Saturday, August 20, 2011
More Weekend Reflections from Market Oracle UK
Ian Gordon, economic forecaster and chair of the Longwave Group: The majority of gold investors are there because they can see the impending collapse of paper money, but some investors, including many hedge funds, are in the gold market simply because they are trend-followers. In ugly markets, such as the one now unfolding, these trend-followers sell their gold. During the stock bear market, which commenced in October 2007, the price of gold continued to rise into March 2008, even though the Dow had lost about 17.5% from October 2007 to March 2008. But after March, gold sold off into October 2008, losing about 35% of its value. We feel that something similar could happen to gold, this time, in the wake of falling stock prices. As for silver, prices fell by 60% between March 2008 and October 2008. A 35% drop from current prices would see the price of gold fall to something like $1,200/oz. As for the stock market, we are extremely bearish and believe that in the Elliott Wave market cycles, we are entering the third downswing, which should take the Dow Jones Industrial Average well below the March 2009 low of 6,470; perhaps 4,500 will be the target by September 2012.
Weekend Reflections - Market Oracle UK Post
Bull/Bear Market
Nadeem, I have been reading your work over the last couple of years, and I have to acknowledge your work is indeed very good. Over paid Economists the world over are raking the moolah with forecasts that are a great deal away from the line of best fit, but I dont blame them at all, given that academics are unwilling to admit that external events (except acts of god and other catastrophes) do not move markets. Bernanke probably does (or atleast the crowd believes so), but in 4 weeks, all of his genius work and therefore, the stock market's post QE2 gains have been completely wiped out in 1/10th (maybe even lesser) of the time. I remember how he adorned the cover page of TIME as man of the year, and I am a great believer in Robert Prechter's Magazine cover extreme. Since then it has been downhill for him and the Fed. Its not the Fed's business to support stock markets, and if it is, they should probably put it on record so people know. History is replete with examples of the market rendering "interventions" absolutely impotent. The latest is the USDJPY episode. You might help create a bounce in the larger scheme of things, only for the worse to snowball into something that no regulator can handle. In this background, let us make an effort to acknowledge different opinions rather than tearing somebody else's arguments to shreds (Read: Mish). The one thing about Robert Prechter that is particularly likeable is that he has never shied away from accepting his mistake. I follow him very closely, and whatever he did recommend, he's always had stops. Always. Here again, I hope he is wrong with his dow 1k forecast, but there is nothing that the market can't do, and am sure with your experience, you know that a lot better than I do. On a final note, am not sure if you follow David Rosenberg of Gluskin Sheff and he's not scared to be a bear. In a bear market, you just cannot be a bull. The great thing about a good technical analyst is to swap sides when the trend turns, and not just be bullish because a bull gets called to studios more often. Having said that, keep up the good work.
Submitted by a guest commentator
Nadeem, I have been reading your work over the last couple of years, and I have to acknowledge your work is indeed very good. Over paid Economists the world over are raking the moolah with forecasts that are a great deal away from the line of best fit, but I dont blame them at all, given that academics are unwilling to admit that external events (except acts of god and other catastrophes) do not move markets. Bernanke probably does (or atleast the crowd believes so), but in 4 weeks, all of his genius work and therefore, the stock market's post QE2 gains have been completely wiped out in 1/10th (maybe even lesser) of the time. I remember how he adorned the cover page of TIME as man of the year, and I am a great believer in Robert Prechter's Magazine cover extreme. Since then it has been downhill for him and the Fed. Its not the Fed's business to support stock markets, and if it is, they should probably put it on record so people know. History is replete with examples of the market rendering "interventions" absolutely impotent. The latest is the USDJPY episode. You might help create a bounce in the larger scheme of things, only for the worse to snowball into something that no regulator can handle. In this background, let us make an effort to acknowledge different opinions rather than tearing somebody else's arguments to shreds (Read: Mish). The one thing about Robert Prechter that is particularly likeable is that he has never shied away from accepting his mistake. I follow him very closely, and whatever he did recommend, he's always had stops. Always. Here again, I hope he is wrong with his dow 1k forecast, but there is nothing that the market can't do, and am sure with your experience, you know that a lot better than I do. On a final note, am not sure if you follow David Rosenberg of Gluskin Sheff and he's not scared to be a bear. In a bear market, you just cannot be a bull. The great thing about a good technical analyst is to swap sides when the trend turns, and not just be bullish because a bull gets called to studios more often. Having said that, keep up the good work.
Submitted by a guest commentator
Friday, August 19, 2011
Now is a Good Time to Get Out of the Market
Today's action confirms the Stock Trader's Almanac pattern; i,e. the market should be weak into August 30, a rally possibly into September 4, and a really shocking drop into October/November.
I'm already out, so I'm not stressing anymore.
But the downtrend on the weekly chart is strong. A close below 1130 will seal the deal for more downside next week. My target on the S&P 500 Index (and it is hard to believe) is about 970. It could happen either by August 30 or by October/November.
Anyway, now is a good time to get out of the market. The move down is very strong. Bounces are being sold with vigor.
Your standing on the sidelines writer,
Wink
I'm already out, so I'm not stressing anymore.
But the downtrend on the weekly chart is strong. A close below 1130 will seal the deal for more downside next week. My target on the S&P 500 Index (and it is hard to believe) is about 970. It could happen either by August 30 or by October/November.
Anyway, now is a good time to get out of the market. The move down is very strong. Bounces are being sold with vigor.
Your standing on the sidelines writer,
Wink
Thursday, August 18, 2011
100% in the G Fund - The Bounce Has Died
The bounce has died. I am 100% in the G Fund. We hit the 13-day moving average and then dived down. It is time to go.
The market has changed. Support has been breached @ 1172. Support shouldn't be breached if we are heading up. Also, we are now below the 200-day moving average on a weekly chart. Time to go and step aside. I found myself hoping. Hope is not a plan.
Breaching 1172 support was a trigger. Breaching the 200-day moving average on a weekly chart was a trigger.
October/November should offer better entry opportunities. It's just not a good market environment. Plus, there is less stress to just step aside and watch from the sidelines.
The market has changed. Support has been breached @ 1172. Support shouldn't be breached if we are heading up. Also, we are now below the 200-day moving average on a weekly chart. Time to go and step aside. I found myself hoping. Hope is not a plan.
Breaching 1172 support was a trigger. Breaching the 200-day moving average on a weekly chart was a trigger.
October/November should offer better entry opportunities. It's just not a good market environment. Plus, there is less stress to just step aside and watch from the sidelines.
Friday, August 12, 2011
Let It Be
"When I find myself in times of trouble, Mother Mary comes to me,
Speaking words of wisdom, let it be
And in my hour of darkness, she is standing right in front of me,
Speaking words of wisdom, let it be.
Let it be, let it be, let it be
Whisper words of wisdom, let it be."
---written by Paul McCartney
The close today was higher than the open. The MACD Histogram is rising. The daily stochastics are coming out of oversold conditions. The week closed higher than it opened with a long-tailed doji. Next week is options expiration week. The moving averages are overhead.
Let it be.
Speaking words of wisdom, let it be
And in my hour of darkness, she is standing right in front of me,
Speaking words of wisdom, let it be.
Let it be, let it be, let it be
Whisper words of wisdom, let it be."
---written by Paul McCartney
The close today was higher than the open. The MACD Histogram is rising. The daily stochastics are coming out of oversold conditions. The week closed higher than it opened with a long-tailed doji. Next week is options expiration week. The moving averages are overhead.
Let it be.
Thursday, August 11, 2011
Market Opportunity Moment
We are in an outstanding market moment right now. Remember, buy low sell high.
Well, the market is going higher right now. It passed the Thursday, August 11, 2011 test. So, if you were thinking about going long, now is the time before the market close (1:00 EST). As I mentioned in an earlier post, tomorrow should be a dickens of a rally. Same for Tuesday, August 16.
Why am I confident that the market is going higher?
There are several reasons.
First, the market was gravely oversold. I have not seen the market this oversold since the bottom in March 2009 and October 2008 bottoms. Even if we are bearish long-term, bear markets can offer epic rally opportunities for profit.
Second, the probabilities favored a low today. When the market kept rising into the final hour of the trading day, that was the signal to go long. Yes, it was.
Third, retail people were scared on Monday and Tuesday. They were crazy scared if you looked at the daily Trin readings. I could see the money just coming out of the market. That created a buying opportunity but you had to trust your signals; i.e. that even if the world is falling apart and the nightmare is upon us, the market will return to overhead moving averages. It just does. When you place your faith in overhead moving averages, then you have the stomach to weather the dramatic falls in the market.
Fourth, if you simply followed your emotions and feelings, you would have sold early this week or late last week. I may discount Jim Cramer but he is on the mark when he says that a panic is the worst time, the absolute worst time, to sell. You have to just forget about the market during a crash, think of something else, and know that the overhead moving average will not be denied.
Finally, we are in the last hour of the trading day as I type. Smart money is at work right now!!! Imagine how fearful the shorts are....They know what is coming tomorrow. I know what is coming tomorrow. (Thank you, Stock Trader's Almanac). The market keeps rising and shorts keep covering. I can feel the upward momentum in the market. This upward move is not false like we saw on Tuesday. This move is for real.
In short, opportunity is a powerful force! I believe that. Right here, right now, we are in a moment of historic opportunity. May we all enjoy the upward climb to the heavenly embrace of overhead moving averages. (OMG, the market is now @ 1180 and keeps going up!! These are the times when traders make their year.)
Your too excited market analyst,
Wink
Well, the market is going higher right now. It passed the Thursday, August 11, 2011 test. So, if you were thinking about going long, now is the time before the market close (1:00 EST). As I mentioned in an earlier post, tomorrow should be a dickens of a rally. Same for Tuesday, August 16.
Why am I confident that the market is going higher?
There are several reasons.
First, the market was gravely oversold. I have not seen the market this oversold since the bottom in March 2009 and October 2008 bottoms. Even if we are bearish long-term, bear markets can offer epic rally opportunities for profit.
Second, the probabilities favored a low today. When the market kept rising into the final hour of the trading day, that was the signal to go long. Yes, it was.
Third, retail people were scared on Monday and Tuesday. They were crazy scared if you looked at the daily Trin readings. I could see the money just coming out of the market. That created a buying opportunity but you had to trust your signals; i.e. that even if the world is falling apart and the nightmare is upon us, the market will return to overhead moving averages. It just does. When you place your faith in overhead moving averages, then you have the stomach to weather the dramatic falls in the market.
Fourth, if you simply followed your emotions and feelings, you would have sold early this week or late last week. I may discount Jim Cramer but he is on the mark when he says that a panic is the worst time, the absolute worst time, to sell. You have to just forget about the market during a crash, think of something else, and know that the overhead moving average will not be denied.
Finally, we are in the last hour of the trading day as I type. Smart money is at work right now!!! Imagine how fearful the shorts are....They know what is coming tomorrow. I know what is coming tomorrow. (Thank you, Stock Trader's Almanac). The market keeps rising and shorts keep covering. I can feel the upward momentum in the market. This upward move is not false like we saw on Tuesday. This move is for real.
In short, opportunity is a powerful force! I believe that. Right here, right now, we are in a moment of historic opportunity. May we all enjoy the upward climb to the heavenly embrace of overhead moving averages. (OMG, the market is now @ 1180 and keeps going up!! These are the times when traders make their year.)
Your too excited market analyst,
Wink
Terry's Model Portfolio: Rally Conditions
Trade execution - Buy 5 SPY August 120 calls @ 1.84.
Trade time - 12:07 p.m.
Date: Thursday, August 11, 2011
Rationale: Historic rally underway. Next week is options expiration week. Insider buying at record levels. Market rising from gravely oversold conditions.
Time Target: Tuesday, August 16 or Friday, August 19.
Trade time - 12:07 p.m.
Date: Thursday, August 11, 2011
Rationale: Historic rally underway. Next week is options expiration week. Insider buying at record levels. Market rising from gravely oversold conditions.
Time Target: Tuesday, August 16 or Friday, August 19.
The Market is Going Up: Overhead Resistance Levels
Club members, the market is going up!
Overhead resistance levels are at the following levels:
1231.70 - 13-day moving average (daily)
1285.84 - 50-day moving average (daily)
1285.69 - 200-day moving average (daily)
1290.76 -13-day moving average (weekly)
Today was key and more important then Monday, Tuesday, and Wednesday of this week. We have record levels of inside buying. Check. We have record panic of retail investors as money flowed out of mutual funds at record levels. Check. The resistance level at 1148 this morning was taken out with ease. Check. The rally's momentum is increasing from oversold levels. Check. All 30 members of the Dow Jones blue chip 30 are higher right now. Check. The S&P price has moved up above the oversold level. Check. The RSI is above oversold. Check.
The market is going up, right now, as I type.
We will look to exit at an overhead resistance level, either on Tuesday, August 16 or Friday, August 19.
This is a good time to go long if you are a short-term trader.
The bounce is on.
Your lunchtime writer,
Wink
Overhead resistance levels are at the following levels:
1231.70 - 13-day moving average (daily)
1285.84 - 50-day moving average (daily)
1285.69 - 200-day moving average (daily)
1290.76 -13-day moving average (weekly)
Today was key and more important then Monday, Tuesday, and Wednesday of this week. We have record levels of inside buying. Check. We have record panic of retail investors as money flowed out of mutual funds at record levels. Check. The resistance level at 1148 this morning was taken out with ease. Check. The rally's momentum is increasing from oversold levels. Check. All 30 members of the Dow Jones blue chip 30 are higher right now. Check. The S&P price has moved up above the oversold level. Check. The RSI is above oversold. Check.
The market is going up, right now, as I type.
We will look to exit at an overhead resistance level, either on Tuesday, August 16 or Friday, August 19.
This is a good time to go long if you are a short-term trader.
The bounce is on.
Your lunchtime writer,
Wink
Thursday, August 11 is the Key Date
Today is the day that we watch the market with great focus.
If the market closes @ the high of the day, then the odds favor a rally into the end of next week. We get out when we hit an overhead moving average. The day for the exit could be Tuesday, August 16 or Friday, August 19.
Watch the end of the day.
There is a possible inverted head and shoulders pattern this week on the S&P 500 Index. If confirmed by a close above Monday's top, then we should be looking @ the 1250 level as resistance.
Today is key. The earlier days this week were less important from a bullish perspective. If the market should close at its lows today, then I'm out.
Later.
Your on the road writer,
Wink
If the market closes @ the high of the day, then the odds favor a rally into the end of next week. We get out when we hit an overhead moving average. The day for the exit could be Tuesday, August 16 or Friday, August 19.
Watch the end of the day.
There is a possible inverted head and shoulders pattern this week on the S&P 500 Index. If confirmed by a close above Monday's top, then we should be looking @ the 1250 level as resistance.
Today is key. The earlier days this week were less important from a bullish perspective. If the market should close at its lows today, then I'm out.
Later.
Your on the road writer,
Wink
Monday, August 8, 2011
After the Crash: 13-Day Moving Average
I was traveling on the road all day. When I got to my hotel, I saw that the market had crashed. So, what do we do? Here is what we do:
The rule remains that we get out at the 13-day moving average. That is hard to do as you see the market continuing to drop. But the drop is setting up a rally. Prices will bounce and we will sell out on that bounce.
Q: Well, Wink, what's the timing for this bounce?
A: The market has more to fall. It just does due to the momentum of the down draft. However, the 2011 Stock Trader's Almanac offers hope.
* Based on a study of 21 years of market data, the probabilities favor a market low this Thursday, August 11, 2011. I would ignore the market news until this Thursday. You will just get caught up in the media frenzy. BUT you should pay attention to the market this Thursday, particularly the close. If the market rallies this Thursday and closes up, then so far so good.
* Probabilities favor a market rally on Friday, August 12. This rally should be a dickens of a rally and reward our patience.
*Probabilities favor a second dickens of a market rally on Tuesday, August 16. This is the rally that should take us up to the 13-day moving average or 1275.10 on a daily chart. If all goes according to plan, we get out on that rally. And it will feel very, very good to be out of this market! (Historically, mid-August is stronger than the beginning and end of August.)
*The Almanac has a striking chart on page 104. This chart shows that the Russell 2000 is likely to plunge EVEN MORE between September and November. We should be on the sidelines before that drop. I would not be surprised if the S&P 500 Index hit 970 before year's end. We are in a powerful Bear Market. Prices are trending down. Sooo, we wait patiently for the 13-day moving average to be hit and then we get out.
I apologize that other commitments have taken me away from close scrutiny of the markets. Sometimes, life intrudes.
Your humbled commentator,
Wink
The rule remains that we get out at the 13-day moving average. That is hard to do as you see the market continuing to drop. But the drop is setting up a rally. Prices will bounce and we will sell out on that bounce.
Q: Well, Wink, what's the timing for this bounce?
A: The market has more to fall. It just does due to the momentum of the down draft. However, the 2011 Stock Trader's Almanac offers hope.
* Based on a study of 21 years of market data, the probabilities favor a market low this Thursday, August 11, 2011. I would ignore the market news until this Thursday. You will just get caught up in the media frenzy. BUT you should pay attention to the market this Thursday, particularly the close. If the market rallies this Thursday and closes up, then so far so good.
* Probabilities favor a market rally on Friday, August 12. This rally should be a dickens of a rally and reward our patience.
*Probabilities favor a second dickens of a market rally on Tuesday, August 16. This is the rally that should take us up to the 13-day moving average or 1275.10 on a daily chart. If all goes according to plan, we get out on that rally. And it will feel very, very good to be out of this market! (Historically, mid-August is stronger than the beginning and end of August.)
*The Almanac has a striking chart on page 104. This chart shows that the Russell 2000 is likely to plunge EVEN MORE between September and November. We should be on the sidelines before that drop. I would not be surprised if the S&P 500 Index hit 970 before year's end. We are in a powerful Bear Market. Prices are trending down. Sooo, we wait patiently for the 13-day moving average to be hit and then we get out.
I apologize that other commitments have taken me away from close scrutiny of the markets. Sometimes, life intrudes.
Your humbled commentator,
Wink
Saturday, August 6, 2011
Too, Too Much Fear in the Air!
I have other work projects I am working on. Those projects have consumed most of my waking hours.
Nonetheless, I keep the radio and tv on.
I simply cannot believe my ears! There is so much gloom and doom on the airways. The debt downgrade has really thrown the media into a frenzy. Geez! I'm a bear too but things don't go down in a straight line. There's always a bounce or reaction or correction to the main trend.
I am bearish on the market in the long run. Daniel Arnold was right. (See The Great Bust Ahead) The trend is down. Nonetheless, even if the trend is down, even if we are locked into a broadening top pattern, even if the world is coming to an end, there will be some up movement. It is just a matter of time.
Why am I so confident that we can get out on a bounce? Several reasons.
1. We haven't hit the 200-day moving average yet on a weekly chart. I keep to the left of my eye a weekly chart of the S&P 500 Index dated July 8, 2010. I keep this chart on the file cabinet because it reminds me of the importance of the 200-day moving average (all praise to Sy Harding, by the way). Even in January 2008 when the October 2008 plunge was ahead of us, the market respected the 200-day moving average. The market tipped below the 200-day moving average (panic, panic, panic) and then bounced (short covering rally) up to 1300. The bounce nearly erased a loss of two weeks in two weeks. If it happened before, it can happen before. There is nothing new in the market.
2. The retail public is sooooo nervous right now. I smell the fear in the air (and mind you, I am focused on other things right now). The Saudi Arabian market is down 5% right now ("Oh, dear!") The debt downgrade wasn't priced in. ("Oh, my!") The fears are all around us. I live by Contrary Opinion and the Fear Factor. I saw the daily stochastics on the S&P 500 Index dip into single digits on Thursday. That reminds me of the last week in August 2010. Just that little dip told me that a bounce is coming. Now, it doesn't mean the trend will turn up. Not at all. But that little intelligence will protect me from selling at the bottom. And that's really a good thing in volatile conditions.
3. What is my target? Some financial commentators and analysts shy away from targets. They prefer to rely upon the market's energy. I respect that approach. But I need something tangible to hang my hat on. For me, moving averages clear away the fog of fear in real time. Remember my old colleague Joel? He's looking in the rear view mirror this weekend. I just know it. And he's thinking, this drop will never end! This could go straight down to zero. This could be 1907, 1929, and 1987 all rolled up into one.
And that's why the rear view mirror will fail you. We all have a natural and human tendency to project past market conditions into the future. But markets, even trending markets, cycle. They go up. They do down. And they go up again (if you are a Bull/smile).
Anyway, I felt the need to reassure Club Members on this scary weekend. Embrace the fear. Accept the anxiety. Put your faith in the moving averages over your head. You cannot trust your feelings. They will betray you. You cannot trust the rear view mirror. It will deceive you. Place your faith in a simple idea, that there is nothing new under the sun in the marketplace. Even if we are heading to 950 or 400 on the S&P 500 Index, its not going to happen on Monday morning. Nor is the crash of a lifetime going to happen next week.
Well, that's all I have to say. Sure, we are in a Bear Market, a threatening down trend. But we know that markets bounce. Markets are attracted to moving averages like bears to honey. We will be ok and navigate these shoals well.
Your hearing too much fear on the airways commentator,
Wink
Nonetheless, I keep the radio and tv on.
I simply cannot believe my ears! There is so much gloom and doom on the airways. The debt downgrade has really thrown the media into a frenzy. Geez! I'm a bear too but things don't go down in a straight line. There's always a bounce or reaction or correction to the main trend.
I am bearish on the market in the long run. Daniel Arnold was right. (See The Great Bust Ahead) The trend is down. Nonetheless, even if the trend is down, even if we are locked into a broadening top pattern, even if the world is coming to an end, there will be some up movement. It is just a matter of time.
Why am I so confident that we can get out on a bounce? Several reasons.
1. We haven't hit the 200-day moving average yet on a weekly chart. I keep to the left of my eye a weekly chart of the S&P 500 Index dated July 8, 2010. I keep this chart on the file cabinet because it reminds me of the importance of the 200-day moving average (all praise to Sy Harding, by the way). Even in January 2008 when the October 2008 plunge was ahead of us, the market respected the 200-day moving average. The market tipped below the 200-day moving average (panic, panic, panic) and then bounced (short covering rally) up to 1300. The bounce nearly erased a loss of two weeks in two weeks. If it happened before, it can happen before. There is nothing new in the market.
2. The retail public is sooooo nervous right now. I smell the fear in the air (and mind you, I am focused on other things right now). The Saudi Arabian market is down 5% right now ("Oh, dear!") The debt downgrade wasn't priced in. ("Oh, my!") The fears are all around us. I live by Contrary Opinion and the Fear Factor. I saw the daily stochastics on the S&P 500 Index dip into single digits on Thursday. That reminds me of the last week in August 2010. Just that little dip told me that a bounce is coming. Now, it doesn't mean the trend will turn up. Not at all. But that little intelligence will protect me from selling at the bottom. And that's really a good thing in volatile conditions.
3. What is my target? Some financial commentators and analysts shy away from targets. They prefer to rely upon the market's energy. I respect that approach. But I need something tangible to hang my hat on. For me, moving averages clear away the fog of fear in real time. Remember my old colleague Joel? He's looking in the rear view mirror this weekend. I just know it. And he's thinking, this drop will never end! This could go straight down to zero. This could be 1907, 1929, and 1987 all rolled up into one.
And that's why the rear view mirror will fail you. We all have a natural and human tendency to project past market conditions into the future. But markets, even trending markets, cycle. They go up. They do down. And they go up again (if you are a Bull/smile).
Anyway, I felt the need to reassure Club Members on this scary weekend. Embrace the fear. Accept the anxiety. Put your faith in the moving averages over your head. You cannot trust your feelings. They will betray you. You cannot trust the rear view mirror. It will deceive you. Place your faith in a simple idea, that there is nothing new under the sun in the marketplace. Even if we are heading to 950 or 400 on the S&P 500 Index, its not going to happen on Monday morning. Nor is the crash of a lifetime going to happen next week.
Well, that's all I have to say. Sure, we are in a Bear Market, a threatening down trend. But we know that markets bounce. Markets are attracted to moving averages like bears to honey. We will be ok and navigate these shoals well.
Your hearing too much fear on the airways commentator,
Wink
Friday, August 5, 2011
A Bounce is Coming
Now that the market has closed, we can assess where we are.
The S&P 500 Index opened @ 1200.82. The high of the day was 1218.11. The jobs report was sold and the market plummeted to a low of 1168.09. News of the European Central Bank (ECB) intervention to save Italy caused the market to rally hard up to about 1210. Then, the market fell again below the day's open before closing @ 1200.28. Those are wild swings, a sign that we are witnessing a broadening top pattern. The other sign of a broadening top pattern was the drop to a daily low of 1168.09 which represents the low of a broadening top pattern trend line since February 1, 2011.
Today's low was a buying opportunity. I'm not sure how long or how high the bounce will last but those souls courageous enough to buy @1168.09 have been (and will be) rewarded in the coming days.
Since we are locked in a broadening top pattern, the proper play is to look for a rally or bounce for selling. Moving averages provide great targets for exit points. Even in August of 2008, one could have gotten out of the market around August 11, 2008 at the 13-day moving average on a weekly chart and avoided the September/October 2008 tumble.
Where are the overhead moving averages on a daily chart? The 13-day is at 1290.97. That is an exit target. The 50-day is at 1300.54. That is an exit target. The 200-day at at 1286.45. That is an exit target. No matter how dark the night or bleak the news, the overhead moving averages will be hit. Its just a question of how long and when.
On a weekly chart, we can see the more serious moving averages. The 13-day moving average is @ 1303.81. The 50-day average is at 1261.22. Even if we are in a Bear Market, I would expect 1303.81 to be hit. That's the sign to go.
Anyway, these wild swings are the death knell of a Bull Market, the birth of a Bear Market. In Bull Markets, we aim to buy oversold conditions in an uptrend. In a Bear Market, we aim to get out on overbought conditions. We are no where near overbought conditions on the S&P 500 Index.
For now, let's just wait for our moving average targets to come within range. Then, we fire.
We've had the fall. This morning, I saw the daily stochastics fall into single-digits. A bounce is coming.
Wink
The S&P 500 Index opened @ 1200.82. The high of the day was 1218.11. The jobs report was sold and the market plummeted to a low of 1168.09. News of the European Central Bank (ECB) intervention to save Italy caused the market to rally hard up to about 1210. Then, the market fell again below the day's open before closing @ 1200.28. Those are wild swings, a sign that we are witnessing a broadening top pattern. The other sign of a broadening top pattern was the drop to a daily low of 1168.09 which represents the low of a broadening top pattern trend line since February 1, 2011.
Today's low was a buying opportunity. I'm not sure how long or how high the bounce will last but those souls courageous enough to buy @1168.09 have been (and will be) rewarded in the coming days.
Since we are locked in a broadening top pattern, the proper play is to look for a rally or bounce for selling. Moving averages provide great targets for exit points. Even in August of 2008, one could have gotten out of the market around August 11, 2008 at the 13-day moving average on a weekly chart and avoided the September/October 2008 tumble.
Where are the overhead moving averages on a daily chart? The 13-day is at 1290.97. That is an exit target. The 50-day is at 1300.54. That is an exit target. The 200-day at at 1286.45. That is an exit target. No matter how dark the night or bleak the news, the overhead moving averages will be hit. Its just a question of how long and when.
On a weekly chart, we can see the more serious moving averages. The 13-day moving average is @ 1303.81. The 50-day average is at 1261.22. Even if we are in a Bear Market, I would expect 1303.81 to be hit. That's the sign to go.
Anyway, these wild swings are the death knell of a Bull Market, the birth of a Bear Market. In Bull Markets, we aim to buy oversold conditions in an uptrend. In a Bear Market, we aim to get out on overbought conditions. We are no where near overbought conditions on the S&P 500 Index.
For now, let's just wait for our moving average targets to come within range. Then, we fire.
We've had the fall. This morning, I saw the daily stochastics fall into single-digits. A bounce is coming.
Wink
Thursday, August 4, 2011
Do Not Panic
Today, I received an e-mail from Barbara. She was concerned about the recent market developments. I have several things to say but the most important thing is DO NOT PANIC!
Stay calm. Be at peace. Inhale and exhale.
Perspective is always a good thing.
Now on to the market....
1. Do not panic. When we are most fearful is when we are most moved to sell at the bottom. That is a fool's game. We are in buying times, right now, not selling times. Remember that it is always best to buy when others are in panic. I must confess that the drop since mid-July has taken me by surprise. This surprise leads me to point number 2.
2. Is the market gonna' crash? Yeah, the market is going to crash. Is it going to crash tomorrow? Nope. Is it going to crash next week. Nada. Nyet. No way. The market is now extremely oversold. Even if we are in a severe down trend (which we are), bounces happen. At a minimum, the S&P 500 Index should bounce up to the 200-day moving or 1280ish. That's a big increase from today's closing price of 1200.
3. Why do you feel so anxious about the market, you might ask. Well, we are hard-wired to be social creatures. We take the greatest comfort when we are part of a herd. Well, now the herd is in a state of Def Con 4 panic. You feel the panic and worry. Look at the headlines on the web. Listen to the commentators on NPR and CNN. Panic is in the air. That means these are actually the best times to buy. Remember, Contrary Opinion works. Resist that anxious feeling. Remember that markets do bounce. And they tend to bounce up to moving averages. If you can remember that little gem of market wisdom, you might feel less anxious about tomorrow and next week.
4. The character of the market has changed. These wild swings up and down signal a broadening top pattern. The market is very emotional and out of control (not a comforting thought for pension funds and 401(k) plans). It is what it is. We cannot change the market. We cannot will it to go up. Not going to happen. From what I see, the wisest move is for us to sell out on the bounce. The upcoming bounce should be pretty extreme. Remember that bounce into July 1? I think we are looking at a similar bounce in the near future. We want to sell out of the C Fund on that bounce. In Bear Markets, we sell the rallies. We do so because the past nine days are just an appetizer which brings me to my final point.
5. We want to avoid with all of our effort the drop that follows the next bounce. The next drop will be a sight to behold. I hope to behold that sight from the sidelines. These broadening top patterns are diabolical because trends fizzle out. But these patterns are also a blessing because they alert us to prepare to get out of Dodge on the next bounce.
Sadly, that is the state of affairs this evening. We are waiting for a bounce to sell out. The coming two months will not be fun months in the market.
Your sometimes AWOL commentator,
Wink
Stay calm. Be at peace. Inhale and exhale.
Perspective is always a good thing.
Now on to the market....
1. Do not panic. When we are most fearful is when we are most moved to sell at the bottom. That is a fool's game. We are in buying times, right now, not selling times. Remember that it is always best to buy when others are in panic. I must confess that the drop since mid-July has taken me by surprise. This surprise leads me to point number 2.
2. Is the market gonna' crash? Yeah, the market is going to crash. Is it going to crash tomorrow? Nope. Is it going to crash next week. Nada. Nyet. No way. The market is now extremely oversold. Even if we are in a severe down trend (which we are), bounces happen. At a minimum, the S&P 500 Index should bounce up to the 200-day moving or 1280ish. That's a big increase from today's closing price of 1200.
3. Why do you feel so anxious about the market, you might ask. Well, we are hard-wired to be social creatures. We take the greatest comfort when we are part of a herd. Well, now the herd is in a state of Def Con 4 panic. You feel the panic and worry. Look at the headlines on the web. Listen to the commentators on NPR and CNN. Panic is in the air. That means these are actually the best times to buy. Remember, Contrary Opinion works. Resist that anxious feeling. Remember that markets do bounce. And they tend to bounce up to moving averages. If you can remember that little gem of market wisdom, you might feel less anxious about tomorrow and next week.
4. The character of the market has changed. These wild swings up and down signal a broadening top pattern. The market is very emotional and out of control (not a comforting thought for pension funds and 401(k) plans). It is what it is. We cannot change the market. We cannot will it to go up. Not going to happen. From what I see, the wisest move is for us to sell out on the bounce. The upcoming bounce should be pretty extreme. Remember that bounce into July 1? I think we are looking at a similar bounce in the near future. We want to sell out of the C Fund on that bounce. In Bear Markets, we sell the rallies. We do so because the past nine days are just an appetizer which brings me to my final point.
5. We want to avoid with all of our effort the drop that follows the next bounce. The next drop will be a sight to behold. I hope to behold that sight from the sidelines. These broadening top patterns are diabolical because trends fizzle out. But these patterns are also a blessing because they alert us to prepare to get out of Dodge on the next bounce.
Sadly, that is the state of affairs this evening. We are waiting for a bounce to sell out. The coming two months will not be fun months in the market.
Your sometimes AWOL commentator,
Wink
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