The market, the economy, the point and figure chart

What if the economy looks awful, but stocks are really cheap?
What if the economy is powering, looking fantastic, but stocks are really expensive?
Do these questions make sense?

The economy is not the market. The market is not the economy.
Oftentimes stocks reflect the economy. Sometimes they don’t.

Enough of a preamble.

Check these out:
Insider Buying: CEO’s Buying Stock En Masse
http://www.marketfolly.com/2011/08/insider-buying-ceos-buying-stock-en.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarketFolly+%28Market+Folly%29

There has been an increased amount of insider buying over the past few days. But what caught our eye in particular was the vast amount of CEO’s that were buying.

Not a lot of info in the article, would like more.

Compare and contrast:
Reuters/Ipsos poll: 73 pct believe US on wrong track
http://www.reuters.com/article/2011/08/10/usa-poll-idUSN1E7790RQ20110810

The poll found that 73 percent of Americans said the United States is on the “wrong track,” and just 21 percent said the country is headed in the right direction.

Pessimism is so hot right now.

——————–
OK, now onto the economy. A post from another blog I rate highly, Modeled Behavior.
Double Dip: The Model Says Yes, The Mind Says No
http://modeledbehavior.com/2011/08/10/double-dip-the-model-says-yes-the-mind-says-no/

However, like Leamer in 2007, I am hard pressed to see what is left to recess? At the time Leamer doubted a recession because he didn’t think there were enough manufacturing jobs left to lose.

This time, I look at construction and local government and think the same thing. The cyclical employment sectors are already so far down. Are we going to start losing jobs in Health Care and Education at this point?

Its possible but its just so hard to wrap your mind around. It’s a macro-economic story that’s never been told.

————–
OK, lets finish up this post with a look at some price action.
From the cash session on Wednesday (10Aug2011).
So much activity at the moment I am using larger scale chart to give you a picture.
It is the Sep 2011 ES contract, a 2×1 point and figure chart.
The vertical blue line on the far left represents the 9.30am NY cash market open (or as close as you can get on a chart without a time scale). The second vertical line is irrelevant to the discussion here. The “Thu” at the top, just to the left of centre is the start of day (just past midnight) on the East Coast of Australia. There are times noted on the horizontal axis, these are East Coast Australia times.

point and figure 2 x 1

OK, note the support around the 1125 area. Note how this support did not hold late in the trading session. It broke in the last half hour of the cash market. Went lower after the close (in the ‘overnight’). As I post this you can see the market has traded back up through this 1125 area, quite substantially. I think this is very significant. I wrote prior to the opening that there were going to be buyers on dips, that sell offs were not going to be extended like they have been in recent days. The market is changing its behaviour. Because there are now big bids around. It never going to be a straight line, linear thinking has very little place in the market (its works occasionally, everything works occasionally), but the buying is coming back at these cheap prices.

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