This has been the most brilliantly engineered sideways correction. Who woulld've thought we'd have 3 years of rising prices and falling valuations. There's still lots of excess liquidity out there and I don't think it goes a way in just a couple of years.
<i>"Hum, you should have been doing that a month ago."</i> We were... lots of it :>) Short side and long side both worked intraday until the recent levitation began. Since then it's been 90% long side trades making money. Same story every day: buy S1 or the daily pivot and hold for at least +4pts ES / +4pts ER. Most days have offered a lot more than that potential... including today. ** 2000 ~ 2002 were wild, wild volatility for sure. We may never see 300pt NQ intraday ranges or 74pt ES intraday ranges again, but the markets are surely welcome to bring it on if they will. When this moonshot rally relaxes, we will see our first 30+ pt ES intraday range in quite some time as it unwinds. Looking forward to that when it happens, but viva la rally until it ends :>)
Thank you, Arnie. I thought about posting the same chart myself but I thought it wouldn't be worth it because people would blow right past it and keep trying to characterize this move as a repeat of a 1999 style blowoff or as totally unprecedented, just as they've done in this thread. I remember watching the market with my coworkers in 1995. Almost every day the market was up and one guy kept saying, "This CAN'T continue!...This CAN'T continue!..." every freaking day. And all year the market moved higher. "This CAN'T continue!..." I think he finally stopped saying that in the fall.
There are always pullbacks...small and large. Longs are just having it easier this month (as expected by the seasonal information) while shorts were forced to do a little more cherry picking and not be over leverage. Look at the last few intraday trading days... Some nice pullbacks to keep the Shorts happy and then the retrace back upwards to keep the Longs happy. Everybody should be happy. Mark
After I posted that chart I got to thinking how this is almost exactly 11 years later. I did a search and found some interesting hits. Here's one that is almost eerie. It is dated 09/08/01 and talks about how the period between August to December 2001 will be a period of danger. He talks about the 11 year cycle in wars in the Middle East. He also comments on the markets, and gold. Here's one quote..... The focus on 2001 corresponds with an 11+-year sunspot cycle that pinpointed Middle East wars in 1945, 1956, 1967, 1979, 1990 & converges in 2001. There still are many other cycles that corroborate this analysis and reinforce the conclusion that late-2001 will usher in a very dangerous short-term time frame (August - October), a very dangerous intermediate time frame (late-2001 into 2003), and a very dangerous longer-term period (2001--2008) http://www.insiidetrack.com/pdf/0012001WarCycles.PDF
Back in 2001 - 2002, margin requirements for ES was $5,000+ and NQ was $6,000+ if I recall correctly. At the time, I was trading OEX and SPX options as 95% of my volume. It was rather something to see index option trades going +100% to +300% intraday, or within two - three sessions. I recall a session in late July 2002 where I bought a number of SPX call options two ticks off the low... near S2 value. Covered for index +18pts (+100% gain on calls) and thought it was quite the trade, until price action kept going higher more than +50 SPX points above my exit. We all sat around and thought it was overbought, no way each flag could keep breaking higher. Wrong. We kept that example in mind later on, and haven't forgotten those lessons yet. Overbought and oversold are very relative terms.
Enough of the BS analysis, it's all quite simple. Nothing but M3 growth, still through repos. Liquidity that hits the ruling class and big institutions first, who keep getting more cash and need to put it somewhere. Leverage to hedge funds, prop desks, B/Ds, etc. Foreign nations also needing to find somewhere to put their US dollars, because there certainly are not enough US exports to spend them on. Where to put them to at least feel like they have any use. The investors may feel like they are doing great by getting 10% a year, but their buying power decreases by more than that. This market has ways to go to adjust for dollar depreciation, assuming the economy has actually improved from 2001-2002. Short or long, it don't matter. You can get knocked on both sides being right or wrong, thanks to leverage. Now that everyone and their mother is a trader, the chopping shakeout games are at full scale. I find it harder to put on a good intraday long during this uptrend than in 2005. Forget 2003, that was golden comparing to this. There was a guest on CNBC who was critisizing the whole Dow 12,000 festival, one of the few who just says it how it is. He received little rebuttal, just a quirky smile as if he is not to be taken seriously. He basically said that Dow 12,000 means SH*T on real terms and a nation simply cannot borrow and consume its way to prosperity. If all you bears get your reversal based on the recession idea, your profits might be worth more as firewood than actual currency. Smoke & mirrors. There is so much other serious sh*t going on in this world right involving this nation. Don't get too distracted with this market "phenomenon".
I agree, this market doesn't make sense. I have been trading for quite sometime and have never seen this kind of action, I think they are definetly pumping this market up. Im reading plenty of blogs and forums and many long and short are not understanding this market behavior. Its the same thing everyday, minor selloff in the beginning of the day, followed by flat trading and then a rally leading into the end of the day. Market hasn't seen any kind of pullback since July, nearly 3 months without a 1% drop in equities. Least when the markets were falling hard in June and July there were bounces of 100-300 points.
There is nothing abnormal about this rally and it may continue for another 5-10 years like the 90's Companies are making tons of revenue and the whole mid east iraq oil thing has calmed down alot. Economy doing fine, time to buy.