Archive through May 24, 2008

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rdumas

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Post Number: 1422
Registered: 11-2006

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Thursday, May 22, 2008 - 04:53 pm:

Is the Bear Market Over??

This is the topic of Shane Oliver's latest Insight bulletin.

olivers-insights_shares-have-we-seen-the-low_edition-16.pdf (282.3 k)

The bulletin mirrors my own thinking in that the March lows probably marked the bottom of this bear market. He also expects more pull backs between now and November which will allow those wishing to put together a good core portfolio together at bargain basement prices.

In previous posts I mentioned that I intended to invest 33% of my capital in the equities market over the next 3 ~ 6 months. I have reached the half way point and now wait for suitable pull backs in order to reach my stated quota.

eblode

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Post Number: 777
Registered: 11-2002

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Thursday, May 22, 2008 - 05:34 pm:

Cat Lady,
Hope you pulled out of SMX when I did.

Dug,
You brought a tear to me eye when you remembered NOL. Seems like a hundred years ago that Ethenol was the flavour of the month.

Eugenio

sway

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Post Number: 319
Registered: 12-2005

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Thursday, May 22, 2008 - 05:50 pm:

resilient, I'll take a look tonight and get back to you

Sway

This is not a recommendation or advice. As they say .... DYOR.

ody

Member

Post Number: 2487
Registered: 10-2006

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Votes: 0


Friday, May 23, 2008 - 10:15 am:

RESOURCES PRICES (lme) THIS MORNING

Well, at least I didn't engage in producing TOTAL "rubbish" the other day, for commodities prices do appear to be falling as I suggested they would.

Now we have even gold (-1.33%) and oil (-1.78%) down a bit.

More strikingly are the prices for alum. (-0.83), copper (-1.09), nickel (-5.59), lead (-5.58), and zinc (-3.85).

One would have thought that prices like these would inevitably influence those for resources stocks, and they used to. Today, however, I refuse to lay myself open to further attacks to the effect that I am getting it wrong as I am only too aware that in practice what many people seem to look at only is iron, coal, and take-over activity. These factors are so strong in people's minds that what I have just quoted may not make the slightest difference to BHP and RIO.

We shall see. But I don't trust the market to do the sort of thing that one might expect it to or that it ought to: I am a realist, and know that the market decides. Of late it has been very "bloodyminded" about keeping resources stocks high, and it may well continue that way even if prices for commodities go down.

However, such a process cannot, of course, go on for ever. BHP and RIO do not just sell coal and iron ore, and they will not at all times be kept up high on the basis of the assumption that BHP will buy RIO (not at all certain), and that the Chinese will get set in BHP (a lot of talk, but where is the action?).

rdumas

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Post Number: 1423
Registered: 11-2006

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Votes: 0


Friday, May 23, 2008 - 11:15 am:

Hi Ody,

I can understand your dismay when resources continue to behave out of synch with day to day commodity fluctuations. As I mentioned in my FA versus TA debate posts, the TA (as represented by the charts) shows the spirit running free of the body (FA) in anticipation of what lies ahead beyond the current issues. The commodities boom for Australia is a multi year event that the market believes in and hence its continuance in its bull cycle.

As you can see from the chart below of the materials index, the index is not over priced at present and is blissfully moving within its channel. Sure it will no doubt pull back within its channel at some stage but I would suggest that it has many years ahead of living within this channel.

If the absolute fear of the recent months wasn't able to shake it out of the channel then I would suggest that it will take something really substantial to do it any time soon. Thats why I bought my ticket on the Resources Express Train.

ody

Member

Post Number: 2488
Registered: 10-2006

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Votes: 0


Friday, May 23, 2008 - 12:04 pm:

RUDY: resources and charts

Yes, it is a very strong channel, and I am probably - as a buyer - hoping for too much. As BHP is now down a reasonable amount on its recent highest figures, I bought a substantial holding (not a BIG one) for $47.40. It looks laughably high compared with what I paid on 20 February for the three majors which I foolishly sold the next day. And even in the last few months BHP has been available several times for around $35. But, with strong stocks, the moment of entry does not really matter that much so long as their basic direction is up.

It is not only commodities prices per se I am concerned about, but also the level and speed of the rises in the prices. If you look at your own chart, one would have to say that at this moment we are clearly still within the channel. However, at the rate BHP and RIO have on the whole been going, they will not take long to reach the top line of your channel. Once that happens, then, on the basis of the two previous occasions when they did so, one could logically expect a fall back to the bottom of the channel, which means that buying then would constitute a significant saving. It IS, of course, possible that they will continue to move in tandem (really along the same line) as the top for God knows how long. Iron ore, coal, and take-overs are strongly on people's minds as though they are a "cast-iron" (!) guarantee.

But it would seem more likely to me that if they touch the upper blue line again they will turn around, and the more so because there would be a variety of factors to help that view along. I shan't mention the same points over and over again - but I still think they remain in essence sound, and that the main fault in my reasoning of the last few days was that I was picking a turnaround in BHP and RIO prematurely because within the channel they still have "room", and I felt too confident that what seemed/is a turning point for several commodities, and what was a very bad two-day sell-down in the US, would now lead to a reversal.

I do note that our market is no exactly gung-ho at the moment. Though I am not unhappy with my BHP purchase - especially because BHP has been good at withstanding falling (or sideways) markets, I am still hopeful - from a buyer's point of view - that we shall see a correction (not just in BHP and RIO of course), and there are a number of factors which make a correction not at all unlikely. For example, inflation is on the rise globally, most economies are weakening, and the US has little room for further rate cuts.

My basic position is - like yours - that Shane Oliver is probably right in his general view: the market is healthy enough for it not to suffer a big and ongoing collapse, but a correction within the next few months remains very likely, and it is really a matter for argument as to when it will come rather than that it can readily be written off as merely a bearish fantasy.

On the contrary, even from a bullish viewpoint - suppose this was 2005 or 2006 for example - one would STILL expect a correction, after the price rises we have seen. I do not imply that ALL prices are too high, or even that many are - intrinsicically. But I do think that after a run of the kind we have had, and with some real weaknesses hovering over economies and markets, a correction is a strong possibility. I am also not sure that we are not already at the beginning of it.

(Message edited by ody on May 23, 2008)

ody

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Post Number: 2489
Registered: 10-2006

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Votes: 0


Friday, May 23, 2008 - 12:15 pm:

PRICE PATTERNS FOR BHP AND RIO

I think they are both no longer as impregnable. BHP is now (with 20 minutes delay) at $47.24, and RIO, which reached a high of $152.90 for the day is now at $150.76. They are still high prices, but we are seeing more fluctuations, and I think that sentiment about price (as distinct from the quality of the stocks) is no longer as rock-firm. It looked as though the weaker prices we had about two days ago was an aberration once the Fortescue "news" came through - but some softness is now once again apparent.

Let me state very clearly, though, that I too DO believe in the stronger for longer scenario, as readers on this thread will be well aware from many posts extending well back into the past. So all I am TRULY concerned about is price.

deanrosario

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Post Number: 1411
Registered: 11-2002

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Votes: 0


Friday, May 23, 2008 - 01:18 pm:

As the daily chart below shows, the XJO is at the 20 day EMA.

On the previous 3 occasions it has quickly bounced off this level and, yesterday, it did the same.

Today the XJO has immediately returned to test the 20 day EMA again.

I reckon a bounce to 5800 is needed this afternoon to demonstrate buyers are confident and willing to enter the market at support levels, otherwise I reckon we'll be heading for the 38% Fibonacci level of around 5620 before we attempt another move up.

If we do not bounce this afternoon, I reckon yesterday's low (5740ish) is an obvious target for today, before buyers step in.

(Message edited by deanrosario on May 23, 2008)

"Never commit yourself to anything you can't walk away from in 30 seconds." Neil McCauley (played by Robert de Niro) in 'Heat'.

"Hope is a dangerous thing. Hope can drive a man insane." Ellis Boyd "Red" Redding, played by Morgan Freeman, in 'The Shawshank Redemption'.

eblode

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Post Number: 778
Registered: 11-2002

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Friday, May 23, 2008 - 01:20 pm:

Hi Rudy, ol buddy,
I think we may consider our little bet complete and if you agree that I have won then I am itching to bet once again, this time on the DOW.
After considerable time working out my Gann figures, combined with Elliot Wave projections, together with an in depth study of point & figure charting I have come to the conclusion that on the 23rd of December 2008 the DOW will be at 14,425, give or take 2 points each way. Or if you prefer, the ASX 200 on 6987, give or take 2 points on the same above date.. What's your pleasure? So I await to hear from you with anticipation of another sure bet.

Eugenio

deanrosario

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Post Number: 1412
Registered: 11-2002

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Friday, May 23, 2008 - 01:41 pm:

Wow Eugenio

If you are correct, I reckon - forget Rudy's bottle of Scotch - you could make a wonderful return from taking a long view on a derivative product on the XJO.

E.g. 1 SPI contract (currently trading around 5780) would require a margin of around $5k and, at $25 for every point, you'ld make a profit of over $30k by December 2008

Alternatively, 25 units of CMC's ASX 200 CFDs can be purchased for under $1,500 and give you the same profit by December!

Of course, if things don't go your way, the downside is as bad as the upside is good.

Best of luck.
Dean

rdumas

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Post Number: 1424
Registered: 11-2006

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Votes: 0


Friday, May 23, 2008 - 02:10 pm:

Hi Eugenio,

Not so fast my friend. In January this year we dropped around 1200 points in less than a month and we still have about 5 weeks to go before the end of June.

I'll call my mate Ben and suggest to him that he needs to raise the interest rates 2% to get rid of his looming inflation problems.

As for your December bet I don't know if I would be game enough to take you on now that Ody and I both bought BHP (and RIO in my case).

eblode

Member

Post Number: 779
Registered: 11-2002

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Votes: 0


Friday, May 23, 2008 - 02:20 pm:

Dean,
Just the pleasure of being dead right again would be compensation enough.

Rudy,
Think about it. I'm already salivating at the idea of having your Scotch for Christmas.

Eugenio

ody

Member

Post Number: 2490
Registered: 10-2006

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Votes: 0


Friday, May 23, 2008 - 09:02 pm:

So ARE resources stocks in danger of correcting after all?

By Sitaraman Shankar

LONDON, May 23 (Reuters) - European stocks fell early on Friday, hit by losses in commodities, as oil traded below recent record highs and investors worried about regulatory scrutiny for a big acquisition in the mining sector.

But Deutsche Postbank (DPBGn.DE: Quote, Profile, Research) and its owner, Deutsche Post (DPWGn.DE: Quote, Profile, Research), gained on reports that Commerzbank (CBKG.DE: Quote, Profile, Research) and Allianz (ALVG.DE: Quote, Profile, Research) were planning a joint bid for Postbank.

At 0833 GMT, the pan-European FTSEurofirst 300 benchmark was down 0.8 percent at 1,335.87 points, led lower by miners Rio Tinto (RIO.L: Quote, Profile, Research) and BHP Billiton (BLT.L: Quote, Profile, Research), which fell more than 2 percent on worries that BHP's bid for Rio would run into regulatory trouble.

Index-heavyweight oil stocks BP (BP.L: Quote, Profile, Research), Shell (RDSa.L: Quote, Profile, Research) and Total (TOTF.PA: Quote, Profile, Research) fell 0.5-1.4 percent, as oil traded well shy of its record above $135 a barrel, though it resumed its relentless rise and added $1 to trade near $132.

ody

Member

Post Number: 2491
Registered: 10-2006

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Votes: 0


Friday, May 23, 2008 - 09:04 pm: