Ian Woodward's Investing Blog

Archive for January, 2008

The Hindenburg Omen came home to roost 3 months later

Monday, January 21st, 2008

roost

I’m afraid we are in for rough sledding when the Market opens tomorrow, but I have tried to keep you one step ahead of the dips as best I can.  It seems the warning signs of the Hindenburg Omen I gave you for the first time on October 15, 2007 will finally take us down to a Bear Market.  Given the state of the World Markets today, it goes without saying we should expect the worst tomorrow.  I feel really sorry for Fed Chairman Ben Bernanke as he has to desperately clean up the mess that his predecessor got us into, who has got off scot-free, all in my opinion. 

But that was yesterday.  Now he has to stand on his liver and deliver, or eat his own words of “the Fed standing ready to take substantive additional action.”  Given what has transpired around the world markets today, which can only mean one thing in my book and that is to make a surprise announcement of his action BEFORE the markets open tomorrow and it had better be 50 basis points minimum.  Anything less than 50 basis points and it will produce another yawn.  That too can be a drop in the bucket.  In any event the reverse psychology can also backfire by confirming that the World Economic situation is in fact worse than they have made it out to be and now that the cat is out of the bag there is no place to hide.  

The futures on the DJIA are UGLY, but were uglier earlier, so who knows where it will finish up by the open tomorrow.  It seems it might have been as bad as -560 at one stage and it is currently sitting at -477 as I write this.  I suggest you watch the Asian markets tonight to see if there is any improvement in the mood abroad: futures

What seems very apparent is that we are due for a wash out in the market and that will happen one way or another tomorrow.  Even if there is a sharp reaction by way of a bounce play, it seems that we are now in for several weeks if not months of working our way back out of this mess.  I note that you have all been refreshing your memory on the New Year RonIandex of leaders just 21 days ago and as you can see from the chart below it has broken the 50-dma and I would not be surprised if it hit the 200-dma Red line tomorrow.  Frankly, it hardly matters now in the bigger scheme of things, but tuck it all away in your memory bank and it may help you in the future as a strong early warning sign.  If you are reading this for the first time, I won’t repeat myself…just go back and read earlier blog notes. 

index 

Best regards, Ian

The Ball Game Isn’t Over Until…

Friday, January 18th, 2008

diva

Heads-up!  We had a Bingo Signal on Thursday, and I cannot be more elated that all my hard work has come to fruition!   I am delighted that we are all keeping a beady eye on “Bingo”, and it might well be my best work yet and comparable to the Hindenburg Omen of others which this blog signaled many moons ago and has proven itself to once again be true.  But before we get too euphoric, I have to give you all a warning.  Those of you who understand our proprietary indicators will recognize this is certainly one small step for HGS Investors in identifying a bottom.  Note that I said “a bottom” and not “the bottom”.  Likewise as we know, the combination of a Bingo followed by a Eureka has been very powerful in identifying the potential for the next move upwards.  But let me bring you down to terra firma, i.e., earth with a quick jolt!  Before you get too excited that at least the first leg of the equation in getting a Bingo signal is behind us, take a deep breath and look at the Indexes back in the 2000 to 2002 timeframe, and then trot all the way back to 1994.  My point is this good stuff is not infallible.  I have always said that there is no Silver Bullet in this business, but two lead ones are better than none.  Likewise, sometimes even Lead Bullets can fire blanks.  The bottom line is don’t be too quick to bet the Farm on this occasion.  Why?  It’s simple: 

  1. When a Bull Market is in full swing as we have experienced since early 2003, the odds are that along the way there will be Minor and Intermediate Corrections, and maybe even an occasional Major Correction.  For those who don’t know what my parameters are for these standard definitions I use,  I refer you to the Quick Glance HGSI Barometer of the Market which I introduced you to in the January 5th Blog “Big Foot is Back and the Others are looming”. 
  2. Once a market starts to labor towards the top, and heaven knows I have shown you that happening before your very eyes these past few months and more so in the last month, you just cannot afford to block out the signals of the Winds of Change.  I know that one can get fogged with all the paraphernalia that is trotted out but the simplest approach is to try the Big Blue Line Pencil Trick…it always works. Once the psychology of the market turns from Bullish to Bearish, and all the various signals say down, it takes a lot to turn the herd around, especially when every second word on the airwaves is Bear Market and every third word is Recession.

blue

     3.  The last vestige of a Wolf Pack got hit hard on Thursday in that the Chemicals – Specialty Group was hammered.  Sure there are always pockets of opportunity somewhere including some Health Care and the safer ‘go-to” staples of the Minerals, Utilities, the Foods and the usual litany that is trotted out of PG, JNJ, KO, etc.  Forget it, that is just fiddling while Rome is burning, unless you are in for a moment trade during the day.  Alternatively, play the QIDs and the FXPs to your heart’s content on the short side, depending on how the wind blows on a daily basis…FXP’s got walloped today, so they feel that avenue for shorting is overdone for now. 

    4.  I’m sure you observed what happened yesterday as Chairman Bernanke was speaking to the House Banking Committee as the Market went down tick by tick with his somber discussion on the health of the economy.  The DOW finished down over 300 points for the first time in 2008, after several of these recently in 2007. 

    5. Look at the ho-hum reaction to President Bush’s stimulus package for up to $150 Billion to boost the Economy and he has asked Henry Paulson to lead the Administration’s effort to forge an acceptable plan.  Meanwhile the Muni Bond Market is already cracking at the edges with the extent of short interest that is in place.  Bond Insurers are being battered and if MBIA and Ambac get hurt watch out even further.  At long last the whole of Washington has realized they better stop talking and start doing…we shall see how the Congress and Administration will work this out. Amazing that every second word on the airwaves yesterday was “quickly”…it’s all talk and no do, and the resulting primary thrust for you and I is Capital Preservation, period.    

   6.  The Bingo with Eureka Indicators have served us well in identifying when the next leg up is underway, but not when we are potentially at the borders of a Bear Market.  One more heavy down day and we will clock 20% down on most Indexes, with the Nasdaq leading the way.    

   7.  Of course our favorite longer term view Bollinger Band 40-Week chart shows the S&P 500 Index broke down through the Lower Bollinger Band with a vengeance on Thursday.  We can also go one step further and look at the 3-standard deviation 50-dma Bollinger Bands to see it too is broken, so it is no secret we are vastly oversold and with luck should get a bounce play soon.   

   8.  I wouldn’t bet too heavily on the quality or quantity of that bounce, as Bear Markets don’t turn on a dime.  Then there are always the surprises that come from left field that try to prop things up, so be aware that this Stock Market is very much EVENT driven right now, more so than ever.    

  Summary – The Value of Bingo:    

The short answer is that the first Bingo is a confirmation that we have reached a first stage strong BOTTOM.  I didn’t say “the BOTTOM, I said “A bottom”.  It signals a much oversold condition in the market, and you certainly didn’t need a Bingo to tell you that.  The Bingo is the first of two lead bullets that usually work extremely well in UP Markets.  The second signal we want to see happen is a Eureka which is tantamount to the potential first day of a rally.  Then as usual we want additional confirmation(s) with a follow through day which is invariably measured by additional Eureka’s.  As I say, that has worked extremely well in all of the recent legs up from 2003, where the sequence is a Bingo followed by several Eureka signals shortly thereafter.  But under these circumstances, the result may only lead to a Bounce Play with more to come on the downside after that.        

 bingo

However, things can get murky in a Bear Market Scenario.  In addition to the above normal scenario which predominates, we can sometimes get additional Bingo’s without any Eureka, we can get Eureka’s without any Bingo, or have the normal Bingo-Eureka combination for a short Bounce Play and then fade again, etc. etc.  Let the market tell you what it is doing, not what you wish it to do.  Enjoy your three day weekend and Best Regards, Ian…Late Breaking News!  We had another Bingo Signal today, Friday.

The HGS Investor January Newsletter Overview

Wednesday, January 16th, 2008

dear

Last month I said that “I feel the Grinch stole Christmas as the saying goes, and we are in for more rough sledding on this roller coaster market” and in hindsight, he has stayed for January as well.  I hope you have read my two blog notes on Chairman Bernanke’s talk last week, and there is even less by way of new good news to come unless the FOMC pulls another rabbit out of the hat and conjures other ways to prop up the market that can improve the lack of confidence that is now permeating through the Investment Community.  Need I say more than the tom-toms are now beating daily with the Recession mentioned by the pundits at every twist and turn?  IBM came in with stellar earnings on Monday to send the market prancing upwards.  Wonders never cease. 

This month I cover several Case Studies.  One Study focuses on Rotation, Rotation and Rotation.  I will show you that the New Year RonIandex was trashed ten days ago and that the new breed is exemplified by the Candidates my good friend Jeff Scott chose at the weekend to do his fishing.  This shows one can buy stocks to buy in a down market provided you know where and when to fish. I also show how the LAG FACTOR problem that other software has is not a problem when you view Ian Slow along with % Pr Change 3 Weeks in the Ranking Module.  I also capture the two days DOW Index reaction when Bernanke spoke last Thursday, for posterity sake.  In addition I have a one page reprise on the famous Mark Pharr chart which I produced 14 months ago to identify the process of when very Long Term Investors should consider this 5 Year Bull Rally is first close to over and then over.  We are there.  

Ron’s movie and focus this month is on an RSS Reader that scours for news on any stock that you are following.  It’s called Stock Spy.  There is some good cross promotion for HGSI and like Quote Tracker it integrates well with HGSI.  As you well know investing these days is very much event driven and news good or bad can cause major swings in a matter of minutes rather than days. It’s a versatile tool for us. 

Best Regards, Ian

Tomorrow Should be an Exciting Day

Tuesday, January 15th, 2008

timber

If you haven’t already heard the news, Intel Corp (INTC) disappointed with their Earnings Report and there are major after hours’ repercussions.  Many of the market leaders are down on top of the bad down day they have had today.   

I am busy writing the newsletter, but I felt my overseas friends would appreciate a Heads-Up before they go to bed.  Thanks also to Trading for the Masses who feature my blog notes and send people my way. 

Best Regards, Ian.

Late Breaking News: The Leaders are Not Acting Correctly

Sunday, January 13th, 2008

late

I said yesterday that I must take time to write the newsletter. But I am full of surprises…like the Stock Market these days. So here’s once around the park for my blogging friends.  

One Objective I had when I started this blog over 6 months ago was not only to teach you how to marry the HGS Investing Process to be in tune with the Market Ebb and Flow, but to also give my faithful followers of this site the PULSE of What’s Happening Now!  News gets stale very quickly these days where information rather than data is always at a premium, so here is a News Break for you to ensure that I strike while the iron is hot and show you there is always a method in my madness behind what I cover in these blog notes. 

Late Breaking News: 

For months I have identified two key concepts in the Process of HGS Investing:

  1. Always have a recent list of Current Leaders as exemplified by the RonIandex.
  2. Identify the Super Gorillas and watch their action – as they go so goes the market

I am sure you have had that drummed into you that you wondered when I would say something else other than watch AAPL, BIDU, GOOG, GRMN and RIMM.  You have also heard me say watch the chart of the overall RonIandex, a feature one can only do in HGSI, and if it breaks the 17-dma watch out below and if it breaks the 50-dma, watch out PERIOD.  Likewise, you have heard me say that these leaders are excellent candidates that will give you great entry points to buy on pullbacks for either short or intermediate gains, and you have all played that trick to the hilt. 

The beauty of this Blog is that I can get a quick note out to you that not only makes you money, but saves you money on the fly, while I am pressured to get started on the Newsletter. 

Sit up and Take Notice:

  1. The Iandex has broken the 50-dma and is on the hairy edge
  2. The top Guns are not behaving properly…they are sluggish and have no life
  3. Even the likes of CF…one of the few stocks out of the remaining hot wolf pack of fertilizers gave up its excellent breakout of two days ago and is sitting now right at its breakout or breakdown point for a false breakout at $112.60
  4. Yes, we all know this market is badly oversold, but at times like these it is the feel of the pulse of what is happening that is most important.  Of course we are looking for a bounce.  I say the Market is FEELING lifeless and has no bullish follow through on all I covered in the previous two blogs on Uncle Ben.
  5. Those of you who are adept at playing both sides and can turn on a dime can make money.  Don’t commit your money to one side and if you play…well you know what to do.  Others hunker down in your foxholes.
  6. Finally, never try to guess what the market will do…its better to go with what it tells you.  This is an EVENT driven market and it can do U-Turns which is always difficult for Freight Trains and Trucks to do in real life.  So be on your toes and don’t dig in your heels.

So my friends, the rest will be covered in the newsletter which I must hurry off to get started on.  Keep your Powder Dry and please tell your friends that this site keeps you abreast of Late Breaking News at the Most Critical Points in time, and cuts through the chaff to try and give you the beef.  Stay tuned.

 Best regards, Ian.

Copyright © 2007-2010 Ian Woodward
Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.