One Year To Nowhere

[Expat1 971]

Well written. I couldnt agree more.

[X Factor 1,111]

The following chart shows a high probability of downward pressure on the markets in January. If you are looking for short term direction this is invaluable. I already purchased some February SPX Put butterfly.

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http://www.businessinsider.com/goldman-on-buybacks-and-market-volatility-2015-12

Since the financial crisis, S&P 500 companies have spent trillions of dollars buying back shares of their own stock. In the third quarter alone, these companies gobbled up $156 billion worth of themselves.

Goldman Sachs' David Kostin estimates that these companies will spend another $608 billion in 2016 buying back shares, up from $568 billion in 2015.

It's important to note that these buybacks — which are enormous enough to sway markets — don't occur evenly throughout the year.

"Typically, we have a huge tailwind in December from buyback action," JonesTrading's Dave Lutz observed on Thursday. "Fascinating: November/December has combined for almost 23% of annual buyback budgets from '07-'14(ex-'08)."

Lutz referred to a chart, which he recently identified as one of the "Most Important Charts In The World," showing what percentage of annual repurchase spending occurs in each month.

"Beware January?" he asked.

"As volumes decline, market performance appears more vulnerable to the seasonality of buyback activity," Goldman Sachs' Amanda Sneider observed in a note to clients in March.

"This tailwind vanishes quickly, as January only has 3% of the total buyback allotments spent," Lutz noted. "Watch out for [PowerShares Buyback Achievers ETF PKW] underperformance in the early months of 2016 — Buybacks collapse in January."

[OriZ 3,157]

On the other hand look at August and despite that we had a drop. So it could work the other way too. But it's interesting and thanks for sharing, and regardless, my charts tell me a decision is close.

I've shown the S&P and NYA chart before with the bollinger bands, I also want to now show a FTSE chart.

One thing I forgot to mention about them last time though - not only do lengthy periods of a narrow trading range lead to a narrowing of the bands which hints at a sharp move approaching(and the narrower the bands - the sharper the move). Another useful way to utilize this tool is to remember that it strives to contain all price action and does so over 90% of the time. And so in this chart for instance, we can see that what's preventing an even sharper drop so far is the bottom band. Unlike the headline US indexes this index is closer to its August bottom than its April top, and gradually the bands are starting to widen again and to the downside, which oftentimes leads to price "sliding" right along the bottom band. Another thing is that once price does exit the band in a sharp move every once in a while - it tends to not only strive to go back into it, but all the way back to the "crime of the scene" i.e. the exact point where it exited. Observe now on this chart, first of all the narrowing initially(circles), especially in the year 2000 and now(first left circle and last right circle). Then, price pressure on the bottom band starts causing it to widen. The first sequence of 1 and 2 is very similar to the one we're experiencing now. I've numbered each instance of exiting the band with the number 1, and each instance of returning to the scene of the crime with 2. If what happened the last two times repeats itself now we are going to see price sliding and accelerating down along the bottom band very soon. So far it seems to be, in the technical perspective(I don't care about the news) one of the reasons(there's other technical tools/reasons I have not brought into this discussion yet) that price declines are still relatively contained. Hope this offers a slightly different perspective of things than the ones one usually hears on the news.

Edited December 29, 2015 by OriZ

[X Factor 1,111]

Yes once a decision is made and the bands expand there is usually a sharp move

[OriZ 3,157]

X Factor did you notice the unusual action in the put/call ratio today?

[X Factor 1,111]

X Factor did you notice the unusual action in the put/call ratio today?

Yes. $CPC at 1.31. Bullish. But the $skew indicator is bearish at 136.29. Lots of weird year end action. Selling losers and window dressing with the high flyers like AMZN, GOOGL etc

[OriZ 3,157]

You know, they've been saying the SKEW is bearish for a while now, but if you really compare the current level to other times in history - there were times nothing happened and there were times markets actually went up. So I'm not really big into the whole skew thing right now. Today was pretty unusual cause it was low volume and ended almost flat but yet NYAD and NYUD were pretty bearish(which could mean bullish looking forward), quite heavy selling.

Mark my words, by the time this cycle is over AMZN, GOOG, MSFT etc will be cut by at least a third if not half or more. Talk about overpriced.

[OriZ 3,157]

Funny how movies like this(or books, for that matter) always seem to come out right in time to rock n roll again.

Michael Burry, Real-Life Market Genius From The Big Short, Thinks Another Financial Crisis Is Looming

http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html#

BTW there are many people with foresight besides them, who made money that didn't have a book written about or a movie made about them.

Edited December 30, 2015 by OriZ

[Expat1 971]

It doesnt take a lot of time and reaserch to determine fair valuations. I dont understand the herd mentality to be honest with you. Sooner, later, doesnt matter - but a lot of people who will be complaining have had a lot of time to park money elsewhere and a lot of warning that they ahould pull out and park it.

Edited December 31, 2015 by Expat1

[OriZ 3,157]

It doesnt take a lot of time and reaserch to determine fair valuations. I dont understand the herd mentality to be honest with you. Sooner, later, doesnt matter - but a lot of people who will be complaining have had a lot of time to park money elsewhere and a lot of warning that they ahould pull out and park it.

Yes and history has always and always will repeat itself in this sense. People will never learn and that's what creates a market. They always seem to think "oh this time it's different" but it never really is. I saw it happen in 2007-8 as well, had people arguing with me, by 2009 those people disappeared. It's like watching a train wreck on live TV, while knowing exactly what that train is about to hit.

And the thing is, it doesn't mean they are stupid. Isaac Newton lost all his life savings in 1720 in the south sea bubble, which prompted him to say "I can calculate the movement of stars, but not the madness of men".

BTW, this "santa clause rally" is looking mighty sad this year.

Edited December 31, 2015 by OriZ

[Expat1 971]

BTW, this "santa clause rally" is looking mighty sad this year.

Santa clause what?

[OriZ 3,157]

Santa clause what?

Exactly.

A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.

All joking aside, I see a massive rally(at the very least a short term one) brewing in oil and gold, and I'm not sure at the moment how that ties into the correlation oil seems to have with stocks at the moment. Of course that correlation changes all the time so it could just go away, but we'll see.

[Expat1 971]

Exactly.

A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.

All joking aside, I see a massive rally(at the very least a short term one) brewing in oil and gold, and I'm not sure at the moment how that ties into the correlation oil seems to have with stocks at the moment. Of course that correlation changes all the time so it could just go away, but we'll see.

Iranian oil has yet to be fully priced into the market.

[OriZ 3,157]

I just think it is brewing. Doesn't mean it can't go down a little bit more first, but basically everything that I've been thinking for the past several years(which has happened) ie. most metals and commodities as well as currencies opposite to the dollar down, and the dollar up - I now think the opposite, at least in the short term. Oil, gold, etc are massively oversold atm, they've been hammered for quite some time now and there's too many technical divergences starting to show up(and too much pessimism by the "experts" who were bullish at the top).

BTW I also think the market tends to lead "fundamentals"(like iranian oil) and not the other way around but that's for a whole nother conversation.

Edited January 2, 2016 by OriZ

[Expat1 971]

Here we go.

End of the screaming "tear your face off" rally. We shall see if the market re-values itself or if this is just a panic dip