Contrarians view- reasons why i believe another correction is coming

[clavocat]

i remember nathan lloyd on here said when u feel confident sell and when u feel horrible buy, cramer says the same thing

MAJOR reason, look at the bullish percent index, it picks tops and bottoms of the NYSE and Naz, this thing is also overbought

NYSE just ran up 1300 points and is due for a correction, remember last run up before may 12th? up 1400 points and pulled back just below the 200 MA 1000 points to 7708, BPI woulda predicted this once it moved up

Im pickin this thing pulling back just after Christmas as there is no new money to be put in the market and when supply exceeds demand, markets go down, its also nearing the top of the trendline if u draw tops.

Where will it pull back to? im guessing 500-1000 points and DEF no more unless we hit a recession, this would pull it back to just under the 200 MA again and hit the bottom of the trendline to about 8200-8300. I dont think it will pull back 1000 as thats worst case scenario but it will prolly pull back 50%of its run up (700 points)

as for the BPI if u look at the MACD for it, it just crossed which is another indicator of a decline lead to a decline


take this with a grain of salt but im going to have all my positions pulled out in early january when i go on vacation and the christmas run up is over, what i still have i will place a trailing stop on. Worst comes to worse im totally wrong and i get out while it still runs up and i miss gains but missed money is better than lost money :wink: Good luck trading all

[discrat]

Remember, typically in a robust and very very strong Bull Market there is many pundits who are continually saying the Market is Oversold and a big pullback is imminent. In meantime, the Market just keeps chugging along higher and higher. The more people that question whether we are going to pullback ,the more the market keeps going up.
Thats how Bull Markets run their course. Thats why personally I DO NOT try to predict the Markets but I rather just react. Of course it has to all do with yor risk tolerance.

That being said there is a possibility that a recession could be in the future next year. ISM is below 50 and this equals a contraction in our economy and in the past this figure has been a consistent predictor of a recession.
So its definitely good to be cautious.

So I must say that it could be a good time to start researching for potential short candidates after the first of year. But just make sure that you dont jump ship too soon with this bull market

[robvia]

I'm looking for a major crash in 07, but later in the year.
If you read the books
Victor Neiderhoffer - The Education of a Speculator
Harry S. Dent - The next Great Bubble Boom 2006 - 2010

They both have historical charts that say there will be a crash near October of 2007. I took notes and this is what I wrote.

There is a strong tendency for corrections to occur late in the “7” year as happened in 1987, 1977, 1947, 1937, and 1917. It would pay to be out of the markets in August thru October of a “7” year, and then being back in until the “9” year.

Over the last century every “5” year has been up. That has typically been the strongest year on average. The next best year has been the “8” year, with eight out of ten up. The “7” and “9” years tend to see sharp rallies and then a fall off late in the year for good positive net gains.

Be out at the beginning of the “0” year and reinvest on June 30 of the “2” year. Be out from August through October of the “7” year, and then be back in until the end of the “9” year.

-----------------------------
Look at what happened recently. There was a report the dollar was weak, the market tanked, then came back a few days later like nothing happened. This Friday there will be a jobs report, the market is expected to tank. But then it will probably come back.
What we're seeing is the same pullbacks and runs that happened 10 years ago. I do believe there will be a major crash in October of 07. I'm looking to close all positions at the end of July. And the biggest thing I need to do is move my Roth IRA to the sidelines for the crash. Put it in a money market fund, then go back into equities for 2008 thru 2010.

[Luc1Grunt]

Then where would you put your money?

[clavocat]

Then where would you put your money?

shorts, and cash...cash is king, maybe even some defensive stocks

[Luc1Grunt]

defensive stocks?

[Luc1Grunt]

Just to understand this thread.

Market's going into a recession based on numbers today.

Market will likely crash Oct 07.

Going to cash (cash is king) in May-Jun.

Or...defensive stocks.

So, the thought process is this...I will plan to the month, 6 months out what I am going to do based on charts and numbers today (which are historical "patterns" not facts).

Now, if I have 750k in assets, where I put my money is very important.

So based on the fact that overbought/oversold/VIX etc. show signs of decline, I would be best off letting fear guide my plans?

If many followed the same numbers/estimates/CNBC fear mongers in June, the money would still be sitting in cash today.

"Year ending with ___" show probabilities. But those probabilities change every year that goes by.

My point is this.......Predicting the long range future is very risky both ways.

Money is made in bull or bear markets. Don't predict the market...respond to it.

It wins every time!

[clavocat]

ya defensive stocks AKA non cyclicals...im just sayin i think a correction is coming and why not take gains instead of losing it, watch and maybe do some short term trades, you do whatever the hell u want i dont care, but im gonna be aware so i dont lose the thousands i just made in the past few weeks, the market goes up 15% its due to pull back and pull back about half of what it did, so where the hell are u?? ur only up half :idea: the stock market wont keep going, wheres the new money going to come from?? if most people are as heavily invested as they want to be (since were in a bull run) ive gotten burned too many times to not be aware of where were headed, especially in may when i lost a ton and am just making it back now.

[robvia]

Cash is the Vanguard Prime Money Market fund (VMMXX), which makes 5%.

When you trade with Vanguard, you set up a money market account, and the brokerage account. So in July I'll close all positions and the money will "sweep" to the money market, where it will make 5%.

Also, where is the money coming from? Company buy backs. CEOs don't know what to do with the profits their companies are making. So the easy thing to do is buy back stock, which makes the price go up.

[clavocat]

Cash is the Vanguard Prime Money Market fund (VMMXX), which makes 5%.

When you trade with Vanguard, you set up a money market account, and the brokerage account. So in July I'll close all positions and the money will "sweep" to the money market, where it will make 5%.

Also, where is the money coming from? Company buy backs. CEOs don't know what to do with the profits their companies are making. So the easy thing to do is buy back stock, which makes the price go up.

your telling me every CEO is constantly investing into their own company, what bout when they sell, no one will buy?

[concrete]

Fort Worth Star Telegram 6 Dec 06



Horton reins in, still strong

MITCHELL SCHNURMAN
In My Opinion

Business stinks at the country's biggest home builder, and the CEO says it may get worse next year. So why has D.R. Horton's stock price climbed 20 percent in the past four weeks?

Because the Fort Worth company is being as aggressive about reining in its business as it once was about growing it.

Best example: Housing starts nationwide declined 17 percent in the three months ended in September, as builders responded to slumping demand. At Horton, the company cut its starts 46 percent over the same period.

"I'd say we're in the early stages of a declining market," Chief Executive Don Tomnitz told analysts in a conference call Nov. 14. "And as I said [before], most of these downturns are longer and deeper than we envisioned at the beginning."

If this is Phase 1, look out.

Horton has never posted quarterly results like this: Home sales fell 51 percent in Florida, 39 percent in California, 38 percent in Colorado and 29 percent in Nevada. Sales in the company's two other major states, Texas and Arizona, were also down by double digits.

The company reported that 4 of 10 customers walked away from their contracts, a cancellation rate that's more than twice the historical norm. And it took a $199 million charge for write-downs on land and land options

Taken together, that sounds like backbreaking news, certainly not something that drives up the stock price. (Despite the recent boost, Horton stock is still down 25 percent since the beginning of the year.)

Home-builder stocks were helped even more Tuesday, after the head of Toll Bros. said the housing downturn appears to be nearing a bottom, a view that Tomnitz didn't embrace three weeks ago. Investors attached more weight to that comment than to the luxury home builder's results, which included a 44 percent drop in net income.

The housing bubble has been deflating for about nine months, and Horton has held up better than its major competitors. In the fiscal year ended in September, it sold more than 50,000 homes and earned more than $1 billion for the second consecutive year.

The company isn't giving any guidance on earnings, sales or other details, in large part because it's puzzled by the high cancellation rate. When an analyst asked whether the company might lose money next year, Tomnitz says he doesn't see any prospects for that.

But if cancellations continue at their current level, "then it's going to be a much more difficult market than I'd want to spin," Tomnitz told the analyst.

The mere question about profitability is revealing, because Horton has been a moneymaking machine for decades. For more than 100 quarters -- and until the past year -- it reported growing revenue and profits, a string that rivaled any on Wall Street.

Tomnitz outlined a spate of recent moves to respond to the current marketplace. In the past three months, the company has cut more than $200 million in overhead, including the jobs of three chief operating officers. It has renegotiated better terms on almost all contracts with vendors and labor.

It reduced total housing inventory by 27 percent and cut the total value of its land options to $4 billion, down from $6 billion.

With Horton's high cancellations, half the company's units are now spec homes, compared with about 30 percent historically. As a result, Horton is spending heavily on incentives and discounting, reducing profit margins by 450 basis points.

Horton has always taken pride in its low overhead and penny-pinching ways, but it expanded the senior management team to prepare for heady growth. Not long ago, the company talked about building 70,000, 80,000, even 100,000 homes annually, perhaps in the next half-decade or so.

"Frankly, we don't see our growth being like that today," Tomnitz said, so the job cuts included the three senior executives.

The company has reason to worry about the depth of the housing downturn. In October, housing starts nationwide declined 32 percent from a year earlier. That's steep, but past slumps were deeper. According to The Wall Street Journal, housing starts fell 45 percent in January 1991 and 52 percent in March 1980.

Home buyers have been pitting builders against one another, seeking more concessions and better prices. And Horton has leaned on suppliers and subcontractors, which Tomnitz said was helping "big time."

At a site last month, he said, a framing contractor brought his calculator for the first time in a couple of years.

"Prior to that, he would just come in and sit around and chew the fat and say: 'Here is the price. Take it or leave it,'" Tomnitz said. "So we've definitely got their attention now."

Although Tomnitz wasn't specific about future results, he said he expects 2008 sales to be better than '07's, and he offered a "perfect scenario."

Housing starts would continue to fall and inventories would be sold off in the first half of the year, he said, and then prices would begin to stabilize, with fewer discounts and incentives.

That would unleash pent-up demand from buyers, who can't decide whether the current prices are a good deal.

Like everyone else, they're waiting for the market bottom.

[Svenwulf]

OT- nathan had a knack of seeing things around the bend- notice down in the similar threads box he had a warning dated early april. about a month before the may top.

i can see luc's point about not trying to outsmart the market, but if one isn't mindful of the tide in which they swim, you could end up underwater. Cramer and a few people have been dancing around the ugly truth that stocks are ralling because in comparison value currently they offer the greatest return. lvlt is a buy because junk is in short supply?!? i am not going to argue.

maybe this is too simple, but if you look back at some basic history, the bigger/ longer the rally, the harder the following correction. now the trick is in the timing, and i really do like the indicator. anyone follow the hindenburg indicator? i just learned about it.

[clavocat]

OT- nathan had a knack of seeing things around the bend- notice down in the similar threads box he had a warning dated early april. about a month before the may top.

i can see luc's point about not trying to outsmart the market, but if one isn't mindful of the tide in which they swim, you could end up underwater. Cramer and a few people have been dancing around the ugly truth that stocks are ralling because in comparison value currently they offer the greatest return. lvlt is a buy because junk is in short supply?!? i am not going to argue.

maybe this is too simple, but if you look back at some basic history, the bigger/ longer the rally, the harder the following correction. now the trick is in the timing, and i really do like the indicator. anyone follow the hindenburg indicator? i just learned about it.


nice to see someone agreeing, what the hindenburg indicator?? did u read the bullish percent indicator before cuz i just learned about it??

[Svenwulf]

jmo but agreement seldom makes me money. the bullish indicator is new to me, i like it and thanks for the info. from investopedia:

Term Of The Day: Hindenburg Omen
------------------------------------------------------------
A technical indicator named after the famous crash of the German
airship of the late 1930s. The Hindenburg omen was developed
to predict the potential for a financial market crash. It is
created by monitoring the number of securities that form new
52-week highs relative to the number of securities that form
new 52-week lows - the number of securities must be abnormally
large. This criteria is deemed to be met when both numbers are
greater than 2.2% of the total number of issues that trade on
the NYSE (for that specific day).


Investopedia Says:
------------------------------------------------------------
Traders use an abnormally high number of 52-week highs/lows
because it suggests that market participants are starting to
become unsure of the market's future direction and therefore
could be due for a major correction. Proponents of this
indicator argue that it has been very accurate in predicting
sharp sell-offs in the past and that there are few indicators
that can predict a market crash as accurately.

[clavocat]

where do u find this?

[Svenwulf]

clavo, i do not know of anyone who tracks this off hand. imagine it wouldnt be too difficult to set up one's self- set a yahoo screen 52 week highs/ lows on nyse, and divide by total issues?

ot- thought this was interesting enough to pass along-

Top executives bail out of stock market... By PAUL THARP

December 7, 2006 -- America's corporate chiefs are unloading their own stocks at one of the boldest paces in 20 years.

In cases of the very rich, such as Microsoft's Bill Gates and Google's top brass, the executives are selling a whopping $63 for each $1 of stock they bought, says a report by Bloomberg.

In November alone, leaders of public companies dumped $8.4 billion worth of stock they owned as insiders, most of it awarded as compensation, bonuses or other management incentives.

But the vast majority of the executives put their windfall cash to work elsewhere, with just $133 million being plowed back into purchases of more company stock.

Analysts say a take-the-money-and-run flight from their own companies signals a growing lack of confidence in the economy's future course, as well as fears of a possible global meltdown if the Iraq crisis escalates across borders.

It's also a good time to take profits, with the Dow Jones industrial average up nearly 15 percent this year, the S&P 500 ahead 13 percent, and the Nasdaq 11 percent higher.

Wall Street investors are displaying fresh worries that the Federal Reserve might pull the trigger too quickly on hiking rates again, possibly plunging the U.S. into a recession as the Fed did in 2000.

Just before the worst of the 2000 recession, insider sales were also at a near record.

Leading the latest wave of insider selling is Microsoft, with $594.2 million of stock sold by insiders during November, with Gates unloading $581.1 million.

Gates has been selling shares regularly - including $2.1 billion last year - as he whittles down his once mammoth stake, putting a big chunk of his wealth to work in a not-for-profit foundation that invests in a wide range of securities and other deals.

Billionaire Paul Allen also sold off 28 percent of his stake last month in DreamWorks Animation SKG for $224.2 million, keeping about 21 million shares.

Insiders at Seagate sold $311.8 million in November, while Google insiders unloaded $182.1 million in the four weeks.

Google's CEO Eric Schmidt and its co-founders Sergey Brin and Larry Page have usually led the insider-selling parade with sales of hundreds of millions as the stock rose steadily to break the $500 mark.

http://www.nypost.com/seven/12072006/business/top_level_insiders_selling_their_stock_business_pa ul_tharp.htm

[clavocat]

good post, get ready for a pullback/recession IF fed hikes rates one or two more times, i said if it gets jacked up .5 basis points were in for 9 months of hell.

[clavocat]

with the dollar declining, international/global look real good