Tuesday, July 31, 2007

The End Of A Wild July

"Perhaps the secret to effective action lies in how you interpret the length of the "day" in Carpe Diem. If it's a moment, or a day, you're cutting down the odds for success. But if you recognize that in business as in sports (or any of life, for that matter), there's a "season" made up of several opportunities, those odds go up considerably.

The most successful business people are those who realize that they are going to take some hits in the process of searching out the big scores - those who know that performance over the long haul is what counts. If you can seize the day, great. But never forget there are days yet to come."

Bill Walsh, "Carpe Diem - Or the Diem After That," Forbes, October 25,1993

Great words spoken by a great man and a great teacher. So many of the coaching concepts Bill Walsh covers in his book Finding The Winning Edge are so easily applied to business, trading, and life as a whole. It is natural to feel sad when someone who has made an impact on your life and thoughts passes away. The right thing to do is not to morn, but to celebrate their life and how they lived it. Thanks Bill, not only your contributions to football but thank you for being the great Teacher and communicator for all that you experienced and learned on your journey. You left the world a better place than when you found it.


Below is a chart of the S&P 500. The top pane is the Advance/Decline Moving average showing the strength of the sell off last week. The strong selling last week is not something that will be overcome in a few days, no matter what the potentates on television say. The index is close to an important level (1476.76) established from the opening range created in the first week of January 2007. If the market can get above this level, it can make an attempt to get back to the 1500.43 level; a big "IF" right now. This area should prove to be resistance.

The next chart shows the intra-day 5minute chart of the S&P 500 Futures from Friday and Monday. The data from Monday's opening range is marked with two black lines. The width of this range gave us the expected swing size for the day. The series of green lines show these levels and how they acted as targets and support when reached. Monday was a series of short squeezes as the low from Friday could not be taken out, the bottom red rectangle. The two green boxes show prices holding the bottom of the opening range, and then breaking above to start the short cover rally.

An interesting Bloomberg article covered Pimco's Corporate Opportunity Fund(PTY). This fund pays a 9.4% dividend and is probably viewed as extremely risky except for the fact that Bill Gross, manager of the world's largest bond fund at Pacific Investment Management Co., invested $1.5 million in the fund after the shares fell to the lowest since its inception five years ago.

Below is the chart showing how far this fund has fallen and where the buys by Mr.Gross occurred. He is a very smart guy, might buy a little early, but well worth following, especially with a nice dividend cushion. Bill Gross bought 4,900 shares in the Pimco Corporate Opportunity Fund at $13.80, 50,000 shares at $13.85 and another 50,000 at $13.90 on July 25, according to a filing with the Securities and Exchange Commission.

PIMCO Corporate Opportunity Fund operates as a diversified, closed-end management investment company. It invests primarily in the United States dollar-denominated corporate debt obligations of varying maturities and other corporate income-producing securities. The fund's investment portfolio primarily consists of investments in airlines, apparel and textiles, automotive, banking, chemicals, computer services, diversified manufacturing, electronics, energy, financial services, financing, food services, healthcare, hotels/gaming, insurance, multi-media, oil and gas, paper products, retail, telecommunications, transportation, and utilities sectors.


Bill Walsh Interview - Starts at around the 20min mark, so you have to fast forward some.

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