Perfect pendant formation in PTR.
Related play: SNP, CEO, SHI.
Wednesday, October 31, 2007
Thursday, October 25, 2007
Relative Strengs, II
Another weak sector - small cap value funds.
The trend is to rotate from small to big, from value to growth. That's why QQQQ is stronger than Nasdaq, which is stronger than Russell 2000, which is stronger than Russell Small Cap Value.
The trend is to rotate from small to big, from value to growth. That's why QQQQ is stronger than Nasdaq, which is stronger than Russell 2000, which is stronger than Russell Small Cap Value.
Thursday, October 18, 2007
Chinese ADRs are Crazy
The Chinese ADRs are on fire. Never have seen anything like it.
Comparing to A-shares, the ADRs are mostly cheaper by 30-50%. But this is just discounting for the fact that the Chinese market is in a bubble.
Comparing to H-shares, the ADRs are actually 5-10% more expensive! Don't know what to make of that one.
The Chinese regulations on QDII sounded like a good design: half the money has to support China related shares. Allowing money out of China reduces pressure on the Chinese bubble as well as the Chinese currency to appreciate. Reserving money for China related shares supports Chinese companies overseas while avoid buying to much oversea assets that are too expensive already.
I still think the Chinese Government's sovereign fund is a bad, bad idea. Bad idea, bad timing in terms of western market valuations. Sovereigns just should not play the stock market. Maybe it's okay for tiny countries like Singapore. Imagine the Federal Reserve getting into the stock market, it's just not done.
QDII good. Sovereign fund bad.
Comparing to A-shares, the ADRs are mostly cheaper by 30-50%. But this is just discounting for the fact that the Chinese market is in a bubble.
Comparing to H-shares, the ADRs are actually 5-10% more expensive! Don't know what to make of that one.
The Chinese regulations on QDII sounded like a good design: half the money has to support China related shares. Allowing money out of China reduces pressure on the Chinese bubble as well as the Chinese currency to appreciate. Reserving money for China related shares supports Chinese companies overseas while avoid buying to much oversea assets that are too expensive already.
I still think the Chinese Government's sovereign fund is a bad, bad idea. Bad idea, bad timing in terms of western market valuations. Sovereigns just should not play the stock market. Maybe it's okay for tiny countries like Singapore. Imagine the Federal Reserve getting into the stock market, it's just not done.
QDII good. Sovereign fund bad.
Wednesday, October 17, 2007
Relative Strengths
Relative Strengths:
Stronger: Oil, Nasdaq
Weak: Financial, RealEstate
In uncertain markets, long the strong ones and short the weak ones, may be a way to play.
Stronger: Oil, Nasdaq
Weak: Financial, RealEstate
In uncertain markets, long the strong ones and short the weak ones, may be a way to play.
Monday, October 15, 2007
Short Squeeze Appears to be Over
Short squeeze appears to be over for now. The bulls are losing it again.
Notice the recent run back to the top by DJIA was not confirmed by DJTA, as required by the Dow theory.
Notice the recent run back to the top by DJIA was not confirmed by DJTA, as required by the Dow theory.
Saturday, October 6, 2007
The Case For Short Squeeze
There was excessive bearishness for the month of October. However, the bears appear to have lost the propaganda war. The bulls have been able to spin everything as good news: bad news becomes reason for another rate cut, while good news is simply good news. As a result, the 401k'ers are not bolting.
The bears need the 401k's to head to the exits to harvest their fruits. Not only that is not happening, but the 401k'ers will be putting in another batch of money into the market every month. The bears will lose their patiences and buy back to cover, which will drive the market even higher.
There's also the smell of fresh money in the air. Chinese investors, who have lately gone crazy in the mainland market, are now allowed to put their money into the global market through QDII. Not only that, the Chinese government has also formed its own investment company, with 200 billion US$ to play with, and perhaps another trillion to follow. The sharks in Wall Street are smelling blood.
Here's how things might work out: the Chinese Government, which seems to have too much money than it knows what to do with, hires some Wall Street firms to 'manage' its money. Wall Street sells buble-level U.S. assets to C.G., then engineer a market crash, then buy the same assets back from C.G. at much lower prices. C.G. ends up with less money, Wall Street ends up with more, and everyone is happy.
As a result, even though our stops have not been triggered, we are closing our short positions until all the Chinese money has its chance to play. The Chinese bull market will probably last until next spring, and the global market may well last at least that long.
The bears need the 401k's to head to the exits to harvest their fruits. Not only that is not happening, but the 401k'ers will be putting in another batch of money into the market every month. The bears will lose their patiences and buy back to cover, which will drive the market even higher.
There's also the smell of fresh money in the air. Chinese investors, who have lately gone crazy in the mainland market, are now allowed to put their money into the global market through QDII. Not only that, the Chinese government has also formed its own investment company, with 200 billion US$ to play with, and perhaps another trillion to follow. The sharks in Wall Street are smelling blood.
Here's how things might work out: the Chinese Government, which seems to have too much money than it knows what to do with, hires some Wall Street firms to 'manage' its money. Wall Street sells buble-level U.S. assets to C.G., then engineer a market crash, then buy the same assets back from C.G. at much lower prices. C.G. ends up with less money, Wall Street ends up with more, and everyone is happy.
As a result, even though our stops have not been triggered, we are closing our short positions until all the Chinese money has its chance to play. The Chinese bull market will probably last until next spring, and the global market may well last at least that long.
Monday, October 1, 2007
October Could Be Another Bear Trap
Bears historically have loved October, and many bears are expecting the market to crash again this month. The problem is, there are too many of them -- the bears have again bought 1.5 million put options on QQQQ so far. By expiration time that number will surely surpass last month's figure.
All that big money betting the market to go down is making it very difficult to go down. That's why the big guys are now spinning all bad news as good news. The bears need the 401k'ers to head to the exits to harvest their catches. The option writers meanwhile are trying to sooth the herd: stay calm, no problem at all, bad is good, good is also good.
We'll continue to hold our short positions, but will stay away from options. Meanwhile we need to watch our stop strategies in case this short squeeze gets serious.
All that big money betting the market to go down is making it very difficult to go down. That's why the big guys are now spinning all bad news as good news. The bears need the 401k'ers to head to the exits to harvest their catches. The option writers meanwhile are trying to sooth the herd: stay calm, no problem at all, bad is good, good is also good.
We'll continue to hold our short positions, but will stay away from options. Meanwhile we need to watch our stop strategies in case this short squeeze gets serious.
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