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Killer Bunny
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It's easier calling tops isn't it?

I have no idea at all what will happen and I'm not going to attempt to call it. This long-term DOW chart is interesting. It only appears to be in the post 70s period that breakouts have not eventually been retraced. There has been no retracement of the break-outs in the 82-87 period, nor in the breakout from around 3,000 to now. That probably reflects the 100% fiat/inflation nature of the period in question, but it is a tad unsettling. If we do get into that area, where's the technical support coming from?

http://4.bp.blogspot.com/_H2DePAZe2gA/SYsS...rm-dowafter.PNG

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It's difficult to predict. I'm really in the mood to puke from the loss. The bubble is from 95. The confusion is in the way of thinking of the CPI. In a sense the dow is already back to 95 level, even lower.

The cause of our current mess is that japan started to buy treasury bonds big time as a way to stimulate their economy from 1995. That gave the extra spice to what otherwise would had been like 1965.

http://www.pimco.com/LeftNav/Featured+Mark...ross+Dec+08.htm

Edited by carseller
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It's difficult to predict. I'm really in the mood to puke from the loss. The bubble is from 95. The confusion is in the way of thinking of the CPI. In a sense the dow is already back to 95 level, even lower.

The cause of our current mess is that japan started to buy treasury bonds big time as a way to stimulate their economy from 1995. That gave the extra spice to what otherwise would had been like 1965.

http://www.pimco.com/LeftNav/Featured+Mark...ross+Dec+08.htm

Depressing stuff. Perhaps the US won't take to socialism for very long.

Edit: On the other hand, 5,000 would be, what, 30% downside? If the upside was double that then it would be a reasonable position to take, especially if you picked your sectors/companies well. Also, it isn't an all or nothing. You can mitigate it by drip feeding and see what happens.

Edited by Red Kharma
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Depressing stuff. Perhaps the US won't take to socialism for very long.

Edit: On the other hand, 5,000 would be, what, 30% downside? If the upside was double that then it would be a reasonable position to take, especially if you picked your sectors/companies well. Also, it isn't an all or nothing. You can mitigate it by drip feeding and see what happens.

I have a mate at Citibank New York. The rumour is that Citi will be nationalised this weekend. Maybe Bank of America as well. Citibank now trading for a buck and change. Interesting thought for the bulls-if all the banks in the Dow go to zero-including Goldman/JP Morgan/Wells Fargo etc. the Dow would go down less than 200 points. If we assume that it's been the financials that have dragged the index down overall with continual bad news, taking two of them out might lead to the index advancing pretty substantially. Just a thought and wonder what anybody else thinks of this?
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I have a mate at Citibank New York. The rumour is that Citi will be nationalised this weekend. Maybe Bank of America as well. Citibank now trading for a buck and change. Interesting thought for the bulls-if all the banks in the Dow go to zero-including Goldman/JP Morgan/Wells Fargo etc. the Dow would go down less than 200 points. If we assume that it's been the financials that have dragged the index down overall with continual bad news, taking two of them out might lead to the index advancing pretty substantially. Just a thought and wonder what anybody else thinks of this?

It would not suprise me. I think they use Alan Greenspan. Greenspan makes a statement, as with that they should let a bank fail (before the lehman collapse), and now about nationalization. I just don't see what role an ex-central banker just have about interfering into the process, unless he have some knowledge.

The thing I read was that they was going to issue loans to some private "hedge fund" like initiative that would buy up the bad assets. However I think they should nationalize the banks. It's the only right thing. Happened in Scandinavia in 1991, crisis ended in 92, the cost of the nationalisation and everything, brought short term interest rates to 20 % in 1992.

I looked at the charts, looks as if Wells Fargo and JP morgan are going to make it. Citygroup and Bank of America looks like something will happen.

Edited by carseller
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Replied to Tom's thread in the main forum. Someone has also posted a link to an article there saying the same thing about C and BAC.

I have no idea what criteria is used for replacing stocks in the DOW, but if you think about it, it can only cause the index to bounce by replacing with stocks with a price higher than these two. Which will happen.

They will also wish to move money out of gold if they can before $1000+ is in the media again. Taking some decisive action in these two stocks should have some sort of impact depending on what they do. Looks like we may be back to Paulson's sunday night bailout special.

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One thing I'm pretty sure of is that the trouble would already be over now, if Greenspan still had been in charge. I think he had some level of practical intelligence that Bernanke is lacking.
Carseller

I agree. Greenspan had "Greenspanspeak" whereby nobody knew what the feck he was talking about, which was deliberate, but the markets trusted him. Bernanke has just never ever looked the part-his basic credentials are that he has studied the 29 crash more than anybody else probably on the planet which is why he gave his "helicopter Ben" speech about adding liquidity by dropping money from above if necessary. It was a bad speech to make and has led to little faith in him. I think bank nationalisation would have been unthinkable with the Republicans in charge but this is a different scenario with the Dems in control of house/senate and the big job. I think it will happen and I agree also with what you say as to it being a good thing. My take is that they will be wary of taking on too much with Citi and BOA but by now Geithner should have a decent idea what's lurking on the balance sheet of both companies. I shorted both in the teens so I am OK but you can't add to the positions now because both are under $5.

Bottom line is that I think Citi will be nationalised, BOA not right now. I bank with Citizens Bank (owned by RBS) and BOA but the new FDIC limit is $250,000 and I haven't got that at either right now so I am OK. Even Wells Fargo is under ten bucks so I might go long on that one. They are in decent shape IMHO. Same with JPM and Goldman. Morgan Stanley will also survive (again IMHO) and that's mainly what will be left standing apart from the regionals.

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Replied to Tom's thread in the main forum. Someone has also posted a link to an article there saying the same thing about C and BAC.

I have no idea what criteria is used for replacing stocks in the DOW, but if you think about it, it can only cause the index to bounce by replacing with stocks with a price higher than these two. Which will happen.

They will also wish to move money out of gold if they can before $1000+ is in the media again. Taking some decisive action in these two stocks should have some sort of impact depending on what they do. Looks like we may be back to Paulson's sunday night bailout special.

Red Kharma

It's just my opinion that the baby is really being thrown out with the bathwater. Not everybody is reporting bad figures (even Dow 30 stocks). Even the ones beating estimates are getting slammed if they are unlucky enough to report on the same day that another bank goes t!ts up. If they were not in the Dow then they can't affect the index or the sentiment. That's why I don't see the Dow retreating to 3000. As an instance I went to the local chamber of commerce/town hall meeting here in Rhode Island last night. "We" are getting $1B (as a state) from the stimulus and it will make a big difference to a small state such as ours. We have some Dow listed stocks that will benefit from the money. Just another thought. It's not all doom and gloom.

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Replied to Tom's thread in the main forum. Someone has also posted a link to an article there saying the same thing about C and BAC.

I have no idea what criteria is used for replacing stocks in the DOW, but if you think about it, it can only cause the index to bounce by replacing with stocks with a price higher than these two. Which will happen.

They will also wish to move money out of gold if they can before $1000+ is in the media again. Taking some decisive action in these two stocks should have some sort of impact depending on what they do. Looks like we may be back to Paulson's sunday night bailout special.

Red Kharma

Basically there is no fixed criteria for being a Dow index component. The Wall St Journal (Murdocs latest acquisition of course) picks the stocks which again is food for thought IMHO. I tend to watch the S&P to be honest, just because it's obviously broader based and a bit more scientific.

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Thanks chaps - interesting thoughts.

I'm not a doom and gloomster, I prefer to take it as it comes.

Kharma

Did I say "scientific" in my last post? I didn't wish that to sound like I was a "chartist" as we had the argument a couple of days ago LOL.

Last thought on the whole bank stuff and what I feel has been wrong all along but not debated by the mainstream. I know I have banged on about this with people like Hamish the Jock (a perma bull on house prices) as against me a bear. I have kept asking him what the CDS debacle would have on banks capitalisation ratios and therefore their ability to lend. He has never answered.

FWIW I have never believed that CDO's would be the proverbial straw that broke the old camel. The total value of "sub-prime" CDO's (although mixed in with other stuff more "prime") was never that much of a deal, even given the default levels. What I think they cannot value is the CDS book. There are just so many parties and bloody counter-parties it's impossible (or very difficult anyway). It was the CDS book that brought down Lehman but nobody will come out and say it. They were counter-party in so many deals. They were happy to take the CDS premiums-pennies on the dollar as an insurance contract, thinking they would never have to pay out. Same with AIG.

A CDS is insurance (or should be). Insurance law states that you havee to have an "interest" to enter in to a contract. The insurer can only put you in to the same position you had if the event did not occur. Your house burning down for instance. You can't have another guy who doesn't own the house having a bet on your poor hovel getting torched. CDS's are different because any bugger can have a bet on the underlying CDO going down. In fact some very large hedge funds have done just that-betting on the value of the underlying security going down (the CDO). It's feckin madness and unregulated. Look at Barclays and what they are holding. At least the CDO market was "regulated" inasmuch as you can't produce more CDO's than the total value of all the mortgages (or other stuff) they are derived from. However an added problem is they then threw in muniicipal bonds and other securities and sliced and diced them. No wonder Greenspan says he doesn't understand them.

Again, bottom line is I think that it's the CDS's that will bring down the house for a lot of the banks. At least the CDO's have a chance of gaining value at some point-the CDS is lost money forever-it has to be paid now.

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I think a CDS contract is pretty interesting. If I buy a countract against the default of the US, how would I get paid?

I think that's quite an interesting question.

Depends whose the counterparty. Imagine if it was that Gono guy in Zimbabwe? You would get zillions and zillions and zillions. Enough for a Macki D and super fries. Off topic here but I didn't see any Dunkin Donuts when I was back "home" last year. Has anybody noticed them in the UK? It started here in the North East yonks ago and I read somewhere that they were thinking of attacking the UK in a big way. Great coffee (half of Starbucks price and as good) plus cheap cheap breakfast stuff. Love em.
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http://stockcharts.com/charts/gallery.html?$COMPQ

Could someone take a look at the $COMPQ (Nasdaq) SPX ratio at the bottom of the weekly chart (2nd chart).

Whenever this ratio is overbought like this we have seen a big sell off. That is usually from a market "top" (intermediate or otherwise).

This ratio is overbought now but we're near a market low. So to correct the Nasdaq must fall quite significantly relative to the SPX, which suggest a general market sell off. A big one.

Am I reading this right? It seems very unlikely that the NASDAQ would sell off with the SPX rising strongly doesn't it? Are we in for some big falls as this ratio turns over? :blink:

Forget charts. We are in uncharted waters . That means what it says on the box. It is foolhardy to try to navigate the south china sea with a chart of the solent. Its no good looking over the back of the vessel to get your heading.That is why so many people are ending up on the rocks. Make for a safe haven to protect yourself or you may suffer a big loss. trust me. I am a licenced boatman.

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Forget charts. We are in uncharted waters . That means what it says on the box. It is foolhardy to try to navigate the south china sea with a chart of the solent. Its no good looking over the back of the vessel to get your heading.That is why so many people are ending up on the rocks. Make for a safe haven to protect yourself or you may suffer a big loss. trust me. I am a licenced boatman.

Many thanks for your words of wisdom. Price is price. It either goes up or down. That's it I'm afraid. There's no such thing as unchartered history. I think you're talking about predicting the future which is something entirely different. Astrology perhaps. I was seeking an historical perspective, which is the only thing a chart tells you. Enjoy your sailing! :)

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Uh oh.

Whenever a stock or an index stops just above a major (huge) support or below a major resistance it can jump the creek.

741 the support. Closes at 743. There's no fear out there yet we are at multi year lows. This implies Mr Market says 'a bounce/rally we deserve.' B0llocks. Probably.

600/650 anyone?

My 30-50% rally from October lows within a few months (timing only as far as that when I said it) is unlikely now. Not impossible.

Scenario - market tumbles next week to 600/650. Then rallies to 1100 by late spring. Not impossible. At 600/650 there will be incredible fear - just the way the investment bankers love it.

Oh, and forget the Dow - as many are fixated on on the main forum. It's immaterial. The NASD and S&P are the only games in town.

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There is many good charts on this site

http://www.dshort.com/

Like this:

four-bears-large.gif

I think it's starting to look ugly, like after 29, and Obama don't say or do what the market wants to hear.

The consumer confidence numbers today are important. If they are bad, then we are in the 1929 version of the chart, as consumer confidence should had turned around by now else.

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One area that still looks good is solar, like this companies:

http://finance.yahoo.com/echarts?s=STP#cha...ource=undefined

First Solar, is going to be great, I think

I looked at some of those companies, some even have roof panel solar panels, that is a solar panel that also work as a roof as well as a panel. I like the way the chart looks, it's the way most software companies looked around 1990.

Edited by carseller
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Excellent chart carseller - thanks for that. Not sure whether to top up my inverse ETFs - expecting a bit of a bounce back in the next couple of weeks but I still think the trend is down overall as a lot of bad news still to come out IMO. You're right, it does unfortunately look like 1929 doesn't it.

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I'm starting to have a mild panic as I got back into shares at 4000-4050 FTSE (again it was only 40% of my trading/pension money). It seemed like a good idea (to me) last week. I'm considering taking a hit to get out, as this is looking a bit ugly to me. The index is almost at a low and there's very little fear / panic. Also, the big stocks I follow (VOD, BP etc) are still nowhere near last years lows, I think this could still go down as much as 15-20% from here. Scary times.

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Uh oh.

Whenever a stock or an index stops just above a major (huge) support or below a major resistance it can jump the creek.

741 the support. Closes at 743. There's no fear out there yet we are at multi year lows. This implies Mr Market says 'a bounce/rally we deserve.' B0llocks. Probably.

600/650 anyone?

My 30-50% rally from October lows within a few months (timing only as far as that when I said it) is unlikely now. Not impossible.

Scenario - market tumbles next week to 600/650. Then rallies to 1100 by late spring. Not impossible. At 600/650 there will be incredible fear - just the way the investment bankers love it.

Oh, and forget the Dow - as many are fixated on on the main forum. It's immaterial. The NASD and S&P are the only games in town.

DOW is useful because it is the one mostly widely quoted, that is all.

I agree more or less with your scenarios, although I wouldn't rule out a bounce back up into that 800-835 area first. It would be unusual not to re-test that 804/820 support. That would suck in some longs too before selling off. VIX (I know you prefer VXO) is trending up but we definately have a bullish divergence developing, and the COMPs and Russell need to sell off before a major fall in SPX I think. So I wouldn't be suprised to see them go lower with a small bounce in the SPX. That may be the signal that a major sell off is coming.

I saw a fair value number of SPX 526 yesterday based on falling dividends, but can't remember where so can't post the link. It would certainly help to have a major sell off to flush out sellers imo. I'm hoping for that on high volume.

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Many thanks for your words of wisdom. Price is price. It either goes up or down. That's it I'm afraid. There's no such thing as unchartered history. I think you're talking about predicting the future which is something entirely different.

Sorry. My mistake. I just thought that at each point of trade, be it buy or sell, a prediction was being made of the future, be it five minutes or five years. I live and learn.

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