I am relatively new to the TG's blogsite. But at the tail end of last week, you got to watch her do some beautiful market timing. Was it based on intuition, gut feeling, experience, market knowledge, all of the above. I don't know her well enough to have even the faintest clue. But who cares, she did a great job.To summarize, The SP 500 got dragged down on the first two trading days of November. On the morning of Thurs Nov 1, the Goddess said she was waiting patiently when C and BOA were downgraded. On Friday morning Nov 2, analysts forecasted an earnings recession for the financial sector in Q4 2007 saying profits may decline 20% for the sector as a whole.
By mid-morning Friday, in less than two days, analysts had estimated and quantified the earnings risks that the financial sector poses to the stock market as a whole for the 4th quarter earnings season - when it arrives in January 2008.
The whole ordeal took less than 2 days to finish forming a bullish inverted head and shoulders pattern in the process. By 10.30 am Friday morning, the SP500 had bottomed and formed the head to the bullish inverted head and shoulder pattern. That same morning TG was in the market selectively buying her favorite stocks. Two hours later, TG was done shopping. Very efficiently done, I might add. Three hours later at 1.45 Friday afternoon, the right shoulder to the Inverted head and shoulder pattern had formed.
What happened on the first two trading days of November can also be correlated to what happened during the Q3 earnings season between Oct 19-Oct 25. Financial sector stocks in late October were reporting an earnings recesssion for Q3 07 - stating profit declines averaging 17%. The stock market formed a 5 day bullish inverted head and shoulder pattern while discounting that earnings recession. The big blow to the stock market occurred when Merrill announced its - $8.4 billion loss on Wednesday, Oct 24. By 10.15 am that Wednesday morning, the stock maket bottomed and the Head to the pattern had formed and two hours later a short covering rally was underway.
Bottom line is that the impact of the financial sector for Q4 07 for the time being appears to be more or less if not fully discounted. On balance, investors need not worry about earnings season risks again to the stock market until January 08 when Q4 07 earnings season arrives. Of course, there will be other risks encountered along the way, but a significant portion of the financial storms has passed. That leaves the path of least resistance for the rest of the market (ROM) to be selectively bullish. Intuitively, if we have been paying attention at all these past several months, we should be able to sense the market breadth is narrowing considerably.
Anyways, in closing, the pictorial graph above illustrates the SP500 discounting and decomposing the earnings recession risks for Q3 and Q4 07 that the financial sector has imposed on the SP 500 over the past two weeks.
John Bougearel
successfultradingtips.com
11 Comments:
so your bullish ?
John,
You give me undeserved credit. lol! First, I must tell you my blog is on CA time. Secondly, I have never posted the actual "times" of my buys. All of the contributors here have different trading strategies. I am a "long" and do not profess to running a trading room where my buys are instantly recorded. For the record however, I did not start buying until 3 Eastern time.
As long as Friday is much lower than where my stocks will be in 3 months, I am happy.
1)I have to be bullish, the tape is bullish (V-Bottoms, higher lows etc) and it's November dammit!
2) I simply made you the heroine to my short story. When you bought on Friday is not materially relevant to the story. The fact that you bought stocks while the sky was falling in the financial sector earned you a badge of courage that day.
3) Every story benefits if there is a hero or heroine in it. If you weren't for real - I'd have to make you up!
I hope you don't mind being the heroine in my little vignettes do you?
TradingKid,
(it is going to take me a while to get used to that name - lol!)
Did you do your laundry today? How are you coming along with your school homework? btw, when you want to say "you are" - that it is a contraction and should be spelled "you're". hmmmmm What else... oh yes, how is that penny stock coming along for you? Did you manage to get out of it?
All Timestamping of orders aside,
I did note on the chart I posted the time of day at which the Head formed on Oct 24 and on Nov 2 as well as at what time that morning head (get the pun - I made a funny!)was tested.
SP 500 Daytraders should familiarize themselves with SP500's intraday clock for short term change in trends.
I addressed the SP 500 intraday clock at my blogsite on sept 26
I also addressed the late Oct bullish inverted head and shoulder pattern on Oct 26 at my blogsite
John,
I have been remiss in not properly welcoming you to the blog. I apologize for that. :(
So, here... welcome to this mad, mad, world of Stock Blog-o-land! :)
AS far as "heroine in my little vignettes", I would be flattered. Will you be selling them on AMZN in the future? Will I become famous in Jane Eyre-like fashion? lol!
As far as morning head goes, I have no idea what that is ... it has been that long. *sigh*
Now, I am no chartist, but it appears to me that if this right shoulder of Nov 2 goes up to about 153330 abouts, then that would form a Head and Shoulders pattern, which is not considered bullish. Am I correct in interpreting that? Crap! I guess I should run over to your house and read up on what you have to say first before I ask. lol!
Where do you keep your extra key - under the mat?
Thank you Teeg,
In bull markets, bearish head and shoulders patterns usually in the end end up being "bear traps."
The left bear shoulder is around 1550 and the bear close gap is 1555 and the bear gap down high is 1539. If a right shoulder were to form, it would have to fail in the 1539-1555 zone.
But that is all short term trading stuff, not for us to really worry our pretty heads about (oops there is that word again, hehe).
The best way to do a book for a chartist/mkt technician who blends economic indications into his analysis is to E-book it.
The cost of adding color charts in print is a killer. And especially the way I like to incorporate so much historical data, the book size would have to be 11x14.
Using thumbnail images in an ebook allows the reader to double click on the image and print that out separately. Opening thumbnails to full size images also eliminates all the distortion that occurs resizing large images and inserting into a document. This is what makes ebooking so exciting, thumbnails were never possible before. The illustrations can be so much more enhanced.
I wonder if I'll be able to do this using adobe acrobat though? I don't need to answer that right now though.
Having you as one of my heroines will be fantastic. I hope to have several btw.
When I had to learn all this crap years ago, and even still today (learning curve does not stop unless you do) it is always so flipping dry I can hardly stand it.
The extra key you ask is round back inside the bbq. :-)
oops, I hope to have only one heroine, you teeg, amongst a few other heros.
John,
Thanks for your analysis. It is appreciated and taken into consideration.
As far as your eBook, I could swear to make one was free.
I agree with you on the learning curve. I will never know all there is to know, and am amazed that one can learn something new every day. Absolutely fantastic!
As far as this "stuff" being dry... maybe if you get some heroes into the book, that would make it more exciting. ;)
btw, nice "save" on your second comment. lol! lol! lol!
Damn straight!
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