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Tuesday Market Expectations From Jeremy Frommer - 7 Reasons the Stock Market is Suffering From Narcissistic Personality Disorder

The Stock Market is Screwed Up, and So Am I

After writing a number of articles about the market being delusional and then a number of articles about me being a little delusional I finally sat down with my wife to get what always promises to be a dose of reality coupled with simple but incredibly valuable insight. Unfortunately the conversation was precipitated by 3 days of intense yoga followed by 3 days of alcoholic binging that made me wonder if it was time for me to call Betty Ford and look up my old psychiatrist, Dr. Prazin. My wife diagnosed me and in doing so helped me diagnose the entire financial community, and even more specifically the stock market.  She said she had been doing some research and has determined that I suffer from Narcissistic personality disorder. Determined to heal my self and improve my trading, I decided I would try to better understand my disorder and at the same time better understand the market.

Narcissists have an inflated sense of their own importance. Check there for both the market and me.

Behind the mask of ultra confidence lies a fragile self esteem, vulnerable to criticism. Check there for both the market and me.

But that doesn’t mean that the market and I are true Narcissists as defined by the mayo clinic. It may just be that we have healthy confidence in our opinions, high self esteem. I don’t value myself more than I value others, (a key component of narcissism) though I often dream of having zero responsibilities, packing a bag and going off grid for a while…. In truth I look around me, and am blessed to be surrounded by great people who are invaluable to me.

The market though, is another story. The market has been behaving like a certifiable narcissist. The market seems to have little concern for the value of others. It wasn’t always this way.

Lets review 7 symptoms of narcissism.

1. Is the market expecting constant praise and admiration? “The S&P 500, up 4.2 percent so far this month, has doubled in less than two years, the quickest 100 percent jump since the Great Depression.” This headline is all over the net. “I’ve never seen a market like this,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services. A market watcher for 35 years, he is taking profits in every area but commodities.” The market is thriving on these headlines.

2. Is the market exaggerating its achievements? “Slowly, but at least so far surely, bullish sentiment continues to grow. It is now perilously close to dangerously high levels.” Say Mark Hulbert of MarketWatch. In the short term this should be bad news for stocks. But the market just seems to ignore these sentiment indicators.

3. Does the market believe it is special and acting accordingly? “The rest of the world has an interest in the US recovery because of its stimulating policies, Mr. Bernanke argued in prepared remarks he plans to deliver in Paris as finance leaders from the Group of 20 nations gather.” Mr. Bernanke seems to think we are special according to newsystocks.com.

4. Is the market taking advantage of others? Reuters Feb 17th “Energy shares gained alongside

Narcissistic Personality Disorder starts at the top

crude oil prices, which climbed 1.5 percent on fresh tension between Israel and Iran. The tension added to concerns about unrest in the Middle East, which could lead to supply disruptions.” Many energy stocks are hitting multi year highs. But on the flip side “California’s average price for a gallon of regular gasoline hit $3.50 Thursday for the first time since 2008, driven higher by the impact of Middle Eastern turmoil on the oil market. California’s average gas price has jumped 8 cents in the past week and now stands at 35 cents above the national average, according to the AAA automotive service. San Francisco‘s average has reached $3.57, while drivers in San Jose are paying $3.53 per gallon. Not since October 2008 has California’s gas prices been this high. In June of that year, the state’s average set a record of $4.61 before the economic collapse pushed gas prices into a tailspin.” Says David Baker from chronicle news service. I fell taken advantage of when I fill my tank up at the station. Really think about it, do you ever come out of a gas station lately feeling good. The oil companies can poison our waters, get away with it, and the funnel clean up costs through inflated prices masked in middle east tensions.

5. A classic Narcissistic symptom is ones inability to keep healthy relationships. It is months now where individual stocks seem to dominate the indexes but broad stocks don’t seem to participate in the movement of the indexes. No one can tell me what the value of overbought or oversold indicators are, since all the market does is power forward. In fact Goldman Sachs market watcher Noah Weisberger had this to say on the phenomenon, in a recent note.

“Within the U.S. market, where we have the richest set of metrics, we find that both implied average stock correlation and implied average sector correlation have declined sharply so far this year. Mechanically, the decline in this metric is a function of a combination of falling index volatility and rising sector volatility (in the case of implied sector correlation) or rising single stock volatility (in the case of implied stock correlation). These measures reached historic highs during the depths of the 2009 sell off. But in the “post-crisis” era, both stock and sector correlations peaked in mid-2010 (at a whopping 0.9 for average implied sector correlation and 0.7 for average implied stock correlation) and both measures have been falling in fits and starts ever since.”

6.  Narcissists set unrealistic goals. Zacks investment research Steve Reitmeister says in answer to the direction of the market “I strongly believe the answer is that we are due for more gains. Not just because there is no double dip. More importantly, there are sound fundamental reasons for the market to continue its advance.” So do many of his peers. Stock markets to not continue to advance indefinitely without healthy reversals.

7. Arrogance and haughty behavior often accompany a diagnosis of narcissism.

A. Headline MSN money Feb 4th: Ignoring Egypt, markets roar on. The political crises sweeping the Middle East join the risks of unresolved economic issues at home. Yet speculators continue to run wild.

B. Reuters Feb 10th: (Reuters) - Investors are often told not to fight the Fed, but in the U.S. Treasuries market taking the opposite stance to the Fed has been a winning strategy in the past six months.

C. FTMdaily reports: Stocks Ignore Growing Inflation Concerns

Arrogance and Haughtiness are acts of ignoring other’s opinions. to hold their opinions in disdain.

I have felt there was something wrong with the stock market for at lest the last couple of weeks. But I could not put my finger on it. But it is no relief to now know that one thing I had come to rely on for my livelihood, is so very ill.

The Mayo Clinic says, “It’s not known what causes narcissistic personality disorder. As with other mental disorders, the cause is likely complex. Some evidence links the cause to a dysfunctional childhood, such as excessive pampering, extremely high expectations, abuse or neglect.” I could find evidence of all of the in the history of the stock market.

Complications of narcissistic personality disorder, if left untreated, can include depression and even suicidal thoughts. I think the flash crash was the first indication there might be something wrong with the market, but I hope my research help you better understand what is truly going on with today’s stock market. And when the market falls into a brief state of depression, and correction, don’t be surprised. We are dealing with a classic Narcissist and there is no real cure. I expect depression to set in on tuesday, and suicidal thought by friday for the Stock Market. Buyers Beware.

I am at a loss, Both in my P&L as well as the market

I am at a loss, both in my P&L as well as my understanding of the market. Perhaps it is time for me to hang up my trading gear. Hand it over to the next generation who are not set in the ways of the past. I have lost too much money in the last week as a bear. AAPL is down 1.2% and the NASDQ is up 21 basis points. If I don’t see a reversal today in the overall market by the end of the day I will be flat all my positions and stay off the keys for a month. It is very difficult to accept as; I do not believe m bearish perspective is steeped in emotion. My arguments are logical. I am shocked that portfolio managers have not sold into what has been the best opening 45 days of a fiscal year that we have seen in many years. Logic no longer prevails. Greed is the defining emotion. I have tried to stomach through it. Yesterday the firm made $25,000. Today we are down $42,000 at 12:47pm. We are net short. We are on the verge of either making what would be an R3 pivot signal ling a reversal and one would expect the market to move down. We are also 1 handle from making a new high on the futures. I have bet big for my last time this month. On the astrological futures trading forecast, we have very bearish indicators for the remainder of the day. I did not see the upward moves in the futures today as convincing. There was no amplitude. I have not seen a V reversal in a very long time. Tomorrow many managers will be out as they begin a long weekend. There is real geopolitical risk out there. It is only logical that managers would take risk off into the end of the day. So as they say, the stars seem aligned, but every time I have felt that way, nothing has come to fruition. I am exhausted from fighting the tape. I was up significantly in the first 5 days of the month and now find myself down significantly as we are close to the final week. The time has arrived. By the end of this day I will no longer be in this position of uncertainty. I will be out of the market for the foreseeable future, or vindicated.

Tuesday’s S+P Emini close

Today’s March S&P 500 index close 1 point lower at 1326 confirms continued consolidation Monday’s weak close, and today’s three unsuccessful selling attempts to breach support at 1322, show us that unless 1322 is definitely broken, we must conclude that the bulls are still in control.

The US Economic releases on Wednesday morning, Housing Starts, and PPI as well as the FOMC minutes in the afternoon have the potential to reconfirm the bullish direction . An advance that crosses 1328 and 1331, with sufficient volume suggest the next upside target of 1342.

On the otherhand If the market does not like these Economic releases and breaks 1322 the next levels of support are 1316 and 1308

Mid-Day Market Update

Although the market exhibited low volume, yesterday as well as so far today US indices reached new contract high’s yesterday of 133.1.25 for the s&P March E-Mini’s.

Continued low volume will cause concern for the bulls and can indicate that the rally is running out of steam.

Test will be if the market declines are met with buyers at support now 1322 in March ES Minis.

Tuesday Market Expectations, How To Trade An Egyptian Million Man March


Odd that in my blog yesterday I compared what was going on in Egypt to the civil rights movement and the next day they announce a million man march. As I said yesterday, the place to be is the NASDQ.  I am expecting the S&P to drift a bit higher as things work themselves out in Egypt. Perhaps the 1292 + level. But any quick attempt at 1300 - 1307 should be met with selling. Without a week or two of consolidation I cannot have confidence in another leg up driven by fast money. The weekend was filled with talking heads predicting a 5 to 10% correction. Where did they all go? Why doesn’t CNBC call them back and ask them “What they have to say now?” I actually expected today to be a bit quieter. We did the down 5 handles thing pre-dawn and from there drifted up. But I did not expect the NASDQ to be as strong. I continue to look upon the movement in Egypt as a positive process. The military is clearly not taking authoritative action, and I see a reasonable probability that they take the side of the crowd and bring a quick end to the Mubarak regime. If the demonstrations continue to remain peaceful, the market will move higher. The vacuum of information will be replaced by something more powerful that can move markets. HOPE. Real hope that we are at a positive tipping point in middle east geo-political history will drive the S&P market through 1300. Here is a simple rule for how to play the day; The more things remain quiet, the more things feel stable…continue to add to you high beta long positions and short DIA – The Dow and perhaps some S&P futures as a hedge against exogenous shock. I am long YHOO , BBY , CREE , CTXS , AKAM ADBE , IMAX , STX , GME , LULU QCOM as well as Home Builders and the game makers TTWO , ATVI , ERTS. I am short DIA and S&P future. Tune into our broadcast tomorrow and I will let you know how it turns out for me. HEDGEFUNDLIVE.COM

Egypt, the Stock Market and……Yoga

Mubarak before getting into his disguise

Mubarak in disguise as he slips out of the country

I feel compelled to write a blog about the events of the day. I assume I will be one of the multitudes of individual’s blogging about Egypt, the stock market, and yoga in a single blog. Let us begin with Egypt. Incredible, Fascinating, Mesmerizing. Look I am actually loving the fact that we are on the verge of real change in the middle east. But here is the crazy thing. It wasn’t Hillary Clinton, President Obama, Former president George Bush or 2009 senate maj. Leader George Mitchell who brought about this monumental change. Who do we have to thank for what seems to be the beginning of the end of Islamic fundamentalism? Not very surprising, Jack Dorsey – Twitter founder, a St. Louis Missouri kid who went to NYU and has changed how we communicate. Not very surprising, Mark Zuckerberg – A Jewish kid from White Plains, NY who went to Harvard, created Facebook and changed how we socialize. Definitely not surprising, Steve Jobs, the da Vinci of our generation for creating the tools by which we communicate and socialize. And yes, let us not forget to thank Al Gore for inventing the Internet. These are the true revolutionaries, sans Al Gore, who when all

Tapas in the Stock Market

the dust settles and a real democracy exists in Egypt, deserve Nobel peace prizes. Al Gore already has one. The Internet has changed our lives forever; we are still at the beginning stage of understanding just what that means. Yoga has taught me to live in the moment, to be present. As we watch these momentous days unfold, it is best not to fear the future, but to embrace the change optimistically. While he was not a yogi to the best of my knowledge, our 16th president Abraham Lincoln wisely said, “The best thing about the future is that it comes one day at a time.” Now I am not suggesting that violence and rioting are good things, but change very often is a great thing. Real change such as we are hearing in the voices of the Egyptian populous is revolutionary, it is evolutionary. And it has been driven by the genius of the aforementioned innovators. The most devastating blow the Mubarak government has thrown was not tear gas and rubber bullets; it was shutting down the Internet. It was also the final nail in their coffin. A starving man will kill to eat. A repressed society will revolt for enlightenment.  No revolutionary moment has come without a price to be paid; Without a price paid, without sacrifice, there is no success.

Yogic scripture refers to this sacrifice as Tapas. It is the suffering and pain we must go through for self-purification. Today was a Tapas day for the stock market. There may be a few more to come or not. We will have to wait for Monday to see if there is more Tapas to come. But what we saw today was healthy. We had approached a psychological level in the market. 1300 on the S&P is not a level to be taken lightly. Nor is 12000 on the Dow. We were not going to just glide through these levels. We need to blast through them when the time comes. And we needed a catalyst to sell off from the levels. But now is a time to breathe. Perhaps we need to pull back a bit more. But not much. What we need to do is rest. Observe the world around us and take stock of our current situation. Monday is month end. I do not expect much as funds will neither want to paint the tape to inflate returns, nor will they want to see much more damage done to the strong returns of the opening month of 2011. As the saying goes in the market “So goes January, so goes the year”. We are still in a bull market, but that doesn’t mean you have to be net

Breath of a Trader

long. It does not mean you buy every pull back. I expect a couple of weeks of stagnation and then a real attempt at breaking the psychological barriers in the market. Make sure you are long the market when that moment arrives. Until then, remember what Andrea Boydston famously said, “If you woke up breathing, congratulations! You have another chance.”

That is going to leave a mark

A very funny Chris Farley line but not so funny when you are referring to your losses for the day. Unfortunately that is what I am left saying today after a brutal down day. First I lost more today than any positive day this month and I certainly hate doing that. Second I have impacted my income dramatically by taking such a huge hit and my wife really hates that.

So I am left to ponder and wonder what could have been. Of course some of our greatest successes comes from our worst losses but who wants to hear that. I have already taken some good notes and am ready to get next week going. That is one of the worst things about a bad Friday is you get all weekend to stew on it but I am fired up for next week. I am going to reverse today’s drubbing and have an awesome week (you can take that to the bank).

So make sure you tune in to watch the “Amazing Mosk” extricate himself from the straight jacket.

Have a nice weekend.

Ugly day today in the market

GS earnings, AAPL earnings, CREE earnings all spelled some doom today for stocks as the markets had a weak day. The only index that held up was the DOW only down 12 points. Is this the beginning of a correction or a healthy pullback?

Right now healthy pullback as stocks have come into support most notably SNDK and GS so for now long sided trades are the right side. Caution may be the proper tone for now as the market for the first time in a while did not bail me out on my long trades.

Watch 1275 and 1269 on the S&P emini futures as support.

ADP Employment up 297K, S&P still down 3.5 Pre-Market

We’ll see how the day ends up, but if the market doesn’t close in the green today then this is another negative datapoint for the market.  It is basically showing that the positive economic numbers are already in the market and what isn’t in the market is the potential negative impact on the Fed’s QE2 that such positive data will have.  Enough said.

Beta will soon be a Four Letter Word

Witness the slow motion car wreck that will cause beta to become a four letter word in a short time.  I blogged about the coming weakness in the market so I won’t go into detail here but I will say that it is getting tougher to make money on the long side in this market which is always a good sign of coming weakness.  I’m not sure when it happens but it will and it may even happen in slow motion kind of like it appeared to today.  You’ve been warned.

Slow Motion Car Wreck