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Get Your Risk On Before The Double Dip!
Nic Lenoir of ICAP
Going into today I considered that there were two possible scenarios for equities in terms of EW count. The first according to which we were in wave 2 consolidating after the initial impulse down to 1,106 before eventually going lower, and the second in which we would have been in wave 3 already, in which case we should have topped around 1,094/1,098 and reversed lower aggressively. I think the first scenario is the one we are currently experiencing. I have only one ounce of doubt left and that is that AUDJPY has rejected quite hard today's highs approaching the key resistance triangle.
Otherwise looking at the daily count highlighted for the S&P, supported by the clean a-b-c structure from 1,126 down to 1,040 with a = c and the fact that the move since 1,040 is clearly a bullish impulse (see S&P 10-minute chart and the complete absence of pull-backs), all indicate we are in a C) wave which will complete the consolidation since the 1,006 lows before we start selling off very aggressively again into a wave III. With absolutely no divergence so far it is hard to imagine we don't have more to come in terms of upside. I see a possible pull-back down to 1,080 in the substructure but after that the target seems 1,122 at the minimum. If we assume today as the top of iii) of the current bullish move I obtain 1,122 using standard extensions. On the daily we see that the C = A target is all the way at 1,163... I don't know that we will necessary get there but it is one of the risk. I will be looking to sell this move once it starts showing exhaustion (read divergence!) but for now I would be out of short equity positions. The Nasdaq confirms these observations.
Those looking to short risk NOW are better suited to try selling AUDJPY around 78 and add if we exit the triangle to the downside, using 79.50 as a stop. I had felt something was off at 1,040 and closed tactical positions, but there was still a possibility we would be in a III lower so it made it worth hanging on to core positions a bit more to find out.
Bonds have finally started to trade in tandem with equities after rallying no matter what for weeks. We broke the 132-11/24 support in bonds and 124-11 in TYZ0. If we are to remain in a downtrend tactical traders should sell bounces close to those supports, stopping on a daily close above the resistances. If stocks do trade further north then clearly it will work out well. I had recommended selling last Wednesday, jumping in here is definitely a less attractive proposition but that's the way to play it to extract more juice out of this move if it materializes.
As far as reality is concerned, we are still shedding jobs, NFP numbers for 2010 will as usual get a 1mm downward revision lumped for the year and announced quietly sometime in February or March 2011. Manufacturing payrolls confirm if anything that ISM is rolling over (which the subcomponent pointed out in the laat release) and when one know that the economy needs to create at least around 125K jobs a month to "break-even" I am not quite sure what there is to celebrate here. That's why I will keep playing equities from the short-side when the market tells me it is ready to sell-off.
Good luck trading,
Nic
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I wanna be a contributor to the site. I promise to post pictures of naked women and charts of stocks that no one has heard of that go straight up during the day...........can I, can I?
NOT unless you know the secret handshake. Only those, Robo, Leo, can post charts no ones ever heard of and put up pictures of naked women, and in Leo's case, Obama.
wanker
Nic,
Thanks for identifying the price spike as the 200,000 EMini SP futures buy right at the close the other day. I exited all short positions on that call.
Always read your posts.
FARCE heeds not truth
the pieces of shit in the fed and GFS JPFM are evil manipulator scumbags destroying every last chance for the USA to recover from their bubbles
Short? But all Zerohedge permabulls just this morning confirmed 100% upside is now guaranteed! WHAT double dip? Leo dubunked all that, and even showed a Chinese solar stock that was up .08 cents.
Do you mean Verizon cents or the regular ones?
BTW, straight up your ass anyone who junked my post, what are you all fukin retarded?
What are you so perma pissed at leo about?
Dr. McHugh: "...phi mate turn date approaching September 10th/11th. There is also a Bradley model turn date September 11th, and a New Moon on September 8th...."
McHugh & Prechter (Elliott Wave Theorist) have been calling for the end of the world forever... I asked both of them to explain how EW can be taken seriously when they don't take into account the intervention of the Fed/Treasury/PPT to lift the offer on the ES and YM when critical lows are hit causing a self-fulfilling short covering rally that sends the market back up to the high end of the range (1100-1150)... I have yet to get an answer.
Relying on Elliott Wave is like driving down the freeway using your rear view mirror for direction... They can always tell you about wave count after the fact, but relying on their advice looking forward is suicide (The last time we had an aggressive selloff, Prechter arrogantly urged an "all in" short strategy - hows that working out now. Talk about hubris!)... They've already modified their wave counts which said that the "terrible" wave III has started and the downside target is 800-850 (That was before the gap up on the bogus ISM number that got this recent rally started)... Using Elliot Wave analysis to determine market action is like using a Schaums outline to learn calculus.
Gap up occured before the ISM.
But Of Course!
(waiting for public numbers is for little people, anon.)
Nic, I always look forward to your posts...and they never disappoint.
good stuff as always. Thanks!
Double Dip? The economy will double dip. Not the stock market.
Well the stock market wont dip, until they want QE panic OR a nice Oct surprise so The Messiah can rush in and 'save americas 401K's' right? Theyve got to have SOME Oct surprised planned, market upside is NOT impressing anyone, poll numbers still sliding. What better way (in their minds) than some event, (planned, of course) causes the market to crash then they rush in and 'fix it' and Obama is hoisted up on americas shoulders! The true Messiah after all!!
And finally, All is well, until the banksters get in trouble.
Now is the perfect time to market a new brand of chips—The Douple Dip! They could be extra long chips so to make double dipping easier. Ticker: DDIP
"Ooooh, so crunchy! and messy! The Double Dip!"
I envision naked ladies dipping chips, twice, at that point, by the way. I also envision one of them accidentaly spilling some dip on...
*puts pipe back into mouth*
Mmmm.
Skynet decided full short covering massacre. Mission accomplished. Skynet goes into weekend mode. Transmission end. zzzzz..........
The dreaded double dip!
Uncle Ben's mantra : "From now on, just take one dip, and end it!"
http://www.youtube.com/watch?v=1J3w4cS2MvM
We all tend to see markets within our own personal limitations, whatever those limitations might happen to be. All of us have biases, blind spots, expectations, hopes, fears, uncertainties -- all of our attempts to describe market action are based upon our own unique intellectual and emotional baggage. The market, is, actually and always, "as is;" i.e., utterly without favorite lines or angles, having no boundaries, never set, never fixed in any manner. It is, instead, constantly changing: it is ever-morphing; it is always fresh and alive. The single best thing that any market student can do is to absolutely abandon all of his personal inclinations, his psychological make-up, his personal conditioning -- absolutely abandon all of this self-imposed confinement-without-reason within you (to the extent that you can) of any and all sorts. All of your beliefs of "what should be" within the financial markets are doing nothing but holding you back, my friend; "What is," after all, will always trump your vision of "what should be."
The market is inherently chaotic. There is no pattern; no organized detectable rhythm. All attempts to "organize" a thing which is by definition NOT organized and UNORGANIZABLE does nothing but attempt to "trap" reality -- yet it is YOU, in fact, who is actually trapped. The market is not "doing this" or "doing that;" in fact, it is drifting in a manner which is utterly patternless -- it is moving in such a manner that resists any attempt by anybody to impose some imagined artificial order upon it.
Elliott, in fact, invented nothing. He created an absolute blank: he came from a place of absolute ignorance and attempted to cast it in stone as if the market was a thing which could be somehow binded. He took a classic conditional logic structure, straight out of any copy of Logic for Dumbasses, and retro-fitted it to match anything that a market could ever possibly do. If I had to guess the method that Elliott used to create his "system," I'd wager that it's probably an empirically-derived decision-tree composed in retrograde; look at its conceptual entities for yourself: up-down-up-down-up, down-up-down, impulse, corrective... it's all a song & dance, my friend. It's all a sham. It's a con-game dressed-up with words that give it the aura of a science, but in fact it remains nothing but a continuation of the ennui of intellectual fraud over the centuries (and its many variations). Xeno himself would have laughed in Elliott's face, and asked him, "is that all you've got...?!!" Aristotle would have told Ralph the Accountant (that would be Elliott, for those of you who don't know) to go sit in the back of the room, and to take extensive notes at Xeno's next class on riddle-making. To accept Elliott's "arguments" is to miss everything important that the market is actually doing. The market, in fact, is not bound by you, it is not bound by your chains, it is not bound by some simpleton pointing to a "wave" that he describes with a self-invented vocabulary which is really nothing but a logica fait accompli. The market is an independent entity -- your attempt to force the market to be dependent upon some chimera you have in your imagination actually does nothing but bind YOU and make YOU dependent: trading at its highest level is an attempt to break through your mental blocks, your restrictions, your ego. Elliott, in fact, leads you to the opposite -- as if an abandonment of spontaneity by a rules-based "system" caging your trading-action will lead you to herding the market to any degree. It's absurd.
It's a shame that apparently intelligent people can't see the true nature of low-brow clap-trap like Elliott's waves -- because let me assure you of something: if you insist upon actually trading upon your blind spot -- based upon nothing but your expectations of what the market "should be" and/or "should do" -- it will lead you directly to ruin.
Those of you debating the "merit" of Elliott's con might as well be debating the heads-tails-heads of a coin-flipping contest in the lunch-line at your local grade school. It's exactly the same thing, epistemologically, as "wave counting." It's a conditional logic structure designed so that it can never be "wrong," and it holds absolutely no predictive value whatsoever, because it can't predict a fucking thing. It looks "perfect," in retrospect, because the rules of logic demand that it MUST.
Nothing more, nothing less.
I say again:
Anything that the market has ever done (or will ever do) will fit one (or another) of Elliott's "rules." Logic itself will permit nothing else; no other outcome is obtainable given Elliott's "rules of construction." It's "perfect," in retrospect, because logic itself demands that it must be, yet understand this:
It IS a sham.
Those of you who subscribe to Elliott's brand of low-rent "thinking" need to pick-up a copy of any old logic textbook, and actually read it.
The best advice I can give you about Elliott and his waves is to throw the whole stupid pile of shit into the nearest trash can, WHERE IT FUCKING BELONGS, before it busts your trading account in half, and then half yet again.
It's intellectual poison of the very worst sort.
All your beliefs are belong to us.
That said, Nic was the first person (I saw) to say we were going up to 1100, when it seemed like it was taking everything Sack had to keep it above 1040. 'Hehe whut u smoking bro' seemed the only appropriate response at the time (many moons ago on Monday), and yet here we are. So I don't know - if SkyNet knows his Elliott, maybe this intellectual poison will take some time to kill the beast.
It depends on your perspective.
“I like to think of space and time as analogous to the ocean, and changes in it as analogous to waves on the surface of the ocean, but those waves, of course, don’t show up when one’s miles above the ocean. It looks flat. Then as one gets down closer to the surface one sees the waves breaking and the foam.”
JOHN WHEELER
Is that the Wheeler that reckons there's only one actual electron in the Universe, and it just MOVES REALLY FAST? And that consciousness was created so there could be a Big Bang?
(PS I disagree with neither statement, whether it's him or not. WTF do I know?)
Perhaps its all just a bunch of data mining and self fulfilling participation based on anticipated results. Life is just a Ponzi scheme.
-profd
Amen! There's less science behind Eliot waves than Astrology. (And astrology, only because the planets my body does feel the gravity of the planets, although less so than the gravitational influence of Greta, my cat.)
Well said Charlie...
My thoughts exactly.
Thanks CB - really interesting post. I read it twice, and this is the tipping point for me in terms of my 1+ year subscription to EWI. I am canceling. For a long time now I have wondering how something that feels so good can be so consistently wrong, and you have opened my eyes to my own blind spot - I am a logical cynic, and EWI - well written and grounded as it is - plays right into my weaknesses. I don't agree with what appears to be your perception that it is malicious or a sham, but I truly don't think that they are full time traders like me. I think they are technicians, but don't live and die by their analysis. They would be in a world of hurt if they did, and the EW FAQs even state that short-term, the waves are highly unpredictable. Watching them be re-labeled week in & week out, or the low probability scenario play out again and again, waiting for the prophesied 3rd of a 3rd of a 3rd, has cost me a lot of money. I was doing better before I was weakened by the siren song of the decline of the Grand Super Cycle.
Nic,
Great analysis as usual. AUD/JPY will go to 80 at least. IMO
With all the outflows of the stock market Tyler has documented, records in TLT, GLD, highs in USO, DBA... we can't break below 10K in the DIA.
To me, it seems like theres just too much $ in the system, leveraged up or whatever. DIA 10K bottom considering cash out there?
Chart: SPX
Given the negative divergences on the RSI and MACD Histogram printed during today's rise, I suspect that we may start falling next Tuesday.
http://www.screencast.com/t/Y2FiODU3
Agreed. Check allabouttrends analysis as well: http://www.marketoracle.co.uk/Article22426.html
you know, eventually, SPX will revist March 2009 low. But then it is also likely that we'll be hitting new high for the year soon enough ... time to short yen/bond/gold?
Having waited untill the very end to bump the futures - Asia, who loves you?
Nic,
Thanks for identifying the price spike as the 200,000 EMini SP futures buy right at the close the other day. I exited all short positions on that call.
Always read your posts, EW or not.
Yeah, I saw that too.
No doubt, that was the sign that "the fix is in", and I exited all shorts immediately and went long big the next two days.
Hey Robot,
Nic is good, but I like your........charts the best. And your commentary too.
You talk about Elliot Waves being junk and about the stock market like it's some pure sentient being with a mind of it's own. We all know that the reason the elliot waves don't work is because the stock market is the con job, nothing else.
I really like this wesbite. I have not posted here before, but I have seen a few posts from Nic Lenoir over the last few months. I have to say the gentleman knows his stuff majority of the time. Well read, follows a large amount of asset classes, correlations and uses quite a few tools. Large abundance of experience on technical analysis too!
I would also like to state, before I continue, that I share his view, as well as many others here, on the long term view of the market and even more so on the US economy. I am ultra bearish on the economy and I think the whole thing is a total disaster.
For those of you trading this market and complaining about being rigged, fixed and not acting properly... I have to strongly disagree with each and everyone one of you. Majority of you on this website continue to be bearish on this market and this is perfect sign for the bulls.
You know the truth is, in my opinion, we are barley hanging on this 1040 support and yet I bought into this rally at 1040 knowing in the longer term it will not be sustainable, but for now it should fly so fast, that it will surprise all of you - and it did! The trade was quite obvious and it was also obvious the rally will go much further than any of you, including Nic are forecasting here. The reason why is all of you are still talking bearish talk. As long as you stay bearish the smart money is on the bull side. When you all give in and throw in a towel, when you all start talking about how FED is cranking up the market like you all did in April 2010, it is than that we actually might start a bear market!
There are way too many bears around here including myself. Majority of you on this website, and every person I talk to almost everywhere - they all talk about double dip. Everyone has been expecting a crash, fall in price or waterfall decline. Every damn website has been talking about Head & Shoulders this, Hindenburg Omen that, stock bloodbath this, recession and double dip that, bonds are safe havens this and that, seasonal weakness in September this and market crashes occur in October that, this market is rigged by HFT this and robots are running the market that... Bla bla bla! You know in my history of investing in the last 4 years I have not experienced HFT beat me or robots outsmart me. You might call that naive, and maybe it is. But I thin, majority of you shorting the market and following Nic few weeks ago are WAY TOO OBVIOUS.
And than when you get it wrong you blame it on High Frequency Trading or the FED.
Market is not obvious... it is a game of chess. That is why the free thinkers, not followers, succeed. This is why only a few percent of people succeed in investing. Becuase they are investing against the rest of you. This is not about the FED or about the current economic data (which is backward looking), as much as those are important. This is about me thinking for the future, pricing in data in December 2010 and buying now, when you sold at 1040 and about me selling to you later down the track coz I know what is coming in December 2010.
We are playing chess against each other! It is my job as a contrarian to outsmart you and guys like you, and make money off you. This is investing. It is you, against someone else, like me.
The whole Wall Street and even every newspaper, and random person on the street was expecting a massive sell off. Honestly speaking the sentiment on the street, on the internet, in the markets, on the TV, in the newspapers is completely bearish. London Telegraph was talking about "Stock Bloodbath". Oh man.... when they got Hindenburg Omen pictures in newspapers and on the pages of some newspapers - you know the majority of the retail investors are scared shitless.
I agree we could actually have a crash later down the track, but first we have to shake of all the bearishness, worry and pessimism that surrounds this market.
And as long as all of you stay bearish I will keep my longs even though I think this economy is a total disaster. And think or the economy, the worse is still to come. But bull markets climb a wall of worry. And you all worry too much so the prices are going higher for now! Majority here are perma-bearish constantly looking for shorts, always talking about the next crack of support or next position to enter the market short. This is why all of you missed the huge rally from March 2009 lows, when pessimism than was just a high as last week. Majority of market participants were bearish and waiting for 1040 break in the last few weeks. That is why it didn't and won't happen.... yet!
This market needs to rally, and it needs to suck some more suckers into it, all of whom always come in late when the price already rose. That is when one should sell or short. These "Johnny Come Lately's" will be buying with a hope that the recovery is on the way and double dip was just a scare. Crashes or major falls happen when optimism or "hope" is running high, and not when fear and pessimism is high!
Honesty speaking, if the market crashed two or three weeks ago when Nic was telling you all to go short at 1100, than this would have to be the best advertised bear market beginning, in the whole financial history of the last 5000 years. Forget about shorts, forget about levels of AUD/JPY or S&P 500 or USD Index or Euro or whatever...
As long as everyone stays bearish, this thing is going up. I have to admit that the best buying opportunity in the last 12 months was on 01st of September 2010 when pessimism was running so high! I am not trying to show off but I did very handsomely in just one week and we do have a strong weekly reversal on S&P 500, now which looks like it could take prices higher. I am cautious but as long as majority are still bearish I know we are going higher. I expect at least a 10 to 15% rally from 1040 support. We already did almost 6% in just a week!
This is chess and I am playing against you! In my opinion, critically thinking, I see the market going on above 1130 and making a new high. Everyone will proclaim that risk is back on and whatever... bla bla bla. Bulls will come back. Technicals will look bullish. All of you who look at the data will find it astonishingly, how economy improved and the data is coming to be good again or at least improving, shall I say... (even though this is backward looking data). All of you should be focusing on what will happen to payrolls in 2011 and not what happened to payrolls in August 2010.
That is a way contrarian takes market bets and that is why one gets rewards handsomely with a 6% gain in a week last week. I repeat: I think this economy is a total disaster and this is all one big massive "band-aid" dead cat bounce - bear market rally.
-- JM Keynes (from Bailout Nation, Barry Ritholtz)
brkan, you sound like a golfer bragging on his best game. I've always said, I don't want to hear your successes, tell me your failures as that's all that really matters. Your 6% gain in a week is irrevelant at this point as you'll give it up soon but none of us will hear about it. Again, tell me abyout your failures my friend.
I do agree with you on your assessment of the market and I do believe it is wired to make as many people wrong as possible. So the sheeple will start flocking for risk at exactly an inflection point, near top in equity.
As for economic data, risks are clearly to the downside with the fed out of bullets and an anti business, bunch of drunken monkeys driving the short bus in DC...this thing is less than a house of cards!
I'll play it safe in my bond, metals and periodic short equity positions for the time being as the markets won't be on the mend for years to come (other than a periodic rally). Bye the way, everyone I talk to in the general public doesn't have a clue what's going on in the financial markets...so hard to make the case that everyone is bullish these days. In '99 the barber shop was rollin' CNBC, today it's back on ESPN because no one cares anymore!
brkan, you're right generally about buying when the mood is bearish. But you're crazy if you think ZH is a good indicator of that. Half of us are borderline paranoid schizophrenics convinced the CIA fudges ISM reports. If they're complaining that the government is manipulating stocks higher, that just tells you stocks are going higher. The rest of us, like myself, are long-term bears like yourself, who come here for the often good selection of long-term bearish analysis, and don't mind having to sort through the amateur hour drivel and nutcase conspiracy theory.
I do envy your quick 6% gain, but I'm old enough to know that you were actually aided by random factors. Having the wisdom to know when bearish sentiment is likely to turn bullish, and vice versa, is crucial to playing a choppy market, which is what we are in for now. But you still can get badly burned on even the most seemingly sure turns. The NFP is a very sloppy indicator - if it had randomly gone the other way, you would have been crushed. So I don't choose to spend my time gaming that stuff. I'm out of the market earning a safe 9%, and that's fine for me.
Old saying at the racetrack: "Don't walk around thinking you're smart when more than likely, all you've been is lucky."
Lets not worry about how well I do or how bad I fail. When it comes to the Internet forum posts like these, it is irrelevant, and is never believed anyway. Lets stay on the topic of why September 01st was a great contrarian buy signal, and that is my view only.
Someone stated that NFP came out to be better than expected and told me I was lucky. Fair enough, this is one way of looking at it, but it is not my way of looking at it. I think that market looks at payrolls in December 2010 or even March 2011, before it will look at August payrolls. Backward looking data, in my opinion, and is totally irrelevant for a discount mechanism, like the financial market.
Another comment was that I will have to give up my gains soon because this rally will not have legs, and that is also fair enough. It is one way of looking at things too. I did state I remain very cautious on the trade, but I still think the rally will surprise majority of you. I didn't write the previous post on how I was happy with a small little gain of 5% plus. I won and lost more money for clients, than I ever thought I would see in my life. I wanted to actually put forward why this game is a greatest challenge any man can test himself with. Financial markets are a game of chess, no one can win all the time, but some win more consistently than others. It is about outsmarting your opponents.
All I am trying to say is that it's a ying and yang, it can be black, grey or white. Everyone sees this market their own way, and this was my way:
Newsletter editors are feeling fear, that is for sure! The bullish tone fell to the extreme levels last seen in March 09. You are more than welcome to stay bearish with these so called professionals, but I wouldn't. Their track record speaks for itself. They were most bullish in April 2010 and October 2007. They were extremely bearish from Nov 08 to Mar 09. I rather bet against these guys and be rewarded handsomely, so I think I was just objective.
You know, I scribe to many newsletters writers myself. And I take time to read them all. I work 10 hours a day, 7 days a week, so you can imagine how much reading I do... So I don't read them because I think they will give me tips on what to buy and what to sell and when, I read them so I can see if they are all singing the same song. And since July, majority of technical newsletters, majority of fundamental newsletters and majority of analysts recommendations were all like an orchestra. They were all synced as the same tune. This usually means the views are one sided. Just like when everyone rushes to one side of the boat... It will tilt the other way!
When I checked Bloomberg analyst data of over 150,000 main US stocks, majority were once again bearish. There were actually less than 30% "Buy Recommendations" for the first time since 1997 and over 70% were Sell or Hold (which means Sell anyway). Lets look at their track record. These Wall Street professionals were telling everyone to buy at the end of 2007. They were telling you to buy before Lehman collapsed. They were telling you that in April 2010 we are in a V shaped recovery and stocks were cheap. Than we tanked 1000 points on Dow in early May and VIX went through the ceiling. And now majority of you are now bearish with these guys?
Yes I am lucky I can think for myself and not stay perma anything (even though i am completely bearish on the economy and i think it will fall apart like a house of cards). I dont like taking sides with majorities and even more so with Wall Street bankers. And yes I am lucky I am long, at least in the short term, because almost everyone is trying to short the market. It even looks like are now short covering on a massive scale here!
Hedge fund managers are now less than 20% bullish on the S&P 500 index in August. Actually only 17% were bullish. Almost 50% of these managers are bearish. Doesn't look good does it? Once again majority are bearish here too. Maybe they are right, that is one side of looking at things for sure.
Lets look at the money flow. You know, the funny thing is, these same hedge fund guys are bullish on bonds, with only 17% bearish on bonds. And scared money is still rushing into bonds with record inflows, as we all should know, just like there were record inflows into stocks in 2000.
London Telegraph posted a major article calling for "Stock bloodbath ahead". Last time magazines or newspapers got calls right was.... Never! The magazine / newspaper indicator of sentiment is one of my favorites. Like I said in my previous post, if we were to crash in the next few weeks, or if we already have had, than this would have been THE BEST ADVERTISED BEAR MARKET anyone has ever seen... ever!
When we see magazines and newspapers and television talk about things like "Recovery is back on track!" in a few weeks or months (which ever one it is), than you know I'll be looking at take profits and look for shorts. And they will proclaim that recovery is back on track soon, just watch...
From a technical point of you, I like to keep it simple. Seasonally, everyone was expecting "weakness in September" just like in 2008. Look at the chart, we sold off hard in August as every one of these guys above from newsletter pros to hedge fund managers started liquidating in anticipation of upcoming seasonal weakness. They did their chess move. And now there is no one left to sell.As a matter of fact, there might be short covering now, as stated above.
Last week it was smart moneys time to buy, even if it is for only a month or so. I don't really know how long it will go for. I don't like technical mabo jumbo too much. I will get out whe everyone else starts becoming more bullish. That can be at 1130 resistance or some other random number.
I always remember an old say that when someone expects the market to hand them something - like an easy break of 1040 on the short side, it always pic-pockets them. I am also not into this whole thing of wave counts and MACDs and divergence's and colorful lines on my screen. I respect it all, but it is not for me. I just prefer to use a major support and major resistance as stated above. And currently, the support holds, the Dow Theory holds, Dax 30 holds and Euro 50 Stoxx hold. I am not sure for how long, it is beside the point, but we just made a first higher low. In 2008 market made lower lows on consistent basis. Currently not so. This is just objective view point, that is all.
As we can see sentiment has been extremely bearish last few weeks, as Nic recommended you guys to enter shorts at the start of August and yet we failed to break 1040. Maybe we still might soon, that is one way of looking at it, but not my own.
Last time everyone was this bearish was in March 2009. Market will surprise on the upside because everyone is expecting more downside. When "hedge fund managers" jump on the trend (they are always money hungry), when "newsletter professionals" start singing the bullish song again and start telling you that double dip was a hoax, and when newspapers write on the front page "RECOVERY BACK ON TRACK" then we are about to hit a massive wall and a sea of red sell offs. Double dip will start properly.
So therefore, I do think, eventually, the market will break the 1040. And we are going down. But, just not yet. I am still in strong believe the market is slowly but surely topping here. We are in the Phase III of the Bull. Reasoning is that economy is a total disaster now. But, we need more suckers on board this sucker train rally and we need more "hope", we need more “optimism”, we need more “complacency” before we do so. So many traders out there, including my friends, are still talking shorting talk. Maybe it will, but maybe the market will first surprise, before it will. Mr. Market is Harry Houdini, and it loves to fool you with the element of suprise.
There are no references above from where I got this data from. Those who are in the know or understand broader views (than just charts) shall not find it a surprise, and most likely went long as the risk to reward was a very good play. Some will call this lucky, but some sometimes it looks like some people get lucky more often than not. I like to think it is more to do with skill. And to be honest, nothing wrks 100% of the time. You need to believe in what you are looking at is from all corners and all sides of the view. Don't just say... "economy is a disaster, you got lucky on your trade and now the FED is keeping the market up bla bla bla this is rigged casnio!"
Those of you who don't use more tools than just the charts, it is time to educate yourself and stop playing the blame game. You know the last time I used tools like these, different ones, plus many others, was in November 09 and March 09 on the long side and April 2010 on the short side. All three times I got rewarded handsomely. There are times I used it in Nov/Dec 08 on the long side and started to get rewarded but than lost a bit of money into start of 2009. Market did not bottom. But the setup once again occured in march 09 as stated above, and it rewarded me once again.
These are some of the reasons I bought with strong confidence at the end of August. This time I do not know how well I will be rewarded past the current 5 to 6%. So far it is looking good and I hold my view that pessimism is still way too high. The market could tank tomorrow for all I know, but I now stand to lose 0% of my capital.
I also remember back in May 2010, I was reading constant posts on this website about how Euro was tanking and the European Union is toast! Majority were bearish on the Euro everywhere. I remember by the end of May we started having huge spikes in the Euro. These were blamed on "ECB intervention" and on rigged markets again. I looked at various sentiment indicators and I looked at general Reuters, Bloomberg and CNBC talk and everyone was proclaiming Euro end. All the Wal Street analysts were taking their targets for the Euro to 1.10, 1.05, parit and all that none sense. I bought the Euro at above 1.23 as only 2% of traders were bullish on it and it had extreme futures sentiment on one side. Euro still went lower twards 1.19, but it was obvious if one was to remove emtions, that the bottom was near. The boat was one sided... completely one sided. Almost 120,000 net shorts and 98% USD bulls... it had to tilt. And it did.
You may call it luck, but for me, no luck was involved. It was objective analysis with proper money and risk management. If you are wrong, than you are wrong, but I will tell you this: there was a much higher probability of a bounce on 01st of September for the S&P 500 and in start of June for the Euro, than there was of a ny further sell off - from my research and my view on things. From your research and your point of you, maybe not. Opinions are often wrong, market prices are not.
And I am not trying to show off, I just hope that this post helps some of you in your own journey when it comes to financial market success. If you have a look at my posts, I have taken a large time and effort to write them. I am not sure if they are worth anything to any of you, but the process of thinking like this has served me well in my own work. I continue to do well. I like this website and this community. I've been reading it for a long time. This is the reason I actually did these two posts. Plus, don't follow or do on what I have said.
Just see that there is actually another point of view. Also someone said I was a golfer. I do not play golf, I hate it. Good luck to all, practice the market by playing more chess and remember this quote - it's my favorite:
"Follow the course opposite to custom and you will almost be right." - Dr. Marc Faber
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