THE DOT - if this turns orange or red be alert

Thursday, June 12, 2008

famous last words

This sentiment index has not been son high for at least 5 years its not a tool you should bet your grandma's nest-egg's on but that is true for any single instrument anyway but combined with a VIX at 16 in times of turbulence its not rocket science to assume markets are coming down again. Its also interesting to notice how the 'cheerleaders' keep repeating the mantra that stocks have never been so cheap in the last decade. Its like the generals who were paid by the white house to cheer up the people for the Iraq war.

Left hand the Rydex Nova/Ursa Index which shows we have not reached any panic sell out levels yet which is also true for MACD which in case of SPX just crosses the 0 line so still some more to come. The minimum targets are not reached yet anyway 1300/10 - so keep selling rallies for now although today we might see for 24h some support since we dived below daily Bollingerbands in the SPX and NDX which is temporarily a little support. More important will be the BKX in 2 days time assuming we make a lower close today. TomDemark indicator will have count down to 13s which implies a short term bottom at hand. So next week we can expect a counter move for a few days before the downtrend should resume the week after. The close of NDX below 200 and 50 MA's implies the outperforming strength it enjoyed is over as you can see from the SOX price action. We also dropped out of an upside trading channel and have 150 points to go from the breakpoint indicating a target of 1810/20 (61,8%) so the April gap at 1850 will be closed. The time frame for this is 6-8 weeks and around the 1905 (38,2% retracement) we can expect a little support short term.

Thain from Merrill said we are well capitalized - that were the famous last words of Schwartz from Bear and its alarming to hear they want to sell their nest-egg Bloomberg but its mandatory for them to raise more capital since they are very generous in firing and firing CEO's - Thain and two buddies from Goldman hired recently have been expensive for the firm costing around 400 Mil. for 3 people - but on the other hand they are paying 100 Mil. for Christiano Ronaldo - and
O'Neal took 180 Mil home that sums up to 600 Mil. I say they should do it like Steve Jobs come. on board for 1 Dollar a year salary do a good job and when and only when ask for your fair share.

Same is true for Pandit from Citi they bought his Hedgefund for over 700 something Million to get his expertise the fund made big losses and is either closed or about too. I have no idea what this board of directors do all day to deserve their pay. He also said they were well capitalised - I doubt that their losses are 'redicule' compared to the exposure in SIV's, CDO's and other gimmick offshore balance sheet components, those two added up to over 300 Bil. so they wrote off like 10% of that?? We have now surpassed the 400Bil. mark in losses but still plenty to go I stick with my 2 Tril figure and we might be happy in 2 years if thats the whole loss. Only after having raised 500 Bil. new capital sometime later this year we are now close to 300 Bil. the sovereign funds might bot be so eager anymore to give new capital.

The best cure would be a G7 meeting which declares that they only pay 80 $ a barrel for oil. Morgan Stanley if I recall correctly made the calculation that the rise in gasoline from3 to 4 ate away the whole government package of 160 Bil. - so if they reduce the oil price it does the same thing to the consumer on a constant basis more mortgages are paid off so banks have less losses as well but America needs to get rid of their energy consumption habits. Per capita (head ) an American consumes 50 % more energy than European - population is similar big - looks like an easy fix to get the energy prices lower - its not only the Chinese and other growth countries. America in rough numbers is 5% of the world population and consumes more than 25% of all energies - that by itself is a problem which can be solved.

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