I dont know where the market is going longer-term, but I see a monster rally setting up. Too much fear short-term. Im already long and buying more Monday AM for swings, to exit on a big up day. Of course, we know either I'm going to be a genius or moron with current volatility. I'm thinking we gap up big on Monday and never look back, that would be most likely scenario. Lets see how it unfolds.
how much fear do you think we had during March 2000 and the months following. to say that a measure of fear means the contrary in price movement is not accurate. Price action becomes recursive, or trendy when enough models break. utlimately it comes down to orderflow into equities. Some things that favor orderflow in equities. price appreciation, results in further price appreciation. price depreciation, results in further price depreciation. so if you see all these troubles looming, are you going to funnel money in low speculative instruments with preservation of cash of the primary importance or will you step infront of price depreciation. now if margin calls and redemptions slow, then sure the impetus to sell will be less, but this is dictated by troubles in other markets. So ultimately the stock markets ability to appreciate or depreciate is linked to troubles in the credit markets. Now whats the primary reason for trouble in credit markets? Too many bad loans to people who will never be able to pay it back. So the people are walking away from the loans. This is massive destruction of wealth, much more so then tech bubble imploding. This loss of wealth drives up costs of financing for anything that needs to be done in the marketplace. This puts brakes on the economy, and its doing it globally. Not just isolated to the USA. So will banks be more conservative for the next few months or years? sure. So everyone will be hoarding cash that they have. And wont part with it, unless the rewards unbelieveably good. The FED made a mistake by not being more aggressive in their statement. Loss of wealth in one asset class could have been buffered by inflating wealth in another asset class. Paulson intimated that thats what he was looking at. But Bernanke is asleep at the wheel. To reverse the damage that has occured, massive infusions of wealth have to occur, and the ECB realized this sooner then anyone. So project out what the world will be like for the next few years. There will be hoarding of wealth by financial institutions. Deals wont be able to get done. The equity market will be entralled in a mood of pessimism, if its not inflated soon. Bernanke should undergoe a psych evaluation, his thesis in grad school was on the Great Depression. Maybe he wants it to happen subsconciously during his reign.
dude, im a trader. I expect to hold for approx 2-5 days. This is not just a "contrarian" call, its looking at price action, etc. mixture of stuff. I just a huge rally coming, probably we go lower after that but we'll see. Right now I see higher short-term and will decide based on price action where we go next. You do have valid points, tho! I've been bearish for sometime as well. As a side note thank you for not attacking me and calling me names as 99% of ET'ers do if you disagree with them PS: I shoudl have a poll to see how many ppl thought this thread was started by stock_trader
no problem, here s chart with outside range bar. Until you see it be suspect of all rallies. It implies that we havent seen the lows. http://www.investopedia.com/terms/o/outsidereversal.asp
"I'm thinking we gap up big on Monday and never look back, that would be most likely scenario..." The market certainly could rally on Monday but i'm not so sure about a big gap up... S&P futures dropped 9 points after the equity market closed at 4:00 (on the Goldman hedge fund news)... then later in the evening we learned the Fannie and Freddie won't be taking on more debt... no gap up in my opinion (which is better for you since you can buy even cheaper for the big rally on Monday).
did you hear that the fed will not raise the cap on freddie mac and fannie mae. this came out after the close on friday along with some more bad news on goldman sachs. by the way,the market was banking/hoping the cap on freddie and fannie would be raised.in fact they said it was pretty much a done deal friday morning. guess they were wrong./
in the short term, volume was not high enough meaning that there aren't enough longs to panic anymore, thats why we need a rally to sucker in new longs to potentially go lower. I dont think we cant break this level without new longs, therefore a rally Of course, I could be LONG and WRONG. But I'm betting with my $$
If I were a trader, I'd be setting up for a short-term upswing. But I'm an investor, so I'm selling and getting short on rallies.