Ian Woodward's Investing Blog

I am very busy preparing for the HGS Investor Seminar in less than two weeks,
so this will be short, but carries the message with the two pictures I have
developed for your review.  Since February 10th, 2009 the Market has spoken
and in a nutshell the key reasons are as follows:

Who can forget the 381 point drop when he had little to say but platitudes?
There has been no real solution to the banking crisis problem and this in turn has raised the stakes for Main Street:  layoffs, Jobs, Jobs, Jobs and 401-K’s.

Of course there are several factors, but Rome has been burning since Feb 10.
Don’t ever forget that Main Street is locked at the hip to Wall Street, and what
we have seen this past month proves it yet again, as I  have shown several times
last year and the year before on this very blog.  What the Administration, the
Treasury Secretary, the Fed and the Congress say is vital to the daily moves
in the stock market regardless of whether it is a Democrat or Republican in
the White House.  Is it any wonder there is no Confidence or Trust?

So what do we have today?  Barney Frank to the rescue on the Mark to Market
and Up Tick Rules…which they have been considering for over a year and now
were forced to say something to prop this market up.  Will his musings all be forgotten in a month?  Where was Chris Cox all last year on this issue?  Only intra-day traders need apply to make money in this crazy market.

The message is loud and clear.  Clear your profits off the table DAILY, and just
play in the direction of the latest EVENT relating to the Economy and the Market,
but be ready to switch from Bull to Bear and vice-versa from moment to moment.

Best Regards, Ian.

When I was a little boy of four, I used to love to play Snakes and Ladders.  In this country they call it Chutes and Ladders.  We didn’t have computers in those days, but dice games were the equivalent fun back then.

I took a look at the VIX – the measure of fear in the market, and it reminded me of playing Snakes and Ladders and/or Checkers. I am in my fox hole as you should never play Snakes and Ladders with your Money on the Stock Market.  Only very nimble Moment Traders can make a buck in this Market.

Short and sweet is my message for today. Cash is King or Short the Market.  You can tell I am poking fun at the idiocy of what “Investing in the Market” has come to mean in these times.

Best Regards, Ian

The headlines from the Geithner and Fed announcements today say “New lending program targets consumers, business”, and seems to have done the trick at least for now that the Government is taking appropriate action to jump start lending in critical areas.  Gone is any mention of TARP or son of TARP, it is now TALF…Term Asset-Backed Securities Loan Facility, and will provide its first loans March 25, the government said.  The reaction during Geitner’s testimony by the markets was mildly positive.

According to the pundits, don’t expect any results until the end of the second or early third quarter altering perceptions about the economy and boosting household, business and investor sentiment.

The Market had a ho-hum reaction to all of this and essentially gave a flat return for the day on all Indexes, but the S&P 500 dropped below 700…not good.

My good friend Mike Scott reminds me of an old rule of thumb I developed many moons ago when the QID and QLD were all the burning rage back in mid 2007.  It is the ratio of the Total Dollar Volume (Close Price of the stock x Volume for the day) of the QID to the QLD.  Since then we have accumulated a vast amount of data as we have plunged from the Peak of the Market in 2007 to the recent Capitulation back in November 2008 to the retest and breaking of the lows yesterday.  The latest reading as of yesterday was 2.5:1.

The two good rules of thumb are:

1)  The Bears drive for Capitulation once again with a QID:QLD ratio of >3.3:1

2)  The Bulls Fight back to start a Fresh Bear Market Rally with the QID:QLD Ratio subsiding to <1.5:1:

You don’t have to go to all that trouble, but keep an eye on the ratio to see if we are heading for deep yougurt or starting a fresh Bear Market Rally. 

Today’s numbers are: 

QID = $67.62 x 26,818,002 = 18,134,000
QLD = $20.84 x 38,671,390 =  8,059,000

QID:QLD Ratio = 2.25:1, i.e., about half way in between the targets, so in ho-hum territory in keeping with today’s reaction, and the Bears with the upper hand.

So there you have it – a new measure of the fight between the Bulls and Bears at the OK Corral, Round #5.

Best regards, Ian.

In my last blog, I reminded you that “741 on the S&P 500 is within easy reach for
the floodgates to open to the downside.  I don’t have to remind you that with the
market as fickle as it is and already oversold for now, that any form of good news
can turn this upwards…but it is the THRUST of the move which will determine
whether it is a one or two day wonder or new hope or despair.”

Well, the stock market spoke on Friday and followed it up with opening up the
floodgates today breaking 741 on the S&P 500 to the downside.  It’s hardly worth
commenting on what has transpired since my last blog other than to say “Take your pick from past memories on this blog” with the following picture:

To drive home the points I have made recently, the following two pictures says it
all regarding watching the reaction by the Stock Market to the enormity of the plans and the uncertainty it brings in the short to intermediate term, leave alone the long term:

Where this will all end nobody knows.  We still await the second shoe to drop which
is the Treasury Secretary’s Plan which I understand is due on Wednesday, but the
Stock Market has had plenty to feed on this past week from all fronts.  Meanwhile,
I have plenty of work to do preparing for the HGS Investor’s Seminar in 2&1/2 weeks time.  I will chirp up again if anything exciting happens, but for now, Bulls hunker down in your foxholes and Bears enjoy the fun.  The direction has been clear the past ten days ever since we had that red Phoenix and two red Kahunas as I showed you in my previous blog.  This good stuff of “Impulse Indicators” works.

Best Regards, Ian.

I have always maintained that the Stock Market’s Moods relate heavily to the events that dictate major policy decisions by the White House, the Congress and the Fed.  The Moods of  Fear, Hope and Greed as the herd decides to be more buyers than sellers or vice versa often stems from these events and influences the short and intermediate term direction of the market. 

I have captured enough evidence on this very blog of the Market behavior countless times that this is not fiction I have made up; rather it is reliable fact backed by example after example.  Of course “Buy the rumor, sell the news” is a convenient way of expressing that mood, but make no bones about it the DEPTH of that sell off is what describes the true Mood and whether there is a preponderance of buyers or sellers…bulls or bears. 

The latest example of this was when the Treasury Secretary was in the limelight and got his first stern warning that waffling on platitudes is not enough when the country is in this dire situation which he in fact mentioned time and time again.  He shrugged off the market’s mood and reaction, but he now knows full well that he is on notice. 

Unfortunately, most of Main Street have lost their way, have had their butt kicked often through no fault of theirs, and don’t know which way to turn when it comes to their life savings. 

 It really doesn’t matter what one’s political persuasion is, Wall Street Investors hate uncertainty which quickly turns to fear and can take the Market Indexes down into a spiral.   It was appropriate to have straight talk to portray the difficult situation the Nation is in and to put a firm stake in the ground that this was handed to the current administration by the previous one.  But now comes the true test of “Where’s the Beef?” or dare I ask “Where’s the Pork?”  It will not be enough to say “I told you so”.

Confidence and Trust are what the Nation needs at this juncture, and in my opinion it will have to start this coming week to restore it with  a one-two punch from two important events due soon:

1.  The President’s State of the Union Address to Congress on Tuesday.  I for one agree with President Clinton’s advice who suggested in an interview with ABC News this week that rather than taking every opportunity he can to talk down the economy, the President should begin to show “that he’s confident that we are gonna get out of this and he feels good about the long run.”  We shall see whether he heeds that sage advice and becomes a Statesman or he delivers another campaign stump rhetoric. 

2.  After the Raspberry the Market gave Tim Geithner 12 days ago with 381 points down on the Dow that eradicated the two Eureka signals and supplanted it with a Heavy Red Phoenix signal, the Treasury Secretary seems to have gone into hiding when the entire banking sector is on the verge of collapse (once again).  If he fumbles once more when he appears with his plan, heaven help us all as the market’s reaction will undoubtedly signal the first signs that we are headed for a Depression, and that will now be on his watch.

It has become very apparent since the Geithner fumble that the enthusiasm for any form of rally has been drummed out of the bulls and although there are plenty of places to make short term gains, it is difficult to stay the course for the long term.  Add S&P 500 projected earnings to the list of under $50 (and I am being generous) and the Fundamental types can’t see supporting 600, leave alone 800!

Since we are now on a Phoenix red as the last “Impulse Signal” together with two dark red Kahunas, the direction is not only down but “Timber Below” is the watch word.  741 on the S&P 500 is within easy reach for the floodgates to open to the downside.  I don’t have to remind you that with the market as fickle as it is and already oversold for now, that any form of good news can turn this upwards…but it is the THRUST of the move which will determine whether it is a one or two day wonder or new hope or despair.

HGS Investors will be able to apply this Indicator to their views hopefully this coming week.  I am sure you have seen the other important upgrade with the “Days Since” feature for the Force Index parameters that Ron described in his Movie on Saturday, which will make for easy pickings of the low hanging fruit, both up and down.

Best Regards, Ian.