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Weekly Chartology (In Which We Discover That David Kostin Is Now Hedged For Every Possible Outcome)

Submitted by Tyler Durden on 09/04/2010 11:21 -0400

Chartology

Goldman's David Kostin, as usual, provides this week all you can eat chart buffett. In this latest edition we also find out that Goldman is also very good at hedging for every possible outcome: while calling for 1,200 on the S&P by year end (and 1,160 in three months, meaning in December the market will have to rise by 40 points), Kostin also admits that recommended sectors have generated -42 bps of alpha YTD, the recently introduced low operating leverage trade was down 1.9% in the past week, the long dividend growth stocks strategy lost 0.7%, yet all this was hedged with a long BRIC sales trade (up 1.1%), and a long Sharpe ratio strat (up 0.8%). Of course, all those strategies will likely net out to zero on a weekly basis going forward, as Kostin now has all bases covered. Some observations: "The S&P 500 was up 4.2% this week. Materials was the best performing sector this week (+6.0%) while Consumer Staples was the worst performing sector (+2.4%)." This is only fitting as Materials was the sector most beaten down going into the last week of August, and there is nothing like a little short covering rally to pass for a new bull market. All this and more inside.

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Sat, 09/04/2010 - 11:34 | 563628 THE 4th Quadrant

Hedged for every possible outcome explains the -42 bps of alpha YTD, if true.

Sat, 09/04/2010 - 11:52 | 563652 RobotTrader

Heh, so many of these so called "strategists" with their quant strategies, macro themes, etc. are failing miserably.

They should simply fire all that staff in charge of producing these fancy stats and reports, and replace them with some pro videogamers who can just follow the intermediate trends and go long or short the ETF's.

I mean really, how hard is that?

Just follow the bouncing ball.

Right now, the trend is back up, with one of the strongest breadth surges we've had in months.

Virtually all the major indexes are back above the 150-day:

http://clearstation.etrade.com/cgi-bin/bbs?post_id=9466156

And every sector is participating. If financials, energy, and health care can get above the 150-day, then its off to the races....

http://clearstation.etrade.com/cgi-bin/bbs?post_id=9466149

We are in the "pessimism" zone, which means the market has the potential to rally for weeks or months.

And the put/call ratios were pretty much maxed out the last two days, as everyone is expecting a crash this fall.

Sat, 09/04/2010 - 15:33 | 563842 Luke 21

Correct me if I am wrong but the put/call ratio chart looks whack. Opened at 0.18, the chart does not go to 0.18. Closed at 2.42 after opening at 0.18 all while the market rallied. This has to be some kind of record movement for a day. Also the change on the chart is 0.96. If you messed with the chart how did you miss this and still manage to answer the difficult math questions required to post on zerohedge? I get those questions wrong all the time. What am I missing?

Sat, 09/04/2010 - 18:40 | 564006 whereismyorange

Not sure why the numbers for CPCI are always very low or high during the day, but at end of day they always down to a reasonable level.

http://stockcharts.com/c-sc/sc?s=$CPCI&p=D&b=5&g=0&i=0&r=8478

Sat, 09/04/2010 - 12:43 | 563689 pachanguero

bull run, bear market....... ho hum

Sat, 09/04/2010 - 12:48 | 563694 rocker

Is it just me, but you seem to always be bullish and make it too easy.

My only thought is, where did all that supply of stocks go that the

fund managers, hedge funds, and the public are liquidating.

Myself, I think I'll just wait, however long it takes for reality to set in.

Nothing lost is better than a chance of a gain.

Sat, 09/04/2010 - 13:09 | 563716 RobotTrader

Eventually, the lure of dividend paying stocks + upside via capital appreciation will overwhelm those invested in fixed income making paltry returns with the risk of principal loss.

The many consecutive weeks of stock mutual fund outflows is likely to reverse when the upside potential of stock appreciation becomes apparent.

That's why utilities and telecom are outperforming at the moment.

If you recall the utilities led the bear phase into the March 2009 low, now they are leading the bull phase.

Sun, 09/05/2010 - 10:04 | 564529 thepigman

Stocks are still
a complete ripoff if
you go by GAAP earnings outlooks.
And GAAP earnings doesn't even get at the fact the banks are still insolvent,
really have no earnings and continue marking
to myth under FASB
rules.

Sat, 09/04/2010 - 14:03 | 563774 Downtoolong

Of course, all those strategies will likely net out to zero on a weekly basis going forward, as Kostin now has all bases covered.

Agreed, zero, less the commisions, fees, and trading margins that Kostins firm will earn if people follow all of his guidance. I’ve said it before and I’ll say it again; The best thing to do in the markets is often the hardest thing as well, nothing.

Sat, 09/04/2010 - 15:43 | 563867 cjbosk

Equity fund inflows? You're kidding right? There's a secular shift in equity participation that is unfolding and likely to last for the next decade. These little cyclical gyrations in a longer term bear shouldn't give anyone any comfort as the overwhelming trend is down. And when you buy dividends because yields are attractive, wait until you see how much more attractive the look at SPX 880-950. Remember, the consesus is saying no double dip, that's enough for me to be scared of equity.

Sun, 09/05/2010 - 10:53 | 564555 thepigman

You don't even need a double dip.
All the wall street earnings forecasts do NOT reflect the 1% GDP macro track we are already on. The street wants to
get their crap distributed before the
lack of growth is obvious. They'll be
missing top line estimates like crazy in the third quarter and warning.

Sat, 09/04/2010 - 18:02 | 563984 bluemaster

I agree with robot trader , futures contract expire in a week and standard manipulation expire on high where have not been trading all last 3 months ( every one lose they win)I am short on SPI ( ASX 200) but with tight stops in place.

Sun, 09/05/2010 - 20:50 | 565265 Something Wicke...

Something Wicked This Way Comes's picture

On the sidelines watching this carnage. Relaxing here bitchez...

Mon, 09/06/2010 - 23:36 | 566552 pointingtrade

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Weekly Chartology (In Which We Discover That David Kostin Is Now Hedged For Every Possible Outcome)

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