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How to Trade Using Market Sentiment & the Holiday Season
Chris is a Santa Clause rally believer, here's why. ~ Ilene
How to Trade Using Market Sentiment & the Holiday Season
Courtesy of Chris Vermeulen at TheGoldAndOilGuy.com
The months of November and December are the second strongest back to back months for the financial markets. Many traders and investors use this time of the year to reap big gains as they close the year out. The fact that most traders and investors are sitting in cash and underweight stocks in their portfolio’s leaves me to believe a Santa Clause rally is just around the corner. Reason being is everyone has cash on hand to buy stocks because they are selling their positions in this pullback we are in right now. I know traders well enough, they will buy back into the market trying to catch the holiday rally in the coming weeks.
Subscribers and myself have been short the SP500 for a couple weeks after watching the broad market become overbought and sentiment levels became overly bullish with greedy pigs thinking they could buy stocks after a massive month long rally that had not pullback. Once the selling started you would either get your head handed to you or you were going to make a killing buying leveraged inverse ETFs.
Those who arrived late to the rally are the ones selling out of their positions this week. The interesting thing about this week’s market condition is that I have not seeing any real panic selling in stocks, and I’m not seeing the volatility index spike in value yet.
What does this mean? Well it means we could actually see another big dip in the market which should last 1-2 days and then we get a sharp reversal to the upside.
Take a look at the SP500 & Volatility index below:
This chart allows us to get a feel for fear in the market. Me being a contrarian trader, I focus on market sentiment extremes. When the masses are losing money hand over fist, I’m generally on the other side of that trade with open arms. Trading off fear is one of the easiest ways to trade the market. That is because fear is much more powerful than greed and it shows up better on the charts. Spotting panic selloff bottoms is something that can be traded successfully if you know what to look for and how to trade them.
On the chart you can see the pullbacks in the SP500 which triggered a panic selling spike in my green indicator. What I look for is a pullback in the SP500 and for my panic selling indicator to spike over 20. When that happens I start watching the volatility index for a spike also. The good news is that the volatility index typically rises the following day making my panic indicator more of a leading one…
Market Sentiment Trading
I could write a 20 page report going into depth this with topic, but that’s not the point of this report. Just realize that the stock market is likely going to put in a bottom very soon and likely end with a STRONG panic selling washout this week or next. If you want to learn more about how to trade market sentiment and panic selling you can read my strategy which was published in Futures Magazine.
Prepare for a sharp drop in the market which should kick start a holiday rally in the next few trading sessions.
Chris Vermeulen
TheGoldAndOilGuy.com –Index, Commodity and Currency Trading Alerts
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Funny thing, your trading opponent (big houses) actually have the SAME charts and contrarian thesis' also. Just like the farce known as "technical analysis"....Scams designed to suck in the seemingly intelligent.
Think "Princess Bride" lydocaine poisoning, except THEY are immune from the effects of the poisoned wine.
As all gambling/trading houses can do, they can take losses a LOT longer than you can and this market is a casino now. Its no longer a place where companies can go to for capitalization of new ideas and expansion without having to use a bank. Good luck Sucka's
Dark Pool, Algo programs,naked short selling, FASB 157, Repo 105, ALL have all contributed to the demise of market logic, common sense and intuition, to TRULY make it a fools game now.....At least with a card game in Vegas, you only have the probability confines of a 7 deck shoe, but at the "Wall street casino", not even super computers can keep up with the odds/probability because its an unlimited shoe and there are 2,000 different cards per deck !
Another "Unintended Consequence" of overeducation with the PhD. Theyre the Financial and mathematical version of Dr. Josef Mengele
Your full of shit!!!
what a waste of time, and time is cheap too right now
It's a contrarian bet and they generally work-
Look at gold after the big washout-it moved up when most everyone was in shock and bearish and now it's making headlines again which is usually a near topping indicator-
Stocks going up in December is the opposite of contrarian.
Stocks going up in December is the opposite of contrarian.
*************
I believe the contrarian call he made was based on current market sentiment-but you are correct if you meant x-mas rallies are not unusual-
Actual year-end rallies from 1988-2010 have
been: 8.87%, 8.83%, 11.94%, 14.25%, 4.39%, 8.62%,
6.99%, 13.17%, 14.31%, 10.11%, 10.89%, 10.79%,
7.2%, 14.3%, 6.5%, 11.3%, 8.2%, 6.1%, 5.3%, 7.7%,
21.7%, 9.76%, and 8.94%.
these guys make all their money on subscriptions - if they were good they would make plenty actually trading!
"Make a bottom very soon", there you have it, party on. .... after we make bottom we can "vote" all of our troubles away in the next election.
There is no Bottom, unless your money is with MF Global.
i respectfully disagree
Your theories, and analysis make no sense. There will be a bottom soon because it's late November? I'll check my horoscope, year of the sheep or some shit. It's nutbags like this that prove that the stockmarket is fucked.
Not to mention that it's a long way down between here and "soon"...
I have heard this story a thousand times. The reasoning is unsound. There might be a rally but it isn't because folks are in cash. Mutual Funds and Hedges are near record low cash according to other sources.
Thanks but I will close out my profitable shorts soon and enjoy my holidays. No need to capture a small rally with huge headline and macro risk nearby.