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Chris Scoreboard Johnston
ParticipantChris Johnston
Here We Go
The sell May and go Away goes against the seasonal tendency for a rally at that time of the year. It does not always happen, but on average it does. That is not part of my trading, so it is not a consideration one way or the other. I am not sure where that came from, but probably from someone who never made any money trading. I cannot afford to get caught up in cute little phrases like that with no basis in fact. I trade for a living, so I need to make money, not write about what others should do. I do advise others, but I only make money when they do, so I need to be pretty accurate. Last year we had a big decline in May which I called one day in advance in my blog. You can go to it and see the May 10th post. That was clearly telegraphed by a bond market decline, which we do not have right now.
When the commercials are as heavily long as they are now, it is not likely that a large decline will occur. If they head to the sidelines, I will go with them. Until that time I will stay heavily long as I have been for about a month now. Fighting a trend like this is a good way to part with ones money IMO, and I have learned that lesson the hard way over the years.
This does appear to be a blow off top, but how far it goes is anyone’s guess, and I want to ride it as long as possible.
ParticipantChris Johnston
The fundamentals for the stock market that I watch are all very strong right now. I have stated this in here repeatedly for the last 2 months. For those that are bearish, I would re-examine those things that you evaluated in determining your position, and correlate them to 6 month stock price movements. What you will find I suspect, is very little correlation. If you find strong correlations than stay short.
Hint – Factory orders do not correlate to stock movements except “possibly” on a 5 minute chart. The dollar also has no short term correlation that I have ever been able to find. I will say what I have said before, too many people in here have too large of a gloom and doom view of things, and as a result miss good opportunities.
I would not suggest fighting this trend, and actually buying any pullbacks we get until July/August approximately. Things can always change, but at the moment all things I study point upward.
ParticipantChris Johnston
Neither one of us really knows what will happen. I think you are more bearish than I am at the moment. This year we are following the seasonal pattern almost to a “T.” As a result, I will continue to weight that heavily. Keep in mind that I am a fairly short term trader. I rarely hold for more than 6 months with stocks, and much shorter than that in futures. I am expecting a substantial downward move in stocks before years end, which will hopefully set up another Oct/Nov buy. However, I am expecting it to begin from higher levels.
If we get a big blow off here like it appears we are, I may exit my longs ahead of the August time frame. Also, if bonds were to get really weak, that could also cause me to exit sooner. Third, a shift from long to short by the commercials, could also cause me to re-evaluate. Without any of those two things happening, I will ride this. My feeling is that you simply cannot afford to miss moves this powerful. I trade based on my trading systems, not my economic viewpoint.
What bad news, most companies are knocking it out of the park with earnings?
ParticipantChris Johnston
I do not think we will see a recession this year, but I do think we will see a good sized stock market drop at the end of the summer. I do have another business interest that is pretty closely tied to day in day out corporate activity, and that business has been very slow for the last 60 days.
Their is a 10 yr cycle due this year for stock market tops in late summer, but we will have to see as we approach if the stage is set properly for the selloff. Maybe that will lead to a recession next year, I am not sure. I am not an economist, just a dumb trader.
I think they are too smart for their own good. Their models get so complex and contain so many variables, that they get lost in the forest. For now the trends are up in both the economy and stocks, so go with the trend until it changes.
ParticipantChris Johnston
I told everyone in this forum with the go on the record thread that a good sized rally would happen mid to late April to the beg of May as the starting point.(It was a guess but based on research) I did commit my money heavily about 2 1/2 weeks ago in line with this. This is the seasonal tendency, and it also ties in with the mid term congressional election cycle ( which lasts 2 years ). The fundamentals at the moment are very strong for stocks.
I have also warned people repeatedly over the last 9 months not to short this, some of you on an individual basis. I think for some reason people get too tied up in this macro disaster you see coming, and as a result miss the good trend moves. This trend is very strong, do not short it here. I hope most of you are enjoying nice returns during this run.
Look to short in August, or itleast exit longs then.
ParticipantChris Johnston
High short interest is a buy signal, not a sell signal. Extreme sentiment readings are best used to fade. They indicate alot of fear, where complacency is typically present at tops. I am heavily long stocks from a couple of weeks back trying to ride this typical seasonal upswing that occurs here. The way I see it, the fundamentals are very bullish in the near term, and I committed money accordingly.
April 23, 2007 at 6:23 AM in reply to: Renters are foolish??? “5 lousy excuses not to buy a home” . . . per MSN #50836ParticipantChris Johnston
I look forward to being financially ruined by my recent home purchase, as now I have learned that is guaranteed.
Kev, I am curious what investments you have and what you see taking place in other asset classes. People with views on things that are that emotional and extreme are typically what people like me look for to “fade.” (This is trading talk for doing the opposite)
Will the value of the ranch I just bought decline?, undoubtedly. Will it ruin me financially?, absolutely not. That is one of the most ridiculous statements I have read in this blog.
ParticipantChris Johnston
Commodities and Futures
April 17, 2007 at 6:57 PM in reply to: Strong Earnings Push DOW Higher & Globalization Effect on US Company Earnings #50425ParticipantChris Johnston
I am glad to see a post from someone smart enough not to fight this uptrend in the stock market. Anyone can argue all they want about why it should or should not be happening, I would argue that it should be based on fundamentals that I follow. However, the fact is the market is in an uptrend and trying to pick the top to short is a very tough thing to do.
I do expect a decent sized retracement in the fall, August or so approximately, but not Armageddon. The dollar discussion is a different coversation entirely. We have a good downtrend, but the commercials are heavily long so a bounce could happen at any time.
ParticipantChris Johnston
I think the market will make a pretty strong upward move into the beginning of August. We are short term very overbought, so a small correction could happen at any time. If we happen to get even a small rally in bonds, we will be off to the races I think. If bonds continue weak, the equity rally will be more moderate.
Just my opinion, but I put my money where my mouth is. The commercials are heavily long, and big selloffs do not usually happen when this is the case. The only thing that would make me change this view is if todays upward gap is filled quickly.
ParticipantChris Johnston
This whole issue is annoying to me as well. However, this is why in my analyis I focus more on past cycles in prices and not on the individual details of what transpired. What this does is take the “noise” out of the discretionary analysis. There are always going to be different individual catalysts that create price change. In general, they are unpredictable in advance. However, if we know for example that a 10 year cycle exists, we can focus on the time element and not get buried in the price analysis. This is why I sold in 2005 in the fall, the 10 year cycle. I did not need to analyze the easy money, or the individual items that “extended” the price run. It was not extended at all by cyclical time analysis. Using price to predict price usually does not work consistently. Using that cycle as a backdrop, I got out at basically the exact top, whereas others who got too tied up in the emotion of the components of the run up, jumped out too early. (My recent home purchase is not a timing decision like the exit in 2005 was, it was a bigger picture decision with poor short term timing).
I state all of this for the following reason. It is by this same logic, that a 50% drop will not occur. We have never had one, and we will not have one. You are starting to see the makings of this bailout crap, and it will qualify as a catalyst that was not predictable. There will be other things as well. You do not need to predict them, just focus on what the prior declines have been like, both in price and time, and go from there.
This is why “the different this time” arguments always fail. There is a reason they have failed, these unpredictable types of things like this. We have no way of knowing what they will be, just that they will be there, and will have the effect of containing the cycles as they have done in the past. It is for this reason mainly, that I have stuck to the 20% drop forecast, which I think will barely happen basis the median, if it does at all. The one qualifier I have, is that that 20% is for the OC median not SD, even though I am now an SD resident.
It does look dark right now, but it has looked equally bleak in past cycles of things that have turned around. Most cyclical timing models show 2008 as the first possible low point, which is based on an 18 year cycle that has repeated from highs to lows.
ParticipantChris Johnston
I will swing by if I can. I am doing some work on my house, and I am not sure if I will have time, but if I do I will drop in.
ParticipantChris Johnston
I completely agree, measuring price to predict price is a notorious mistake in the world I live in. It is clear to me that the interest only calc for mortgages needs to be substituted for the 30 yr P+I as the base affordability measure. These loans have been around for a very long time, and are not going away, so figuring payments based on those I think has more merit. So maybe 20% down and then Interest only on the 80% etc.. The 100% financing I am not too sure about longevity wise. This also needs to be used in the rent to own ratios in my opinion.
Ratios like you speak of have been written about, even by that pathological liar, Lereah. I do not know what the best ratio would be, but I think research in that area is prudent. I do not have time to do it. I read an article recently about a gal who created her own P/E types of ratios and used them to buy and sell homes successfully. There are some great researchers in here, so maybe somebody can take this one on.
ParticipantChris Johnston
I do not think we are near a recession as I have stated repeatedy in here. Especially with todays non-farm report showing a good employment picture. It is unlikely that GDP will show two consecutive quarters of negative growth anytime soon, and that is how recessions are defined. There may be sectors that individually have them, like RE, but the economy as a whole does not appear to be headed for one right now.
If someone wants to define an alternative concept for a recession, than maybe one can occur, but not by the traditional standards, itleast in the next 2 or 3 quarters.
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