Stock Top At Hand?

Christopher Carolan and Terry Laundry, both highly respected by me and many, many others, are calling for a major stock market high within the next day or so.  Carolan's is based on his Spiral Calendar F11 (279 days) from the January 6, 2009 high which comes out tomorrow as I measure it. Laundry's is based on his T Theory forecast from the March 18, 2009 NYSE volume oscillator high which he calculates as coming out October 12-13. You can click through to both of these fine analysts via the "Blogs I Like" list in the left hand edge of this page. (Carolan's site is part subscription but you can get the flavor of his work in the free part. I heartily recommend his classic book, "The Spiral Calendar" which you can buy from him or perhaps through Amazon.)

 

While a decline can always start at any time and may well do so tomorrow, my sentiment and volume studies do not support an intermediate term decline at this time. The 2CS is at 90.33 as of Friday October 9 and really should be under 80 for an intermediate term high that is going to decline more than 5-8%. The volume studies are also not at normal extremes for a top.

 

Laundry is  expecting a decline of perhaps as much as 16% by mid to late November. He has several audios and pdf file at this time today explaining it all, and if you have the time his free reports are always worth the time and effort. To be sure, Laundry does have a longer term T which doesn't expire until the summer of 2010.

 

I certainly can't, and it would be absurd to, claim to know their work better than they do, but they have both been so open and kind over the years in making their ideas

available to the investing public, that I have used their work in my own way for over 30 years in Laundry's case to nearly 15 years for Carolan's. I believe that Laundry's T could extend to October 30 which would give the market time to become truly overbought.

 

Carolan says that in his experience with major Spiral Calendar highs, other usually reliable indicators often fail to warn of impending doom. That's a humbling idea for me. By the way, I do believe that the current decline in T bond futures was predicted by the Carolan F11 (279 days) from the December 30, 2008 bond high.

 

 

Comments

[Tom Drake]

http://www.MarketTrak.com produces hundreds of neural networks all geared to the Dow Jones 30, and they are all polled daily. They have been long the Dow since late July.

I subscribe to their service, so I won't say much about their signals except that they are useful to me.

[Joe]

Tom,

Of all the information sources you use - whether by paid subscription or free - which one would you judge as the most useful for you.

P.S. I'm currently looking for a home in the North Phoenix area and the market has become a lot more competitive in recent months. I find it quite hrd.

Thanks, Joerg

[Tom Drake]

Joe:

http://www.investech.com Try a short term special. I've followed Stack for decades. Uncomplicated and reliable.

House buying and selling is brutal. Keys for us were "close in and quiet". Good luck.

Tom

[Joe]

I guess the only way we can construe a top with the 2CS here is in the fact that we have a higher high in th S&P, but not a lower low in the 2CS. Even if it's a top here, it does not see to be a major one.

Joe

[Tom Drake]

Joe,

There is a tide high here although I see it as weak. In addition there is a rigid four day calendar day cycle I follow which ended today. And it has a chance to invert down tomorrow. So sideways to lower this week is certainly possible. But unless things are VERY different now, this is not a game-breaker high leading to a major correction.

Tom

[Tom Drake]

Here a several examples of current lack of interest in or fear of stocks:

http://www.marketwatch.com/story/fund-investors-continue-to-favor-bonds-2009-10-13

http://theartofcontrariantrading.blogspot.com/2009/10/climbing-wall-of-worry.html#comments

[Joe]

Tom,

What do you understand by a "rigid four day cycle"?

I agree with you assessment. There is way too much fear out there for a meaningful stock market top. If anything, M. Hulberts data suggests a bond crash with higher rates.

Joe

[Tom Drake]

Joe,

More on the 4 day cycle another time.

On bonds it might not be anything like a crash, just a move of interest rates going up for a long time. I've done very well in bonds and bond-like entities this year. It may be time to move some more money out of them and more into equities. I've been doing it for a while now in my usual very slow manner: "tiptoe in the water". It works for me and I sleep at night.

Tom

[Joe]

Tom,

I meant t-bonds in prticular. As you mentioned here many times, corporate bonds function more like equities. I think the ferve of the general public with bond funds is with the "safe" treasuries. Isn't even the Vanguard treasury money market fund closed because of overcrowding - like the gold stock fund was closed a couple of years go?

Joe

[groucho]

The High Yield (Junk) Bonds "function more like equities", but Investment Grade Corporate Bonds do not. Nor do bond-like entities, i.e. GNMA's, etc.

[Tom Drake]

Joe, Groucho,

There is a spectrum for corporate bonds all the way from top-rated AAA to C (or worse). Some bond funds overlap "Investment grade" and "junk" bonds all the time or periodically depending upon their then current judgement. LSBDX comes to mind as one such fund, and they also carry foreign sovereign and some foreign corporates.

GNMA's are a different beast entirely. They have benefitted from a variety of favorable pressures this year until quite recently.

I haven't been in US Treasury's directly this year due their major bull market top on December 30, 2008. However, some funds I own do have modest Treasury positions from time to time. PTTRX and HSTRX come to mind.

My analysis is that *long term* Treasury's are going down for a long time (rates up). They had a 27 year bull market, so "it's time" for a lengthy bear market.

On the corporate side it was a more comfortable (less volatile) ride this year for a retirement portfolio than flat-out long equities. That is what I am gradually reducing and adding into equities. I will never have a very large equity position, so I will have to wait out a return of yield to the short end of the note/bond market to get very involved there. VSGDX and VFIJX can help.

Tom