WHY A GAP DOWN TOMORROW FOR THE GENERAL MARKET MAY STICK
With all the house cleaning the bulls did last week, getting all the "earnings are baked in" bears out of the way, there may not be much in the way of bids to hold this market up in case of a gap down tomorrow morning. The shorts were cleared out all of last week, especially in the market leading tech space. Not to mention the fact that bears hate three day weekends away from the market in the midst of a table and chair match, where they are getting continually pounded. As for the buyers, most of the "I don't wanna lose my Wall Street job" performance chasers who underperformed last year and were catching heat from above, are fully allocated into the market following last weeks move up. They weren't going to wait until the second half of January to allocate...they had to do it quickly and they have been chasing performance all of January. The bids will be light my compadres. Beware of any gap down...the gap may be retraced initially, but that's as good as it will get. A rip-roaring ascent for the markets tomorrow morning - should we open weak - is a low-probability event. Whereas, continued selling pressure throughout the day may be the modus...
OUR LARGEST POSITION – OIL/GAS SPINOFF GETS MORE EXCITING
It just gets brighter and brighter for our oil/gas spinoff, which is already up 350% since we initiated the position in October of 2010. I love talking stocks...and I love sharing picks. I've been doing it since the late-90's after I left my job as an institutional trader for Bank of America Investments. I am to the point with this one where I just want to tell everyone that reads this blog what it is so they can see for themselves the potential it has, due to the right management team, the right financing and the right experience. But I can't do that to my members and I can't do that to my investors. So I have to zip it. What I can say is that the parent company is leading this spin-off forward. I can say that the parent company is up about 1000% or 10 times over the past two years...and it looks like by the time all is said and done it could be one of those gems that ends up gaining an obscene amount. The beautiful part is that our spinoff is the parent companies baby...and they are treating it as such. They are grooming this thing to possibly make the parent companies gains look tame. With everything we are seeing in the inflationary supercycle that will take commodities higher, oil higher, stock prices higher. This one will keep rising and I think by the time all is said and done Zenpenny members will be a happy bunch. And that's guaranteed, of...
CURRENT POSITIONS UPDATE
Thus far into 2011, our portfolio has been flat. I'm not necessarily disappointed, as our two largest holdings were both up in excess of 300% in 2010. I expected there to be some selling during the first quarter of the year, until these names resume their uptrend, which I expect they will in a big way. Our newest holding, the consumer subprime play, has done well since we initiated the position towards the end of 2010. It's up about 20% since initiation and we have been adding as it has been moving up. The upside here is about 300%, and there is a large margin of safety, as this name is tremendously undervalued still. Our biotech reorg play has been pancake flat since initiation during the 4th quarter of 2010. We are keeping the position small. It is our belief that this will be a play that suddenly gaps up overnight. It won't be a gradual move up at all, like our oil/gas play or tech play. We'll remain patient with this small position for the time being. Looking forward to seeing our portfolio continue its bullish ways in 2011. You can view the current positions page here Subscribers get full access to our portfolio. A 10 page research report outlining our findings with respect to each position. And we give you 100% of your membership fees back if our picks do not perform. Confidence in our research allows us this type of guarantee. Click here for more...
GOLDMAN SACHS BIZARRE TIMING
I always wonder if a majority of these investment banking firms are on a campaign of misinformation for nefarious reasons that will revealed by Wikileaks in the coming months or years. Perhaps it's just that the fundamental research guys that come up with recommendations to buy equities, as they did today, are not allowed to discuss things with the technical, market-timing guys. While Goldman's recommendation to buy equities for the long-term is the right recommendation given the bullish variables in favor of long-term growth in the equity markets. Their timing will be damaging to any of the investors who choose to take their advice. The tree that is the US equity markets is about to start shaking, and odds are that your average, mentally scarred investor will not be able to hang on long enough in order to enjoy the fruits of Goldman's recommendation. Just goes to show that the conflictory jungle that is Wall Street is alive and well. Analysts with fancy degrees, dressed in funny suits and ties, acting as if the knowledge of all the heavens is at their feet. When, in fact, the reality of the situation is that they are the modern day version of a carnival barker, doing work that - in the end - is truly...
ILLUSTRATIONS AS TO WHY THE MARKET NEEDS TO STOP PARTYING OR IT WILL END UP IN REHAB
It's party time if you're a bull. The drinks are flowing, the girls are dancing, and the bulls are eating it all up. But, as the wise amongst us know, the party lifestyle is fast moving and runs over you before you're able to run over it. The bull market that we are experiencing here has some short to intermediate business it needs to attend to or it may find itself dancing alone, in a vacant apartment, with only memories of its previous glory. Long-term is very bullish. However, every bull market needs to take breaks and shake the tree a little bit before it has the right mojo to begin another leg up. As bullish as I have been, we are now entering a period of time where that shaking may begin. And here are some illustrations as to why: Click on the charts to...
THIS SOCIAL NETWORKING THING
You know, I have to admit, I never really got this social networking thing. I am one of the only people born in the 70's without a Facebook. I never had a Myspace. I'm just not a big fan of telling people what I drank at Starbucks in the morning or that my wife just bought me a new sweater. I'm not necessarily eager to have my old high school friends contact me either. It was fun guys, but I've moved on...if I want to relive our memories, I will look you up. Transparency is good in the capital markets, but not in the family market...that's my opinion. But guess what? I'm experiencing a bit of a change. I'm starting to get it...a little more, at least. Twitter, thus far, has been a great experience. I just joined it a couple weeks ago. I am realizing the benefits of this social outlet more and more on a daily basis. One of the greatest benefits I see is that it creates an online, indisputable track record of my opinions, thoughts and analysis. I like that part a lot. I want people to be able to go back and see what I was saying about the Gold market at such and such time. I want people to go back and see what I was saying about the S&P in January of 2011 a few years from now. Even shorter time frames. I want people to go back and see what I was saying about the markets earlier in the week versus what the actual results were. The reason is simple. I am right more often than I am wrong...a lot more often, in fact. It's not just bloated opinion...it's a result of 16 years of hard work. The enormous highs of running a top-ranked hedge fund to the devastating lows of not being able to have a winning month for the life of me. All of those emotional swings and literally thousands upon thousands of trades, have led to some sense about what the market is trying to tell me...I speak its language rather well. I'd love for everyone in twitter land to see the accuracy of our individual stock picks. But, I'm sorry...the work we (my analyst and myself) put into discovering, studying and investigating these names is simply too much to give away for free. Paying members understand what I mean. Twitter, it turns out, is not just great for networking with like-minded individuals, but provides a fantastic forum for recording my opinions so that whomever feels the need to check up on this Zenpenny guy, has the opportunity...
THE “EARNINGS ARE BAKED IN” CROWD IS BEGINNING TO GIVE UP
This slow, steady climb is surely causing the "earnings are baked in" crowd to reluctantly throw in the towel. This was very necessary in order for the markets to begin responding to the numerous indicators that have been telling us of the fact that things are getting somewhat overheated and we are due for a break. I have reiterated that market tops in January following a previously bullish year are indeed rare. This market will not be the exception. However, the always endearing drunken chop will now be free to begin, as the long side becomes overcrowded and the bears continually attempt to find the top. Bottom line: next week will not be as smooth as this week was. We are closer to the beginnings of an extended period of consolidation, as opposed to any monstrous run up. Caution reigns...
WHY BE LONG TERM BULLISH? WELL, HERE ARE 6 REASONS
Investor sentiment - retail investors have abandoned the financial markets like at no point in recent history. Wall Street is seen as a group of criminals in suits, which isn't entirely incorrect...but when retail investors actually begin seeing the truth...it creates an enormous amount of sideline money, that will come back into the market as we continue pushing higher. Classic wall of worry scenario taking place - the economic fundamentals are perceived by everybody to be so awful that it has created a classic wall of worry scenario. This keeps just enough people on the sidelines to keep the fire burning in a bull market. Liquidity excesses - an enormous amount of cash provided as a result of the excessive liquidity that has been thrusted into the marketplace. Not to mention, investors are holding onto tons of cash as outflows from funds have become the norm over the past couple of years. The inflate or die trade - very simple, the global central bank cabal is still in inflate of die mode. They have literally told us that they will not allow asset prices to decline. Moral judgments aside, this is bullish for the markets. Inflate we will...and financial markets have a tendency to overshoot by vast amounts. Gold - it's the leading indicator of asset prices. It's the leading indicator of the inflate or die trade, and it has a good 1-2 year headstart...it's literally towing the rest of the asset prices higher. Everything from corn to stocks. A market dominated by professionals - you know what happens when you have a bunch of short-term orientated, trigger happy professionals dominating the market? You get short term pullbacks, but nothing more. Everyone is so concerned about the next swoon as a result of the pain they have experienced over the past few years, that bearish sentiment rises to extraordinary levels, extraordinarily fast. This means that as soon as weakness is observed...hedges come into play, short-selling ensues, stock is sold...making the dips into minor events...and creating demand when the markets resume their...
THE RULE OF THIRDS APPLIED TO THE DOW GOING BACK 100 YEARS
The Dow has essentially been in a 100 year plus uptrend. Marking the ascent of the United States and western civilization as a whole. It hasn't been a steady climb, however. There have been periods of volatility, decline, and mania. The fundamental human emotions of fear and greed have insured that periods of drunken shaking and wiggling, immediately follow periods of prosperity and consistency. Over the past 100 years there have been three different periods when the Dow stopped its normal trend of moving up and instead paused for an extended period of drunken, obnoxious behavior: 1929-1954 - the effects of the Great Depression lingered for 25 years, until the Dow managed to break into new highs and not look back. Liquidity measures and frankly, cheating in order to force the markets higher didn't exist back then. But this lengthy period of pain guaranteed us that cheating or as we call it today, aggressive monetary policy, would shorten these periods of pain, thereby putting us back on track for growth and prosperity, marked by an uptrending Dow Jones average. 1966-1982 - The second lengthy period of consolidation, marked by a period of nationwide shrugging of shoulders, excessive drug use and subsequently, interesting fashion choices...came from the period of 1966-1982. But get this...this time around, using the lessons we learned from the 25 years of consolidation in the Dow that was 1929-1954...we managed to cut the period of time we consolidated by a third...16 years, instead of 25. 2000 - present - Finally, we have the current period of consolidation, marked by a stunning rise in technological innovation, which has led to most human beings staring down at their phones more than they look up. I am convinced that this phenomenon will lead evolutionary forces to create another set of eyes on top of our heads so that we can text, twitter, facebook and check email at the same time we drive and walk. Anyways, I'm getting off the subject here...oh yeah...the consolidation that we have faced from 2000- present. As we have faced the challenges of an imploding technology bubble, an imploding real estate bubble, a historic shift in the global economic landscape and a wonderfully creative global central bank cabal that has managed to reinvent itself as the messiah to all institutions of capitalism that experience pain...we have gone into a volatile period of 11 years doing nothing but carving out notches in this sloppy trading range. Using the rule of thirds, as applied to finance...we find that in order to cut the previous consolidation period of 16 years by a third, we get an 11 year period...
GOLD MARKET – A BOWEL TEST FORTHCOMING
It's a crowded trade boys and girls...the current pattern is screaming "get off my back...I'm carrying too much weight..and I'm about to buck you off". Hope you're a cowboy. Click on chart to enlarge: