PREDICTIONS

[garilou]

Hi Bryan,

Although I still think that you might not see the big long term picture in your prediction.
The week is not finished, but I must admit that for the past days, you prediction seems (at least for the DOW) pretty good! (it hurts!)
It is very possible that the depression has already been priced in. The market is fast and always in advance.
But this depression is predicted to last pretty long!

They say "Politics never influence the markets, but the markets DO influence the politics!"
We can see that pretty close to us in the moment!

It is not unusual that the DOW and the NASDAC go in opposite directions, but since months, the TSX has with few exceptions mimicked the DOW charts (although in percentage almost always many % points under).
Today was one of the few where they "came back to normal", I mean not going in the same direction.
I guess you are eager to see that DOWN timing signal to switch to  green!
I feel now in a in between, and being 100% at cash is not funny.

Let see how the next days will go! Lots of jobs to be lost, both in the US and Canada!

But I guess we coming closer to the "normal" in that individual companies results will be taken in account, and for a while we won't be able to pick with the help of the monkey I talked about a few posts lower 

L.

[bryanmcn]

Dec 6

The TSX retraced downward more than expected because of oil prices but the DOW retraced half of its previous weeks gains and then bounced. Although the chart isn't well formed, I think 7500 is long gone and we should go up from here. We have a Christmas rally to look forward to as well so this is good news for the bulls.
The question for us is wether or not the TSX will move up or fall below the last low made on Nov21st. 

The DOW needs to punch through the 9500 mark in the long term to be confident about an upward trend but my money is on the bullish side in the US.

Its had to imagine oil continuing to fall from these levels without at least taking a break (Oil was $145 back in July and its less than $41 as of Friday!). A bounce might give the TSX what it needs to form a slightly higher low and move up.  Lately it has been moving with the DOW so it should rise from here.

CAsh is the best bet for the next few days IMHO but I think we'll see a rally next week.

[garilou]

Hi Brian,
I think we should change our nicknames: you'd be BullBryan, and I'd be BearLou! 
You are bullish because like 90% of investors, you are optimistic.
But I do not know on which basis you make your predictions!
Intuition? crystal ball? magical thinking?
I would really like to know!
After all being a "hero" should not only be a matter of how many posts one writes!
 
Because I can tell you why I am bearish!
 
Look first at the TSX (although it should come last, because the American (and global) crisis, is just starting to hurt us.)
 
Because the TSX is so bound with the oil and metal commodities, a move upward of those would certainly help.
BUT!
I was looking yesterdays what stocks were in the Ishares that mimics the SP-TSX:
http://ca.ishares.com/product_info/fund_holdings.do?ticker=XIC

First I have compared XIC with the actual SP-TSX, and with a few days exceptions, it really mimics it really good.
(And surprisingly, in the past 3 months, very close to the NASDAC too!)
 
 Now the first largest positions in that portfolio are:
 1. ROYAL BANK OF CANADA  (RY): Very bearish (surprising!)
 2. ENCANA CORP (ECA): Slightly bullish in the short term but could move up if Oil and Gas go up (which will not happen very soon)
 3. TORONTO-DOMINION BANK (TD): Very bearish ! (I'm still short on this one)
 4. BANK OF NOVA SCOTIA (BNS): Very bearish.
 5. BARRICK GOLD CORP (ABX ) : Slightly bullish: and probably not too affected by the Gold price, what anyway seems to starting an upward trend
So 3 Financial stocks amongst the first 5!
 
As for the DOW!
After Friday's news, I doubt it VERY much that the DOW will keep the up move of last week.
You write:
 

We have a Christmas rally to look forward...

 
Have you checked if this is a myth?
 
Look at those 3 attached charts (2005 -2006-2007)! And tell me if you can count on that rally!
I mean for a long term turn around: maybe slightly more volume in December: people take their profits or losses depending on what they need for their Tax reports. But when the trend is up, it stays up, when the trend is down, it turns back down right after.
 
Once again, I think that you look too much at the very short term, at the daily numbers and charts, and do not see the large economic picture!
A rally next week? Maybe, but not enough to turn SSP Timing signal to green!
 
When it goes to buying and selling, in these times, I too look to the very short term, there is not much else to do but short term trading, apart, as you suggest, staying at cash!
 
Or buying those fixed revenues Ishares (XSB and XGB are pretty bullish and will stay so as long as the TSX and the DOW do not recover).
 
I would really like it if you did not just make new predictions once a week, and if you discussed my posts, argue against me a little bit!
Sure it takes time: I rarely take less then 45 to 60 minutes to prepare a post.
 
I don't know if they can help others, they help me anyway.
 
Still hoping that your predictions could materialize!

BearLou 

[bryanmcn]

I am not changing my predictions. I said that the DOW would reverse and it did. I thought the TSX would as well and I think it is about to. Its all technical. Your fundamentals don't mean a thing. They are worked into the price of stocks already.

The DOW has a long term support at 7500.  Look at a ten year chart and you'll see what I mean. It's gaining upward momentum and I don't think it will sink that low again.

Oil can't stay this low just like it couldn't stay at $145 a barrel. It will move back to a reasonable price when the speculation stops. Then the TSX will move. I think this will begin to happen on Monday because on Friday it formed a dragon fly doji - a bullish reversal pattern.

I'm staying in cash for now.
 

[garilou]

Hi BullBryan,

1.

I am not changing my predictions.

And I did not say you did.
Although on Dec 2, you wrote:
"I think the DOW and the TSX will both reverse and head for higher highs"
The Dow did, not the TSX. Will it follow? Who knows? But you might be right, I won't challenge this. This is IF the Dow confirms what you see as a new trend.

You've been talking about that "long term support at 7500" of the Dow for a while already.

But in order to talk about a support, the level must have been tested at least one. On a 10 year scale, I do  not have a magnifying glass to see it, but it has probably been tested a few times in September 2002. But it did not last. And look at the volumes you still had!

December 2008 is still too young to compare, but if the volume triples till January, it will be comparable to the volume we had recently in August 2008. (And it might be caused by the end of year movements).
That volume increased in September and October, but it was a volume on decreasing values!, when investors started to realized that their brokers were wrong when they said "it's just a correction" or "what goes down go up again", and got rid of their Mutual Funds.
Between November and now (always on that 10 years scale, you can see a small - positive - change in the downwards slope for the DOW.
Put the TSX on the same chart, there is absolutely no such a change in the slope, to the contrary, the slope is still closer to the vertical!

If one changes the scale and go to a one year chart: you are right (and I admitted it a few days ago in my reply # 15) there seems to be a an upwards momentum in the DOW and during that time, the TSX departed from the curve, and went back to new lows, and (in %) went a lot lower then the DOW.


2.

Your fundamentals don't mean a thing. They are worked into the price of stocks already.

I don't see any "fundamentals" in my last post. There is a difference between "fundamentals" and global economics.
No one can remember of anything in the modern times (and certainly not in 2002), as large as we are facing now.
We're not talking of individual stocks financial results, or even sectorial financial results that could be already "priced in". Financial results in the moment do not seem to be significant in the move of individual stocks, much less on the general tendency.

3.

Oil can't stay this low!

I wish you were right! (I personally receive monthly payments on Oil and Gas Royalties). But this also what Air Canada thought when they "hedged" them-selves between 90$ and 95$ a barrel and look where they are now!
If it went up, this would only contribute to make the "crisis" worst: in Canada, when they talk about investing on "infrastructures", it is not the same as in the US, where infrastructures are mainly road and bridges, anyway nothing much for public transportation. But the individuals and the transporting companies (on ground, oceans and air) could not afford a higher price!
The American airlines did terribly good when the oil price started to go down (Air Canada excepted and a few ones), but now they are slowly but surely going down too! Why? Certainly not because the CEO's of the "Big 3" take their hybrid cars instead of their private jets to meet the congress!

4.
California is about to go bankrupt! One of the largest economies in the world. And not talking about the "three big"!
The past 10 to 15 years were based on unlimited credit. I don't know if you've heard of that guy who wanted to take advantage of the low housing prices, and buy one of those "for seizure" homes: he had the cash to buy it, wanted a mortgage to repair the damages: people who must give their houses away (2700 per day!) leave with everything they can: the sinks etc.. Well that guy could not get a mortgage, simply not!

People are starting to throw their credit cards to the thrash (on of the reason I'm short on VISA): When the DOW showed signs of wanting to go up, VISA peaked in a tremendous proportion (I'm not making a cause-consequence relationship here: people who make the credit cards rich are not those who invest in the stock markets)!
Then it was pulled down with all the stocks. On a very short term basis, I can say I was too early,(and I might be very wrong) MasterCard did much worst then VISA (was too expensive still for me to short), but it will follow the trend: if credit cards start to limit the credits, if people simply go bankrupt, the credit cards that made so much money with their abusive interest rates and the percentage they take on every buy, will not cash even the minimum monthly payments, and the consumers will buy less for a big while!
So in a sense the direction of the credit cards could be a good indicator too!


5.

Friday it formed a dragon fly doji

!!!

You are comparing a one day pattern (and candle patterns are only interesting in the very very short term), to a 10 years chart!
The news were so bad Friday that probably lots thought that we had touched "the bottom of the barrel": but if you look at the volumes (this time on a 10 days chart) they always happen a the very end of the trading day, equally on up and down days, which means exactly that: the market now is not in the hands on "buyers" or "sellers" they are in the hands of day traders!

At the end of the day, sure the markets are in advance on the general economy.
Not sure at all if they will have a big impact, but all the measures governments are taking all over the world, in France particularly, might have some.
But by doing so, the markets are going progressively into the hands of the governments (which brings up the hated word of "socialism"): might be a good thing for a while, but all the citizens will have to "buy" those markets and pay for them.
Is this already priced in? Maybe yes, maybe not yet. "IMHO" I think not.

When it goes to individual stocks fundamentals, yes the technicals show that those results were most of the time already priced in, but now we're talking of something totally different, where all the "Joe the plumbers" of the world make the call!

Just some thoughts that you might call fundamentals...

BearLou

[bryanmcn]

I define fundamentals as anything you or I or anyone knows about the market. That includes financials, global economics, oil prices, jobless rates, interest rates, etc.

By definition - if you know about it then someone else does (assuming its not inside info) so its already built into the price.

Technicals are ONLY used as predictive tools. They look at long or short term patterns. The DOW has long term support at 7500. Long term because it was a turnaround point in 2002. The recent test of the same level means that the DOW is "unlikely" to go below it. One day patterns CAN make a difference. Look at any chart and you will see piercing arrows, spinning tops and bullish engulfing patterns. Their predictive values are not 100% but the probabilities of being right increase if you use them.

If your economic information changes and the markets go up, you have a good excuse. My historic technical indicators do not change. If the markets sink on Monday then I am wrong. Period.

We'll see Monday.

[bryanmcn]

Its 20 minutes after the close on Monday, Dec 8th and the markets rose as I predicted. Luck? Perhaps ... but given the technicals, the probablilities were in my favor.

My prediction for tomorrow is with less confidence. I see markets pulling back a bit. Gaps like to be filled so the TSX could pull back to the 8100 level. This could be a nice buying op as I see a rise throughput the week. We could even break 9000 by weeks end.

[garilou]

Hi Bryan,

I would have liked to be the first to congratulate you about your prediction for today!

When the markets closed, I had to go for my "end of afternoon nap", and I was really exhausted.

I was happy of the discussion we had in the past days.

Whatever happens tomorrow, I think that so many stocks are oversold that the new trend will last at least for a few days (will it?) and it will be interesting to see if the last low will be tested again to become a support, and most of all, where will a resistance build up, because I guess until the market goes back really upward, there will be a relatively long trading period.
Will SSP's signal turn green soon? The level to trigger it has gone down again today.
I'll let you do that prediction! But I am impatient.

And let us know when you come out of you cash position 
(And before you ask, yes, I naturally got stopped out my shorts, while I was voting at -23 degrees, pretty late though, I thought it would come much earlier and till 2:00 PM, I thought I could stay under)

I would still like to discuss another small thing, but tonight, you deserve only my congratulations.

Louise

[bryanmcn]

Dec 14, 2008
We didn't see the TSX hit 9000 this week. In fact, it formed a lower high and pulled back. From a technical perspective its forming a triagular pattern. Its consolidating. There is a higher than average probability that the trend will continue downward after the consolidation is complete. Thats the bad news.

The good news is that the DOW did make a higher high just touching over 9000 before pulling back. Friday it formed another bullish pattern and looks like it will move higher on Monday. 

Will the TSX follow the DOW or are their trends parting ways? Looks to me like the latter.

[garilou]

Will the TSX follow the DOW or are their trends parting ways? Looks to me like the latter.

I guess we would then come back to the previous way those two indexes used to behave, what would not be, on the long term, too bad: The SP-TSX is so much heavily weighted on natural resources, it could go up and down a lot.
Crude oil might have touched a bottom  on Dec. 5 at close to $43.00, but IMHO, short term.
Same with gold, that is so volatile I wouldn't bet on this one.
Cupper is far from showing an upward trend

But some stocks not linked to natural resources are doing pretty well. The "crisis" is moving up from the south to the north, so (to reply to a question you asked DCA in another post), it might still take a while until the DOWN signal is lifted.

So if I agree to some extend to your statement, as for the DOW, I am not sure at all if it building an long term upward trend. I think we'll have to consider sector by sector, from now on.

And not forget about the NASDAC that seems to do much better then the DOW. The behaviour of the NASDAC could influence some sectors in the canadian markets.

Louise

[bryanmcn]

Hi Louis
Any stocks you think look good?

[garilou]

Bryan,

I think I have already answered that in your Topic:Good Looking Charts?
(« Reply #2 on: 09 December 2008, 02:18:29 »)
Did you not see it?

But, since then... we are not out of the woods... and I am still shorting  .

Louise

[garilou]

Just read from a (technical) analyst:

"...There has been a small rally out of the November lows, but volume has been weak. Deeply oversold readings have so far failed to deliver a rally of the strength and duration we would normally expect, and, with internals now becoming overbought, time is running out. The problem, I suspect, is that the only buyers are nervous short sellers. Once the shorts have covered, new buyers needed to continue the rally fail to materialize because nobody wants to buy this market."  (Underlined by me)

I must admit that I am one of those "short sellers" that are a little more nervous then a month ago 

Louise

[bryanmcn]

Hi Louis

Well... he IS right about the volume but I look at the chart of the DOW and definately see a short term upward trend.

I think that anyone who has thought of selling has sold and anyone who is shorting is covering or about to cover. That means that there is  no one left in the market but buyers.

Like me ...

[garilou]

Hi again Bryan,

Yes! He IS right about the volume: and a rally on a small volume is NOT a good sign.

That means that there is no one left in the market but buyers.

This is your conclusion... you might forget about the day traders!

But I tell you, it is no more a matter of "market", it's a matter of sector: some might be profiting from the general state.
I'll stop looking to the DOW or the TSX alone, but compare the behaviour of some sectors, then of some specific stocks, to the general trends of the main indexes.

Anyway, I'll wait till lots of people become "Buyers"... like you. 

I am NOT a bottom fisher! Neither when I buy, or when I short (in which case I would say a "sky scraper"  .)


Louise.

PS: I think that the activity on this forum could also be a good predictor: the volume has increased a lot in the past days