Strong open tomorrow - I wouldn't look look that gift horse in the mouth. Might even dig a little deeper in my pockets and pony up some spare change.

No position.canadian markets closed today.just window shopping.Before buying this on,check your charts.

AgnicoEagle

aem.n

Oct.10/08...........
( 1) . Downside Breakout on Friday.Target $ 22 to 26.
(2) Double Mov.Avg. Crossover 21wk/50wk
(3) Commodity Channel Index Daily/weekly Bearish

Stockastic & RSI ......bearish

Friday is options day.

Does anyone think stocks will rally big this week so they get close enough to their "max pain" #'s ? I have no experience with options so that is why I ask.

bought more IBM at 87.90

ya know. having the Cara survivor list & ibd list, is almost too many to pick from. nice problem to have i guess.

If this rally is confirmed with today's close and strong open tomorrow, it will be like shooting fish in a barrel with a bazooka.

This rally started in Asia and I think we'll need to see a follow through there tonight.

gold is down, and gold stocks not doing too too badly as broad market strength is keeping them from sinking.

i still feel as if gold needs to be rising w/ the market before the miners wake up. if they break new lows today while the S&P rallies, and the same happens tommorow i will be out for a while. nothing will bring gold miners back if they require a strong rising gold price w/ a rising market just to avoid making new lows.

Good morning

Confusion and irrational fear characterized financial markets during a remarkable week, with the CBOE Vix Index (the so-called “fear gauge”) spiking above 70 for the first time. Amid the dumping of stocks on all bourses, the US dollar, Japanese yen and precious metals were the only safe havens.

Nobody really knows what happens next, although some indicators are starting to signal that a bounce may not be all that far off. But stock markets are unlikely to find a cycle low before measures are implemented to stem the decline in confidence. It may take a while yet before we see the bear’s corpse, but look out for a 90% up-day as a signal of the completion of the selling climax.

My weekly review summarizes this, together with some thought-provoking news items and quotes from market commentators during the past week.

The link to “Words from the Wise” is: http://tinyurl.com/4bqv6n

That's the way it looks from Cape Town (or rather from next to Lac Léman in Geneva until later today).

RDR:
Really? What level of income prevents/abates alcoholism, STD, pedophilia, crack addiction, divorce, racism and addiction to pornography? 100k per year? 200K?

Bill, what would you recommend for those of us who fit your description...

"I do empathize with people who cannot do that, (short puts) whether they have self-directed brokerage accounts, (that's me) or managed pension, (my son's 401(k) — very limited) mutual and/or hedge funds, particularly in the latter case where asset managers have been incompetent."

Should we simply buy good, solid companies (XOM, SU, GG,etc.) at these prices and resign ourselves to a slow recovery?

[Bill Cara note:

I believe that the shares of high-quality companies that have very low debt will perform well for a few months, ie, very positive Total Returns. The first cyclic move will be a rally from extreme over-sold conditions, supported by short covering. The is well over $4 trillion available in US money market funds. That ought to be sufficient to take the DJIA back to the 11,000 or 11,500 level. Then there will likely be a test of the technical support, maybe back to 10,000-10,500, probably in late December through mid-January. By then the new President will take office and establish a new Administrative team. We will also have the time needed to see how the bail-out programs are working. So, if we are still confident that a new Bull really has started, the next wave will likely take prices higher. But the global economy must be showing clear signs of a turnaround by say mid-February for the next wave of the Bull to lift prices higher. I do think the Bull will last from now through 2011, but like the 1970's will not be one where +26% annual returns from equities are easily obtained -- starting in 2009. I would be looking at companies that produce essential products, commodity goods and services, and try to stick with them.]

dr.cosa - Wouldn't you anticipate rapidly rising gold to drag PM miners along for the ride? There's a huge amount of fiat printing going on right now in order to flood the market with cash... Trillions!

I'm no trader wizard, but it seems like a perfect reason for gold to reflect the debasing of fiat, no?

CP, look at CNH, which I mentioned thursday night. Naturally I don't own it 'cause its doing too well :P

Are you then saying that meaningful employment doesn't reduce these things, with the exception of some of the mental illnesses?

I would say that alcoholism, STD's, drug addiction, divorce and perhaps racism are influenced to a large degree by employment and income.

If access to higher education is income related, and it is, then almost all of socieities ills are imporved by employment and income.

That doesn't mean we fix all the organic and genetic components, it means those that can help themselves would tend to do so.

No earth organism chooses struggle over prosperity.

Income could help my spelling too.

schwab streetsmartpro - wacky numbers for Friday's close?

Is anyone else noticing that 2 day chart closing price doesn't quite match trading window closing price for Friday?

[Bill Cara note:

At the closing bell on Friday, the DJIA was down -44. Because of slow reporting due to the avalanche of market on close orders, the DJIA jumped all over the board every few seconds for the next nine minutes. At 4:09pm, I stopped recording and did some other work. The DJIA was down -128 at that point -- a drop of -84 points after the closing bell.]

any thoughts on TM?
the fundamentals are better than XOM and BA

[Bill Cara note:

The rising Yen is hurting Japanese exports.]

@Chickenpookie,

in the past i would have agreed with you.

but recall the HGD (gold miners 2x on the TSX)
was at about 20 last time gold crossed above $900 earlier this year, and more recently it was about $15, and the most recently it was about $12.

the ratio of the miners vs. gold has steadily gone down this year.

i hope for a change to this relationship but i have been concerned for some time that weakness in the broader market has brought gold stocks down, as has weakness in gold. so there are 2 variables working against them. (weakness in base metals seems to wax and wane vis a vi gold miners) w/ gold getting smacked down the last few sessions and w/ the broader market finally showing some pluck, we need to see something legitimate to show why a miner is a better bet than the metal.

(and this goes beyond concern about the actual validity of a paper etf)

i know the miners have traditional leverage to the metal, and it may just be a case of miners not being able to stay down once gold crosses a certain threshold like $980-1000.

or demand from obtaining the physical may just be too great and people in fear of paper based ETF's will return to the traditional way to own gold by purchasing high-quality miners.

Goldcorp is usually a relative strong performer in the gold sector, yet today seems unusually weak. I've noticed Bill looks to sector leaders for clues to future market direction. Does anyone think there is any significance to this or have thoughts on the matter? Thanks.

wavesmash

Thank you for your post at October 12, 2008 10:09 PM

Very helpful!

For what it's worth, Joe Ferrazzano uses Newmont as the lead indicator for the gold sector (and Walmart as the lead indicator for the S&P).

[Bill Cara note:

I don't know who Joe is but that seems ok. Maybe somebody can list the top half dozen ranked correlation coefficients for bullion (and the goldminers index) and the S&P?]

Goldcorp was doing well until Friday, even bucking the selloff earlier in the week. Friday it got murdered in sympathy with gold.

I don't know what to make of today's action: dollar down, silver up, gold down. I suspect the gold price is being managed to give the illusion that the crisis is not so bad.

There are too many reports of very heavy demand for physical gold, the latest one from the BBC.

Dear All,

can somebody recommend a professional provider of real time push charts incl. indicators e.g. RSI, MACD, Momentum, Fast Stochastik..I need it to daytrade options. Thank you.

APWR has been making a move this morning (up almost 60%). It looks like it because they have said that their conference call for Monday will reaffirm guidance.

The news came out of Shenyang, China (my wife's hometown).

Buy alert was Oct 7.

I am cautiously long. Already this morning, I have been in, out, and in again.

As noted in my earlier post, Jaketh, even wealthy people can have problems such as those listed in your post. But at the lowest levels of income there is an increase in social pathology. Money does not solve problems, but lack of it exacerbates them.
This is a silly thread in a blog about investing. If you don't think $ is going to help you or your family cope with problems and challenges, why are you here?

Bush and Berlusconi kicking back at the White House today. No surprise that Bush's best friend in Europe is probably the only EU leader that is despised by his own countrymen as much as Bush is despised in the U.S. How reassuring. NOT!

Jock,

Which ticker are you looking at? I noticed that sometime they repeat friday's bar during weekend. But, it'll get corrected on Monday.

Volume is kinda low which scares me.

POG/miners: Read the WIR again....

Bill expects $USD strength the next couple days.

More opportunity. GG @ 22.66?

go AGM go! The 'lil engine that could :)

Craig,RDR:
* U.S. has nearly the highest divorce rates in the world. (54.8). India has lowest (1.1)
Which country has the highest....Sweden..54.9

*US has highest rate of STD in the industrialized world. Leading the way are college-educated students.
*AA will tell you the disease is no respector of wealth.
*Web porn addiction and Gambling addictions more prevalent as income rises.
You are correct "Money doesn't solve problems."
The imprudent use of it does, however.
I am here (since you ask)to learn how to use my money more prudently.

dr. cosa - Great examination, thank you!

My belief is we're entering an inflationary period. Today's prices may not be witnessing reality in terms of metal and miners due to volatility in the general market coupled with government meddling with gold prices.

I've got my inflation goggles on.

JessieSLC

Re: Sector Leaders in Gold

See WIR #32
Bill notes 'the dance' and its participants.
Companies noted as ones to watch include:
RIO RTP AAUK BHP

If I've taken this out of context vis a vis an outlook on a short term movement, then someone correct me.

Hope this helps. It helps me in that I am adjusting my portfolio with miners and bullion.

[Bill Cara note:

Thank you. In my view, the goldminers can rally and even rally hard, but only for a short while, without the major base metal miners doing the same.]

re wealth and social ills-

everything in moderation, which is why too much of anything will inevitably warp the mind...abject poverty and out-sized wealth both lead to distorted views of the world and self, which can translate into high-risk behaviors...

Web porn- was it nicholson who once threw his PC out the window and remarked how the ---- can anyone get anything done? (CS Lewis once compared porn to gluttony, and asked why no one pays money to view lavish dinners prepared on a stage, or magazine spreads of the same)...

Has anyone tried the interactive NYTime How This Bear Market Compares?
http://tinyurl.com/47tnhl
It's great!
I remember that Bill Cara compares the 2007-2008 bear to 1987. Many hard core bears consider 1929.
How about a "happy" medium 1974. Any takers?

Bill's 5 miners are rocking, +14.7%:
http://nexalogic.com/5miners.html

So are CARA100, +9.4%: http://nexalogic.com/cara100.html

And so is Brazil, +15.4%: http://nexalogic.com/brazil.html

[Bill Cara note:

That's what I want to hear: discussion of trading... and success.]

LOL!

There are certainly cultural issues here that have nothing to do with income.

We could also say that the cited problems are from a lack of jobs and income! LOL!

Crime also rises when incomes fall, so the correlation of porn "addiction" (assuming that it exists or os a real problem) and gambling are a little whacky as you can't gamble without money or afford an internet connection without money.
Do we have a study that breaks high school graduates out from college educated when it comes to STDs? I would think libido in young people might be a factor...

AA...it's nice to be able to afford treatment.
$$$ won't change a genetic predisposition, but it could affect exposure and treatment.

It's a losing argument to say income and employment doesn't help. Help is different than cure.

I can respect Jaketh's deep seeded feelings, I think we could learn something from him if we were only willing to listen (I'm willing). Anyway, this isn't the time or place, so I apologize for opening my big fat mouth.

actually, i thought most of bill's comparisons have been to 1973-1981, with expectations of stagflation and range-bound trading...that may have changed last week, but i didn't have the time to read everything last week...

Working hard to keep position size in forefront as emotional purchase (larger position than usual)last week of RIO really has me behind.
Started small position in CTSH based on WIR and buy signal last week.
Thanks to all who post here. Glad to see the philosophical and political postings wait for close of trading.
peace

hey 2nd,

I was right about the airlines...theyre rising some even with rising oil.

The US also has the greatest disparity between rich and poor in the developed world, and it is increasing. To use a broad brush regarding U.S. rates of social ills and money, you need to examine these problems by individual income levels.

shark- you have your pick of the Cara 100, and you want to focus on airlines?

C3 - Schwab tech support acknowledged problems with listing of Friday close on Streetsmart. The say it will be fixed.

I'm seriously frustrated with Scottrade and considering about switching to Interactive Brokers. However, I'm having a hard time understanding their commission & fee structure. Could someone explain that here please?

Thanks in advance,

kp84

Thanks for the reference to WIR #32. I see my confusion now, boy do I see it. As a goldbug that was a very painful WIR to revisit. Anyone who doubts Bill's ability to see the big picture I suggest you reread WIR #32. As Bill would say, "Proof of Concept".

"abject poverty and out-sized wealth both lead to distorted views of the world and self, which can translate into high-risk behaviors..."

Agreed.

Hope your doing well today 2nd. Back from the brink?

Vorlon

Here is that follow up on Fibonacci phi mate turn dates I posted Oct 10. Sorry I'm late with it, but I am still licking my wounds from not heeding this guy's warning in Aug-Sept. This Wave Elliot stuff is like "voodoo", but so far he has nailed things even to the very day.
Remember "Caveat emptor" !
~~~~~~~~~~~~~

Our Fibonacci phi mate analysis is suggesting another turn is due this coming week, around
October 13th, 2008 +/-: This is the eleventh phi mate date we have scheduled for 2008. It will be a
bottom, albeit possibly a short-lived one. That is because our next phi mate turn date after this one is October 23rd, 2008 +/- a few days, only ten days later. Tuesday October 14th, 2008 is a Full Moon,and declines often bottom near Full Moons. We wrote in our September 12th, weekend newsletter,page 7, “September 29th could be a kickoff to a devastating stock market crash.” That has proven true to the day, the Industrials crashing 3,260 points, or 29 percent since the 29th. We noted that there was a New Moon on the 29th, and New Moons have been associated with the start of crashes in autumns in the past.

The math for the most recent phi mate turn date: Friday, September 26th, 2008, was a closing
top (phi mate analysis uses dates where closing prices are tops or bottoms) that came 1 trading day early from the ideal mathematical scheduled date of September 29th. The Industrials closed at
11,143.13 on September 26th, then the Industrials started crashing from the morning of the 29th,
3,260 points, or 29 percent, so far, rivaling the 1929 and 1987 stock market crashes. But this has
been a crash inside a larger and longer-term crash from the 14,198.10 top on October 11th, 2007. Its phi mate was the June 2nd, 2005 high, which came 1,353 trading days from January 14th, 2000’s top. January 26th, 2008 was 2,188 trading days from the January 2000 top. 1,353 / 2,188 = .618, precisely phi.

Turning our attention to what comes next, there are two phi mate turn dates coming over the
next 10 trading days. This most likely will mean volatility, a bottom, then a small top, or a more significant bottom could occur sometime between the two dates, October 13th, 2008 and October 23rd,2008. After October 23rd’s phi mate turn date, the next one is November 20th.

Here’s the math for October 13th +/-: October 13th, 2008 is 2,183 trading days from the Dow Jones ndustrial’s top back on January 14th, 2000, eight years ago. Its phi mate is May 20th, 2003’s high, which was 840 trading days from 1/14/00. The relationship between these two dates, is 840 / 2,199 = .382, or 1 minus phi (.618). What the phi mate analysis has demonstrated consistently since January 2000, is that whatever trend is going into the turn will reverse, nearly every single time, into a tradable trend. The value here is that aggressive traders don’t care which way a trend goes, as long as they know when it is coming, to be alert to trade it. While phi analysis will not find every significant trend, it finds most of them, and when it does identify the probability of one coming, we have always gotten it since January 2000. These trends are not subject to intraday reversals. They are not for daytraders. They are multi-week trends.

~~~~~~~~
Happy Halloween? There maybe something to this. I been following this since June and made some $$$ from it. But I made the screw up of a
"100 generations" last month when I didn't listen and let the "great white whale of a trade" get away. :-(

2nd: I will say here that I would like to be tested on the out-sized wealth argument.

I think I could easily disprove it given the chance! LOL!

craig- i wouldn't say back from the brink, as i haven't yet reached the point where i need to intercept a brink's car...

Blackjack:

RE: IB

$1.00 per 100 shares. Need to place $30.00 in trades a month or pay small fee. Additional services vary in price, the basic ones are either free or reduced in price if you meet the $30.00 per month requirement.

However, Scottrade Elite gives you free "Tade-ideas" which I like.

WIR-32 "Oil, then metals, then gold. Up, then down. Only occasionally is that cycle contorted."

From this and what I'm reading above I draw the conclusion that we are witnessing a buying opportunity for gold related equities and physical.

Trying to get this out in the open where we can discuss it...

[Bill Cara note:

Yes, it's time to buy the oils, the metals and gold. The avalanche of new money being printed by most every country in the world (to try to end the crisis in the financial system that has taken the capital market down with it) is going to have an effect very soon of pumping up the energy, basic materials (especially base and precious metal producers), and Industrials and Tech. But this process is devaluing paper, which hurts the Financials. In a rally, even turkeys soar like eagles, but only so far. The laws of nature (of which the capital market also must obey) ensure that.]

QT, where is that Fib,etc analysis from? website? I'd be interested in taking a further look.

Thanks

Mackinaw - CNH - Good choice man! I hope you make a bundle. I'm assuming their fundamentals are strong and won't accidentally be running out of cash.

jacek thanks for the chart. I posted this elsewhere:

As for how long and strong this upwave might be, here is what I see in these historical charts in terms of retracement (before the next plunge downward):

1932 39% down in 2 months, 17% retracement in 5 months

1942 53% down in 15 months, 20% retracement in 4 months

2008 47% down in 12 months, ?? retracement in ?? months

For a swing trade we just need a guesstimate on those 2 variables... Comments?

Something strange is happening in my port today - up +13% (still vry neg YTD)! Glad I didn't sell last Friday...!

navid - using your data in my curvilinear interpolation calculator yields 18.2% retracement in 4.32 months.

[Bill Cara note:

Yes, it's time to buy the oils, the metals and gold. The avalanche of new money being printed by most every country in the world (to try to end the crisis in the financial system that has taken the capital market down with it) is going to have an effect very soon of pumping up the energy, basic materials (especially base and precious metal producers), and Industrials and Tech. But this process is devaluing paper, which hurts the Financials. In a rally, even turkeys soar like eagles, but only so far. The laws of nature (of which the capital market also must obey) ensure that.]

I will def use the above to filter out some of my pickings. check out GTI folks. up 30%. Steel related. Was from my IBD list of symbols the other day. I am sure large public work projects will be started to spur job growth globally. steel is needed to build. i am sure many alternative energy projects will also be started. FSLR, recent darling, also up nice.

So few posts today -- looks like everyone is busy buying. :) The stop limit orders I placed last night were triggered, giving me 500 shares of SLW at $5.2 and 1000 shares of SWC at $3.5. Also, I just purchased 10 RSX November calls with a strike price of $20 for $2.45 each.

Pardon my naiivete but where does one buy gold when sellers are holding?

French-Canuck:

I have just read the article for which you posted the following link.

http://www.safehaven.com/article-11551.htm

I agree with you... highly recommended...about the significance of the spiking gold lease rates.

thanks for posting.

Some of us are waiting to sell what we bought on Friday and patiently waiting for a retest of the lows after opts expiration gets done.

Rome wasn't built in a day.

Holding or buying GE? Believe in free speech?

"Corporate liberals have done their share in shutting down anti-liberal speech, too. "Saturday Night Live" ran a spoof of the financial crisis that skewered Democrats like House Financial Services Chairman Barney Frank and liberal contributors Herbert and Marion Sandler, who sold toxic-waste-filled Golden West to Wachovia Bank for $24 billion. Kind of surprising, but not for long. The tape of the broadcast disappeared from NBC's Web site and was replaced with another that omitted the references to Mr. Frank and the Sandlers. Evidently NBC and its parent, General Electric, don't want people to hear speech that attacks liberals."

BARONE: The coming liberal thugocracy

http://tinyurl.com/543vpy

How about we give the owners of capital a guaranteed return on/of their investment in bailing this sorry country out?

Ara Hovnanian says give home buyers a $15,000 tax credit for buying a house. Alright. I think it would help.

How about tax free returns for CD's earning the same as Warren Buffett's preferred's? I'd compromise on the return if it were tax free.

Forget all this going to the public tax trough for free, I say give the owners a shot.

I'd gladly put a lot of money into a guaranteed acct. earning 10% tax free to capitalize the banks and cover their transactions.

Any takers?

Ooops forgot this. The portion of the video they canned!

http://www.youtube.com/watch?v=epE9lk0xj68

Re SNL:

The conspiracy is not liberal or conservative, it's establishmentarian. Those in power do not like the truth of their failures broadcast so widely for fear of accountability. We need to stop thinking in the blue vs. red frame, as those that control the markets could care less which side they are on: both parties serve their interests. The parties function is to divide us - the ruled.

I'm sounding more like Kaimu every day.

Nice interday cup and handle forming on PFF?

Sorry, not PFF. I meant AGM.

Zeto, it's like a teeter-totter. We should try putting blocks under each end.
I take it you are one of the top 2% of earners?

Yep, holding GE and will add on pull backs.

nemo - CPST - Looks like some folks liked last weeks price.

I haven't seen so much green since playing liar's poker with a leprechaun, over a bottle of Old Bushmills (DEO), in The Murlough Room at The Royal County Down Golf Club.

Utilities, as a sector, are crazy strong today - really broad-based increases

moab - You're absolutely right!

Just to play devil's advocate....

SNL is an entertainment show owned and operated by GE/NBC as a business. It is entertainment and subject to customer ratings. If the population prefers one part of the show over another then is it censorship to make the customers happy?

If GE edited the news or tried to cover-up a newsworthy story then it might be censorship.

It might be that some people get their news from SNL, but we can't really help that.

Most things seem to be floating around at or just under last Wed. lows. One of those "bull & float" days. Does not feel particularly bullish so far.

Most bullish (subjectively) seems to be QQQQ, weakest XLE.

My long energy trusts / short XLE spread has done well, XLE up 7% currently, while both DMLP & PBT are up more (9% & 13%).

Added 2 Jan. XLE puts, will sell 2 Dec. puts on the next bear movement. Think things can go sideways for a while.

Intraday volume/accumulation says this rally is about done, which doesn't mean they can't push it up into the close today. Expecting a pullback & then another rally try later this week - unless things turn really bad again.

Craig - "I'd gladly put a lot of money into a guaranteed acct. earning 10% tax free to capitalize the banks and cover their transactions."

As long as AIG isn't the guarantor and the banks provide transparency of their balance sheets along with full disclosure on their investments and brokerage strategies.

Well, I guess they don't want my money...

Sometimes truth is spoken only in jest.

Can someone tell me why GE is down 3.5% today when everything else except for gold miners is sky rocketing? TIA

AdamG - Because GE is 45% a finance company and won't admit when their balance sheet is full of toxic paper?

GE has censored SNL before when a Smigel cartoon skewered GE as a polluter and influence peddler. That cartoon never aired in any repeats of the episode. (I can sort of understand that as why should GE pay to attack itself.) It is not about right vs. left, it is about power and control (= money).

Ahhhh! My egg money!

CP: an FDIC guaranteed acct paying 10% tax free?

Really?

They did something similar back in the 70/80 recession.

GE was up over 13% as of close last night, so a reversion has to be expected....

bsi87 -

Always look forward to your post. Learned a lot in the past. thank you. You said -

"Some of us are waiting to sell what we bought on Friday and patiently waiting for a retest of the lows after opts expiration gets done."

Might you "project" that the op. exp. will push up the market this week? Heard similar comments elsewhere.

GE -

I think, comparing to others, GE is not down as much and as cheap as other. CME was up last week and flat today. Noticed SLB/BHI combo.

Anyone know the story on NGD (New Gold)? Its selling for under 1/3 of book value now, and appears to be cash flow positive...

long morgan

re:Opts expiration

Sy Harding's blog (Streetsmart report) has shown this idea where the big boys force the markets down prior to opts expiration week, load up (Friday was quite convenient), and sell 'em this week.

If u check max pain opts number for Oct, there's an upward pull on about everything. Doesn't mean the stock will get to that max pain number but it's like gravity.

ST (hours/days) I think the markets/stocks will bounce between the 50/200 DEMA and the recent lows. In that time frame, I'd looking for capitulation in various issues, RSI 7 day <10, to go long. A regular RSI Triple Buy is just too risky IMO.

IT (days/weeks) I think we'll have to see the weekly MACD crossover to the upside to give these markets some kind of support. OR we'll need to see them capitulate, wash out the last bulls.

LT (weeks/months) Wow, I think the markets could rally into April/May and then when they realize that whoever is Prez has huge issues facing him, we could see some very rocky trading.

wow only 85 comments on discourse. everyone must be watching every tick. 1 hr left; lets see how it finishes. so far so good

Theory: Since many of the large gold miners have primary listings on the Toronto Exchange, its possible that gold/gold miners are being relatively muted today in an attempt to shake loose some more shares when the exchange opens back up?

------------------

Separately, IF today is the ultimate bottom for the broad indices, they have reversed precisely 1 year from the intraday tops that occurred on 10/11/2007 for the Dow, S&P500, and R2K. (NAZ topped 10/31/2007) After the top, all three indices fell over (roughly) the next 7 trading days before trying (and failing) to retest the tops.

If a similar pattern occurred on the bottoming process, we would see these indices rise through the middle of next week (10/21-23ish) before selling off for a possible retest of lows around 10/31/08.

Subsequently, the NAZ did not put in its intraday top until 10/31/2007, so if history repeated itself, the retest of lows for the Dow, S&P 500, and R2K could possibly coincide with an attempt at a fresh low on the NAZ around 10/31/2008.

Of course, this is all mathematical and historical observation which means none of this may occur. But, I would be keeping an eye out for this rally to last about a week and for Halloween as an important date for the markets in some fashion or another.

I find it VERY interesting to see the top to (maybe) bottom on DOW, S&P500, and R2K coming exactly 1 year apart.

FXP @ 95 - down 50% from Thursday. Sheesh!

DJIA was up 340 in first 30 minutes.

Needs that or more in the last hour (close around 9400 or above)to keep the wagon rolling.

JMO

in 2002, the initial bottom was in October, followed by a very close retest in March of 2003.

There are very few major "V"-shaped or spike bottoms with no retest. (Actually, none exist, that I'm aware of).

I think we're definitely in a tradeable rally here, but I won't be surprised to see prices back at or below these levels in the next 6 months.

Howdy all--

One can really tell which energy stocks still have some hedge funds liquidating them--example: PXP, not so much, CHK, still lots of sellilng at times throughout the day. I'm fairly long both of these, plus ESV, and it's been very interesting watching their intraday movement.

let DE go. Up 14%

[Bill Cara note:

Please read my ADDENDUM at 3:07pm ET. This is MUST READING.]

Correlation to bullion, at mr cara's request:

Symbol Correlation Plot
IAU 1.00
DGL 0.98
DBP 0.95
GOLD 0.86
SLV 0.84
AEM 0.83
GG 0.82
KGC 0.82
FXF 0.80
DBS 0.78

NOTE: This is based on correlation to GLD, which clearly is not bullion but may track close enough for these purposes. Results provided by http://www.sectorspdr.com/correlation/

[Bill Cara note:

Thanks. Here from the same source is the S&P500 CorrelationPlot:
XLI 0.97
XLK 0.96
XLY 0.93
XLF 0.92
XLU 0.87
XLV 0.80
XLB 0.76
XLP 0.65
XLE 0.50 ]

Bill,

IMO we will see a retest of Friday's lows. The big boys are gonna back that train into the station and load up.

The MACD is not diverging and strong resistance lies overhead.

[Bill Cara note:

Sounds like you joined the Bull train.]

bought some FXP at 95.46

there is the volume! its been on cruise control all day but we are starting to realling speed up into the close

bought some FXP at 95.46.

Probably too soon but it's a small position to hedge my longs.

Thanks Bill! Followed your suggestions, and I'm racking it in today!
Bill you're the man!

[Bill Cara note:

melon, I've been around long enough to know that you are quickly forgotten after the last of those "You're the man!" cheers are heard. Unless you take this as education, there will be a time when I'm not the man! I will try, of course.]

I'm a trader. I used to worry about whether I should hold a bullish/bearish POV. Not anymore.

Last Friday you put it out there for all to see Bill.

Speaking of "I would be looking at companies that produce essential products, commodity goods and services, and try to stick with them.] ", today we have:

SDA: +25%
PDA: +26%

You can eat chicken and pork, you can't eat an Ipod or a Blackberry.

Sorry, I meant EOG instead of ESV in my postof 3:07 ...

stunning moves today - look, for e.g. at BIDU

Friday and today remind of the young bull and old bull story.

An Old Bull and a Young Bull were standing at the top of a hill overlooking a large meadow full of cows. The Young Bull says excitedly, "Let's run down there and do us a cow!"
"No, son", says the Old Bull, "let's walk down there and do them all."

I don't chase nothing.

I just want to draw attention to the words of a Kudlow, who has done nothing but lead people into disaster and loss with his mindless cheerleading, versus those of Bill, who has given guidelines, trading methods and occasional direct picks, all of which have helped preserved capital and even yield gains in these tough market times.

I know we all know this. But I think people like Kudlow should be held accountable for the damage they have done. It's no joke, even though he and his crew are.

we're getting (for all intents and purposes) Act IV, the +500/1000 open/close that closes the door on re-entry for sellers shaken out thursday and friday...based on the 1929-33 numbers, however, we may return to 7800 within a few months..

Jay,

Thought I'd add...

The bottom in 2002 was on October 10th.

Best,

TCG

Semi-holiday today, bonds not trading means a lot of players cannot "do their thing today" I would suppose.

Sometimes I also wonder if both Mondays & Fridays are often "amateur" days - has the OPM crowd extended their long weekends gradually over the years to now include both?

re: DE

up 2.89 in first 30 minutes.

3PM price 42.25.

Hi,

At the risk of spoiling the party, if Bill forgives me for doing so, I would like to say that I am patiently waiting for a higher low to form before I start getting long equities. I have no interest in picking the bottom, and I rather jump into the trend if, as, and when it prooves itself.

This does not change the fact that I respect and very much admire what Bill is doing for all of us here at the Community.

Please do not be offended by my skeptical outlook.

Cheers!

[Bill Cara note:

maro, you are legitimately cautious because you have responsibility for OPM. I put out my beliefs to people who I don't know so that they can think about their personal circumstances and do the due diligence they need to trade wisely. As for my latest piece of writing, it was obvious to most people that I did not even wait for the system "alert" because I didn't want too many people to miss the boat, but those alerts will be generated by the (end of the day) system now. Now as far as your comments about waiting for a confirm; I agree that a higher low would be a confirm, but that next low may be missed as well and by then the train has so long ago left the station that would-be passengers are going to be saying woulda, coulda, shoulda. That's precisely why I wrote at 3:07pm what happened when rallies occurred in the Mother of all Bear Markets. In any case, I think you are wise to show others your judgment, and I am happy to see it.]

CNBC's Selling the Rip -

CNBC been telling the viewer to sell into the rally. Bill is right on! (Thank you!) I think the market will punish those pull out too soon by going higher than Sept low, perhaps even beyond next Monday.

bsi87 - Thanks for your analysis on Opt Exp and the Old/Young Bull. Right on the Q.

Talk about a fast and furious rally! We got one today... I am glad that I gathered some cash over the weekend (took a loan for 50% of my 401K and found a credit card offer for $23K at 0% for one year) to cover my margin call and was even able to buy a little today.

The fact that the TED spread (and LIBOR) has decreased only marginally is good -- that means there is more powder to power up the continuation of this rally as the TED spread continues to decrease.

maro- no offense taken...i would use your POV to point out that a 'buy-and-hold' (for purposes of this post defined as anyone who bought between 9/26 and 10/7) strategy may, on a relative basis, not leave one that far behind...the average player is unlikely to have gone all-in at friday's open, right? nor is he likely to be going all-in today...he may wait for 'confirmation,' which may occur at 9500...at that point, his basis will not be much lower than that of the 'buy-and-hold' player...

maro,
Similarly...

I've taken to charting 5/20 moving averages with NO price line, looking for crossovers. It helps keep the head clear of price noise and look for trend changes.

I'm not saying it's the basis, taken by itself, for anything. I just bring it up because, like you, I'm watching for indicators of a longer-lived move.

http://stockcharts.com/h-sc/ui?s=$INDU&p=D&b=3&g=0&id=p46311093790

hope they keep squeezing, just to get a 1000 point rally on the record books...

Its taking a lot of patience to just sit on my hands here, but something tells me that days like today are made to get people to happily hand over the remainder of their portfolios to HB&B in exchange for a front row ticket to watch the real train leave the station shortly thereafter............

Now I'm impressed. Hope it holds...

WOOOOOOOOOW!

That was one heck of a "Fibonacci phi mate turn"!

Hit a high of +971 pts

Next turn date the 23rd...Happy Halloween

:-)

i like that analogy, sundance...i'm pretty sure threei would agree, but i haven't seen any comments- no time for us today ;)

"Nobody can take back the losses of those of you who were long all the way to the bottom on Friday."

I rode my bag down from 10800. I really don't want to add to the bag just to ride it down again... I'd prefer to sell rallys and buy dips to make up the difference and hopefully yield gains.

Dow 9399 - that's a 1500+ run from Friday AM's lows. What was the previous record for 1-day point gain on the Dow?

FXP hit 171 friday, and 82 today? that's bipolar, man...

lol 2nd... just finished the day, will put the log on in a few...

Scenario is played like music sheet, note by note. Including that added comment about big gaps as an element of leaving as many as possible in the dust. Some things just don't change... but sheesh, two 1000 points range days back to back, this is something.

parabolic into the close -
who can trust a manic-depressive market?
this is truly a traders-only market.

weakest seem to be XLY & XLP.

strongest QQQQ - already most up to last Monday's gap down.

Obviously the retest of the breakaway gap down last Monday has started.
If they can't close that gap & then break higher, then it's back down again.
We shall see.

No further change in positions.

No further change of positions, still

DE closed up 25 cents in the last hour. Volume for the day was about 70% of average.

I was buying on Friday when the Dow was down 600 points. A few people here wished me LUCK. It was great to see Bill Cara's call later that day. I was about ready to sell Friday to lock in profits, when he said buy.

I was able to catch the biggest point gain in the Dow, 936 points!

Here are some of the stocks I bought with their gains from just today. I was up on them before the weekend, too!

XOM +18%
SLW +13%
NVDA +18%
SU +18%
F +24%

These look like 1 year gains! Thanks Bill.

waiting for vinod to update his OEX trades...

IBM wasn't up too much, even though the market was up huge and they reported great earnings. I think IBM is still a great buy here. It is still trading at roughly 10.5 times the 2008 earnings they just reiterated last week.

b0ss- nicely done, congrats...

Interactive Brokers: Yes, $1 for 100, usually my number, but when buying thousands of cheap stuff may rise as much as other discounters, like $5. The ability to disregard the commission when deciding to move in slowly, change your mind, take profits gradually, I find to really feel free about. Charts offer all indicators, one click ordering, if you choose. With a cat in the house, I have 2 click ordering, ha, or HA! Web site other than trading is slow and obtuse, does not have all the wonderful graphics of those expensive sites, but I have never, never, NEVER, seen it slow down or "break". Not only that but their stock is up $1.97 today, and I own 200 shares.

actually, i hope we ALL caught the 936 point gain in the DJIA today, regardless of entry points...

Bulls will say: "the new bull has started".

Bears will say: "Fri. - Mon. was just a typical w2 retracementin the major w3 down, now we crash".

Market makers may say: "now we got them both on the hook, let's churn sideways & sell those options."

So I sold my first put options early this a.m., a concept I would have never considered had it not been for this Discourse and the Trader Wizard book. I went short the XOM Jan 16 '09 55.0 puts, and I'm very pleased.

The market has often been compared to the ocean, and, while it may sound quaint, I'd like to compare Bill's efforts here to that of seasoned Fishing boat captain.

Bill *freely* gives us a daily and weekly "weather report" and, every so often, he'll even throw out which bait may be successful at a certain location.

But we remain the fishermen in charge of our own vessels. It's our job to make sure we preserve enough "fuel" and have enough "life jackets" for ourself and our crew, before we head out into the waters.

We and we alone are responsible for steering the channel, looking out for other vessels, and staying away from the rocks and submerged wreckage out there.

And then, hopefully, we get to come back here and rap about our "fishing" exploits. It's a hell of a great gig.

boss - Congrats! That's fantastic! I caught today's gain too, this reversal was a welcome sight for my red eyes.

UYG closed almost exactly where it opened.

Thank you for everything Bill.

Gains from Friday AM -
FTO - 200 @ 9.76 +24.7%
SU - 100 @ 20.90 +27.6%
VLO - 100 @ 18.69 +15.5%
CHK - 100 @ 12.50 +61.6%
(this was a real stink-limit-bid that hit)

Hit break-even in Deere and sold 150 @ 42.50.

Underwater in AA and AUY, plus techs NVLS, NOK, AKAM. Holding for now.

CPST - Capstone Turbine

Chartwise, CPST looks like turning up. I phoned the VP/IR to ask about their equity financing, due to close 9.23 involving 21.5M shares (at 1.49)with 6.4M warrants (strike 1.92 for 5 years).

VP/IR was gracious and well-informed, confirming that the funding had closed as planned. Good timing, CPST! - 4 days later, the market fell off a cliff!

Given CPST's trading volume, warrant over-hang doesn't seem an issue; dilution acceptable for a growth company.

Others' views? (no position)

Bill,

What do you think about GG - it missed the big rally today compare to other miners, e.g, NEM. I am not sure whether it is under the feds pressure or what?

Gained +19.8% today and -22.7% YTD

sdgold - GG is a buying opportunity. Read Bill's real-time posts and you'll see why.

Let me make a prophecy for tomorrow: GG should go up strongly. It was dumped today not because there is any doubt in its future but because the interventionists dumped some gold on the market today, and traders decided that FOR TODAY they can get bigger returns by moving their funds from GG to bank shares. That should change tomorrow. I have just placed an after-hours buy limit order for 500 shares of GG at $24.70, which was already partially filled. Hopefully it gets filled fully today and GG then takes off tomorrow. :)

Bill & others,

Due to being close to margin call, I couldn't load up on Friday. Then, because of Canadian Thanksgiving, I was not able to play the markets closely today. I made a couple of moves, but nothing substantial and I certainly missed the main benefits of this 1000 point DOW move!

What I'm wondering is, how does one play the following day intelligently? No one likes chasing only to overpay, regardless of whether they're trading short, medium, or long term.

Some think that we'll see Friday levels again. Others think that we've already passed that point and will likely stay above 9000!

So what is the consensus on what to expect tomorrow and the rest of the week? Surely a lot of the move today was short-covering.

10 day ATR for DJIA is now 586 so that's just an average daily move, up or down.

Congrats to all who are up today. I am basically looking at stocks that still have a lot of room to go to meet their 50 day moving avg, from the Cara Survivors list and my IBD list. not going to reach for the largest gap in today's close vs 50 day ma. just the middle of the pack and best selling, IE RIMM.

I suspect the brokers have orders to call every client and yell at their clients for missing the largest 1 day move in dow in history, with an "i told you so attitude" to get mom and pop coming back in to drive everthing up to the 50 day ma. And eventually Dow 11,000.

Bill Cara wrote: "In my view, the goldminers can rally and even rally hard, but only for a short while, without the major base metal miners doing the same."

BHP and RIO rallied hard today. Why wouldn't GG rally hard tomorrow? If traders now believe in the improvement in the credit market, then the mad chase for $USD should stop and $USD should experience an abrupt weakness, which is something that John Hussman wrote a week or two ago.

Forgot to remind folks "Stocks are sold, not bought" :)

Placing a sell limit order at $6.2 for 500 shares of SLW I bought today at $5.2 and a sell limit order at $4.5 for 1000 SWC shares I bought today at $3.5.

Jock,

additionally, two news items on PCST today:

[CPST] Capstone Turbine Corp Signs a distribution pact with General Detectors International for oil and gas applications and market segments in Venezuela and Trinidad and Tobago
- Terms not disclosed

and

10/13/08 05:01am
[CPST] Capstone Turbine Corp Receives milestone payment from UTC Power for C200 Microturbine Build
- The "Microturbine Build" milestone marks the completion of five of the six milestones that were outlined as part of a development agreement. To date, Capstone has received a total of $10.5M of the $12.0M owed under the development agreement.
- Capstone delivered a complete low-pressure, dual-mode C200 microturbine system to UTC Power that met the performance specifications outlined in the agreement. The system was subsequently delivered to UTC Power for integration with its PureComfort absorption chiller and further reliability demonstration testing.

Chart wise, I'll get interested if it breaks 1.50 with volume and, desirably, after some consolidation. These cheapies can often just die after short-lived spike, gotta make sure there is momentum to them.

Maybe so few comments because everybody is exhausted from being in the cage all last week. I know I certainly am and one up day lights few fires.

sometimes the statement made by the market is eloquent and clear, and trying to add your own comments takes away from it...

Oh and of course Cramer dead wrong at the exact wrong moment again. Do not trust this man.

2nd
Did not look at market today, spend day at Massachusetts College of pharmacy (MCP)
Open house where my daughter is going for 6 years of doctor of pharmacy program starting next year.
Just check the market, up 40K today and only green are DRYS/JCP/UAUA/UWM.
So, look like going to have good return if bill’s opinion materializes.
Did not buy any OEX Friday and I had none.
If market go back to level of 10 days ago return will be over 90% YTD
May use little margin money and buy GG tomorrow beside that do not have any plan to make any change
I hope you and all other friend here did very good today. And why not we have best teacher in Bill Cara

shark_attack
Trust Cramer and do opposite to what he says
there will be good return

Hulbert update: 9-to-1 up day..will need a second one for 'confirmation'...

http://tinyurl.com/3hfh3e

[Bill Cara note:

Thank you 2nd. I'd also like to thank you for being so incredibly supportive of others in this community. You must be a special person.]

vinod- congrats...both kids (you have just two, right) have done well...

Look like US govt will own some banks tomorrow...Hello socialism! Biggest mortgage company/hedge fund, biggest insurer...

Finally someone on Seeking Alpha who puts Crammer in his place - I lost so much money in the past listening to this jokester.

http://tiny.cc/9PwLw

Thank you Bill

[Bill Cara note:

Trying to combine financial advice with entertainment (if that's what you call it) is a dangerous thing. His audience has to recognize it for what it is.]

AdamG
Like Cramer many of our CEO of financial institute is also clue less
They will not get rid of him unless GE gets some WM like treatment.

Did any one look at EEV today

[Bill Cara note:

EEV (Ultra Short Emerging Markets) plunged -45% today. When governments around the world are pumping trillions into the global banking system, traders cannot fight it. A couple weeks ago, I opined that governments had drawn a line in the sand, and would agree to put up trillions. I said it would start at two, but would quickly escalate to 4, 6, or whatever it takes to solve this crisis. Now they are. Today Germany agreed to put in $680 billion into investments and guarantees of its banks. This is not about socialism, and not as Marc Faber said today on Bloomberg, ie, the US government would soon go bankrupt. The fact is that EVERY country can just add a zero to their currency because they are the ones to print the money. So instead of somebody living in a $500,000 house, it's going to be a $5 million house. The gas at the fuel pump won't cost you $50; it will be $500. The gold 1 oz coin will not cost $850; it will be $8500. I told you before that when I was a youngster, the cost of a bottle of coca-cola was 6 cents. Add at least a zero to the same product today. The bigger point is that life goes on, but we traders have to be watching those prices to take advantage of the trends and turns in the price cycles.]

"I rode my bag down from 10800. I really don't want to add to the bag just to ride it down again..."

Ditto. Always early.

Bill once said in his WIR that "Gold is the last to leave the dance floor". I noticed that on Friday. Bill's PM Addendum provided additional confirmation for a turn-around. THANK YOU, BILL. I've "recovered" 20+% of my loss and my sanity thus far.

The 5 miners up 24%
Brazilian ADRs up 26%
CARA100 up 14.75%

SDA and PDA each up 31%.

A straddle a day keeps the doctor away... IWM straddles doing very well still.

[Bill Cara note:

Twenty-two of the Cara 100 were up over +20.2% today. Today was the biggest move in over 70 years. I didn't want you to miss it. Somebody up there must be thanking me for supporting this community.]

Bill, here's someone down here thanking you. Even though I only got going at midday today, I picked up TECK, CCJ, ABX, SU, BA right away - all solidly green(except ABX -0.3%) at the close. Then I got lazy and began some diversification of my portfolio with QLD, EEM, IYY, VEU, DBC, TIP, and GIM - all green at the close too.
That takes me from 100% cash on Friday to 80% in the game. I don't play options (don't get Bill's book until Xmas) so I'll try to use the remaining 20% for some other hedging opportunities. Any non-option ideas?

Vadym - Capstone Turbine

Thanx. For a chart-master, CPST must be an intriguing case: crashed from 100 to 1, then climbed to 6 with Katrina, traced an ear-to-ear "smile" from mid-06 to mid-08 (ranging from 4 to 1 to 4) and recently back below one.

Products much steadier than the chart!- and in tune with the energy future. How high might it ultimately go ?

20? - the resistance level from '00 and '01

http://tinyurl.com/3zvs8d

A great commentary from perma-bear John Hussman.

In short, stock valuations are favorable.

Today reminds me of my old Ford Escort... had to push it down a hill to bump start it half the time... once it got going it was ok, until it overheated.

According to P&F charts we're seeing a Low Pole Reversal on the SPY & DIA.

No new trend on QQQQ. (other than being up 12% which is nice.) We are back to last Tuesday's opening price just like we didn't see the most horrible days in market history Wed, Thursday, and most of Friday.

"The low pole reversal is seen when a chart falls below a previous low by at least 3 boxes but then reverses to rise by at least 50 percent of the fall. The reversal implies that the supply that was making the prices fall has been absorbed and demand is taking over. The pattern is an alert that higher prices could be seen in the future. The ideal buy point would be on another reversal back down to be closer to the stop loss point. This would also set up a double top breakout if the prices reverse up and break over the current column's high. "

Waiting for another reversal... I'll probably be hitching a ride in the caboose.

Ford (F) only managed to get back to last Wednesday's prices. GM managed to get back to last Wednesday's low.

May enter Suncor tomorrow with a price target of $33.50. Will probably play in CAD though...

[Bill Cara note:

Somebody better bump start Fifth Third Bancorp (FITB). The stock plunged from 40.55 to 8.75 in 13 months. I bailed early by dropping Fifth Third from the Cara 100. Today, in the biggest rally in over 70 years, their stock closed just +4.75% higher, but the Fifth Third chief investment strategist advised clients to sell into rallies. He was talking about the market, but he should have been referring to FITB and Fifth Third management ought to be giving that guy an exit interview. What a screwed-up bunch that one is.]

SiO2

Are you using the current month's options for the IWM straddle/strangle?

In the past two weeks, what has been printed?

fed? 800 bil?

EU over 1 tril? (thought I saw a news headline that said EUR pumped 2.1 tril, not sure...)

So is it safe to say that perhaps over 2-3 trillion in central banking cash has been or is being pumped into the system?

who is going to pay for that? I can't seem to understand where the money is going to come from when we are bailing our the g-8 banking system.

I can't seem to conceptualize how this is possible.

BillG, I currently have two strangles alive, one from Thursday last week and one bought today (54/55). The one I bought on Friday was sold today (+44%). These are all Oct. expiration. This is expiration week though, so this week is risky, if the market does not move, or if it moves and comes back and you don't sell.
I am starting to look at next month too. I am thinking those should be strangles as the premiums would be lower, perhaps strikes ~10% up and down from current price, but I am not sure yet.

QT, tks for the sharing. Hope to read more in future.

bsi87, like many, I look forward to reeading your postings. They are good food for thought.

I'm grateful for the rally - added NUE, INFY, GG in the AM to Fridays list -

Bill-I tell my friends that you are the "prophet" Bill Cara, or I should say the "Profit" Bill Cara.
Some have questioned your Bull call....my brother is one, but I tell them you are usually early.
Your selections put me in XOM and I added to my SSO on Friday....I exited XOM today for a very nice profit....thank you. I plan to enter BA on any dips.
I also added to my GLD calls, and added an AEM call. AEM is down 50% from its highs.

[Bill Cara note:

rayg, you can call me prophit; you can call me profit; you can call me Bill, but just call me. Thanks.

Japan's Nikkei is up +13.72% so far (mid-session today) and (Cara 100) Toyota Motor (TM) is up +15.22%. ]

Thanks SiO2

I had a good day on Friday with a straddle thanks to you. Sold it close to the high then the market reversed. Decided to open another but selected IWO. May lose as the Greeks are bad. Live and learn. Thanks again

re: Phi Mate turn dates

See McHugh's website

www.technicalindicatorindex.com

Not an advertisement or endorsement; simply a response to several inquiries that have been posted. Offers a free 1 month trial subscription.

Listen to him from time to time on Puplava's FSN broadcast. Agree with QT, the dates have been eerily accurate...

MCM

Bill,

Indeed, FITB is a remarkable story stock. I was in and out several times since early 2005 starting at $44 and making small profits. I was going by the Morningstar 5 star rating that it was undervalued and an excellent company as well. My last sale was APR 07 at $38 and it went down from there big time. I lost interest... and faith in Morningstar, at least as far as bank stocks. Surely financials are a most difficult sector for an analyst.

[Bill Cara note:

On a more positive note, Bloomberg Late Night is interviewing Seth Glickenhaus (Glickenhaus & Co, founder & CIO) tonite. I hope somebody puts a link to the youtube video. This man worked on Wall Street in the 1920's and still is manager of $1.8 billion. I am in awe at this interview. The man has not said a single sentence that I don't completely agree with.]

Vadym - Capstone Turbine

Thanx. For a chart-master, CPST must be an intriguing case: crashed from 100 to 1, then climbed to 6 with Katrina, traced an ear-to-ear "smile" from mid-06 to mid-08 (ranging from 4 to 1 to 4) and recently back below one.

Products much steadier than the chart!- and in tune with the energy future. How high might it ultimately go ?

20? - the resistance level from '00 and '01

Lets hope the trend upwards, continues. One last sign that we should be there, is the expected mass redemptions of equity mutual funds...are we there yet Bill ??

Lesson learned about "holding all the way down" - todays huge up move in some of the issues I've held (like PAL +40%, PLM +49%) looks like a small blip up on the chart. Will use stop losses in the future (After I make my money back, that is... ;)

Bill - that is not what Marc Faber said on Bloomberg - he said the U.S. would ONE day Definitely go bankrupt - ONE day. I'm sorry to say this, but the notion that even the U.S. and OECD partners can just indefinitely add zeros over the LONG TERM is so flawed and outrageously wrong, I don't know even know where to begin.

I keep apprised of about 10 people's outlook whom I consider the smartest around. Faber is an economic historian who has also correctly called every major move for 30 years in global markets. I strongly suggest you read his book (Tomorrow's Gold). You will find that you have more in common with his outlook, than not.

This time, he has even correctly called this short term event - he said deleveraging/possible deflation first then inflation coming after reflation later.

[Bill Cara note:

I probably stand corrected because I was half listening to his interview. He wasn't saying a single word that was helping me trade, and that's the bottom line. Entertaining, yes. Valuable commentator, yes. A friend, I'd like to think so. Trader? You tell me how much he helped you Friday and over the weekend to set up for this rally. In the past couple weeks, I have implored people to watch prices and let the rest of it go. Even when Gov. Palin flat out lies, I have to close my ears. Doesn't mean anything. Obama is going to win, according to the widening gap in the polls, and so I have to be thinking about how that result will impact the drivers of equity market prices.]

I think that some of the world's current financial woes can be easily traced back to the implementation of a certain self-regulatory framework implemented in the US last November.

"Basel II has been described by some commentators as the most significant trigger for change in the world’s financial services industry in recent history."

http://tinyurl.com/4uw24t

What changed?

"The major change in the New Accord’s Standardized Approach is that claims
would be assigned to risk buckets according to their external ratings, rather than
solely by type of counterparty (i.e., sovereign, bank, residential real estate, and
corporate). New charges are also proposed for unused commitments with an
original maturity one year and under (unless they can be cancelled
unconditionally by the bank without informing the borrower) and for collateralized
repo transactions, both assets and liabilities."

http://www.banking.state.ny.us/rp0305.pdf

It's interesting to see an article from 2002 already talking about the coming CDS bubble if Basel II was implemented.

"the Accord did not recognize non-bank forms of credit risk mitigation (the unintended consequence, of course, being the stimulation of massive cross-sectoral credit risk transfers for the purpose of regulatory arbitrage)

So did regulatory arbitrage and attempts to game the system cause the mess we're in today?

If you can get through the jargon it may be worth a glance to check out some of the current concerns.

CGFS issues reports pertinent to the financial turmoil
4 July 2008
http://www.bis.org/press/p080703.htm

The 3 major issues?

Private "leveraged" equity
Ratings
Central Banks

The recommendations? (a play-by-play guide to current central bank & Fedge fund activities, skip to chapter 5)

http://www.bis.org/publ/cgfs31.pdf?noframes=1

My favourite line:

"However, experience indicates that, once established, stigma is difficult to
dispel."

I guess it takes $9 billion dollars or so.

http://tinyurl.com/4lthjb

Missed the 97% uptick on MS today... but that would account for our pep rally spirit.

Wishing I'd caught my bid on RBS last week too. Up 135%!

FITB did better than GE today. I guess it's harder to wash out Bill O'Reilly's stigma with Warren Buffett soap than it is to clean up an already smelly investment bank.

Anyone catch whether the commercial paper market is still frozen? We had Bahamaian weather up here this weekend...

http://tinyurl.com/4glwyr

Just read this wonderful article by Hussman.

http://www.hussmanfunds.com/wmc/wmc081013.htm

The only thing we have to fear is the fearmongering of Wall Street itself

Look – a few weeks ago, there was a $700 billion pile of money on the table, but the only way for Wall Street and bureaucrats to get their paws on it was to scare the public out of its collective gourd. They succeeded, but created the psychology that the U.S. was on the verge of depression if the bailout wasn't passed. Having created that psychology, the crisis took on a life of its own.

I have argued since 2003 (e.g. “Freight Trains and Steep Curves”) that the U.S. financial system was pushing toward major credit difficulties. Earlier this year (“Which Inning of the Mortgage Crisis Are We In?”), I noted that the eye of the storm would pass just about where we are today. These difficulties were largely expected. In response, the badly reasoned and childish panic coming out of Wall Street analysts these days is an embarrassment to the investment profession.

Word to the wise - don't accept advice or analysis about this crisis from anyone who failed to anticipate it in the first place. The people warning about Depression now (or even talking about it casually on the financial channels) are the same reckless jackasses who told investors that stocks were cheap and “resilient” at the highs.

Stocks are now measurably undervalued

Investors will berate themselves for the panic they are now exhibiting. This, from an advisor that has adamantly argued for over a decade (with the exception of 2002-2003) that the stock market was strenuously overpriced and likely to deliver disappointing long-term returns. My impression is that investors who abandon properly diversified and carefully planned investments here, with the stock market already down by nearly half, will regret it as the emotionally panicked decision that wrecked their retirement prospects.

Long-term shareholders will recognize the following chart, which is an update of our 10-year total return projections for the S&P 500 Index ( standard methodology ). The heavy line tracks actual 10-year total returns. Note that the total return for the past decade has been zero, right in the mid-range of what we projected at the time. The green, orange, yellow, and red lines represent the projected total returns for the S&P 500 assuming terminal valuation multiples of 20, 14 (average), 11 (median) and 7 times normalized earnings. Stocks are now at the same valuations that existed at the 1990 bear market low. Relative to 30-year Treasury yields, the S&P 500 is priced to deliver the highest excess return since the early 1980's.

Four magic words will ease this crisis: “We are providing capital.”

The main problem in the U.S. financial system amounts to roughly 5% of the mortgage assets outstanding. Much of the panic can be traced to the wipeout of shareholder equity in highly leveraged institutions, but it's only a small percentage of the volume of loans in the financial system. Investors are now being quoted ridiculous dollar figures in the trillions and quadrillions (e.g. the total value of the U.S. housing stock, or the un-netted notional value of financial derivatives) as if these figures represent potential losses. The people spouting these figures are appealing to the worst impulses of a frightened public that doesn't fully understand the market mechanisms at work here.

Four magic words will ease this crisis: “We are providing capital.” Specifically, the Treasury should refrain from buying bad assets from financial institutions, and should instead provide capital directly . As I noted in You Can't Rescue the Financial System if You Can't Read a Balance Sheet, buying bad assets does nothing to improve the capital position of an institution unless the Treasury overpays for those assets.

The markets have endured credit-related “panics” before

I recognize that all of this is very scary – particularly the rate at which the market has declined. But it is important for investors to understand that the current selloff has all the quite standard markings of a “panic,” of the type that Charles Kindleberger described in Manias, Panics, and Crashes: a “seizure of credit in the system.” It is just mind-boggling to hear financial reporters and Wall Street “professionals” foaming at the mouth that the difficulties we are observing today are wholly new and unprecedented. We've seen these before.

Economist Stephen Roach wrote weeks ago that “The most important thing about financial panics is that they are all temporary. They either die of exhaustion or are overwhelmed by the heavy artillery of government policies.” That fact is worth remembering here.

Look – if your asset allocation is wrong (e.g. if you are relying on the market to recover quickly, at the risk of intolerable losses and changes to your plans if it doesn't), then your asset allocation is wrong, and you should immediately start to make changes so you can get it right. Don't put money that you need to meet short-duration obligations at the mercy of long-term investments, regardless of the market's valuation.

In contrast, if your asset allocation is consistent with your risk tolerance, you're diversified, and you have a “full cycle” investment horizon, stick with your discipline. If your exposure to risk is small, a panic is a good time to increase it gradually on depressed prices. That is what good investors do. The bad investors are the ones that establish leverage at tops and are forced to sell at bottoms. Those investors unfortunately exist, and their behavior can amplify movements in both directions, but a disciplined, gradual, diversified strategy should allow for that.

[Bill Cara note:

Yeah, he's a great writer, isn't he.]

Very interesting. Just read on Bloomberg.

http://tiny.cc/MaCJN

U.S. Treasury is investing $125 billion in 9 major banks. (including $10 billion to Goldman Sachs...)

Nice.

[Bill Cara note:

The Treasury Wizards from Goldman Sachs did not do something they would have if the $125 billion was theirs. The public is getting screwed by Treasury's investment in non-voting preferred. Voting common shares are needed to balance the risk, but Treasury is bailing out their friends and fellow shareholders. But it is what it is. The injection of funds is absolutely needed. Do you recall that just a couple months ago these bankers swore an oath on their parent's graves that their firms' capital base was quite solid. They lied. They knew they couldn't get out of the mess they created. They were just waiting for pallie Paulson to get control of the People's Trillion.]

Bill, I just listened to the Oct4 interview. What a great attitude about your site and the help you provide for people. I really appreciate your humility. Thanks for all you do. I look forward to your trading service. David

is that a triple bottom formation on GG?

Each time GG has dropped to 25 or lower, it has rallied on increased volume

[Bill Cara note:

ABX dropped -6.4% and GG -3.3%, but the $USD plunged -1.32%, which ought to have zoomed the goldminers. All I can think of is that the market interventionists were trying to position the leading goldminers as losers. Either that or a gold fund was shut down in the morning. I say that because the losses in ABX/GG occurred right at the open. The rest made no sense. When you see an inconsistency or data anomaly like that, go with the bigger driver, which in this case is the $USD.]

Do we gap up in the morning? Would anyone recommmend using market orders to buy or wait for a pullback assuming we ever get one? TIA

AdamG-I know some traders don't like to buy first 20-30 minutes of trading. Some wait till the SPY/DIA trades through its opening range-Mark Fisher.

taxpayer investment in banks -

WTF? why non-voting shares? Do we have THAT much faith in the management that's in place? I think the Gov't should insist upon at least negative controls on mgmt (just like you'd do in a private deal). And if the bank can earn back enough to buy its shares back, fine. If not, let's be socialists for a while !

[Bill Cara note:

Jock for Treasury Secretary!]

mining sub-industry returns on Monday:

Steel and iron 25%
copper 24%
non-metallic mining 23%
aluminum 20%
industrial metals and minerals 17%

silver 8%
gold 6%

curious, huh?

Bill,
You called the Bull on Sep. 19 (a Friday), even in stronger language in WIR #38 http://tinyurl.com/3slvg2:

That WIR began with this sentence: “Very few of you it seems, and very few of the “gurus” as well, agree with my opinion that the 2007-2008 Bear market is over.”

I myself thought this was premature, so I was happy to hear dissenting opinions within the Bill Cara community. But you stuck to your guns and even clarified your position the following week, stating that this was no bull market rally in a secular bear, but the beginning of a new secular bull.

From Bill’s comment to kc135guy on Sep. 25th. http://tinyurl.com/3hxs2j

“I believe the market is transitioning from a secular Bear to a secular Bull, and that it is in the first upleg of the initial Bull cycle. There will be over the next several months a series of higher highs and higher lows.”

This implies that there will not be any lower lows once we’ve “bottomed”. Obviously the jury is still out on this call, but today you brought some clever historical analysis (in an addendum) to the discussion http://tinyurl.com/4ugovs:
S&P500 records:

June 1, 1932 to Sept 7, 1932: 4.40 to 9.31 (gain of +111.6%)
Feb 27, 1933 to July 19, 1933: 5.53 to 12.20 (gain of +120.6%)
Oct 19, 1933 to Feb 4, 1934: 8.61 to 11.82 (gain of +37.3%)
Mar 14, 1935 to Mar 5, 1937: 8.06 to 18.68 (gain of +131.8%)
Mar 31, 1938 to Nov 14, 1938: 8.50 to 13.78 (gain of +62.1%)

The average gain for the five major intermediate-term Bull cycles during the Great Depression was +92.7%. Nobody can take back the losses of those of you who were long all the way to the bottom on Friday. But on Friday I posted the full-out Buy Alert at 3:40pm ET. In the Week In Review on the weekend, I urged you again to Buy. I am a Bull, and will be until I believe the risks are too great to be long stocks.]

Now, this sounds to me like you are discussing bull market rally returns in a secular bear market. Let’s look at this from a different perspective.

Where was the S&P500 before the crash http://tinyurl.com/ybayyx? 24.86 on Jan. 1, 1929. But let’s keep consistent with your dates:
- Oct. 1, 1929 to Jun. 1, 1932: 27.99 to 4.77 (loss of 83.0%)

That took more than two and a half years to find the bottom (I’m assuming you picked the bottom with that 1932 date). Fine, you might say that this is irrelevant because the government wasn’t inclined to bailout the financial sector, or the economy back then – they sure are now, right?

If that’s your argument, then why post those Depression era gains. They’re clearly bull rallies in a secular bear. You have emphatically stated that this is not just a bull rally (or “bounce”), but a new secular bull, with higher highs and higher lows. Again, time will tell, but you do no justice to your argument throwing out this cherry-picked data from the 30s.

This is inconsistent at best.

Another way to look at it that the S&P500 has fallen by 28.4% (1255.08 – 899.22) since your initial call was made (yes, those are closing prices on the index from Friday, Sep. 19 – Fri. Oct. 10). We may be in for a ferocious rally (starting today, Oct. 13th apparently), but you still have not really explained why you feel this is a secular bottoming and not just a bounce.

When I asked you for clarification last week you directly ignored my post (http://tinyurl.com/45tgey) and then the very next day constructed a straw-man argument railing against all academic economists.

It’s great that you’re feeling vindicated today and all, but you really should consider the arguments for a severe recession and the possible implications for equities should that occur. If you have then please illustrate further.

I just came up with a possible explanation for why gold was down today while $USD was down as well: traders were buying gold in the past two weeks as a hedge against the crisis, and they sold it today when they realized that the crisis is likely over and other more risky assets will provide a better return FOR THE DAY. So gold and in particular GG might very well rally tomorrow. My after hours order for GG was filled only partially, so I am putting now a buy stop limit order for GG with stop at $24.80 and limit $25.5.

Another theory I have is that the market will close green tomorrow because many people did not buy "enough" today and are waiting for a pullback tomorrow to buy more. So any pullback tomorrow will be bought. And if a pullback does not occur, then people will still exhibit panic buying in the second part of the day, being afraid that the market will never come back down to these levels. Naturally, after such panic buying tomorrow, the market should go down on Wednesday. Just my theory...

JB- I don't see the inconsistency-> 1932 to 1938 looks like a 6-year bull run to me, and Bill's time horizon right now is only 3 years...

ALOHA !!

David ... you are only looking at one piece of the puzzle. While gold was down in USDX terms gold has been up in all other currencies yesterday and today and even while I type and the ASX and Asia is going off, all gold prices in all other currencies are up!

I also noticed the USDX today was tepid at best while all the commodity backed currencies flew like the AUD and REAL.

I believe with the baby-boomer mentality of watching TV for the past 50 years with Father Knows best solving problems in 30 minutes that same mentality bleeds through where a one day rally means all of America is back on track! In actuality it is the complete opposite. None of the fundamentals for reviving the US economy have improved. A DOW rally means just that ... a DOW rally! The DOW is closer to the spigot of money flow than America's small businesses or the guy standing in the unemployment line. My business did not benefit one bit from the $700bil or the DOW rally. If I was KAIMU BANK with a seat at the US FED discount window taking "temporary loans" I know I'll never have to pay back then I would benefit too! But I am too honest and hard working to be among the group of thieves known as US Bankers! Besides I have no clout in CONgress, I have no representation at all. All I do is fund the US Banks and CONgress through my taxes.

I have to ask the CEO of Morgan Stanley(MS)... How does it feel to be a US government worker now? All the Goldmans and the JP Morgans they're all just US government workers now. Yet more welfare for private corporations that have no financial ability to stand on their own two feet! That list is HUGE and most of the FORTUNE 500 are on welfare!

Now we get FASB accounting rule changes so we can lower the bar ever lower until US Corporations may as well move their headquarters to ZIMBABWE! GAAP is out the window here!

FINANCIALS? WE DUNN NEED NO STINKIN' FINANCIALS!!

The rule of Common Law is lost on America. It has turned into a Third World casino! Actually I am insulting Third World casinos! HA!! Sorry Third World casinos!!! Ever see that movie THE DEER HUNTER? Where Christopher Walken is playing Russian roulette in Bangkok. That's what the rule of law has turned into here. Russian roulette ... only for US citizens the gun is fully loaded! We lose all the time ... every time!

Name one time US TAXPAYERS have even won?

HEY ... Oh yeah ... It was a long time ago, but we won this one!!!

"We the People of the United States, in Order to form a more perfect Union, establish Justice, ensure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
Preamble of the US Constitution

Oh yeah ... we won here also ...

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."
Declaration Of Independence

Does 95 years of monetary debasement qualify as a "long train of abuses and usurpagtions"? What have we evolved into as a Nation?

ALL OUR BEST THINKING GOT US HERE ...

Placing another buy stop limit order for GG: stop 25 and limit 26. Don't want to miss it even if it gaps up...

ALOHA !!

Today I drove around the PUNA area going to other nurseries looking for some white den UH800 field stock. NONE!!! I have been looking for a year now. It is absurd! The reason why I cannot find any? The UH(Uni Hawaii) has the Ag Dept under construction and the cultivars got misplaced and some other screw up regarding the UH800 flasks that set the whole program back a year! I bought some UH1089 purple dens and I have already finished planting them. As it turns out maybe instead of looking for UH800 plants I could just buy another nursery! HA!!

THE TOTAL
While driving around I listened to Rush Limbaugh on the radio for a bit. He was talking about a new CONgress SPENDING BILL worth $150bil. It is touted to create jobs for Americans but according to Rush all there is in it is more welfare. It would increase unemployment benefits and increase food stamps, but nothing about new jobs. Then I stopped and got gas($3.99 reg)and I noticed the headlines on the Honolulu Advertiser ... HAWAIIANS MORE DEPENDENT ON FOOD STAMPS! Well for those that do not know food stamps is an old term, now there are credit card things called EBT. I was in line at ISLAND NATURALS in Pahoa the other day and a lady with a British accent swiped her EBT card to pay for her groceries and the cashier told her the card was no good. So what happens next? The lady pulls out another EBT card and hands it to the cashier and the cashier takes it and swipes it and that card was good! Hummmmm??? I never saw that before and she was a bloody BRIT!!! My attitude now is "HEY, they need it more than Goldman Sachs!" But, I am speaking to the pervasive mentality that is ruining America. ITS NON STOP WELFARE!!! Not just at Pahoa's Island Natural but even more so at CORPORATE AMERICA! I study the annual government budgets and I guarantee you that I have never seen American corporations pay their fair share of taxes! NEVER!!! The average American pays 54% of their income in various taxes. US Corporations pay 13% ...

So lets add the total up over the past two weeks for just three line items. I doubt this new SPENDING BILL fails. How would it look to hand banks $700bil and then shoot down a measly $150bil job creation Bill? So US Banks get $700bil and US citizens get $150bil, that's 80% less than US Banks get! Who is right next to the money spigot?

The BAILOUT PLAN passed with $700bil for US Banks and $150bil pork(the bait)so that is a total of $850bil and the new SPENDING BILL is $150bil so that brings the total to $1tril for three line items in two weeks. I did not count the extra for AIG and the MS guarantee to Japan and the $25bil to each US car manufacturer and who knows what got loaned out the begging bowl at the US FED! I did not even count what we spent on the WAR ON TERROR either, so as you can see, like a major league baseball game, we need a "program" for all the BAILOUTS!!! Now I see why the head of the GAO, US COMPTROLLER GENERAL quit when he did! It was just like Jeffrey Skilling suddenly quitting ENRON!

These derivatives are killing us and that market is still going into hyperdrive. Shouldn't we shut down all future derivatives trading markets and sort out what we have on the table so far? We've barely sorted out LEH counterparty derivatives and that threw banks for another $400bil loss(plus or minus)! Merrill settles for 20 cents on the dollar and LEH settles for 9 cents on the dollar ... whats next? Its trending down and hey ... who's going to pick up these massive liabilities?

We allowed the floodgates to open ... We gave them an inch!! Look what happened ...

ITS THE MONEY STUPID !!!!

ALOHA !!

ON FASB
This is the problem ... The derivatives markets just do not want any regulation at all! This is crazy ... They want it all! They want US TAXPAYERS to be in BAILOUT MODE to infinity and they want no rule changes on valuations!

How can there be a "real market" without market pricing?

READ ON:
Bankers group asks SEC to override FASB on fair value rules

American Bankers Association sends letter advocating reliance on internal estimates rather than market pricing

October 13, 2008 3:22 PM ET

(Reuters)—The American Bankers Association on Monday asked the U.S. Securities and Exchange Commission to override U.S. accounting rule-makers’ new guidelines on mark-to-market accounting, saying they still rely too heavily on distressed asset values.

The staff of the Financial Accounting Standards Board released guidance on Friday intended to formalize a Sept. 30 joint clarification from the SEC and FASB which said that banks could rely on internal estimates, rather than currently deeply discounted market prices, to value assets in illiquid markets.

In a letter to SEC Chairman Christopher Cox, the American Bankers Association said FASB’s guidance was “circular” and “refuses to recognize the realities of the current situation” by requiring companies to still evaluate liquidity risk in their calculations.

“Given the importance of this issue, the impact it has on the crisis in the financial markets, and the seeming inability of the FASB to address in a meaningful way the problems of using fair value in dysfunctional markets, we believe it is necessary for the SEC to use its statutory authority to step in and override the guidance issued by FASB,” Edward Yingling, president and CEO of the American Bankers Association, said in the letter.

The FASB staff’s guidelines, titled “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” differed slightly from the original Sept. 30 statement. The changes reflected concerns raised in more than 90 comment letters sent to FASB last week on the change.

ALOHA !!

This is a great example of how things are today and it shows you who the winners will be and who the losers will be! Did anyone have any doubt that there can never be a level playing field so long as the casino has a money machine?

I think this will open some eyes ... This is a monetary application that you could share with your own kids and they could relate to it.

READ ON:
What We Learn From a Play-Money Auction

Daily Article by Bart Fuller
10/13/2008

Play Money Auction
At this party auction, play cash was king.

If you want to get an idea of how this bailout bill is going to affect your family in the months and years to come, all you have to know is what took place at my nephew's party. My sister-in-law thought it would be fun to give away party prizes by having an auction with play money. I got to run the show. I had attended auctioneer school recently and needed the practice.

A quick aside: The beauty of an auction is that it's a very clear and simple example of what goes on every day in a free market — buyers and sellers meeting to negotiate a price. When the sale starts, the price is usually fairly low in order to get as many bidders interested in the purchase as possible. As the bidding proceeds, buyers drop out of the bidding, one by one, as the price exceeds the value those buyers place on the item. Eventually, a point is reached where all the buyers have dropped out of the process except two. Now, with each call the auctioneer tries to get just a little bit more money from the "out" bidder, the one who has not placed the highest bid. Back and forth between the two bidders the auctioneer calls. There comes a point when the asking price reaches an amount that one of the bidders is no longer willing to pay. This bidder becomes "the one excluded … by a slight rise in price" — Rothbard's marginal buyer.

Now, back to the party auction. Items for sale included various candy bars, treats and toys, with a couple of gift cards to ice cream shops and booksstores to make it interesting. Everyone who took part started out with the same amount of play money. There was no more to be had; it was a limited supply. Since the supply was limited, all the participants had to look ahead and plan their purchases and bidding accordingly. There was no ability to pull out a credit card and charge more for an item than they actually had on hand. Play cash was king.

As always, at any auction, the bidding was lively and competitive, even with play money. Cousins were battling for the same candy bar or box of sparklers. In-laws were bidding against each other for gift cards and treats. Everyone was having a good time.

Once people started winning some of their bids though, there was a change. Invariably, someone would win an item or two and then have only a few play dollars left. So few, that the amount they had left was now worthless for any further use in the auction. Once this point was reached the person would decide they had better things to do. Before leaving however, they would offer their small amount of leftover money to someone else. This started a secondary auction — the new auction being one in which the remaining active bidders vied for the unwanted play money of the people leaving.

Engagement in this second auction occurred each time someone left the primary auction with the departing player giving the money to whomever they liked. The winners of this new money suddenly had more purchasing power than those who were not as fortunate, leaving the less fortunate in the lurch as they were consistently outbid for the remaining items by the new-money bidders. For the sake of argument, let's say these winners received a "liquidity infusion."

As time went on, this process only got worse. There was a greater and greater disparity between those who had money and those who did not. In fact, it was possible for those who had all of their original money and had been saving it for a certain item, to lose their bid to someone else who had spent the original money, but also received a "liquidity infusion." Those with new money were able to bid up the prices of the remaining items and crowd out the people who had not received a new liquidity infusion.

My nephew's auction serves as a good example of what we now face. This same liquidity-infusion process has been going on for decades in our economy with the Federal Reserve providing new money to the banking and financial industries. With the passage of the Emergency Economic Stabilization Act of 2008, however, the Fed is poised to accelerate this process at a rate not seen in our lifetime. Those who will be hurt the most, of course, will be those who do not receive the new money.

For, just as in my nephew's auction, the banks and firms that receive the new money first will be flush and able to finance their projects before the market exhibits the resulting rise in prices. Those of us not receiving the new money will be crowded out of the market only to see the prices of our purchases rise and our planning and value of our savings dissipate as it takes more and more money to do in the future what we could today have done for less.END

2nd_ave,

JB was pointing out that Bill was/is calling for a new Secular Bull Market.

Secular Bull Markets are at least 8-20years in nature. So a 3-year bull market is technically not secular but cyclical in nature.

The 1932-1938 rallies cited by Bill are Bear market rallies. Note that most were around 6 months or less in duration, before the larger downtrend brough the Dow down to new lows.

Like JB, I am curious why Bill considers this a Secular Bull. Secular bulls normally occur when the PE ratio is at <8.

Hope Bill can clarify for us his thought process, and reasons. Thank you.

[Bill Cara note:

How many trillions of reasons do you need? You missed the whole point to my running the table from June 1 1932 through the Great Depression. You just called that period a series of Bear Market rallies. You are wrong there too. You are looking at the glass as being half empty, and I told everybody that the process we have been going through is a change of mind-set to where the glass should now be seen as half full. Would you call the equity market a secular Bull if it tripled in the space of less than six and a half years? Well, the S&P500 did just that through the Great Depression -- from 4.40 on June 1 1932 through 13.78 on November 14, 1938. Where do you think the S&P500 was 20 years after the June 4, 1932 level of 4.40? You obviously don't understand, so I'm not going to continue to respond. I have a limit to my interest in debating, which is the reason I first learned how to trade and then I stopped listening to people. Education yes, for those who will listen; but debate, no. Sorry.]

Social Equity for HB&B!! Right on.

http://tinyurl.com/3s74wr

The Dream Team

At Indian Call Centers, Another View of U.S.
http://tinyurl.com/473f7y

Today on the CDN TSX is going to be funny. After being on holiday yesterday, Asia and Europe rallying hard for two sessions, and the other American markets exploding yesterday and likely to do so again today, they have some major catching up to do.

What are we likely to see? I figure a 5+% gap up (minimum) and then some sort of record trading day to follow on the upside.

Not sure if this is a problem with my software/quote provider or just another thing I don't understand about the workings of the market. I noticed for quite a few of my stocks huge slugs were traded yesterday at 21:00:00 at significantly lower prices than the close.

Dell 13,065,104 13.26
CHL 5,145,559 44.20
USD (the ETF) 316,778 19.00

TIA and sorry if I’m wasting time with a vendor error!
Miggs

2nd,

Vorlon hit the nail on the head this morning @ 5:43. A three year bull call is inconsistent with my understanding of "secular".

We may have some wild bull cycles in the next decade, but that's not the same as a secular bull. I think this is an important distinction.

[Bill Cara note,

You too missed the point. Please see my follow-up to vorlon.]

Good morning.

Here are your Cara 100 Ratings Changes:

CHRW - Coverage Initiated with an Outperform @ Morgan Keegan

GOOG - Coverage Resumed with an Outperform @ Friedman Billings

-------------------------------------------------

Have a great day.

USD index looking toppy and ready to roll over
from a TA perspective.

http://i34.tinypic.com/2yma8uw.jpg

Things are still chaotic and up in the air (also in Sweden), too soon to be able to see what may come of all this.

Swedish Stibor (interbank rate) was down a little more today, from 4.96 Mon. to 4.75, still at an elevated level.

I note that the German rescue package is not a done deal, it will be decided upon on Friday apparently, and the German states (republics? provinces?) do not like it, as they are apparently expected to pay for 1/3.

Sweden will apparently build up a fund for investment in banks if the need arises (not so far), this will be done partially with private capital, and the taxpayers will not be put at any risk (they say).

I note that the Icelandic bourse opened today and is down - 76% currently.
That would have to be the buy of the century - or not?
Now they say this is not correct, that it is down 76% becaues the big banks that have been taken over (and are not trading) have been listed at zero.
But - what should they be listed at? hm . . .

Ho, hum -
another bailout, another automatic rally.
This time international, if not yet world wide.
(What might a truly world wide bailout be in response to if one becomes necessary?)

The former bailout rally crashed in short order (was a w2 in EW-speak).
I'm guessing so far this one leads into a trading range instead (is the beginning of a w4).
However, there is a chance it is another w2 at a higher level.
That would be the lead-in to the real crash.
I do not give this a high probablilty, but there has also never been a better setup.

Have decided to sit on my Dec. & Jan. puts (XLY, IYR, XLU - all still deeply ITM & well profitable) for now, probably take profits on half on the first serious retest.
May re-evaluate the XLU puts if utilitites seem to benefit significantly from any bailouts.

The energy trust / short XLE spread is currently negative by about 2 XLE puts, however I have some leftover energy trust calls that are now almost in the money again, so I don't really have to do anything there either.

We shall see . . .

SLW: no clear picture (same for silver).

gold is likely the buy of the century.

silver below 11 has me cautious today,the hs top explains the ferocity of the fall on friday

http://tinyurl.com/4bvacy

Bill,

Your interesting addendum (10-13-08) viewed from a slightly different angle —

1. The TV is talking to the masses (any independent thinker/trader is not listening to them).

2. Isn't it likely during the bull cycles you listed that a low volume (just a guess) and general mood (like now) made such gains possible? If so, the negative/possitive fear is reinforcing your view that this as a good time for traders.

Question on different topic:

What would you recommend for those of us who fit your description...

"I do empathize with people who cannot do that, (short puts) whether they have self-directed brokerage accounts, (that's me) or managed pension, (my son's 401(k) — very limited) mutual and/or hedge funds, particularly in the latter case where asset managers have been incompetent."

Should we simply buy good, solid companies (XOM, SU, GG, etc.) at these prices and resign ourselves to a slow recovery?

Bill, Sorry I reposted the question before I got to your reply.

Thanks

Cara 100 Update:

RIMM - Upgraded to Hold @ Needham

Exciting times, yes? The blog discourse has never been livelier nor Bill's comments and guidance more direct. Because he warned us all some time ago to take our skins out of the game unless we were prepared to play at a pro level, I've lost very little ground and that only in a bit of profit in something I got emotionally attached to. Now easing my toes back in with conservative amounts of high-quality equities that I (fortunately) could never have afforded a few weeks ago. I'm not agile enough yet to day trade effectively (slow learner) but history tells me to buy smart, don't overstep my resources, and don't panic. Good luck, Everyone.

Markets going lower.
Stop losses are in order.

Great, now that we're all on the same program (inflation), let's get on with the dissection:

Let's first pick a reference point from where we can begin discussion, I like Bills, for the sake of simplicity - let's add another zero...

Stock prices must reflect the devalued currency in which they are denominated - If that coke now costs $6, my KO shares should be around $440. Extrapolate from there...

Regardless, a simple DOW return to 12k would leave us in the dust when normalizing our portfolios to inflation (bottom line on the inflation time horizon).

Gold up, up... DOW up, up... EVERYTHING up, up...

I feel sorry for anyone referencing yesterday's data (prices) and holding large amounts of fiat currency without consideration for inflation. In order to maintain a normalized calculation, references to returns must be made in terms of percentages. These are arguments for the value of individuals "wealth" growth through the instrument of leveraged debt.

After all, why do you think banks wouldn't keep adequate liquid reserves in the first place?

Nobody wants to hold fiat paper in inflationary times.

Bill,
Not sure how you manage it. Making those bold calls esepcially when every word you say is being followed ... and receiving those emails .. and moe importantly continuing to blog rather than just give up is a sign of character. And also your upbringing.

Thanks for all you do.

rimm up after hours too. but no biggie