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Alliancebernstein Income Fund Message Board

  • yanisbagman yanisbagman Aug 16, 2007 3:23 PM Flag

    If the day wasn't bad enough...

    Now Maria comes on CNBC at 3 o'clock and screeches almost endlessly. Normaly don't watch that channel, but can be a source for news and events in these times. Gotta turn the sound off.

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    • I think we now have to accept yesterday's interesting price action as an example of the climax day, one-day-reversal, or, more descriptively, cleanout day.

      So, I got out my ENCYLOPEDIA OF CHART PATTERNS to see Bulkowski's stats for his 500 stock sample of 1991-1996.

      He found 331 "bottom" formations of this type--i.e. high volume reversal days occuring after a panic drop. The failure rate, those formations that produced a gain of less than 5% before the downtrend resumed, was 17%. The average gain of successful formations was 26% with the "most likely" gain (by frequency distribution) at 10 to 15%.

      So, allowing for the difference in these two historical markets, let's say there's about an 80% chance that yesterday's action will produce a worthwhile, tradable uptrend that sets up a Dow Theory-type test of the primary trend towards the recent index tops.

      At the moment, we're a little more comfortable with prime debt than with equity, as it seems Fed easings are increasingly baked into the cake.

      Stocks are more problematic, from a primary trend point of view, owing to the increasing probability of a recession or slowdown. The financials, in particular, present difficulties because many loan quality, and therefore book value, issues have to do with slowly-developing credit problems, particularly in the mortgage markets.

      So, we have a watershed technical event of poor certainty, as compared to, say, a rectangular or h & s base after a long bear market-type downtrend. In fact, one might make the case that this plunge was merely the first and wildest leg down of a new primary bear trend--at least that's the supposition that now needs to be tested in the equity markets.

      If we see poor participation (internals) again on a leg up, then I think we'll resume selling bull market long stock, experimenting with long/short approaches by sector ETF, and, above all, day-trading to reduce risk, condition I can get the time to spend at the monitor.

      As you say, "careful." I wouldn't take anything for granted in this environment. Again, the two key tests whichever takes place first:

      1. Yesterday's lows on improved sentiment and internals
      2. The sector and index highs of June, July, and August with particular attention to signs of distribution on the way up.

      I'm concerned about the quick builds of leverage in the system, apparently poor liquidity on the way down, and unrestrained short selling on downticks. IMO, it's going to remain a difficult and dangerous situation for the small investor and position trader.

      FWIW, as always.

    • I think "careful" is the right word.

    • I guess all have their likes/dislikes of various showbiz folks and I have not noticed her screeching but don't follow her that often. Maybe you are sensitive to the pitch of her voice or something.

    • <Me thinks yanisbagman needs to lighten up on the eye appealing talking heads. Gee it's just a job>

      There are plenty of finance-babes on TV who don't screech. Just watch the boys roll their eyes when Maria tells us that the Chinese, with all their money, will save the market. Anyone see her on Celebrity Jeapardy a couple years ago? She's not the brightest bulb in the chandalier.

    • Picked up JRO and PHD yielding more than 10% because "retail" investors believe the end op capitalism as we know it is near. I am a retail investor myself and I know this is only the 2nd crisis of the century this century (i.e. a buying opportunity) and that - even though the rating agencies aren't alll that smart - the investments of these funds are worth considerably more than what I paid for them. God bless fear and greed.

    • It really is the purpose of the financial media to echo or reinforce the predominant trend, whatever it might be. So they're really bullish when the market is, and, well, the press and tv are now full of end-of-the-world stories. That's how they sell themselves. Better still, turn the tv off.

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