. Wow. Unreal.
ReplyDeleteI think the top is in, guys.
ReplyDeleteRock you Rock! Thank you so much!
ReplyDeleteTsunami warning!
Nice one, Rock.
ReplyDelete@Jeff,
ReplyDeleteYear end targets on S&P - ritholtz.com/blog
Average 1401.
Also,
"Kobe Earth quake's impact on the Nikkei and $/Yen".
@Rock,
SU is back but not at the level you and I sold. I still have a few.
ICan
Bears afraid of Momo Monday?
ReplyDeleteICan
Anyone who believes in DGDF - check out EPI.
ReplyDeleteICan
@Rock,
ReplyDeleteFrom the 'herds lists". Interesting to see both transports and utilities rising.
If risks comes "off" then utilities would rise.
ICan
Reality setting in for the "consumer"?
ReplyDeletehttp://www.calculatedriskblog.com/2011/03/consumer-sentiment-declines-sharply-in.html
re myself previous post,4:19AM: Strong bullish divergence on the 10min charts.
ReplyDelete(...)
Currently sitting at 3931 (-0.8%). I think such a change in the intraday trend will lead us to at least +0.5 / +1%.
11:30AM update: ok that intraday (virtual) trade is a failure so far. Paris closed at 3928 (-0.89%). All in all, though maybe not discarding them all together, divergences are more like secondary tools, for confirmation purpose only.
Regardless, it's been a good dirty week for Paris stocks.:p Let's see how it ends up in the US.
ReplyDeleteWell the Tsunami was a non event on the west coast as far as I can tell.
ReplyDelete@Thor: The U.S. has been amazingly lucky on the natural disaster front for a while now. Knock on wood....
ReplyDelete@Mutt:
ReplyDeleteFrom yesterday's postings:
YAAAAAAAAYYY!!!!!
Makes me think about Rock's observation, from the The Master Swing Trader: Support and Resistance post:
ReplyDeleteHis [Farley's]second point is that S/R parameters, each by itself, is weak, and the more that add up at a particular price, the stronger the S/R point becomes.
To broaden this point, I believe it safe to state that "the more confirmations (price action and indicators) that add up in favor of a given trade, the higher the probability for this trade to succeed".
Sorry if that sounds obvious. Nothing seems "too obvious" to me, when it comes to trading.:p
@ICan:
ReplyDeleteYou're right, good observation.
The other observation I have as a result of the review of the moving sectors is that there seem to be safe havens. When the world is in trouble, people seem to by pharmas and healthcares.
I guess that's a lesson. When the middle east comes under greater pressure, sell everything and buy pharma ETFs.
Also, if the dow starts to rise, we've got trannies and DOW both rising which is bullish.
I could be full of bull again. I made a little short, and with VXX, but stopped out when it turned and I will wait for a setup again before I go short. Manwich thinks the top is in, and I think every reason we have for the market to go up is still there: global recovery, more jobs, POMO, and Ben threatening to do more if oil rises substantially. And UUP is down again (watch that one, the bottom may fall out of the dollar, they were saying Spain may not need a bailout).
It breaks my heart that McDonalds isn't doing as well. Remember, I told you guye they were closing them (and BKs) over here, and I have to take a 20 minute bus ride to get one.
"The U.S. has been amazingly lucky on the natural disaster front for a while now. Knock on wood.... "
ReplyDeleteYeah, Florida is due for a few hurricanes. We haven't had any hit in the past two years.
@ICan:
ReplyDeleteAccording to a report I read, it costs about &40 to get oil out of the ground, and about $20 per barrel to make gas and stuff. So the oil operations should be making about $50 per barrel profit.
XOM is the biggest. Their profit will be huge. Especially as the price of oil goes to $120. SU also, and SU had quite a pullback, so it may be time to load back up on it.
It occurs to me that reinsurers are going to be hit hard by this and the Australia quake. Add in some Florida hurricanes and by September...
ReplyDeleteEmmie - I've been thinking that for years now. When I was a kid growing up in SF, we used to have a good sized quake, one you could feel, at least once a year. Since 1989 and 1994 though, the two quakes that hit us, almost nothing. I think we're long overdue for a massive quake. Especially here in SoCal. God help us if that happens.
ReplyDelete@Mutt:
ReplyDeleteNot that this is a tech support column, but you were saying your computer seems sluggish.
You may want to download Sysinternals' Process Monitor (now a Microsoft product, but I know the author, and it's a good one, MS bought Sysinternals because of the Brain Drain). Run that when you think your computer is slow and see what processes are running and how much time is spent in each one. A friend's computer was sluggish, and it turns out it was spending time in Nokia's OVI Suite when there was no phone present. We uninstalled OVI, and *poof* it was fast again.
The other thing Proc Monitor is useful for is to record your boot process so you can look to see what programs are accessing some foreign website and maybe you don't want that.
You could also have a rootkit, so get Sysinternals' rootkit revealer, it's best in breed.
They are all free.
And bnesides, I need my post numbers built up. Thor got 99 yesterday.
Quite the reversal for SLV today? Market now anticipating QE3 again? Schizo, waiting on Benny.
ReplyDeleteOK, everybody, remember Greg's post yesterday.
ReplyDeleteAAPL has turned the corner, made my favorite W formation with the right side higher. The setup is in.
In other "union" news, doesn't look the NFL owners are going to bust the NFL Players Union any time soon. The contrast in leverage couldn't be more striking. I actually don't blame the players for wanting the owners and league to open up the books.
ReplyDeletehttp://sports.espn.go.com/nfl/news/story?id=6205936
But interestingly, nobody has a problem with unions for mulit-millionaires. Our culture is very sick.
ReplyDeleteSomebody needs to clue Obama in. He just said Quaddaffi is on the wrong side of history, and the Bolivian people deserve international assistance.
ReplyDeleteI wonder if he knows Bolivia is not Libya.
Did hre really say that? Good grief. I thought W was long gone from the WH.
ReplyDeleteSloppy typing lately. My apologies.
ReplyDeleteDid you see what I wrote for the description of IAK? That's what happens when you touch type.
ReplyDeleteRight hand was over to the right one key.
Osjares Omsiramce omdex should be
Ishares Insurance index
Brother.
Fed's Dudley Says:
ReplyDelete-No Fed tightining soon.
-Not to worry about food inflation because ipad deflaion makes up for it. What?
via - Trader Mark -fundmymutualfund.
ICan
Maybe Jobs will figure out a way for one to eat their iPad if things get really desperate on the food front?
ReplyDeleteLooks like ZH on that same train of thought. Didn't even realize it until after I posted.....
ReplyDeletehttp://www.zerohedge.com/article/former-goldmanite-and-head-new-york-fed-several-career-risk-free-restless-natives-let-them-e
That IS truly unreal though, isn't it? This just boggles the mind. Inflation in necessities and deflation in everything else makes it OK?
ReplyDeleteSo, Dudley sought an everyday example of a price that is falling.
"Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said referring to Apple Inc's (AAPL.O) latest handheld tablet computer hitting stories on Friday.
"You have to look at the prices of all things," he said.
This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment "tone deaf."
A good post by Edward Harrison over at NC:
ReplyDeletehttp://www.nakedcapitalism.com/2011/03/this-is-how-qe-really-works.html
Manny - the wealthy and powerful in this country are getting farther and farther away from the little guy. You should see the number of gated communities out near Palm Springs. It's like those with money don't even want their neighborhoods accessible to the little man. At what point are entire cities going to be gated?
ReplyDelete@Jeff,
ReplyDeleteJobs should thank him for free advertisement!. Wonder how the media reacts to that? A cartoon or two I suppose.
ICan
CAN"T have deflation at all costs!
ReplyDeleteLet grandma eat catfood.
ICan
ICan - Maybe that's part of the reason they don't want deflation to take hold. It would be good for people on fixed incomes, but probably bad for the wealthy because so many of them are so heavily leveraged.
ReplyDeleteHere's something you won't see heavily reported here.
ReplyDeleteHow millions of lives were saved in Japan because of strict government buildings codes.
@Rock,
ReplyDeleteWhat does AmerRa's monthly 3LB says about the S&P 500 bull/bear trend?
ICan
@MAnnwich:
ReplyDeleteGreat article. I was going to post a real long comment, but forget it.
Harrison's numbers don't add up. From
http://www.federalreserve.gov/releases/h3/current/h3.htm
reserves went from 2.1 trillion in Feb 2010 to 2.2 trillion in 2011.
US banks don't need the money. They're not lending, and nobody wants to borrow anyway. Where do you suppose all those dollars from Treasuries are going, especially when US banks can get as much liquidity as the want from the discount window at 0%?
Overseas. The Fed's simply giving them dollars now, and will retire the treassuries in the future. A 0 sum game, as long as you can simply create the dollars. So we're providing emerging markets with liquidity. And inflation.
The other thing is that the prop trading done has created a bubble. We lost 32 trillion in the crash, and the Fed has put in 3 trillion (actually a lot less) so the 90% recovery of the market has been recovered by leverage (borrowing).
Keep your stops tight and program market orders for the VXX or SDS.
BTW, IMHO, the reason Spain probably won't need a bailout is because of QE2.
Rock - Thanks for the 411 on Sysinternals, I will check it out this weekend. I do appreciate it.
ReplyDeleteMutt
@Thor: Those pesky regulations again. ;-)
ReplyDelete@ICan:
ReplyDeletethe weekly 3LB says we're still up, up, and away. Grinding higher. However, we will see the start of a turn-around when we close below 1320 this week.
However, the daily 3LB says we're turned around. And the volume was up for only 1 week, then dropped back to "normal", or as Dss would say "no fear". Without a volume follow-through, there's no commitment to the trend.
Without volume commitment, the price action has less meaning. It means low-volume could come in and push the market higher. Like we saw in the article about the overnight E-minis. or as Mannwich pointed out, the PPT.
Remember our pullback is only about 4%.
@MAnnwich:
ReplyDeleteOne thing escapes me. Why are we creating worldwide liquidity and inflation? Except to force instability on other nations, I don't see the reason.
@Rock: I think it's obvious, no? I always just assumed that it was to bailout the elites and their banker friends, who would likely be hurt most if we got true deflation.
ReplyDeleteRock - but how much of that do you think is cause by us VS the Chinese? Have you seen the graphs and numbers on their own QE over the last few years? Every bit as large as ours, and remember, it's the Chinese who are buying up all the commodities lately, not us. You saw that link I posted yesterday on metals being used as collateral in business and real estate loans in China.
ReplyDeleteI don't think the inflation is all us, I think it's only partly caused by us.
I need to withdraw my earlier comment about AAPL. We don't have a W formation. Sorry. I screwed up.
ReplyDeleteStill watching, watching.....
And remember, we had very little, or reverse inflation for most of the last two years of QE. I think there's another dynamic going on here and that China might be a big part of that.
ReplyDeleteI get what you're saying about the entire recovery of equities has been done primarily with leverage. Leverage got us into this problem, and these people are hoping against hope it can get us out of the problem. Shit all the debt away from consumers and businesses and move it on to government balance sheets. That can't end well.
Here you go, Rock:
ReplyDeletehttp://www.zerohedge.com/article/guest-post-when-things-fall-apart
I wonder how much of this rally is merely short covering ahead of Mo-Mo Monday? I'm still not convinced the top isn't in. Or least close to it.
ReplyDeleteNow saying maybe more than 1,000 dead in Japan? Wow, what a tragedy.
ReplyDeletehttp://www.huffingtonpost.com/2011/03/11/japan-earthquake-tsunami_n_834380.html
@MAnnwich, Thor
ReplyDeleteI think your 3:31 and 3:35 would be a great topic for a weekend thread.
I think if we really understand the "why", or the psychological aspect, it may help us understand how to trade it.
Good day everyone, this is your captain speaking. We are now clear of the storm pattern that we got caught in, and the flight should be relatively smooth from here on. Feel free to lower your seat back trays, enjoy a beverage of your choice, and enjoy the ride.
ReplyDeleteI don't think so, greg. We might approach those prior highs but I might be dumping the remainder of my equity longs at that point and getting out of dodge. Too little upside with too much risk, all things considered, for my liking. Of course, I'll probably be wrong, but I'm OK with that. The return OF my principal way more important to me these days.
ReplyDeleteThere's a divergence.
ReplyDeleteVix is up 30% since the middle east blowup. The S&P is only down 3.8%.
Interesting. Either VIX is overpriced, or we should have fallen farther.
@Rock: You know what camp I'm in. LOL.
ReplyDelete@ICan:
ReplyDeleteBloomberg had an OPEC minister on. He said that the revolution is pretty contained. He said that Algeria won't revolt because they've already been fignting themselves for 20 years, and theey're tired of revolution. He said there's no way the Saudis will revolt with the price of oil at $100.
However, he said that should oil fall to $30 again, a revolt in Saudi Arabia is likely.
I think Obama could buy a revolution, if he wanted to.
Greg - I'll saunter over and join you in that call ;-)
ReplyDeleteCould someone here enlighten me as to what the Saudis would want to revolt against? I saw a documentary once that said all Saudi citizens are basically taken care of from birth to death. If I remember correctly health care is free, they will pay for university for any citizen, and I don't think there is any poverty. Perhaps I'm remembering incorrectly or things have changed. It just seems to me to be a pretty good gig.
ReplyDeleteThings getting more precarious in Japan:
ReplyDeletehttp://www.zerohedge.com/article/nuclear-expert-fukushima-has-24-hours-avoid-core-meltdown-scenario