Classic Bearish Action
Fox Business Channel…October 15th…
“Innovation has brought about a multitude of new products, such as sub-prime
loans and niche credit programs for immigrants. . . . With these advances in
technology, lenders have taken advantage of credit-scoring models and other
techniques for efficiently extending credit to a broader spectrum of consumers.
. . Where once more-marginal applicants would simply have been denied credit,
lenders are now able to quite efficiently judge the risk posed by individual
applicants and to price that risk appropriately. These improvements have led to
rapid growth in sub-prime mortgage lending . . . fostering constructive
innovation that is both responsive to market demand and beneficial to
consumers.”
Who said that? Yup…Alan Greenspan in 2005. Ben Bernanke echoed those words.
Now let’s look at a few charts. First…mortgage related names.
 Charts courtesy of Stockcharts.com
Charts courtesy of Stockcharts.com
Charts courtesy of Stockcharts.com
I would show you New Century Financial but companies that are out of business
do not have charts. My thanks to Al and Ben for their fabulous oversight.
There is nothing good about what I am seeing. In fact, nothing but bearish
action. I don’t have to add much to my last report but did want to repeat
something I have told you for years. In bull phases, markets can open poorly but
almost always finish well. In bear phases, markets can open up well…and then
close badly. Tuesday’s action was classic bear action. And to make matters
worse, the market finally came after the leading names I have talked about for
months. Even the mighty APPLE, that some believe is curing cancer, was wacked on
massive volume. This is also indicative of a market in trouble. And lastly, I
have thought that until the leading OILS gave way, the market would hang. The
leading OILS are now giving way.
I have no clue as to how long the ugly lasts or how far it goes. I do know
that as of this second, it is imperative to stay defensive. The market couldn’t
care less about what any of the permabulls say just like in a bull phase, the
market ignores the permabears.