Paul Desmond follow up

Back in February, I did an extensive Q&A with Paul Desmond of Lowry’s Reports (Part I is here, and the important Part II is here).

At the time, I asked Paul where we were in the market cycle, and he replied: "We are well in the process of forming a top, but we are not to the final
stage of this thing yet."

That was dead on. After all the technical damage we’ve seen of late, I followed up with Paul to see what he was thinking these days; I wrote him:

We are running about 10 to 1 on the NYSE up down volume – but not as bad on the A/D, and not as bad on the Nasdaq. I’d love a bounce to short into . .  .

His reply:

"It is very likely that our short term indicators will all fall to oversold levels as of today’s close.  That would set the market up for some kind of a snap-back rally (to short into) within the next few days.

Also, today’s (Wednesday) decline has been flirting with a 90% Downside Day.  If it ends as a 90% Down Day, the probabilities would strongly favor one do-nothing day (as investors try to recover from the shock) and then a rally lasting from 2 to 7 days before the decline resumes. 

So, you may get your wish.
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Just so you know . . .

What's been said:

Discussions found on the web:
  1. B commented on May 18

    So a buddy of mine IMs me with some feedback that TheStreet.com says titanium is the new tech bellweather. Since I don’t subscribe, I can’t see it. Anyone have access to what it says?

    For the author of that story, I just have two words. Shooting star. Symbol TIE, Titanium Metals is an interesting chart. If you have access to a charting package, look at the 2003-2006 chart on a monthly perspective with candlesticks. Nonlog scale. Can you say parabolic?

    It took three years for this company to go from a few bucks to $24. Then it took 45 days to go to $48. Cumulative run is about 4,800% in three years. There is the ugliest shooting star I’ve ever seen on a monthly chart with this company. Is TheStreet a reasonable contrary indicator? Or are we just getting a healthy correction? lol.

  2. rob commented on May 18

    woo! barry you da man! you keep my portfolio alive in 06.

  3. TonytheTiger commented on May 18

    A lot of damage has occured. I would expect some volitility for several days before a long entry.

  4. david commented on May 18

    I went over to TheStreet.com just to see who wrote that article on TIE, since I do not subscribe either. It’s Cody Willard, so I take it that the article is worthless hype and that it will end up being a contrary indicator.

  5. dark1p commented on May 18

    David, harsh! Is Cody really that bad? A little overzealously bullish sometimes….OK, a lot of times. And the groovy lifestyle stuff doesn’t help (maybe I’m just jealous).

    Barry, you and Cody are friends, aren’t you? What’s your opinion?

  6. Barry Ritholtz commented on May 18

    He went to cash a week ago Wednesday — good timing

    I disagree with him on MSFT, and he’s been too bullish the past — but he has gotten cautios recently

  7. B commented on May 18

    If Cody reads this blog, maybe he could post his article for us to read. I’m curious about the premise. Now, I’m not a metallurgical engineer but I don’t really see the correlation to titanium and being a “new” tech bellweather.

    I do know it is in my Neutrogena sun block. It is in those super sophisticated Chinese fireworks. And it’s been used in aircraft construction for half a century. Mostly preferred as aircraft sheathing by the Commies during the cold war. And, wasn’t The Terminator liquid metal? Maybe titanium? And it’s in my grandmother’s hip. So….how does that translate into a tech bellweather? It’s a metal. A rather commonly used metal. And, it’s part of the asset bubble.

    Only time will tell but I’d venture to say this is a “wrong way” Bill Gross kind of call.

  8. dark1p commented on May 18

    Thanks for your thoughts on Cody, Barry.

    Mr. B (or is it Ms.?), Cody’s line of thinking on titanium is basically that the CEO from RTI International Metals said that titanium is a cyclical business. And Cody said “you want to sell the cyclicals in a boom and buy them in a bust.” He believes that tech earnings growth the past couple years is showing that we’re in the beginning of a boom phase. Ergo, titanium as a cyclical will be a contrary indicator for tech stocks.

    I think I got that right…

  9. david commented on May 18

    Maybe I am a bit harsh in my staement about Cody, but I have gotten to the point where I can no longer tolerate attempting to read TheStreet.com. Back when there was some amount of balance in the opinions written [bull vs. bear], I was a user of their paid site and found it quite useful. However, they gave the boot anyone with anything bad to say, or so it seems, so I quit. Sometimes, I wonder how many of their calendars still say 1999…

  10. Bynocerus commented on May 18

    I can see how people think Cody comes across a little too strongly, but he really does seem to be a nice guy – always very pleasant in emails he writes back, and if you read his blog, a pretty interesting guy. I think people confuse his youthfulness with cockiness, which isn’t necessarily fair.

    I will admit that whenever I see Cody and me agreeing it makes me nervous, given that I think a heck of a lot more like Barry. But, the fact that he went to cash a week ago after riding the telecom wave to the very top tells me he’s a lot smarter than some people give him credit for. I’m not sure I understand the titanium call, but just thought I’d throw out my two cents.

  11. dark1p commented on May 18

    I agree with David about thestreet.com. I keep meaning to call and cancel my sub, but I still like Helene Meisler and Alan Farley and I read some other stuff now and then. Guess checking in every few hours is a habit at this point. The heavy emphasis on stocks over treasuries and commodities doesn’t work for me, but I suppose the vast majority of subscribers are stock traders and folks reeled in from Cramer’s clown show. Still, it used to be a much more interesting site some years back. Cool that Dick Arms is still there, though.

  12. B commented on May 18

    Mr. Ms., either will suffice. I’ve been called a woman, a mother and a few other things.

    I just totally disagree with that premise. In fact, I have fifty years of market data that supports the exact opposite conclusion.

    Economically, we are in a weak dollar, inflationary hard asset boom. Technology typically lags in such cycles. Hard assets, on the other hand, tend to lag in strong dollar, produtivity driven technology booms. That is why in the greatest technology run of modern history, TIE and the underlying metal actually had a negative return. Thus, historically one should be in either one asset class or the other. So, rather than an indicator of technology, titanium has been the anti-indicator of technology.

    And, unless technology actually recovers here to lead us higher in the 2nd half of 2006, the reality is the broad based technology bull market lasted from April of 2003 to December of 2003. Since then, the leadership has crumbled and very narrow technology themes have performed Ok but the broader technology platforms have stagnated or even been negative for 2.5 years. That means the technology shakeout from 2000 is likely incomplete. The bull for the last 2.5 years has almost exclusively been asset driven stocks and those that benefit.

    Now, I don’t know Cody from Adam and he might be a great guy but I don’t like this blathering-billy type of analysis that most perma bulls douse on the general population. It all sounds plausible but the facts is the facts. There is no historical data supporting such an argument. So, for that to the be case, we’d have to be in a brave new world. Maybe a Goldilocks world.

  13. Grace commented on May 18

    Who doesn’t like Cody Willard??

    The sportos and motorheads, geeks, sluts, bloods, waistoids, dweebies, dickheads… they all adore him. They think he’s a rightous dude.

    I’m sorry…. I asked for a car, I got a computer. How’s that for being born under a bad sign?

  14. Mark commented on May 18

    B-

    I agree with your comment on cycles. Tech CANNOT lead here according to market history. Start of next economic cycle? Absolutely. Along with the financials under an improving interest rate picture. But here? No way.

  15. dark1p commented on May 19

    Late getting back to you B, but I tend to agree with you on this goofy titanium thing. I was trying hard to present it objectively….wasn’t easy….

  16. F commented on May 20

    Titanium: The New Tech Tell

    By Cody Willard
    RealMoney.com Contributor
    5/15/2006 11:52 AM EDT
    Click here for more stories by Cody Willard

    Forget Google (GOOG:Nasdaq – commentary – research – Cramer’s Take) as your market tell for tech.

    You don’t need to watch Advanced Micro Devices (AMD:NYSE – commentary – research – Cramer’s Take) if you’re curious as to where tech is headed near term either.

    And, just in case you need to hear it one more time — Dell (DELL:Nasdaq – commentary – research – Cramer’s Take) is yesterday’s news. (Hmm, typing that makes me want to buy some Dell, so I guess I’ll put that one on the potential shopping list for when I’m buying again.)

    Nope, instead of those good ol’ fashioned tech-trading clues, my eyes keep going back to Titanium Metals (TIE:NYSE – commentary – research – Cramer’s Take). Since last Wednesday, this stock is down more than 20% from what I am going to officially label a “blow-off top.” Whether it’s simply a near-term or a full on long-term top is yet to be determined, but TIE now needs to rally a full 30% just to get back to where it was this time last Wednesday noon.

    And the catalyst for such a horrid trashing of the stock? Well, you sure can’t point to the Wall Street Journal story about Airbus paying big, new high prices to secure titanium over the next nine years, which was supposed to be a big indication of endless boom in the industrial metal sector. At least according to the commodity-loving bulls, of which there are plenty.

    But as Timothy Rupert, the CEO from Titanium supplier RTI International Metals (RTI:NYSE – commentary – research – Cramer’s Take) said on Kudlow & Company the other night after actually signing that nine-year contract with Airbus: “It’s a cyclical business.” His own company’s stock is now down about 20% since last Wednesday.

    And you want to sell the cyclicals in a boom and buy them in a bust.

    You heard about the ongoing longest streak of double-digit earnings growth since the 1950s? I’ve been calling this economy a boom. I think we’re still very early in that boom. Heck, I even think the potential still exists for a true tech echo bubble over the next few years, but I sure don’t want to fight the forces that are trashing RTI when the company just secured nine years worth of visibility.

    At the time of publication, the firm in which Willard is a partner was net long GOOG, although positions can change at any time and without notice.

    ###

  17. Craig commented on Mar 22

    Could Cody really be warning of the cyclicals/commodities melting up here?

    It sounds like he’s ringing the bell on commodities and clearing the decks for the coming of financials and tech……but as others have written, that isn’t for some time now.

    In the short term I think metals will resurge until we get to Feb’s highs, then look out below.

    Face it, everyone including the Fed, knows we are done. The fork in our butts is a clear giveaway.

    More punch anyone?

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