I want to thank all the folks who have made comments about some of my recent calls. It is of course nice when the market behaves according to the analysis - but important not to expect it!
One thing that I have noticed is an increased arrogance in the bull camp. This is very encouraging and my experience has taught me to get ready. Enjoy the last wave of suffering as it is the first of several obstacles to come before you can truly profit from your short position. Painful is the topping process, filled with more than a fair share of failed reversals and price lunges to infinity. A good top makes the average short so nervous, that they exit just as the fun begins. It is the opposite of the greedy bull diving in to catch the falling knife. We saw that in the final hour. The fearful bear just doesn't want to miss a chance to get out before the price reverses to the upside. Of course as soon as the fearful bear covers, the market continues it's descent with twice the force. Have a price target, be patient, and be prepared for a rough ride.
I can not say that we are correcting - we have been here before and one day of volatility means very little at the top. As KPH pointed out, we need to see follow through tomorrow and the balance of the week to support a correction theory. Payline notes a double top - and is correct - but I would like to add that this second top was set on a day that featured a major same day reversal - very bearish...
One interesting anamoly, the dollar index did not rise - this is a divergence from the prevailing trend. This either means this selloff lacks conviction or the dollar and stock indexes are decoupling - as I suggested would start to happen in several of my most recent posts. I suggested first a decoupling and then a reversal in the driving forces. Right now falling dollar creates rising stocks, soon falling stocks will drive rising dollar.
A bear raid would be terrific right about now. It is also a terrific move for the smart money - as they have been exiting their long positions for the last 6-10 weeks dumping cooly on the remaining "suckers" and the short covering "buyers of last resort" . It is a terrific move because they are also aware that the cautious and crowd are waiting on 1120 to take profits and/or short - why would the smart money carry price action to that level? Why let the masses get on board the train? Rather, the smart money can have better control of the downleg with a good, unexpected head start. The head start combined with some well placed initial gyrations should do the trick.
Anyway, I do not like to speculate too much about these forces. Fact is we will never know all that contributes to the market movements. I much rather let the technicals tell the story - however dry or exciting it may be on any given day.
Let's see what tomorrow brings!
I'll try to update the blog with my charts late tonight. I want to switch my view to the weekly and daily line charts of the closing price. I want to see what levels stand out and overlap with the hourly candlesticks.
Good luck out there - and thanks again for your acknowledgements and comments. I hope you are making some money on the calls!
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10 comments:
Hi David ,
Those silly Bulls, houses never go down in price , Oil will never go under 100$ . Gm is so big , Banks dont need a credit spread.
Would sure like to see some snap back action on the $.
We need to not make a new high this week. This feels real but so did Sep 25.
There is a little gap from the down action today about 1089ish
be nice to close both 89 and 80 tomorrow .
100% short , SPX , DJI , XLF and Oil.
A comment , I do not think Bove can make the whole market roll over, but its a good story line.
My Best
Hi David,
Like I noted on the HMS site, your in-depth work, charts and knowledge has prompted me to learn more about EWT. Can you recommend an "easy-to-read" book on the subject. I think teddy said he doesn't follow EWT and his "results" he lays out for us everyday validate that he doesn't need to, but I know I must learn everything I can, so I can start to understand everything you chart out.
Wow Wow Wow! Payline shorting the whole shabang!
Thanks again,
kaleb5
David:
I think your cystal ball reading is 5-by-5 right now, great!
Added to my DXD and FXP at mid-day to 50% of portfolio. Now it is time to watch for the rising wedge pattern to be either be true-or-false. Either way it seems that a big move will happen fairly soon given the difficulty in maintaining an orderly market and threading the increasing narrow wedge boundaries. Also, there does seem to be a possible trend line at mid oct 07, mid may 08, and today (?!?).
On the SPX I would expect ~30ish point move through the moving averages and wedge boundary, since a clear signal is needed to tell every one to get on board, and stop bickering!
But it isn't over yet, there was a false head and shoulders pattern back in may-june. And Like Jim Rogers says, this crazy market is capable of anything!
Your charting and help is appreciated by everyone!
Kaleb5:
" Wow Wow Wow! Payline shorting the whole shabang! "
-----------------------------------
That was my reaction also!
** Payline: **
I respect your decision! In my book your are "Rambo Trader".
Hi Guys
Rambo Trader :) I think I perfer Grizzly Bear.
Also shorting the long Bond for now
expect to exit on a when rate hits 4.5% ( soon) as there should be a run to Bonds.
I have not shorted Silver and Metals yet , but that time may come soon.
The bull oil play will break down , or break down the what we have for an economy, then breakdown.
The end is the same , time is the variable.
( went long out Monday , flipped to the bear side after close tonite.
My Best
KPH = Kerry, btw. I'm fairly sure we'll get another day of follow through and then a squeeze somewhere. Too many people are predicting a higher squeeze to 1120; either we try and fail one more time or we squeeze up higher and screw up everyone. Should be interesting. I'll keep my core position, especially given that I can't short my special ETF anymore. I'm hoping/expecting a trend down day and then the squeeze?
For Kaleb, a good thing to read is anything that mentions how Prechter is down 95% in 20 years.
Bove is a stooge, but he has worked to move the market in the "right" direction in the past. I'd guess that tomorrow is down a bit but we ramp starting Friday. (Or are we gonna start going down?)
Kaleb,
I read just about everything I can on technical analysis. Much of it is repeated over and over again. Pretcher is the biggest proponent of Elliott Wave Theory - and has been credited for it's popularity.
Start with the web, then move to the books. EWT is an observable phenom. It is also fractal, meaning it is present in all time frames.
In terms of books, I highly recommend Edwards and Magee - Technical Analysis of Stock Trends. Yes, it is old, but the fundamentals are a good start. From there, you need to determine what your specific goal is. If you simply wish to study the subject of TA then I would recommend the Kirkpatrick/Dahlquist book. If you are looking to swing trade, then I would check out Farely's Master Swing Trader.
Whatever you do, don't put all your eggs in one basket. EWTs alone are not the answer. As I am sure you know, the most rewarding setups are confirmed on a number of fronts - levels, patterns, trends, channels, oscillators, signals, indicators, etc...
The key is to assume that the market does in fact discount everything and future movements can be predicted by the past. Turn your radio off for a week, stop participating on the boards/blogs, and track the indexes. See if you can predict the movements. Very interesting experience. Once you think you have it, put some money on the table and see what happens! (a whole different ball game).
Good luck out there.
Kaleb,
Edwards and Magee do not treat EWT... Their book was published in 1948. Their work is fundamental DOW theory - very important.
Tough times for a spring bear like me.
Seems I got out of my cave too early.
80% short, index & oil (hurting bad).
Am re-reading Livermore. Basic stuff, but the best. Ever
Hi again David,
Thank-you for your recommendations (and KPH too!). I WILL take your advice and also pass it along to my son who's graduating with a degree in Finance (no ETW study at U of Illinois) and just received a nice offer from an oil trading company (I think his minor in Atmospheric Sciences played a part in separating himself from his competition). I remember when I first learned about Bollinger Bands 3 years ago - there are so many pieces to the puzzle and then when one (me) starts to actually get some confidence checking every piece of knowledge gained before making a trading decision, then comes someone like Bove and I was not at my computer!
Thanks again,
kaleb5
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