What follows is an after dinner conversation that transpired over cigars and a goblet of Grand Marnier:

AD: Mr. Obvious, what are you seeing in the market right now?

Obvious: Well, Alphadawgg, what I have determined through careful analysis is that we are in a bear market. Through yesterday’s action, the Dow is down 20% since it’s peak in early October of last year. The S&P 500 is a tad below 20% down, and the Nasdaq is down 21.25% since its high on 10/31/07. My measuring stick is 20% down from the peak. So it’s official. We are in a bear market.

AD: Isn’t that somewhat of an arbitrary measure? Bear markets are characterized by markets that trade back and forth and go nowhere, even down. Hasn’t that been rather obvious? No pun intended, of course.

Obvious: Well, not exactly. Prior to being down 20%, the market was just exhibiting volatility. You see at my brokerage firm of Obvious Lee Klewliss & Howe, we prefer to be optimistic about the markets. We are buy and hold investors. You have to look at things over the long term and ignore market “noise”. It is always a good time to buy. That’s our motto, and we’re sticking to it. Besides, bear markets, which we prefer to call “pauses”, only last a few months. Actually, we are still in a long term bull market. These corrections are simply pauses, as we say. It’s analogous to a bull in the pasture, happily consuming vast quantities of grass, then lying down for a brief knap (chuckle).

AD: Interesting concept (rolls eyes). But, don’t you think that by looking at the charts, examining trends and market sentiment, you can clearly see that we have been in a bear market now since late last year? As a matter of fact, since late March of 2000, the Nasdaq is down 54%, the S&P down 17% and the Dow has been flat. Doesn’t that qualify as a secular bear market? Isn’t eight years an awful long time?

Obvious: Maybe. Again you have to look at things from a long term perspective. To me, charts and technical analysis are fictions made up by people who think they can time the market (chortle). It can’t be done. College professors have proved this to be a fact.

As far as market sentiment, I try not to get sentimental about the market. It’s too emotional and I run the risk of getting verklempt. Really, if you look at the market going back to 1926, it has given us an average return of 10%. Where can you get 10% these days?

AD: But that’s over 80 years. People don’t invest for that long. Additonally, returns are never always 10%. That’s simply the average. We can experience quite a variation in any given year. Also consider that by the time many investors reach age 47 1/2, they start pulling money out of stocks and going into bonds for part of their portfolio. They’re advised to start being conservative.

Obvious: Yes, that’s true. We even tell them to do that.

AD: Well, then they probably won’t be able to make 10% , will they?

Obvious: (Scratching his head). Hmmm, I didn’t think of that.

AD: Moving on, what should people be doing now?

Obvious: Well, since we are now officially in a bear market, which I prefer to call a “pause”, people could consider moving into cash. They should also buy bank stocks. They are cheap and pay a hefty dividend.

AD: But Mr. Obvious, going to cash and buying banks,  isn’t that contradictory? Aren’t you worried about a further meltdown with financials?

Obvious: No. Haven’t you heard of the C-O-N-T-R-A-R-I-A-N strategy? Go into cash and buy the banks, now!…Before it’s too late!

AD: Mr. Obvious, with all due respect, you don’t know WTF you’re doing, do you?

Obvious: How dare you speak to me that way? I am the Chief Investment Strategist and CEO at my firm!

AD: Obviously, we are in a bear market, Mr. Obvious. Nice call.

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And obviously, this is a fictional account of what a typical conversation most retail investors may be having with their brokers right now. 

The NYSE Bullish Percent is now at 30%. The percentage of NYSE stocks trading above their 10-week MA is at 28%. We are approaching oversold territory, but we’re not completely at that stage—– yet.

The public is starting to get worried about their bullshit accounts. Capitulation, here we come.

It’s also interesting to note that some of the most highly regarded hedge fund managers on the Street are down for the year. They are in the process of raising cash to try to take advantage of oversold conditions and a bounce.

We saw some of that yesterday, obviously.

By posting the “fuckus” stocks for your perusal, I’m simply offering up some fare from my table laden with ribeyes, lobster, ambrosia, tycoon whiskey and whatnot—so to speak. In essence, I like you.

People, I still hold (SKF: 160.40 +0.70%), (FXP: 91.73 -0.74%), (DBA: 42.03 -0.14%), (DGP: 23.1001 -2.41%), (GSG: 76.35 -0.04%), (SZK: 81.74 -1.51%), (FXA: 96.07 -0.33%), (FXC: 97.96 -0.71%), and (DXD: 65.18 -1.33%) in my large and profitable hands. Additionally, there are other holdings that are waiting in the wings to fill my coffers with coinage. You need not feel sorry for me because some people decided to waylay some of my stocks in some of the leading sectors. Every dog has his day.  

In closing, it pleases me greatly that (MA: 253.74 -0.68%) is following my orders to the “t” , after I so unceremoniously shorted it around the $295 mark. Again, and I quote, “death to MA and all who practice usury”.

Thank you, and good night.

Sorry about that. I just had to get that off my chest. Strangely, I still don’t feel better.

As of today, these stocks are now known as “fuckus” stocks.

Holdings: (most recent prices) and original purchase prices:

(AGU: 97.00 -2.76%)@86.26

(BIG: 32.34 +0.62%)@ 29.05

(CLF: 93.57 -2.20%)@89.40

(CNX: 94.83 -0.77%)@91.41

(FDG: 79.15 -2.05%)@69.30

(FLS: 114.65 -11.63%)@121.10

(PBR: 65.72 -2.06%)@65.55

(POT: 210.89 -0.78%)@199.26

(WFT: 44.21 -3.37%)@41.99

(WLT: 87.57 -1.96%)@83.87

I am still sitting on profits, but they are going the way of “The Magic Man”…now you see ‘em, now you don’t.

I’ve got it in my head that these will bounce back like a super ball. However, right now, they’re being tossed like rotten peaches off the cliff of death.

Definitely egregious and reprehensible.

Decisions to make tonight.

We may be getting closer to a near term bottom. There, I said it.

I emphasize near term, because fundamentals are not even close to supporting an “all clear, hands on deck, buy, buy, buy” scenario.

Still, I remain bearish on the market, until I become bullish. It’s a Zen thing.

Yesterday, the NYSE Bullish Percent moved closer to the magically oversold level of 30%. It now sits at 32%. For all you newbies, the Bullish Percent indicator is a measure of market sentiment. It measures the percentage of stocks that are on buy signals based on Point and Figure (PnF) charts.  

As you know, I start to look at opportunities to go long when the Bullish Percent dips below the 30% level and crosses it again on the way up. By crossing back above the 30% level, it typically signals a major shift in market sentiment that can develop into a trend and be sustainable for a period of time.

In addition to the NYSE Bullish Percent, the OTC Bullish Percent is now sitting at the 30% level after yesterdays action. On top of all that, the percentage of OTC stocks that are trading above their 10-week moving average is now only 22%. This may set up an interesting scenario where the OTC may lead the charge to get the market out of it’s funk. Hey, shit happens.

In the meantime, I continue to sit in cash (59%) half of which is allocated to the Australian Dollar via (FXA: 96.07 -0.33%) and the Canadian Dollar via (FXC: 97.96 -0.71%). Both the Aussies and Canucks have commodity based economies whose currencies continue to waylay the dollar. I’m also nursing my 10 focus stocks, my commodity and inverse ETFs and my (MA: 253.74 -0.68%) short. At this point, I’m not adding to anymore short positions (via stocks or inverse ETFs) unless on small rallies, and if so, will set stops pretty tight.

The current trend is still down, but I’m starting to plot a course for when sentiment changes, thereby accumulating more coin for the vault, egregiously of course.

You see, many simpletons true to form, simply ”stick to their guns”, whether bullish or bearish, stubbornly clinging to their opinions. Then the market says, “fuck it, I’m going to Constanza your ass”. Then out come the hickory axe handles, and the simpletons get waylaid unexpectedly, ”Walking Tall”-style. 

In closing, to perfect our craft, we all must take heed and listen to the voice of the market, measure it’s pulse, and finally ride it’s coattails all the way to the bank, whether in a bearish or bullish posture.

Be well, do good work and keep in touch. 

Even though it appears to be making a comeback from the lows today, it’s still a  matter of how FUBAR this deplorable market will get. If you’re a bull at heart, then take heart. Go stab yourself with a spoon. It doesn’t appear to be getting any better near term.

Rising oil will continue to waylay the bulls and all things gay. It’s the law, by the way.

As for moi, I am happily twiddling my thumbs sitting on piles of cash as I watch (MA: 253.74 -0.68%) go down, as ordered. By the way, death to MA and all who practice usury. 

In Costanza-like fashion, I am stubbornly holding on to the 10 focus stocks. I believe they are “safehavens” for bulls looking to hide from giant granite balls falling from the sky. Despite that factoid, they are getting the hammer of Zeus today.

However, with equal justice meted out, (ZEUS: 58.22 -4.09%) is getting the homo hammer of Thor in spades. How appropo. 

I covered my (COF: 38.44 -1.16%) short position @ 38.25, partly because it doesn’t feel good to be short that stock, and partly because I can.  Also, I just covered (UA: 25.02 -3.02%) @ 25.60 for $6 and change, because people running around in tight spandex make me nervous.

Finally, my urging is this: do not step into this developing maelstrom of evil by going long, except for energy and energy services. The market can be like a bitch who appears to be raising her skirt for a “look see”, then frags your ass with grenades.

Keep this in mind.

You may now continue to move about and establish more short positions. 

This was mostly due to supply contraints that were a result of events in Iraq and Iran in 1979 and 1980.  Odd, no?

The energy sector was almost 30% of the S&P 500. Inflation was running rampant. Mortgage interest was 16%. In short, to quote Louis Armstrong, “what a wonderful world”.

Oil was all people talked about. All that investors wanted to buy.

Subsequent to that period, energy went bust. Oil prices dropped from over $35/bbl in 1981 to under $15.

 And, as recently as 2004, energy was only about 7% of the S&P 500. Financials were 23%.

Fast forward to the first half of 2008. As a result of all the plundering going on in the bank stocks, financials now represent under 15% of the S&P 500. Energy is now about 16% of the S&P.  So, from the perspective of sector weightings within the S&P, energy has more than doubled its weighting in just four years, but is nowhere near the weighting the market saw in 1980.

What does the future hold? Well, imagine this….if trends continue, could we possibly see a flip flop of 2004, where energy now becomes 23% of the S&P and financials 7%? Will financials continue to get waylaid by the bears? How about if energy gets to 1980 levels,…30% of the S&P?  Is it possible? Time will tell. We’re best advised to continue to track oil prices.

Putting it all in perspective, It appears that there is still room for the upside in energy stocks.

You see, the flyfishing junket was aborted “midstream”, due to egregious leverage from the homefront. As I mentioned last Friday, there were questionable roadblocks, namely “weekend projects”, that were slated to be postponed in lieu of fishing and alcohol consumption. However, these so-called “projects” actually  ended up on the front burner. 

I can’t give you all the graphic details, but suffice it to say that my ticket to ride the booty train this past weekend was not going to get punched, unless I was on the right track, so to speak. Treachery, thy name is manipulation.

It’s a sad fact that women can be tough negotiators, especially when they’re not in the kitchen making sandwiches.

It wasn’t a total loss, though. I did manage to catch two rainbows and a brownie, and of course, completed the “projects”, and got my ticket punched.

Disclaimer: This post has absolutely nothing to do with the market or investing.

—————————————————————

News Flash 16:07 ET: This just in from Mr. Obvious…..”the market is weak and gayer than a plastic pink flamingo”. 

Sorry, but trying to predict what the market will do next is about as worthless as a velvet picture of a monkey’s ass.

In the world of investing, we can take two approaches. Either we try to prognosticate (a fancy word for predict) where a stock or the market is headed, or we adapt to market conditions and act accordingly based on the information we already know.

My approach is to adapt. That means I prefer to take my cues from current data and make a decision whether to act on it or not. To do this, one must have a system in place that screens through all the market bullshit, and faux-advice from the media,  and generates reliable and useful information to help structure trades or an investment portfolio.

The most useful methodology that I’ve found is to use the relative strength approach. That is, looking for securities that are outperforming or underperforming relative to the general market and their peers. Most of us already do this: look at strong sectors, then look at strong stocks within those sectors and go long those stocks. Or, look at weak sectors, then look at weak stocks within those sectors and go short those stocks. This is not rocket science for dummies.

However, most Joe Blow investors and their brokers think the market is like a complex maze of events, kind of like a rubiks cube / jenga party. Unbeknownst to them, it’ s quite simple when you break it down logically. I didn’t say it was easy.

The alternative to adaptation is to try to predict where the market is headed. This is quite difficult without the aid of a time machine. You’ll have a better chance of getting a date with Pamela Anderson, than being able to predict the market consistently. It follows that, If predicting the market consisently was possible, Pamela Anderson would be banging Dennis Kneale during lunch breaks. It ain’t gonna happen.

Now that earnings season is upon us, it behooves us to ignore the cries from CNBC for “gloom and doom”, or a “bounce / recovery from here” and focus on what the next move is based on what we already know. Not by predicting, but by thinking through at least three possible scenarios and working up a game plan ahead of time, much like a head football coach would do.

“What do i do if oil keeps going up, or if it goes down? “What will I do if earnings on financials are better than expected?” Don’t chain yourself to one particular scenario, stubbornly holding on to your opinion because you’re afraid of being wrong. Be flexible enough to switch to the other side efficiently and elegantly.

Adapt to the changes as they come.  

The Naz looks like it is approaching oversold territory. Five times more stocks are making new lows vs. new highs. Additionally, only 28% of stocks on the Naz are trading above their 10-week MA, which is a slightly oversold condition. Be watching this week for continued downward action. Were we to get a reversal this week or next, it could be a fairly healthy bounce back.

However, news and fundamental data from earnings and economic reports in July, and the perception thereof, will be the main drivers of the market in the near term.

If you’re looking to get bullish here, you’re either playing with sticks of dynamite, or, to quote Ronald McDonald, “you’re too fuckin’ drunk to taste that Happy Meal.”

Last week, I trimmed nine stocks from the focus portfolio. The group of stocks was flat last week, gaining only 0.18%. However, the SP500 lost almost 3 % and the Dow 4%  for the week, so all things considered, it was a win.

So far, since inception:

Focus Stocks: +11.83%

S&P 500: - 8.92%

Dow: - 11.88%

Naz: - 6.95%

Top three winners:

MEE +49.60% (realized)

FDG +35.13% (unrealized)

WLT +28.40% (unrealized)

Top three losers:

GLW -9.51% (realized)

MTL -6.50% (realized)

SID -5.91% (realized)

Sector allocations: Energy 26%; Materials 35%; Industrials 24%; Info Tech 7%; Consumer Discretionary 8%.

Holdings: (most recent prices) and original purchase prices:

(AGU: 97.00 -2.76%)@86.26

(BIG: 32.34 +0.62%)@ 29.05

(CLF: 93.57 -2.20%)@89.40

(CNX: 94.83 -0.77%)@91.41

(FDG: 79.15 -2.05%)@69.30

(FLS: 114.65 -11.63%)@121.10

(PBR: 65.72 -2.06%)@65.55

(POT: 210.89 -0.78%)@199.26

(WFT: 44.21 -3.37%)@41.99

(WLT: 87.57 -1.96%)@83.87

Disclaimer: This information is not intended to be used as the primary basis of investment decisions. Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. Trade at your own risk.

Fuck the weekend “projects”. They can wait. What’s more important? Catching bushels of Rainbow Trout, or cleaning out the garage? Priorities, my friends. Needless to say, the Mrs. is not a happy camper, and has opted for cold dark stares and frozen dinners all weekend.

Turning back to money matters, it pleases me that my focus stocks, with the exception of the two “tech marvels” (TTEK: 20.93 -2.52%) and (GLW: 22.39 +0.67%), are all up last time I looked. I never continually watch my stocks. It makes them nervous, which in turn causes them to try a “prison break” to upset the apple cart (…egregious mixed metaphor, I know).

Due to reprehensible action by (TTEK: 20.93 -2.52%) and (GLW: 22.39 +0.67%), they were given their walking papers this morning at 23.56 and 24.06, respectively. So long, jerks.

In conclusion, due to (SKF: 160.40 +0.70%), (GLD: 92.06 -1.19%) and (SZK: 81.74 -1.51%) action, my focus stocks stabilizing and my shorts in (UA: 25.02 -3.02%), (MA: 253.74 -0.68%) and (COF: 38.44 -1.16%) bowling over the bullish fringe, it looks like I’m going to the bank again today.

Things are looking up, because they’re looking down. Odd, no?

Have a great weekend. Good times.