Go to Jeff Salisbury LWGate Home Page.From: Eric Jaenike <ericjaenike@yahoo.com>
Subject: RE: [CANSLIM] Low Number... a bit OT
Date: Wed, 25 Sep 2002 15:59:47 -0700 (PDT)
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Financial management firms are under a lot of pressure to perform. The mutual fund complex (along with some others), outstanding citizens that they are, will buy the stocks that comprise their largest holdings (or are the most illiquid, which are easier to jam up) right at the end of the month. This artificially boosts these stocks' prices, which artificially boosts their performance, which is generally evaluated monthly. This practice is completely illegal. Frequently, this buying starts a couple of days before the end of the month, and ends on or the day after the end of the month, as funds try to hide this activity from regulators.
Disgusting activity, completely unethical and ultimately futile, but market moving nonetheless.
Eric
Lin Wells
wrote:
Thanks for this response. I don’t want to belabor something you probably don’t want to labor – but if you will, what does the following mean in the context of your analysis
And its the end of the month (think markups).
Thanks,
Lin
- -----Original Message-----
From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com] On Behalf Of Eric Jaenike
Sent: Wednesday, September 25, 2002 4:46 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] Low Number... a bit OT
This rally has all the makings of rapid failure. Look at what happened here. The markets got oversold right into the natural reversal area of the July lows, which many are looking for as the area for the formation of a double bottom. The market bounces, on poor volume, with the SOX, the ultimate speculator's tool with the worst fundamentals, leading the way. And its the end of the month (think markups).
The double bottom has been highly anticipated. The smart play was to get long at close yesterday (or play the ETFs immediately after hours on the lack of blowup announcements after the close. They trade in some volume until 4:15, although afterhours trading is oh-so dangerous). Risk reward is very high for that play. Then, when the secondary players get long today (and possibly a bit for the next couple of days, aided by end of month markup) and drive up the market, close longs and get short again into the rally failure. IMHO.
We have just transitioned from the up momentum market off the July oversold low to the current down momentum market. IMHO, this downside momentum has not run its course, and, in fact, has just gotten started. This short/medium term momentum needs to be completed before one should even think of taking the long side.
We are still in the middle of warnings season, and things have looked ugly to this point. There are a lot of threats facing this market, beyond Iraq. Anyone notice the Brazilian real? It is now trading BELOW where it was before the IMF bailout, as the leftist Lulu looks likely to win the election. We will probably lose South America shortly thereafter (having dropped $30 billion in the process, but I digress). I don't think that event is priced into the markets yet.
There is one other event that has not yet received the press it deserves, but probably will shortly. There is significant liquidity risk right now. There is $1.5 trillion (yes, with a "t") of enery/telco debt floating around right now. That debt is getting floated right now through "life support" (ie Japan style) capitalism. The time is drawing nigh, however, when that debt will have to be crunched. If the banks freeze credit because they have to write down this debt (think JPM, the worst offender of them all), good customers will get frozen out of the liquidity they need to operate. And that would be very bad for everyone.
What happens if that debt gets crunched right when we lose South America? Bad things, IMO. I have very serious concerns about this market, and am not sanguine. I am of the opinion that this market will bottom at a level much lower than most people think (although, as a canslimmer at heart, I recognize that my opinion means nothing. The only opinion that matters is that of the market).
There are, of course, as myriad of other problems facing the market that I won't bore people with.
In the interest of disclosure, I am talking my book. I am still net short, but took down a lot of SPY to hedge my shorts this a.m. (I should have done in last night, but thought I could poach the open, which was stupid. Regardless, I will start closing that long over the next few days).
Sorry for taking up so much space.
Eric
Spencer48@aol.com wrote:
Kelly:
When the market makes a new low, the first day in a rally will show few
"new highs" because stocks have been following the market down.
I imagine that's why WON says it takes a few weeks to see if leading
stocks (which at the market beginning is at their nadir) will break out.
jans
In a message dated 9/25/2002 4:27:18 PM Eastern Daylight Time,
kelly.short@fw.us.neoris.com writes:
<< Interesting that on this high volume up day the number of new 52 week
highs (price>$12, Amex, NSDQ, NYSE) was 10, which is the average daily number
for the past week.
>>
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<P>Financial management firms are under a lot of pressure to perform. The mutual fund complex (along with some others), outstanding citizens that they are, will buy the stocks that comprise their largest holdings (or are the most illiquid, which are easier to jam up) right at the end of the month. This artificially boosts these stocks' prices, which artificially boosts their performance, which is generally evaluated monthly. This practice is completely illegal. Frequently, this buying starts a couple of days before the end of the month, and ends on or the day after the end of the month, as funds try to hide this activity from regulators.
<P>Disgusting activity, completely unethical and ultimately futile, but market moving nonetheless.
<P>Eric
<P> <B><I>Lin Wells <LINWELLS1@CHARTER.NET></I></B>wrote:
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<P class=MsoNormal><FONT face=Arial color=navy size=2><SPAN style="FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial">Thanks for this response. I don’t want to belabor something you probably don’t want to labor – but if you will, what does the following mean in the context of your analysis</SPAN></FONT></P>
<P class=MsoNormal><FONT face=Arial color=navy size=2><SPAN style="FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial"></SPAN></FONT> </P>
<P class=MsoNormal><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">And its the end of the month (think markups).</SPAN></FONT></P>
<P class=MsoNormal><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt"></SPAN></FONT> </P>
<P class=MsoNormal><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">Thanks,</SPAN></FONT></P>
<P class=MsoNormal><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">Lin</SPAN></FONT></P>
<P class=MsoNormal><FONT face=Arial color=navy size=2><SPAN style="FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Arial"></SPAN></FONT> </P>
<P class=MsoNormal style="MARGIN-LEFT: 0.5in"><FONT face=Tahoma size=2><SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma">-----Original Message-----<BR><B><SPAN style="FONT-WEIGHT: bold">From:</SPAN></B> owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com] <B><SPAN style="FONT-WEIGHT: bold">On Behalf Of </SPAN></B>Eric Jaenike<BR><B><SPAN style="FONT-WEIGHT: bold">Sent:</SPAN></B> Wednesday, September 25, 2002 4:46 PM<BR><B><SPAN style="FONT-WEIGHT: bold">To:</SPAN></B> canslim@lists.xmission.com<BR><B><SPAN style="FONT-WEIGHT: bold">Subject:</SPAN></B> Re: [CANSLIM] Low Number... a bit OT</SPAN></FONT></P>
<P class=MsoNormal style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt"></SPAN></FONT> </P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">This rally has all the makings of rapid failure. Look at what happened here. The markets got oversold right into the natural reversal area of the July lows, which many are looking for as the area for the formation of a double bottom. The market bounces, on poor volume, with the SOX, the ultimate speculator's tool with the worst fundamentals, leading the way. And its the end of the month (think markups). </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">The double bottom has been highly anticipated. The smart play was to get long at close yesterday (or play the ETFs immediately after hours on the lack of blowup announcements after the close. They trade in some volume until 4:15, although afterhours trading is oh-so dangerous). Risk reward is very high for that play. Then, when the secondary players get long today (and possibly a bit for the next couple of days, aided by end of month markup) and drive up the market, close longs and get short again into the rally failure. IMHO. </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">We have just transitioned from the up momentum market off the July oversold low to the current down momentum market. IMHO, this downside momentum has not run its course, and, in fact, has just gotten started. This short/medium term momentum needs to be completed before one should even think of taking the long side. </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">We are still in the middle of warnings season, and things have looked ugly to this point. There are a lot of threats facing this market, beyond Iraq. Anyone notice the Brazilian real? It is now trading BELOW where it was before the IMF bailout, as the leftist Lulu looks likely to win the election. We will probably lose South America shortly thereafter (having dropped $30 billion in the process, but I digress). I don't think that event is priced into the markets yet. </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">There is one other event that has not yet received the press it deserves, but probably will shortly. There is significant liquidity risk right now. There is $1.5 trillion (yes, with a "t") of enery/telco debt floating around right now. That debt is getting floated right now through "life support" (ie Japan style) capitalism. The time is drawing nigh, however, when that debt will have to be crunched. If the banks freeze credit because they have to write down this debt (think JPM, the worst offender of them all), good customers will get frozen out of the liquidity they need to operate. And that would be very bad for everyone. </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">What happens if that debt gets crunched right when we lose South America? Bad things, IMO. I have very serious concerns about this market, and am not sanguine. I am of the opinion that this market will bottom at a level much lower than most people think (although, as a canslimmer at heart, I recognize that my opinion means nothing. The only opinion that matters is that of the market). </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">There are, of course, as myriad of other problems facing the market that I won't bore people with. </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">In the interest of disclosure, I am talking my book. I am still net short, but took down a lot of SPY to hedge my shorts this a.m. (I should have done in last night, but thought I could poach the open, which was stupid. Regardless, I will start closing that long over the next few days). </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">Sorry for taking up so much space. </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">Eric </SPAN></FONT></P>
<P style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt"> <B><I><SPAN style="FONT-WEIGHT: bold; FONT-STYLE: italic">Spencer48@aol.com</SPAN></I></B> wrote: </SPAN></FONT></P>
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<P class=MsoNormal style="MARGIN-LEFT: 0.5in"><FONT face="Times New Roman" size=3><SPAN style="FONT-SIZE: 12pt">Kelly:<BR><BR>When the market makes a new low, the first day in a rally will show few <BR>"new highs" because stocks have been following the market down. <BR><BR>I imagine that's why WON says it takes a few weeks to see if leading <BR>stocks (which at the market beginning is at their nadir) will break out. <BR><BR>jans<BR><BR>In a message dated 9/25/2002 4:27:18 PM Eastern Daylight Time, <BR>kelly.short@fw.us.neoris.com writes:<BR><BR><< Interesting that on this high volume up day the number of new 52 week <BR>highs (price>$12, Amex, NSDQ, NYSE) was 10, which is the average daily number <BR>for the past week.<BR>>><BR><BR>-<BR>-To subscribe/unsubscribe, email "majordomo@xmission.com"<BR>-In the email body, write "subscribe canslim" or<BR>-"unsubscribe canslim". Do not use quotes in your email.</SPAN></FONT></P></BLOCKQUOTE>
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