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Dennis Gartman sees the shipping industry flattening out after years struggling to recover from the economic collapse that hit at the same time many new ships were coming onto the market. On CNBC he said to hold Dryships (DRYS). It’s “the lottery ticket for the future. Only up from here.” He sees the sector holding during a time of high oil prices and no more ships getting built. A turnaround point?         The stock market is a game made up of characters. Behavioral economists recognize this. Many traders don’t, because people often get caught up in their own characters. If they admitted the market was all about characters game playing, the competition factor could drive many traders out. The leading characters in this game change regularly along with newly acquired powers, incentives, and goals. Automated computer systems track the characters’ attributes and behavior to trigger inner demons, which usually incite the most untimely decisions. The predictability of human behavior, particularly when it comes to handling money, is no secret to the anticipatory financial systems. Joe the Investor doesn’t need a super computer to recognize when power players are working emotions. Using logic and knowing who the power players are in the game will help him recognize when the leaders are changing positions, when another camp is stepping in to shift the market’s direction. Traders continue to call for further upside, because they think suckers who are still sitting on the side can be dragged into this market. Are they banking on an old game theory that may be shattered? Analysts are talking up the chance that Joe the Investor could giddily jump in for fear of missing the train or that he can be blinded to the risk of entering an over-extended market — behavior known as capitulation the old timers used to mark as a turning point. But Joe’s scared, skeptical, and still hurting from the fall. Joe the Investor has sat firm for a couple years. He knows the market is at all time highs. He knows the economy is not as strong as headlines hype. He knows an ugly campaign season is looming. Joe is smarter than he was when he was riding the bubble. Joe has held off this long. Why wouldn’t he be willing to wait a little longer? Joe the Investor is not the character he used to be when he was hooked by market moves. The question is: How long can computer trading and the pros fuel the market without Joe? Will Joe give or will the game masters give us a correction and a better entry point? The market already reached analysts’ year-end targets. So, what next? Buyers are clearly out of this low volume market, while HFTs push this puppy up, not allowing for a healthy short correction before peaking in April or May. The Last Hurrah before the real campaign heats up. How long can this bull run? With only a week before the end of the quarter, don’t expect short sellers to fight portfolio managers who want to log in these levels on their Q1 statements. Then, earnings announcements start. Q1 should look good for most companies. But traders will be listening for Q2 forecasts. UNCERTAINTY of a slowing global economy and political rhetoric won’t be in the future any longer. Strategies out of Market Whipped: And Not By Choice would say it’s time to be weighing the risk of riding out the last ticks. This could be the last hurrah until after November elections. If it doesn’t correct with profit taking after Q1 end, expect key stocks to break the current tight range and the “go away in May” crowd setting up for a massive blow out. The stock market is not capturing the slowing global growth story. The chance of a further slowing global economy is increasing as data rolls in. McDonalds reported slower global sales than estimated and lowered next quarter earnings due to “persistent economic uncertainty, austerity measures in Europe and commodity and labor cost pressures, particularly in the U.S.” Only days ago, Brazil, Europe, and China lowered their GDP targets. Analysts are increasingly hesitant to stick with their forecasts for a 3% U.S. GDP growth, rate while the consensus has been dropping into the 2.0 to 2.5% range. Far from healthy growth. The active traders are ignoring the emerging macro economic signals and jumping on any story that could possibly excite the “animal spirits.” Today, the story is Apple, media’s darling cultish tech play. Multiple investment firms immediately jumped to raise their target price on Apple after Goldman Sachs raised its price from $550 to $600. Fringe firms followed with outlying target prices upped to $730. Apple, which is heavily weighted in the index ETFs, can easily impact the intraday market moves. The battle to break the current market’s tight trading range is heating up. The global growth story is building. While fast traders use the hype of Apple, the Greece bailout, and any story that can dominate the day’s headlines to push the low-volume environment. Eventually, the range will break one way or another. Investors caught on the wrong side of the market often say that the direction of the market is only obvious in hindsight. That’s an excuse for blowing off signals worth monitoring. If the economic downturn is real and significant, eventually the market makes a sharp adjustment when the data can no longer be ignored. In the meantime, there is enough data mounting to perk any smart trader’s attention. No, you can’t predict exactly which camp will get the upper hand. But, you can be prepared. Weighing the underlying forces and identifying players in the lead are part of the strategy outlined in “Market Whipped: And Not By Choice.” Jumping in a market on a big drop can be risky if your timing is off. The market opened down 140 pts., breaking a two-week long tight trading range, and moving well into the lower end of the next lower trading range. The levels of that trading range will be tested. Traders have been begging for a correction. The question is whether this is a bounce to jump in or a more significant correction. Considering the timing, having happened in March, the odds are there will be one more run up before summer after this correction. So, a bounce? A short term opportunity? Don’t forget the 3-day rule. Apple stock is struggling to hold its highs until Mar. 7 product release. The stock market has hit major resistance for more than 4 weeks. The longer the market waits to correct, the question will be not “if or when, but how sharp a fall.” New target price and product announcement ups Apple stock, which continues to push up the stock market indices. Its stock was hitting resistance until news of a new iPad announcement scheduled for Mar. 7. Today, Stearn Agee upped its target price from $550 to $620. Outliers, particularly those from small firms, often signal a temporary topping. Short sellers are getting squeezed as the market fights the DOW 13K and struggles to kick out of a tight trading range since late January. Turning point? Beware of month end. Squeezing shorts seems to be working yesterday and today in early morning trading, but still struggling to break key S&P target price. After the initial injecton of new money at the beginning of the year, trading voume has fallen off, leaving computerized trading and technical traders to rotate between sectors and key stocks that prop up the indices. Apple, in particular. This is all in an attempt to squeeze out the shorts, which would trigger a boost in volume and a spike that could spur another leg up. Traders are wanting and waiting for a short term correction. Will it come after the beginning of the month? Resistance and test target price = S&P 1375. (Strategies based on concepts from book Market Whipped: And Not By Choice) The only reason analysts have for breaking out of the current tight trading range is that Joe the Investor is still sitting out of the market game. Is Joe scared or skeptical? Is he burned out or can the media trigger his emotions to sucker him in. The Delusional Newbies and even many of the Elite investors are holding out, for now. “The beauty of them, at least from a Quant’s point of view is their wonderful consistency. When they finally do make a move, they create a great surge.” –Market Whipped, p. 36. That is what the analysts and Algos are pushing for. Will Joe buckle or keep his senses? That’s today’s bet. |
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