Irrational exuberance

[War Wagon]

Dow just broke an all time high today, and the downturn is sure to happen in the next 10 days or so.

Or is it?

October scares the holy fuck out of me, so I'm just going to ride out the rest of this month with some low risk investments, and see what happens.

Rack this forum.

[KC Scott]

Dow just broke an all time high today, and the downturn is sure to happen in the next 10 days or so.

Dave - barring a 9-11 type event, you won't see an entire market (Naz, S&P500, Dow) all dive excessively in a single day.
The market is now topping, but that doesn't mean a trap door trips and the whole thing the next day.

As I explained in the other thread, the market is lead by certain factors. The old Dow theory was we are a nation of industry - in other words we build shit the rest of world wants to buy. The new theory is that our economy is built on technology and information as our chief growth drivers. I agree with this.

If this new theory is true, then semiconductors are the lead component of the technology group. Semi conductors and chips must be bought by the companies that build the cell phones, PCs and gadgets. If the companies aren't buying semiconductors and chips, it's beacuse their customers aren't buying their products.

The last 2 weeks have seen most semi conductor and chip companies go down - Some down hard.
AMD, Sandisk and a host of others like: EXAR ISIL LLTC MCRL MSCC MXIM SMTC AMAT EQTMAKE KLAC LRCX CYMI NVLS BRCM & TXN have all gotten whacked.

Most of these companies are part of Nasdaq and some are components of the Nasdaq 1000 - The ETF for NAZ 100 is QQQQ.

As these semi conductor companies continue to fall, they will in tur drag the Nasdaq down, even if the dow rises for a while. Remember that what Wall Street is buying when they buy stocks is growth. Next years growth in particular. None of the chip companies are forecasting much growth for 2007. Hence they are falling.

After the tech bubble crash of 2001, S&P500 and Dow went down afterwards. The entire market was bearish until tech finally bottomed in Oct. 2002. After tech began rising, the rest of the market followed in the months afterward. It is all part of the cycle.

Guys like MVS will listen to the news and hear only 'Dow 12,000" and "rising consumer confidence" and yet the lead car in this market train is faltering.

Another insidious part of this equation is that Institutions are selling their shares to the retail investors in this period. They know what is happening yet the spin meisters and talking heads in the media just keep encouraging Joe6Pack to put his money in.

[KC Scott]

As these semi conductor companies continue to fall, they will in tur drag the Nasdaq down,

Nice theory except for the fact that it isn't happening.

Like I said, these things don't happen overnight.

The Naz may not make it's plunge for a couple more weeks.

Tops form over time, unlike bottoms.

Again, barring some unforseen event.

[KC Scott]

Here's a good article explaining the Chips / Naz situation:

http://www.thestreet.com/_googlen/marke ... &cm_ite=NA

[Mikey]

Here's a good article explaining the Chips / Naz situation:

http://www.thestreet.com/_googlen/marke ... &cm_ite=NA

Yeah, that's a wonderful article.



These guys are great at looking at charts, drawing a few lines, and making predictions based on nothing. Might be more believeable if they mixed in a little analysis of how the sector is actually performing in terms of business, and the demand for and profitability of their products. Might as well kill your fucking cat and examine its entrails if you're going to give any credence to this leech.

[War Wagon]

If our economy is built on anything, it is the service sector.

So where do manufacturing and Constuction rate in relation to the service sector?

Seems to me that the industries that actually produce tangible value would rate ahead of the service sector.... maybe not in terms of overall jobs provided by employers, but at least in terms of overall importance towards a healthy economy.

[KC Scott]

The Naz may not make it's plunge for a couple more weeks.

I suppose if you keep saying that over and over again, you'll be correct eventually.

Yea, but I'd hate to be long the day it does fall.
I made my first buy of QID (Inverse Bear Naz 100 ETF) today at 55.75 - Lets see how it does

As far as your "new theory" that our economy is built on IT, it is patently false. It is nothing more than one sector of a 13 trillion dollar economy. If our economy is built on anything, it is the service sector.

I didn't write the economy is "built" on IT - I wrote that Semi conductors lead the Naz and the Naz leads the Markets.

If stock growth or trend were a train - The Sox would be the lead engine, then the Naz, Then the Russell 2000, then the S&P 500 & the Dow would be the caboose.

Go look at the start of this Bull market in Oct. 2002 - What was the lead horse? Semis and tech
Now at the end of this market what leads? The Dow

I'll be the first to admit it's tough being a bear right now, and if the Naz rises back into it's channel on volume and balance, I'll say Whoa - I was dead fucking wrong. But I don't think it will.

And I put my Money behind it.

Just cuz I know your keeping score:

I've been short AMD since 27.21
Short KLAC from 48.75
Short ADI from 31.66
And I shorted TXN today at 31.85
and as Mentioned earlier I'm long QID at 55.75

BTW - Oil is getting closer to a bottom - But not ready to go long yet.

[KC Scott]

[
These guys are great at looking at charts, drawing a few lines, and making predictions based on nothing.

I wouldn't be so quick to call charts "nothing" - Technical analysis of stocks is a wonderful tool to use in the trading of stocks.
The basis of it dates all the way back to 17th century Japan to guage supply and demand:
http://stockcharts.com/education/ChartA ... ticks.html

Might be more believeable if they mixed in a little analysis of how the sector is actually performing in terms of business, and the demand for and profitability of their products. Might as well kill your fucking cat and examine its entrails if you're going to give any credence to this leech.

Mike in this case he did - Semiconductor demand is down and is reflected in both the charts and in the earnings releases of companies like BRCM, AMD and TXN today

The Semiconductor HOLDRs Trust (SMH - commentary - Cramer's Take) is best examined in the longer-term view, given the daily cheerleading in the group. This pattern still is relatively negative for chip stocks, despite obvious progress since the July low. In particular, the instrument continues to trade below significant resistance at the broken May top.

It doesn't look like earnings season will bail out the sector, at least from the results we've seen to date. So let's assume that resistance will remain in place, and then plan accordingly. In other words, don't look for chip stocks to help the Nasdaq averages break above yearly levels this October.

[KC Scott]

If our economy is built on anything, it is the service sector.

So where do manufacturing and Constuction rate in relation to the service sector?

Seems to me that the industries that actually produce tangible value would rate ahead of the service sector.... maybe not in terms of overall jobs provided by employers, but at least in terms of overall importance towards a healthy economy.

Here's a really, really long article on how we have evolved from a manufacturing economy to a service based one: http://findarticles.com/p/articles/mi_q ... i_n8765445

In terms of the stock market, both Manufacturing and Infrastructure (Construction), With few exceptions, are heavily dependent on low interest rates.

The Fed has done a good job of choking back both of these.

Caterpillar (CAT) a dow component, got hammered 14% on Friday after the released earnings and weak guidance.

[KC Scott]

I've been short AMD since 27.21 - Covered at 20.50 on 10-24
Short KLAC from 48.75
Short ADI from 31.66
And I shorted TXN today at 31.85
and as Mentioned earlier I'm long QID at 55.75

BTW - Oil is getting closer to a bottom - But not ready to go long yet.

Closed the AMD Short Position today at 20.50 for a 24% Profit

[KC Scott]

Short KLAC from 48.75 - Covered Short at 47.90 today for 1.5% profit

I may short this again around 52

[KC Scott]

Short ADI from 31.66 - Covered Today 30.99 -
2% profit

Short TXN 31.85 - Covered Today 30.50 4% profit

Long QID at 55.75 - Sold today 55.75 - Even

==============================

This Bear is going into Hibernation for a week.

The market is parabloic right now - This means going up in a straight line.

Contary to belief,Bears actually serve an important purpose in the market - That is they provide a safety net for stocks. When Bears sell, there is always the knowledge they must cover at some point. Once you kill off all the bears, that net is gone.

This is the rarest of market occurances beacuse it always - and I mean always leads to a correction of major proportion when the Buying stops.

There is a belief right now among the more conspiracy minded that Wall Street is pushing Buy cycles (Churn) as we head into mid-term elections.

I can't say that - only repeating the rumor.

What I will say is I'm sitting on the sidelines drawing 5.43% till then.

Good luck to all of you - (even you MVS)

[Ruff]

Long QID at 55.75 - Sold today 55.75 - Even

==============================

Scott, zero trading costs? Hey, you are really good aren't you.

Actually I think you're an idiot.
Mikey called it on the technical analysis. If that's all you use to make your calls, you're an idiot.
If you use other analysis, you're still an idiot. Charts and graphs and lines tell you very little.
If the real objective is to create long-term wealth, that shit does very little to help.

[KC Scott]

Scott, zero trading costs? Hey, you are really good aren't you.

At $7 per trade it's negligible

Mikey called it on the technical analysis. If that's all you use to make your calls, you're an idiot.
If you use other analysis, you're still an idiot. Charts and graphs and lines tell you very little.
If the real objective is to create long-term wealth, that shit does very little to help.

I Don't use TA exclusively, but when your looking at the long term trends - then, TA is the only way.
If your style is buy and hold - then more power to you.

However, here's an easy example of why Buy and Hold is not the way -
In 2001 the Naz hit 5000
Now 5 years later it's still not 50% recovered.

Of course there are great extremes the other way - but by and large stocks and markets go through cycles.
TA is the only way to identify those cycles.

At the End of the day the only thing that matters is the price - The Market is always Right
And all investing or trading is made on the presumption a stock will go up or down.
Why wouldn't you want to have every tool available to make that judgement?