The Kirk Report

Last Weekend's Chart Show

You see, even a blind squirrel can find an acorn once in a while...

This was an archived video of my weekend chart show that I provided for members last Sunday. A number of members have found my videos helpful in their journey not to mention that I enjoy doing them.

The End Of Prediction Season

It will come of no surprise to many of you that I spend an hour or two each and every day reading about the market. As once clear benefit from doing that every single day, I often notice subtle trends that others don't because they don't read as much as I do.

Let me provide you one interesting and timely example.

For over the past month, I've been collecting links offering both bullish and bearish views about the year ahead. In essence, if I found something that provided a strong bullish bias, I copied the link down and put it in a file. I also did the same thing bearish links as well. Now that the month has passed and we've officially exited "prediction season," what did I discover from this process? Bottom line - bearish predictions outnumbered bullish predictions five to one.

What is noteworthy and unusual about this observation is that following strong performance years, that doesn't typically occur. In fact, the more the market is up in the prior year, the more bullish the predictions tend to be for the next. Recency bias at its finest. But, that was not the case for 2010.

While I'll leave it to you to draw your own conclusions about that finding, it is obvious that the wounds and pain from the market's crash have not been healed or forgotten. Even amid the most bullish forecasts I could find, it was a challenge to uncover anything so bullish that seemed out of this world bullish. I mean something like "the market is going to be up +50% this year and this is why" kind of stuff we've seen in the past. In fact, you would think that coming off the great rally from the March lows in 2009 we would see at least a few predictions for an even stronger market this year. But, if that exists, I was not able to find it.

Moreover, it does suggest that we all need to be gatekeepers of our minds and opinions in order to not let the mood of the masses cloud our ability to make good investment and trading decisions. After all, opinions don't pay the bills but making good trades do and many times the best decisions will be made that go directly against the vast majority. The key is to know when to simply follow the herd and overall trends and when it is best to bolt from it as fast as possible. And, even if you get really good at doing that, there will be times you'll be caught leaning the wrong way. That's what makes this game so much fun and also why God created stops!

With that said and especially given the recent gloomy mood of the market, you may find this brief collection of "bullish views" of interest especially since most of them probably have been forgotten by now that the first month of the year and prediction season is now behind us:

• America's economic recovery will be twice as big as experts predict (Slate)

• Might the recovery be more robust than widely expected? Wall Street’s most respected pessimist thinks so (NY Mag)

• Most newsletters on Honor Roll are bullish for new year (MarketWatch)

• Some reasons to be bullish about 2010 (Barrons)

• Good underpinning for continued recovery (Morningstar)

• Recovery will be stronger than forecast (Investment Postcards)

• The interest rate myth - A bullish argument (Trader's Narrative)

• The great recession is over! (Barry Ritholtz)

• Why I'm buying stocks this year (TheTradingReport)

• The US will grow like gangbusters and surprise everyone (Dennis Gartman)

• Evidence is building that the world economy is headed for a substantial recovery from the worst financial crisis since the Great Depression (Bloomberg)

• A bullish long-term technical outlook (The Technical Take)

• The economy is growing faster than you think (Real Clear Markets)

• The non-consensus view of things to come (Rising Dividend Investing)

• Mr. Sunshine's happy economic outlook (CNN Money)

• Up again in 2010? (Standard & Poor's)

• Fleeing bonds for equities again (Jim Oberweis)

• Improved fundamentals coupled with flat stock prices could provide a good tailwind for S&P 500 companies (Morningstar)

• "There are two types of forecasters, those who don't know and those who don't know they don't know." - JK Galbraith

* If I missed any outlandish bullish forecasts, please be sure to send them my way so I can pass them on.

Investor Sentiment Cycle

In the whole scheme of things, where do you think we are currently at in this sentiment cycle?

I think some would certainly say we're at the anxiety stage but frankly we could still only be at the relief or optimism stages instead especially if you're looking at it through a longer-term lens.

Whether we again see the market find its footing and then rally even higher following the recent pullback will certainly help us figure out which one is most likely.

Relative Weakness In Small Caps

They are sure trying to hold trend, but have you noticed the relative weakness in the iShares Russell 2000 Index Fund ETF (IWM) when compared to the other major indexes (SPY, DIA, QQQQ)?

This is something I commented upon in last week's wrap-up and its something we haven't seen throughout this impressive rally. A potential character change that has important consequences for near-term asset allocation.

Watch That Range!

We've been monitoring this chart fairly closely over at the members' only website:

Violation of this tight range is important. Stay frosty!

Emerging Markets: Pullback or Rollover

It's been awhile since we've seen a meaty pullback in the emerging markets area. This group lead us higher, so will it also lead us lower?

Looking over the iShares MSCI Emerging Markets Index Fund ETF (EEM) (especially utilizing a 2 period RSI coupled with the modified ATR trailing stop) we're testing a key level in today's session. The last time we saw the RSI this oversold was back in April which offered an attractive risk/reward pullback setup. If the rally in emerging markets is going to continue, watch for a snapper soon.

Among many other things, something I'll be keeping front and center on my radar over the next few days.

Range Bound

This is about what we could expect given the headlines.

We chopped around and closed pretty much right in the middle of the trading range everyone is working with this week. While I didn't trust the positive bias of premarket futures and that helped keep me out of some trouble in today's session, like most everyone I'm winding everything down ahead of the holiday weekend. Yes, there is a bullish bias around Memorial Holiday, but I see little reason to press my luck. But, that's just me.

Tomorrow I hope to post the Q&A for May (it will be a little different than usual, but still quite good) and start the holiday a little early. To my surprise, a good friend from Minnesota has decided to fly in so we can play some golf over the next few days and I'm really looking forward to it. Frankly, I need a good excuse to drag me away from my trading desk as I haven't been doing a good job of taking much needed time off although I need to. I know you know the feeling.

See you tomorrow!

Bulls vs Bears

A picture sometimes is worth a thousand words:

After getting killed (i.e. stopped out) at the open, I'm doing a little buying this afternoon again (partial positions with tight stops, of course). I feel like doing this as much as I like going to the dentist, which is why I'm still firing away.

I wish I could say I'm expecting a nice final hour reversal, but I don't. In fact, on the contrary which is ok. In my view, another ugly close would be what we need especially since I have a few stocks that I want to buy that are refusing to pull back to levels I want them at.

Boy, what a rough way to start out the new month.

Tough Love

Between dodging the latest "who will save" AIG rumor, the Fed doesn't give in to the market's demands and holds interest rates steady.

First, it seems that the majority thinks that AIG is too big to fail and is trying to get ahead of another bailout announcement (much like they did with Fannie & Freddie). A nice little relief rally is underway following some very oversold conditions earlier this morning.

Second, the Fed's new tough love stance is interesting and marks an important change for the market and the Fed's role in it. While the Fed is still throwing cash to inject boatloads of liquidity, this is really the first time they stood up to the market's demands and said no. Frankly, this is probably a long-term positive as we have to sooner or later break the market's addiction to a friendly Fed, but you have to wonder why they decided to adopt a tough love stance now and whether they had any choice given what we may see in the coming weeks (i.e. perhaps the Fed is reserving their final few bullets for when it is truly needed and they don't think now is the right time). I don't know, but these are good questions to keep in mind as we see some green on our screens.

Leaders & Laggards

With Jim Cramer having proclaimed that we've hit bottom and we will not take out the July 15th low, I'm curious to see which ETFs have been the raw performance leaders and laggards since that specific point. Here are the top ten for both:

This is very similar to the type of performance activity we saw following the January "bottom." Both the financials and homebuilders rallied the most leaving everything else in the dust. The big difference between now and then, however, is in the.....[READ]