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George
Slezak's www. Stock Index Timing .com Index
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MARKET VIEWS .TV INTERVIEW CHART PAGE |
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The following charts are for reference to the interview of George Slezak by Ike Iossif of Market Views .TV on January 18, 2008. ----------------- From Stock Index Timing .com Reminds me of "Hunt Thursday," March 27, 1980 One of the worst days I ever had as a trader was "Hunt Thursday." It was one of those downtrends that everyone was short and making money. In 1979, the Hunts had tried to corner the silver market and after the silver market turned bust, their broker, Bache, was rumored to be on the rocks due to losses from the Hunt brothers accounts being under water. The thought was if Bache went under they would drag down the street. It was a market decline based on a "street issue," much like the decline the last few weeks has been about the health of the Wall Street firms and the Municipal Bond Insurers. Back in 1980, I was trading in the IBM option's pit as a member at the CBOE. We had huge volume and the market was just in a swan dive for weeks. Following is a daily chart of IBM back in 1980. You can see from the February top through the March 27 low, we were in one of those "relentless market declines." It was great short side trading. It seems, every day was a sell day, until March 27th. Chart 1 I don't have intra day data for March 27th for IBM to show you what happened that day, but I'll just give a my brief memory of what happened to me. IBM again had opened at the high of the day and traded down all day and was putting in new lows for the day and move, until there was 30 minutes left in the trading day. At 2:30 Chicago time, an announcement came by on the news tape that Bache was ok. I don't remember what authority was declaring Bache was not having a capital problem, but someone declared all was fine, and a market rally began. I was short about 10,000 deltas of IBM, so I turned to my stock clerk and gave an order to buy 10,000 shares of IBM at the market. That was at 2:30 Chicago time. Orders came flying into the pit like crazy, but prices on the NYSE were not moving and we weren't getting fills back on our stock orders. The system had overloaded and the tape was down. I'm guessing it was probably twenty minutes after the 3 pm central time close of the market when the tape finally started printing trade prices and the closing prices. Shortly after that I got my fill on my order for 10,000 IBM at the high of the day. Now, I seem to recall the price IBM was trading at was like $35 a share at the bottom and my fill was at the high of the day at like $39. I had lost over $35,000 in just 30 minutes. The chart above shows the prices for that day retroactively adjusted for stock splits. It shows the low of that day at $51.38 and the high and close at $57.50. That is a rally of $6.12 or 12%! And it happened in just 30 minutes! With the tape stopped! When I was short 10,000 shares! The following chart is the Dow back in 1980. On the Hunt Thursday low, the low was 729.95 and the close was 760. That was a run up in the last 30 minutes of the day of 30 points or about 4%! The next day the Dow closed up another 2.5%. So in just a few days we had nearly a 10% rally from the lows in the market. Chart 2
The market did retest the low a few weeks later, but the Hunt Thursday low was the beginning of a bull leg that took the market up over 40% over the following year! The following chart shows how the market moved from under 750 to over 1,000 in the following 8 months. Chart 3
The following chart is a comparison of the market in 1980 to the current market. I have set the comparison suggesting we could have a reversal day like the Hunt Thursday low in the coming few days. Chart 4
My point is the things that have driven the market down the last few weeks are "street things" like we had "street things" back in 1980. Our current market slide has focused on the financial condition of the Municipal Bond insurers from the losses they have taken in the sub prime mess. The concern is "if" they lose their "AAA" rating it would create a crisis in the Municipal Bond market. AND, the issue is OVER when they get some new capital, publish year end financials, and the rating agencies say they remain "AAA." Do you understand that? Put enough capital in the Muni Insurers and the market crisis is OVER. Actually, they already got new capital and all we are waiting for are the year end numbers showing the audited financial condition and if the rating agencies say they are happy with the capital position, the crisis will be over. Now, don't you think many already know the financials of the insurers? We have been told about the fresh capital injected. You know they got what they needed. If they needed more they would have gotten more. Don't you think many know how long after the results are stamped final it will take for the agencies to affirm their ratings? This market decline is a decline based on the effect on "the street" of what happened in real estate and mortgages over the last two years! This is NOT a decline based on "anticipating" a new set of economic conditions the would impact earnings. This is a decline based on conditions already past. When this final imagined impact of the crisis extending into the municipal market passes, the market will be looking towards the next market expansion! If you see a near recession, you are looking backwards! Look forwards and see the potential for a new bull market leg now that the real estate and mortgage crisis is behind us! My current "guess" is, after we turn, we will have a market pattern over the next nine months much like the following market pattern comparison to the market from the low in May, 1953. The comparison suggests we will have a generally strong market between now and next September. Chart 5
Good luck and good trading! George
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For more information call George at 1-888-311-3400, or email george@ georgeslezak.com All aspects of any trade recommendations contained in this report are subject to modification at any time. FUTURES TRADING INVOLVES SIGNIFICANT RISK OF LOSS AND IS NOT SUITABLE FOR EVERYONE AND THE RISK OF LOSS SHOULD BE CONSIDERED CAREFULLY BEFORE MAKING ANY TRADES. A STOP LOSS MAY NOT LIMIT YOUR LOSS TO THE AMOUNT INTENDED. YOU SHOULD BE FOREWARNED THAT SYSTEMS WHICH TRIGGER FREQUENT TRADING SIGNALS AS PART OF A DAY TRADING STRATEGY CAN RESULT IN SUBSTANTIAL COMMISSIONS AND FEES. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ANY STATEMENT OF FACTS HEREIN CONTAINED ARE DERIVED FROM SOURCES BELIEVED TO BE RELIABLE, BUT ARE NOT GUARANTEED AS TO ACCURACY, NOR DO THEY PURPORT TO BE COMPLETE. ANY REFERENCE TO PERFORMANCE IS INTENDED TO BE UNDERSTOOD AS STRICTLY THEORETICAL. REGULATORY DISCLOSURES REGARDING HYPOTHETICAL RESULTS HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS EXISTS IN FUTURES TRADING. All traders should read the CFTC CONSUMER ALERTS and the "COMMISSION ADVISORY" on trading systems.
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