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« Earnings Expectations Come From Overly Optimistic Analysts | Main | Morning Musings From Fractal Finance »

Monday, August 23, 2010

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twitter.com/DrBubb

James Miekke, the "world'd leading expert" on the HO has said we saw a second signal last Friday. According to his analysis, the odds of a slide improve dramatically after a second signal.

He gave a great interview to TFNN's Dave White, and you can hear it on the TFNN website, or (briefly) here: http://tinyurl.com/Hind-Omen

nspolar

Due to limited choices have substantial 'company funds' in FBIDX (a bond fund). Been very good to me overall, since I entered before the smashing and mashing started elsewhere. Also been a very good experience and it has taught me how useful bonds can be, not only w/r to capital preservation but also w/r to appreciation whilst maintaining capital preservation.

Don't necessarily think a LT top is in for bond funds, but as of today I am out and into cash funds in this port. W/r to a LT term top, we're getting closer, but I don't think we are there.

I think chit is ready to hit fan on a ST basis, and when chit hits fan, everything gets smashed. We shall as always see.

TA indicators on FBIDX are getting very stretched as well. I puckered up and remained in, but the puckering has ran its course. Enough. Back to pure capital preservation in this limited option port.

Capital preservation is an under rated aspect of this biz.

ns

OracleLurker

What about the .39 equity put/call ratio in the midst of negative price action omen? It remains to be seen how much damage bears can do here but this certainly doesn't look like a bottom.

nspolar

Some gems come about on Yelnick, sometimes via Yelnick.

One recently was that terminals are very rare (attibutable to Yelnick). I about flipped my cookies when I read this, but alas it was there.

When I see things like this written in black and white by a blogger, I immediately think contrarian. Enuff years reading all this chit leads to this kind of reaction.

My LT 'time' signals on gold predicted a possible truncated top today, of a terminal that is shall we say longer term in basis. BS or otherwise ... I have no idea yet. But the recent action on crud and tonights action so far on gold looks positive (for the short side). The end to this (on gold) has been no picnic for the waver, or TA'ist, or whatever.

It is never easy, and it is never the same as it was in '29, or '37 or WTF ever. It always has its own flavor.

Still short gold via GLL (small % overall) and a bit behind. Will I catch up?

ns

Mr. Panic

I think I'll dip a toe in GLL tomorrow. Saw a nice chart over at TTW with Gold in a rising wedge pattern similar to the recent rise off the July low in the stock market. Looking for new ideas. I have updated a cycle analysis over at the comments section for the recent Larry P. interview at D. Frisby's podcast site or at the redpill site.

Mr. Panic

All of the HO talk was driving me nuts recently but all of the hype seems to have subsided. One service I subscribe to seems to put a lot of faith in it and admitted for all intent and purposes it gave a sell signal on Friday. A second observation confirming the first. The Omen was never confirmed at the height of the HO frenzy; an observation was created. Anyway, I remember seeing HO signals being triggered during minor corrections in the 90s. Kennedy Gammage was a big proponent of the HO. Anyway, Tom McClellan has done an article debunking it statistically also. In crash environments, it works 100% of the time but it also fails at other times. And I don't know effective it is when it has been triggered after a 16% correction in the markets.

yelnick

ns, yes, terminals are rare. In orthodox ewave, they are called ending diagonals. In neowave, terminal impulses.

They can easily be confused with another Neely concept, of the "non-limiting" triangle at the end of a complex correction. Zoran used to call the non-limiting triangle at the end of a complex correction a Terminal, since the implications are similar as for a terminal impulse. When they follow a zizag or two, it can look like a terminal impulse.

In general orthodox ewave teaches that triangles only come in the B wave or 4th wave, so they are a great signal of nearing the end; and the thrust out of them is not supposed to go (much) beyond the widest part of the triangle. Orthodox ewave also allows for trinagles at the end of complex (horixontal) corrections, and Neely expands it to include at the end of slanting (zigzag) corrections.

Given that the Hope Rally can be counted as a triple complex correction with two X waves (June 2009 and Jan 2010), it raises the interesting possibility of an ending non-limiting triangle. The run from Feb5 to Apr26 would be leg A, and the drop to Jul2 leg B (or leg D if you count the intervening drop in May and pop in Jun as legs B and C). The run to Aug10 would be leg C, and the current wave action leg D. A final E would be expected, and then the thrust down. The good thing about this type of Terminal is it looks very much like a triangle is supposed ot look, and comes to an apex. If we are in that, we would expect the current drop to end above Sp1010 and the final E to end around the middle between the 1220 high in April and the 1010 low in July - say 1120.

The concept of a Terminal to end a complex correction is quite intriguing, because in a topping action we often see either a narrowing triangle (those nasty nested 1-2s down) or an expanding triangle (the classic Broadening Top formation).

My favorite of all of these is an Ending Diagonal/Terminal Impulse whose fifth wave breaks as a non-limiting triangle. Orthodox ewave would typically count the A leg of that fifth wave as the total fifth wave and BCDE legs as nested 1-2s of the wave down. When the notional nested 1-2 annoyingly take too long, orthodox ewave loses heart; but seen as a triangle it fits. Also, often the nested 1-2 is hard to count as 5-waves down and 3-waves back up, whereas easier to count as all three-waves as in a triangle.

Part of Zoran's bifurcation concept was to look for the break down to end the prior wave and start a new one. When we have the triangular activity at a top, the bifurcation waits until the apex of the triangle is broken in a sharp thrust down. It simplifies things to look at it this way. Zoran also found the fib and repetition ratios fit better.

Jose

Yelnick, anymore BS for the desciples, or is that about it for this evening?

Jose

yelnick

Jose, I will save my next pile of BS for tomorrow morning. Hope you enjoy!

Jose

Yelnick, sleep tight and I will enjoy. I am tired, tired, tired ... too many ditches have I dug recently, for all the elitists. But the wage was fair, and for what I agreed to beforehand.

Unlike the elitists I keep my meager savings in my sock, with .44 Mag close at hand. No gambling with the WS crowd.

And ya know what? In these times there is a shortage of ditch diggers, and others like me who know how to fix things. Why everyone seems to think that electricity and all that other fancy stuff just comes out of the wall. I like that, and whenever I can, reinforce that thought. It helps make my meager wages go up.

Well I have to go water the tomatoes.

Jose

yelnick

ns, sleep well. since 1971, we have progressively thinned out our economy and allowed the banksters to command a very high sweep. down where I am - Silicon Valley - the venture industry has created a huge percent of new jobs of the high-paying type that required skilled workers. yet that industry is slowly being bled too. all of this is fixable but time is wasting away.

Bird

Mamma, NS, this morning is one of my time junctures for a possible bottom on 60 min Spx.

JimS

From ZeroHedge

http://www.zerohedge.com/article/artists-rendering-boj-central-banker
Hopefully those who thought the Hindenburg Omen was just a joke don't end up in this unfortunate position.

nspolar

Yelnick, contrary to popular opinion not everyones stock goes down, down, down during a recession. It is a relative thing.

Society still needs the basics and always will. Electricity does not just come out of the wall. Water does not just come out of the faucet. Sewage does not just go down the toilet. Fuel does not just flow out the end of the hose on the pump. There a lot of other details and infrastructure involved.

We continue to evolve and depend on more and more complicated devices, to just maintain and carry out our lives. This requires a higher technical skill set. Nothing wrong with all of this.

What I think I continue to see, as I have for the last 30 years (roughly my working career) in the line of work I carry out, is less and less need for the paper side of society. This is the side that basically carries out a lot of non value added functions ... all the folk who watch Jose digging his ditch, and write little notes about it. These folk get hit hard during recessions, then after they storm the beaches and make another come back.

Supervision and management is not in general a place to be these days, w/r to job stability. This is but one example.

I anticipate crude oil will go below 40 before the next major bottom, and maybe below 30. Along with that I anticipate some major layoffs to occur in the oil patch ... where I work. We need a good house cleaning and have not had one for a while. I started in the oil patch in the 80's. The hiring and firing has been very cyclical and in line with the Elliott waves of the oil indices. Most companies have not done a very good job, rather when things tighten up, they suddenly fire. Then when the boom gets going again, they over react, hire a lot of unneccesary folk, and go deep into major projects just when project costs are near maxed out. No real long term thinking and planning, instead primarily reactionary.

Human nature ... it seems to be somewhat predictive in these things. That at least is my observation.

W/r to my crude prediction, cheap commodities are likely to fuel the next boom, which should start late 2011. Will we have 2 dollar gas again? Maybe.

It was sometime ago that Prechter did a really good piece on crude oil (and peak oil). It was free. You ought to do a piece on it. Energy is quite important to society. I am not sure if Prechter is right or partially right or way off base. I do however see the possibility he espoused, and that the heydey in the energy industry may be over for a spell. The energy industries may have to go through a new and long basing perioed again. Time will show.

One thing working against energy these days is inflation. Inflation has hit the oil patch fairly hard, so if a big dip occurs, the fall off combined with inflation is a double whammy.

Just to finish it has been of interest to me as to how many times I have read recently to buy energy here, because it is so cheap. Well it could get a lot lot cheaper, and no guys like Buffet, Icahn and all the rest do not always get it right. I think Icahn just made some big purchases for example. OTOH those guns have enough inertia they can weather a few storms w/o problem. Some of those seem to think a bit more longer term, in the way they manage their assets.

ns

yelnick

ns, I agree with all your points.

On some stocks doing well in a downturn, look no farther than the 'four stocks of the apocalypse' in 2008 - Walmart, McDonalds, Hersheys, Campbells Soup. Cheap stuff, cheap eats.

On the paper-pusher jobs, down here in Silicon Valley we live the flat organization. It is appalling to see the huge increase in "administrivia" from govt regs. Health services are running towards 40% admin, a level public education already has hit.

We may be seeing the end of socialism, defined broadly as continued public sector interference in the private economy, and in private lives. It is running out of money and patience.

Prechter's piece on Peak Oil basically said the concept is a reflection of mistaken sentiment, in the recent case of a credit bubble that led to incredibly high oil prices on speculation being interpreted as based on fundamentals. Not Peak Oil, but Peak Credit.

The green alternative to oil is sputtering. Wind is the fastest renewable to scale up, but is an economic disaster which paradoxically increases carbon emissions (due to the need fir backup nat gas plants). As the subsidies run out - that End of Socialism thing - wind will die. This makes a transition to electric cars from internal combustion more problematic.

nspolar

Yelnick, I started my engineering career in Silicon Valley stuff, just not in Silicon Valley. Made several trips there. Did't like it so went to the oil patch and been there ever since. I like getting my hands around lots of horse power.

W/r to silicon valley, I was at one time a disc memory design engineer, on those old 150 lb behemoths that stored maybe 20 MBytes. Ancient man.

I am not sure Silicon Valley is as lean as you think. Maybe ...

There is a major difference between the oil patch, at least the production side which I currently work, and Silicon Valley. Least this is my opinion, having experience in both areas.

Technical products from SV are sold on the basis of rapidly evolving and instantaneous feedback type markets. If one designs a bad product, puts it out, the feedback is very quick and brutal. It then takes time to recover. Likewise if one designs good products and captures a major segment, the market still evolves rapidly with the technology, and it takes effort to stay on top.

Now take the oil company that discovers a Prudhoe Bay. The inertia is immediately huge. It is almost like let the partying begin. A lot of screw ups can be made, before there is feedback. That occurs on a much more slow and evolving basis, but it does occur. ARCO for example discovered Prudhoe, but they are no longer around. They were not well ran.

The refining and chemical industries are a bit different.

All of these segments take huge economies of scale anymore, at least if one wants to be a big dog. Literally huge. The money burned in the oil patch is yet amazing to me, and I have been on the inside for 30 years.

On the production side the money to be earned is enormous, when the timing is right. But likewise, if bad times come about (30 dollar crude again if it happens); the losses can likewise mount very fast. In particular in aging and high lifting cost fields, like Prudhoe for example.

Yet I think most American company CEO's, regardless if there has been a bunch of bums in the bunch, are still born, bred and true capitalists. Hence I agree if times get rough, for a long enough time frame, the paper shufflers are gonna have a prolonged rough patch. And it will be universal.

This leads to another observation and question. Is this recession we are in universal? Or is it location and industry dependent? This may be an important question/observation, relative to where the Ewaves are in the longer term time frames.

ns

yelnick

ns, this recession is fairly widespread, with the deepest drops in those industries most affected by the credit bubble (eg housing). Tech is holding up well in part because it already had its bubble in 2000. Government is holding up extremely well - it will be the final bubble to burst.

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