Lots of complacency

Discussion in 'Trading' started by detective, Oct 17, 2008.

  1. The stock futures are gapping down about 2%, and people are acting like that's nothing and are still positive from yesterday's reversal day to the upside. I just have a bad feeling when I see weak action with lots of complacency, even though the market still hasn't opened yet.

    I think we could be in for a weak close today due to the complacency and weak price action following a reversal day.
     
  2. Do you know anyone who is complacent? I don't, most people I know are beaten, bloodied, and scared shitless. When I go to bars and restaurants I often overhear non-pros talking about the carnage in stocks and the economy. The VIX is in the mid 70s, not exactly a sign that people are cocky.

    Weak opens are common during rebounds from significant panic lows & capitulation. The pattern of weak open/middle-session, strong close is typical of bull runs. At the very least, 2% gap down opens are usually not the best opportunity of the day to sell or go short. Quite often they are an excellent trading buy - if we close merely unchanged today, for example, you will make 25 points form the gap down open. If we're up 25 you'll make twice that with opening buys. Just as gap up opens in the last 2 months were not buying opportunities, or evidence of bullishness, so gap downs are no reason by themselves to sell or go short. Today could be another big down day for all I know, but the fact we open lower will not be the cause.

    IMO you are at risk of turning into a permabear. If you pointed out the bad fundamentals, or the fact that we've rallied 60 points from the lows of yesterday, or that government is not really coming up with a good plan, those are all legitimate bear points. But to point to complacency when there is clearly nothing of the kind, to say that a 2% gap down pullback during a market which the previous day rallied over 10% from the lows, this is clutching at straws, trying to find evidence from meaningless tea leaves.