- how one technical call lost a lot of people a lot of money;
- why Ben Bernanke is out of ammo; and
- a calm, cold analysis of what could happen to Caterpillar shares.
The 200-Day Rally Posted at 6:31 p.m. EDT on Friday, June 8 Pathetic that what made you the most money this week is exactly what might have cost you most of your year for the last three weeks. Some people aren't going to like this, but what I think was the worst call in a long time was anyone who said, point blank, that the 200-day moving average is all that matters and when it is taken out then you are going to have a big decline. If you remember last week every trader and his brother talked about this concept. We had a guest on CNBC who said that this was it, that you had to sell because of it and he is a highly respected trader. He gave his prognosis after speaking to tons of other traders and the groupthink is totally odious. > > Bull or Bear? Vote in Our Poll I think when we look back at this week we have to remember exactly how irrelevant the charts are at some very big moments. In fact, I am calling this the 200-day rally because it was probably precipitated by all of these know-nothing shorts who bet against the market and then were forced to cover because they heard about the secret deal. It was a week that I wish we had more exposure on (notice I use the traditional term, "exposure," not "risk"), but that's exactly what would have wrecked us for the last five weeks. There was lots of scrambling these last few days and, once again, it defied a lot of patterns. Nothing in the book said we should have had another good day today. After a week like this, frankly, we should just throw the book away or at least the chart book, because the main thing you needed to know to trade positively this week was that many people shorted off the 200-day claptrap and then Spain got so bad that a deal became necessary.
Big Ben's Out of Bullets Posted at 10:50 a.m. EDT on Thursday, June 7 What did we expect? Did we expect Ben Bernanke to say, "We are cutting rates to minus 1% and forcing every man, woman and child to take a loan?" There is a reason why Ben Bernanke can't do anything. He's done everything. The bond market has done the rest. I continue to be perturbed by the idea that the stock market is at the beck and call of Bernanke. China and Europe are in charge. The Bernank's simply being as helpful as he can. The "diminishing returns" comment isn't totally on point. I mean, think about it, there's no return at all for Fed actions. The bond-market buyers are more powerful. We need people to want to take loans, and we need banks to loan. He's done as much as he can to make that happen. Now is time to focus on Banco Santander ( STD) and Beijing. One other point, though; I have to hand it to the guy, he totally gets the financial cliff, he totally understands that Spain and Italy are the issues, he gets that Angela Merkel has to give. They just don't work for him.
Bottom Fishers Heed This Analysis Posted at 10:47 a.m. EDT on Tuesday, June 5 How much is an estimate cut worth? That's what the stock market is wrestling with right now. How much will a stock like Caterpillar ( CAT) be hurt if the trends keep up that everyone sees around the globe? Caterpillar's a perfect model of what can go wrong, so it's nice to address the downside on a positive day. First, the earth moving and generator company is a worldwide powerhouse with sales on every continent and a big share taker because of reliability and superior technology. Now, Caterpillar traded at $116 back in February. It is at $83 now. That's a staggering, almost-30% decline. Caterpillar's been a hideous stock to own and is emblematic of almost all industrials here. Does it deserve that haircut? Let's consider what happened to CAT in the 2008-2009 Great Recession. Caterpillar earned $5.66 a share in 2008. The very next year it earned $2.19 a share. That's a staggering cut in earnings of roughly 60%.