This page has been archived and commenting is disabled.
Put Your Hard Hats On
Put your hardhats on as the ride is going to get bumpy.
Although long the markets, I have been very clear that this was a counter trend trade within a bear market. Furthermore, I have been very clear about the “line in the sand” being at SP500 1133.65. A weekly close below this key pivot level while investor sentiment is bearish could lead to a waterfall decline. Today’s air pocket is testing that support level.
This is how this works. With investor sentiment bearish, buying should ensue. At least this is how it works out 80% of the time. The absence of buying when there should be buying is a bad sign, and this is the scenario where you might see that waterfall decline.
Since 1990, when my sentiment data begins, there have been 5 occurrences when there was a close below a key pivot or support level while investor sentiment was bearish (i.e., bull signal). The first incidence was in October, 1998. This did not lead to lower prices but was a fake out that led to the blow off top to the 20 year bull market. The second incidence was June, 2002, and here we saw the SP500 drop some 25% over the next 7 weeks. The third incidence was July, 2006, and like 1998, this was a fake out leading to the 2007/ 2008 market top. The fourth occurrence, which led to the 5th occurrence, was in September, 2008. Here the SP500 dropped about 35% in 8 weeks.
So to summarize. Our “line in the sand” is 1133.65. A weekly close below this level puts the market at significant risk for lower prices. If this is a fake out, then we should know as the SP500 will reverse back through our old support/ new resistance level. This is a bear market. Protecting capital is of utmost importance. I will take steps to defend my capital vigorously. While we can argue that 2 of the five occurrences led to significantly higher prices, why take those chances. A reversal hasn’t occurred yet, and I would rather give up a little on the upside for some downside protection.
This data/ observation is supported by research from other individuals, and by research that I have yet to present that does not utilize sentiment but utilizes SP500 trading models stretching back about 50 years.
To receive thetechnicaltake via email newsletter (click here): 
It' FREE
- advertisements -
Must. . . cross. . . back. . . over. . . 11K DOW line. . . .
no hookers, no cam..the depression kills the white powder and the profligate woman...what a drag for those who need both..
You can't trade a market where the bullish and bearish sentiment changes every microsecond. Look at the action today, you want to tell me that is normal? That any single level means anything? There is no support level unless you know the level pre-programmed into the computer. The charts today are the most fuked up things I have ever seen.
Oil swung almost $4 in half of one day. The headlines can't keep up they still say oil falters on weak home sales and Europe woes. Oil isn't faltering when it's up $1.
This is the most fucked up manipulated market in the history of man. There is no price discovery, no real fundamental, just rumors of who will get freshly printed cash.
"The absence of buying when there should be buying is a bad sign.."
Yes indeedy, did it take long to work that one out?!!
The absence of buying (low volume) was a sign of the March 2009 onward rally ...someone might even think these stock markets look completely f**ked even when they're supposed to look healthy going up... wonder what that means?
"Although long the markets, I have been very clear that this was a counter trend trade within a bear market."
I'm pleased you're "clear" you're long in a bear market because otherwise I'd shit my pants at this apparent confusion in your trading strategy. How about going short in a bear market? ....just a thought!
I can't make heads or tails of this article. So buying is bearish, up is down and 1133 could be bad or good. Great. That's why I just stack silver...
"trading models stretching back 50 years" don't mean jack in a market that trades on interventions and rumours of intervention.
The ride is already bumpy, or have you not visited your local Safeway in a while? When I went for a few things yesterday even I was shocked at some of the increases and I thought I was immune to further outrage over cost of living increases. You know what hit me as a huge spike up the most? Doritos. The bag used to be a pound and a half for $3.49 like the last time I bought them a few months ago, as of yesterday the bag has shrunk to 11.5 ounces for $4.99 like I am not going to notice a 300% increase? And produce, all of it, this is harvest time for god's sakes when every year we get fresh food and a reprieve from high prices, so why are they charging the same $2 per pound for peaches they were charging when they shipped those greenish rocks up from South America and called them peaches? Broccoli, $1.99 a pound in September? Let it rot in the ailes. Four bucks for a shrunken box of crackers, $2.99 for hot dog buns that they used to give away with with the hot dogs? There is less than 3 cents worth of wheat in those buns even at current wheat prices, who are they kidding?
Today's Doritos are what we get when we are burning food for auto fuel with nil energy gain from that subsidized process. Subsidize a crop at record high prices! That's the spirit!
Glad we're not poor and in Mexico.
- Ned
"Within its 9 Pages I will unlock the secrets of the Universe"..oops wrong guy.
Heh, a little dig at Graham I take it...
ZH will be NAYSAYERS ALL THE WAY PAST 14,000 IN THE DOW.
ZH will be NAYSAYERS ALL THE WAY PAST 14,000 IN THE DOW.
i didn't realize IQ 1.45 was something smokable, but thanks but you might want to butt it out in your eyeballs soon.
Markets will end up 5% this week as every down is ALWAYS met with a responding up...hope for QE, hope for Europe and window dressing...this is the stuff that bull markets are made of..
Short again just short of 12000 in the DOW.
Unfortunately, most traders, and people in the business of advising traders, don't think that way. You've got to love it when someone makes a clear call without any baloney about how they know exactly what is going to happen. It can go either way, the numbers are on the side of the bears, but don't take on too much risk in this kind of environment. Good work.
construction can be an unusually good business.
http://expose2.wordpress.com