Market's Dramatic Reversal Doesn't Appear to be a Fluke

Friday, June 7, 2013

Market's Dramatic Reversal Doesn't Appear to be a Fluke

Ibb (Photo credit: yourdoku)

There's strong evidence that the indices have successfully tested their immediate key support zones

By Sam Collins, InvestorPlace Chief Technical Analyst

New York, Jun.7, free investment ideas .- A recovery from a midday sell-off saved the Dow industrials’ record of “more-than-a-five-month streak” (The Wall Street Journal) without a drop of three consecutive sessions. The sell-off appeared to be due to a sharp drop in the U.S. dollar versus the yen, falling 2.1% by the close.

It was a wild day of trading with the Dow recovering 196 points from its low. The rally was led by defensive sectors: Health care, utilities and telecommunication services all gained more than 1%. The iShares Nasdaq Biotechnology (IBB) rose 2.9%, and the financial sector also did well, up 1.4%.

Initial jobless claims fell for the week ending June 1, reporting a number that was slightly lower than anticipated.

At Thursday’s close, the Dow Jones Industrial Average was up 80 points at 15,041, the S&P 500 gained 14 points at 1,623, and the Nasdaq rose 23 points to 3,424. The NYSE traded 799 million shares and the Nasdaq crossed 466 million. Advancers were ahead of decliners on the Big Board by 3-to-1 and on the Nasdaq by 2.4-to-1.

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After rising to the second highest intraday reading of the year, the CBOE Volatility Index (VIX) closed on the low of the day — a very bullish indication that the market has held at an important support zone.

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Thursday’s dramatic reversal, from what looked like a crushing blow to the bulls at noon, is strong evidence that the market has successfully tested its immediate key support zone.

Note the strong buy signal from our proprietary indicator, the Collins-Bollinger Reversal (CBR) as prices jumped above the 50-day moving average. The extremely oversold MACD supports the notion that this was no one-day fluke and that buyers stand ready to commit at the 1,600 level of the S&P 500.

And each of the various key indices look much like the S&P 500′s chart, showing CBR buy signals as each popped from a key support area. The Nasdaq reversed from its 3,400 line, and the Dow industrials reversed from below the 50-day moving average and the psychologically important line at 15,000.

Conclusion: Thursday’s buying was no mistake — institutional buyers had determined in advance that the key support zones noted above were where they would take a bullish stand. Now if the jobs numbers support this trading action, the market should be able to maintain Thursday’s lows throughout the summer. ...

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Benjamin Graham Was A Crappy Hedge Fund Manager

Jack Bogle, the outspoken godfather of index funds and passive investing strategies, didn't approve of a recent Wall Street Journal article defending hedge funds.

In particular, he took issue with the author's reference to Benjamin Graham, the legendary Columbia finance professor who literally wrote the book on Security Analysis and mentored Warren Buffett.

Bogle wrote a letter to the editor. Here's an excerpt: Citing Benjamin Graham as the first "hedged fund" operator is an especially unfortunate example. "The trick," Mr. Rice writes, was Graham's "clever way to make money . . . whether it [the market] continued to rise, or started to fall." ...

Proposal for New Hedge Fund Fee Structure: 1% + 33% of Alpha

By The Big Picture

One of my pet peeves is the way that insiders -- whether corporate CEOs, hedge fund managers, or elected politicos -- capture compensation (or credit) for normal cyclical gains they had little or nothing to do with.

This is the approach favored by the Crony Capitalists — those people pretending to be free market participants, and who merely pretend to be creating value. They are taking credit for structural successes that would have occurred with or without them. What they are actually doing is capturing value, not creating it — and then transferring it from its true owners (shareholders/investors) to themselves.

This is wrong; it is legalized theft.

If you want to see a good example of how CEOs transfer shareholder wealth to themselves, a good place to start is Roger Lowenstein’s 2004 book, Origins of the Crash: The Great Bubble and Its Undoing. The section on CEO compensation is astounding; these guys were essentially getting wildly overcompensated for being CEOs during a bull market. The prime example was the CEO of Heinz, who gave himself (with the tacit approval of his Board of~~Crony~~ Directors) a $90 million bonus. And this was back in the early 1990s, when $90 million was real money.

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www.ritholtz.com

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Argentina's President Is Making Great Political Theater Out Of Paul Singer Seizing The Country's Naval Ship(BusinessInsider) Cristina Fernandez de Kirchner is turning her feud with hedge fund manager Paul Singer into a political rallying cry in Argentina. The President has refused to pay Singer's firm Elliott Management the $1.3 billion it owes the fund after it defaulted in 2010. de Kirchner says it's because Singer was given multiple chances (in 2005 and 2010) to restructure, like other hedge funds did, and take a haircut to recoup at least a portion of their losses. Singer, needless to say, did not. Instead, he decided to capture one of Argentina's naval vessels as collateral, and got Ghana to give him an order to detain the ARA Libertad last month. ...

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All Time Record Gold Transactions Reported By LBMA

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Weakness in gold and silver is leading to robust demand internationally as store of value buyers accumulate gold and silver on this dip. This is particularly the case in Asia where premiums remain robust and supply demand imbalances remain. ...

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Today's top Green Energy Good News

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Texas is set to double its wind energy generation from 60 gigawatts to 120 gigawatts in 2013.

Britain has made substantial investments in wind energy and its technology. British PM David Cameron is touting his country’s green expertise on his trip to India to promote trade with that country. ... Continue.

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