Santoli’s The Trader

A few interesting observartions in Mike Santoli’s Trader column in Barron’s. Please note that these are decidely contrarian negatives in the face of a rallying market making new highs:

"Charles Schwab (SCHW) last week reported that February was among the heaviest months for client trading since the bubble burst in 2000; the firm took in a net $10.6 billion in assets, a big haul. Some of this is market-share gain, but it fits with other indicators of an awakened investing public.

In the short term, if inflows continue, this money will keep the market firm. But the public’s lack of interest in stocks wasn’t an altogether bad thing, given the timeless notion that no market flops without first hooking the little guy."

Further, as we have observed prior, the breadth has been only fair for a market making 5 year highs. Barron’s quotes Larry Berman, technical strategist at CIBC World Markets, who noted: "The number of stocks (in the S&P 500) that have made new 52-week highs in the past week was 104, which is notably lower than the 128 that we saw at the January ’06 and July ’05 peaks."

Lastly, despite the nice move off the lows over the past 2 weeks, the Market Sentiment gauge from Citibank ("Panic /Euphoria") is almost out of the panic zone (wtf?)

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Panic

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C’mon Tobias, its time to adjust those parameters! Whatcha waitin for? A crash or sumpthin?

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Source:
Stocks Race to New Bull-Market Highs
By MICHAEL SANTOLI, THE TRADER 
Barron’s, SATURDAY, MARCH 18, 2006 6:15 a.m. EST   
http://online.barrons.com/article/SB114263811850701808.html

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What's been said:

Discussions found on the web:
  1. Larry Nusbaum, Scottsdale commented on Mar 18

    Barry:
    Could all of this in-flow be the result of the Jan – April 15th IRA/ROTH/401K/SEP funding propping up the market and when it stops in April cause the market to decline?

  2. Barry Ritholtz commented on Mar 18

    Larry:

    Very possible — there’s a reason for seasonality, and it has a lot to do with year end and pre-tax day maneuvering

  3. John Navin commented on Mar 18

    March peak, April sell-off has been the seasonal pattern for the last two years.

  4. mtnrunner2 commented on Mar 18

    I’m new to this site, and am looking forward to learning so much from you.

    I’ve been fortunate at averting bubbles. I stayed out of tech stocks during that bubble, and just sold my house in San Diego to cash out of the housing bubble.

    I’m looking at my retirement fund, half in Vanguard index funds, half in money market, and am debating whether to move all to MM short-term. The reason: I read your recent article on the overvalued P/E ratio. All assets revert to the mean.

    The thing to consider is that bubbles can go on longer than anyone thinks. As more people buy stocks (for retirements savings, as an alternative to buying out-of-favor real estate), the prices will climb. We could have a good long bull run for a few more years. Of course, it’s quicker to lose it all in stocks. Housing prices are sticky on the way down, and you have many months to get out. With stocks, you only have minutes, maybe hours.

    So what are the factors I should consider when making a decision whether to put more money into index funds or the money market (exclusive of GSEs of course).

    And what companies typically do well in a recession?

    That’s where we’re headed, and I’ve googled this topic, and have come up with nothing. I think the internet wasn’t popular enough during the last recession, and the articles on the topic are not archived.

  5. Franco commented on Mar 18

    Actually compared to a daily chart of the SPX that thing looks like it works pretty well.

  6. charles Levin commented on Mar 18

    so the indicator is making lower lows..ready for an upside breakount?

  7. angryinch commented on Mar 18

    Since we have topped every time we hit the -0.3 line, I assume that must mean euphoria.

    BTW, the Dow is less than 1% away from its ‘real’ all-time high—-the zone b/w 11,350-11,425. Most are focused on 11,750—the spike high in Jan 2000. But the ‘real’ top is the zone mentioned above. It was tested five separate times b/w 1999 and 2001. It got through on the second try (that was the 1/00 spike). But it failed the first time and the final three. Then it went down.

    Maybe i’m crazy, but it’s a mighty big deal for the Dow to retouch its ‘real’ all-time high. Does Tobias really believe that, with the Dow 1% away from a zone that repelled it for 2 years, the market is ready to zoom higher?

    I suppose anything could happen. But the market has genuflected at key resistance all the way up (SPX 1160-1177, Dow 10673, RUA 650). Will this time be any different?

    And if it does zoom through the 11350-11425 zone, it’s much more likely to be a spike like 1/00 than some sort of sustainable move higher.

    The good news is: we shouldn’t have to wait too long to find out if the Dow can knife through its all-time high like butter. Next week sounds about right.

  8. Michael C. commented on Mar 19

    The fact that he does not adjust that obviously misaligned chart is because it is more about attracting money than it is about market timing.

    “Invest when investors are panicking! Wait…see, look at my chart. They have been panicking all year. Now is the time to give me your money!”

    “And when do you sell? See, look at my chart. When there is investor euphoria. Almost never. Never take your money out after giving it to us!”

  9. Larry Nusbaum, Scottsdale commented on Mar 19

    Posted by: mtnrunner2 | Mar 18, 2006 2:53:19 PM: “and just sold my house in San Diego to cash out of the housing bubble.”

    LET’S SEE HERE. YOU ARE MOVING TO 100% Money Market AND YOU’VE SOLD YOUR HOME? WHERE ARE YOU LIVING? IN A BUNKER, PAYING RENT?

  10. Michael C. commented on Mar 19

    >>>LET’S SEE HERE. YOU ARE MOVING TO 100% Money Market AND YOU’VE SOLD YOUR HOME? WHERE ARE YOU LIVING? IN A BUNKER, PAYING RENT?<<< What's wrong with that?

  11. Michael L commented on Mar 20

    Ding,ding,ding. GMA had Diane Swonk, the former Bank One economist, on in the FIRST segment after the news. She said all is well, time to get in, DJIA 12,000 for her forecast.

    Add Kosmo’s comments last week, they’re ringing the bell (at the top).

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