Monday, June 15, 2009
(Cont'd from above)...

Jim (cont'd):   

Now, I have a different theory for why today happened… totally different… why the Dow plummeted 185 points… step by step, inch by inch… slowly the S&P fell, dropped 22.49... the NASDAQ got totally panicked… 42 point collapse… see the answer ain’t just in this book… that is right… do you see the answer… the answer is in these… my S&P Daily Action Stock Charts… yep, these… now we normally take up the charts on Tuesdays… during our Off The Charts segment, when we analyze a stocks charts and challenge the chart with the fundamentals, and we will be back doing that tomorrow… but sometimes the chart totally and completely controls… sometime the chart is the whole she bag… which is why for me the nightmare began Saturday morning not Monday… when I heard the thud against my front door.

You see I get this chart book delivered each Saturday morning… because unlike you or just about anyone else in the world, I lead a pathetic life that is dominated by stocks that live in my head… and I take their pictures out Saturday morning, the way regular people take out snapshots of their family… okay, if you are done feeling bad for me, let me emphasize that one of the great pleasures on earth for me… is to get the extra large coffee from my Dunkin Donuts, the usual, it is ready when I get in… get a marble or pumpernickel or even a everything bagel from Bagels For You, and sit down at the kitchen table Saturday morning and go thru each chart… so I can think and be ready for next weeks Lightning Round… and by the way, if you want to do a Lightning Round and have a chance to get it right, you have got to get into my morning ritual… and here is what I saw.

After an astonishing charge up for seven months… the seven month highs in the S&P 500... I saw this chart, this chart on my cover… I saw this chart right on the cover of my book… and I have got to tell you, I gulped my Dunkin Donut coffee when I saw it… and then I did a Danny Thomas spit take… an obscure reverence to someone who once dominated daytime TV, well he only did it when Uncle Donus came to town… see the coffee went all over my coffee… but I managed to save the charts from the brown onslaught… I gulped because this chart of the S&P 500 had moved up substantially from the two lines I like to see it parallel to… the 30 week and the 10 week moving average… I circled this immediately when I saw it… cause I was like freaked, oh my God, this is just horrible… see here is the line… this is the 30 week that I regard as being so important… here is the 10 week that I also regard as important… right there… we are so far away from the parlance of the chart, that I knew that there was just no way that we were not going to take a big hit.

See there was way too big a gap between these… that is the gap, do you see that… in chart terms, that is a gigantic gap… look, here is the whole increase… so you can see, we are going to get hit… it is way too big… and it was darn right scary for me… we always talk about the market getting ahead of itself… this is a chart that demonstrates that it finally has happened… it is a chart that depicts what the market was thinking when it woke up this morning… and is a chart that played right into the hands of the soft European markets, the weakness in oils, something that was not supposed to happen if the ruling party in Iran won, and oh by the way… the individual charts that I looked at in the book… they all pretty much looked like this one in one shape or another… and the result is what happened today… you have got stocks down huge… working back to these lines… but unfortunately, we are not there yet… now, just so you know… I want my chart nightmare to go away… and it can only go away by the S&P 500 going back to touch those two lines… that is the bad news… the good news is that at this pace we are going to be there tomorrow… and then I expect the fundamentals reassert themselves… and the fundamentals are unchanged from last Friday… despite what you heard, or may have heard otherwise all day today.

And what was the fundamental alibis and excuses that I heard today from the exasperating pundits, who try to pin every single move on something of substance that does not exist… oh there was plenty of noise… but the only one that rose above the din, was that the worlds policy makers are getting scared… they are getting nervous… and they are not going to continue their stimulus because their economies are getting better so much faster than anyone thinks… I have got to tell you… I think that that is totally, and unequivocally wrong on both counts.

First, the economy is not moving up… it is just less bad… it is just going down more slowly… with unemployment still going higher and higher.

Second, I think that the Federal Reserve and the Treasury, in this country, know that the chief risk is a more serious recession coming back and biting us… and they are no where ending their support for this economy… they know that there are some green shoots out there… but they also know that there are a lot of plants that look just like this… dead plants… and the ones that can make it are in desperate need of some Miracle Grow… which in this case is pure stimulus.

Hey, you know what, I think that Tim Geithner is smarter than that… I think that the Treasury Secretary has got our back here… so does Ben Bernanke, the Fed Chairman who will go down in history as the man who saved the western world from the Great Depression Part II.

What else, oh people were freaking out today because oil is down… sorry, the next leg of the economic turn if oil goes to a level where gas is at $3... I am not buying it… how about the dollar got strong… hey come on, do you really think that with our budget deficit that is going to be a trend… the President’s healthcare plans are going to hurt the economy… particularly the healthcare portion of the economy… oh please, has anybody looked at the United Health, or Eli Lilly, or any other drug or healthcare play… they have been disasters forever… that is nothing new.

Nope, the real story, the bottom line…

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The Bottom Line!:     All of the real reasoning for the sell off… what was it… it was technical… okay… it was done with very little conviction, that means that volume was very, very light… remember heavy volume tells the truth, light volume does not… and today’s sell off was on the lightest volume in a long time… I think that today’s sell off was all about the charts… the charts that ruined my Saturday morning, and ruining your Monday… giving you the worst day in a month, if you own stocks… just like the trend lines told you would happen.

[verbatim recap]

[end of segment]

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