Hey MVIC! Well Beans in the teens. Finally after 30 years as a battle cry. I have fabulous extention res in Beans right on the highs.
Trading Gold. Re-Short at 877ish. The ISE index has been very reliable. Much more so than traditional p/c's. I got long ES in the last hour and I'm trying to justify the trade. We're at great support with really negative sentiment. I'll just chill and lean on the lows. I can't imagine anything turning this stuff back up.......
Well, finally today we got some fear, with the VIX going up to 28.5 intraday. This is the first day that there were any signs of true fear in the market. It is also close to the "normal bottom" levels of around 30. However, in bearish/correction markets, it usually takes a VIX of 35+ to put in a bottom. That will easily be reached if tomorrow is another down 30+ points day on the S&P. As a result, I think we are now within 2 US trading sessions of a bottom. The most likely scenario IMO is a down day closing at or near the lows Friday, then Tuesday having an opening gap lower and that is the low. Tuesday should close up big in this scenario - 50-80 S&P points, and then follow through for say a week before any kind of meaningful (>1 day) pullback. The other scenarios I could envisage: i) v-bottom tomorrow i.e. big initial selloff to new lows and a huge rally in the last 2-3 hours to unchanged or even up significantly. ii) tomorrow is actually a rally right from the open. Unless this is on some major news (e.g. inter-meeting 75bp cut), this would IMO provide a good short next week and we get the bottom later that week. If we get a helicopter bailout, well just follow the August playbook - get long for 6-8 weeks, short the crap out of the dollar and go long every commodity in town. iii) friday is weak, then tuesday becomes a 1987/1929 style crash. I think this is very unlikely - VIX >35 almost never preceeds a crash the next day. But I'd give this an outlier 1% chance, and you need to be prepared so you don't fall for it on the off-chance it happens. If I'm right and Friday/Tuesday is the bottom, then IMO it is quite likely to be the bottom for 2008 and thus the best buying opportunity for the next 5 years+. Consider your investment portfolios accordingly - if there are any good stocks you want to be long for the long-term, now is your great chance to buy them at a discount. Consider in 2009/2010 how will you feel about having bought Goldman at 175, BSC off 60% from the highs, GOOG below 600, AAPL below 150, RIMM at 75, CMG at 100 (off 1/3) etc. If you are right about the fundies, these buys will look dirt cheap, especially once the slowdown/recession is a distant memory. You ought to be thinking how much will investors pay for these stocks in 2010/2011, with 2-3 years extra eps growth, where the recession is a distant memory, and the market is full of raging bulls paying top dollar. Lots of more conservative blue chips are also getting hit in this slump, and the financials have been hit very hard. There are plenty of great bargains out there for the conservative value investor. If this is in fact the low, what are the chances of buying the brokers, banks, investment banks and blue chips at such discounts to their recent highs? They have not been this cheap since 2001-03 during the bear market of a generation. Even if 2008 is a disaster and stocks make new lows for a 25%+ killer bear market, you will make nice returns over 6-12 weeks on a medium-term trading rally. Then you can decide at S&P 1500 if you wanna hold on or jettison for a nice 15%+ profit (much more if you go for gogo stocks or use leverage). IMO most people are missing the woods for the trees here. I see threads where people are trading markets with 0.5% stops going for 1% returns. Instead, people should be taking their entire net worth and putting into a quality stock market portfolio within the next day or two. There are loads of great trades on the table any moment now. Take buying the Nikkei at 13000 - this market is off from 18300 8 months ago, it is trading at early 1980s levels, foreign & domestic sentiment is ultra bearish, more than half the index is selling below net assets, the entire index is 0.8 times book, it is arguably the cheapest market in the world. People should be banging down the door to go 100% long this market. Worst case is what, 10-15% quotational risk down to 12000ish, but you have a 99% chance of making that back within 12 months, even in a worst case scenario. Upside is you make 5000 points in 12 months, a 40% return (unleveraged), merely on a return to the summer 2007 highs. Look 1-3 years out and 20,000-24000 is possible. And since this is an entire market as opposed to a stock, and selling at a deep discount, with a bottom catalyst within 2-3 trading sessions, you could easily afford to juice returns with some leverage.
Well, Friday saw neither washout nor rally, just a modest down day. This contradicts my "imminent panic bottom" theory. It's like we are drifting lower but not enough to freak people out - classic bear market action - rather than puking down in a panic. So far I've thought were were in a slightly bearish-biased trading range since August - 1350-1575. The lack of real capitulation this week forces me to reconsider, and give some weight to the possibility of a bear market grinding lower into the 1200s. Since I'm not really sure right now which is true, I'm going to stay cautious rather than make any big purchases here.
I have to admit, I am in two minds here. Normally I would get bullish just because we had that VIX spike and the market is down so far, media reporting is all about recession etc. I have to admit, a lot of the signs needed for a buying opportunity are here already. The main thing giving me pause is that we have not had that big panic down day that many bears or neutrals have been expecting. However, sometimes you can get a bottom without some big headline-grabbing mini-crash. In the 2000-2003 bear market, there was one bottom in Oct 2002 around 770 which did not have a huge puke down on the last day. What happened was that the market sold down there to the prior lows, but then nothing much really happened for a few days, it just bumped along near the lows. Then one day it opened up a little, waited around for a while - the exact opposite of most market bottoms - and then, slowly at first but with increasing momentum, a huge 40 point (5%) rally ensued. That low started with a whimper and ended with a bang. Normally the lows get put in with a huge amount of noise and then reverse equally spectacularly. So I'm wondering if maybe the bottom this time will be kind of stealthy like that one in 2002, and not a big crash bang wallop. If so, then there's nothing really to wait for and I should start getting long on Tuesday. What do you all think? Could we be within days of the lows, or does the lack of panic mean we have further downside to go?
An email exchange that Cutten and me had over the weekend. (I'm sure he won't mind) Author Message Pa(b)st Prime 01-19-08 01:42 PM Registered: Oct 2006 Posts: 2036 Re: Your current thoughts on the S&P I'll post in my journal but I'll discuss privately some of my work. The reason I sold the rally in December was there were two measurements in SPX off the Nov low that were the same size as moves leading to the last stages of both the 1987 and 1998 pre crash bull swings. I had 100% confidence the market would stop at 1511ish and get creamed in January. Like you I pay VERY close attention to sentiment (I check p/c's hourly) and while I said a week ago that "fading the fade was the fade" even I was surprised by the lack of bounce. Here's the deal. If Friday's lows break we're going to 1247 SPX immediately. Perhaps even Tuesday. These lows Friday are so frickin' important to my charts that a penetration will be devastating. For example this break from Oct is now the same distance as 1998 Jul-Oct. Big stuff. There's several other counts just like this. A key one is from 2000. The stops below these levels are MASSIVE. I won't buy the market (although like an a-hole I was caught long Thursday in the 1440's) until SPX trades 1219. Sentiment, vix, cash on sidelines, low p/e's are MEANINGLESS when the market's in crash mode. Whether Friday's lows provide anything more than the bounce they caused intra day, I don't know. I suspect we're plunging. I detect little "crash" sentiment and a lot of "buying right here" type shit on various boards. I'm sure the thinking is "what's my risk buying a 200pt pullback?'" Cutten I won't even guarantee that after we trade 1220 that the mega bounce is able bring us back any higher than these levels. IMO, it's over. -------------------------------------------------------------------------------- Cutten wrote on 01-19-08 12:52 PM: Just thought I'd get your opinions on this. Right now my gut says we are very close to a bottom and a big subsequent rally. One thing I was waiting for was a big panic down day, as in August. However, after Friday's performance I am not sure if we will actually get one. If ever there was going to be a big puke down, yesterday should have been ideal conditions for it - the market sold off despite the Bush plan (down 45 pts from the open), it was an expiration day, VIX had been low recently, long holiday weekend etc. I had contingency planned for a *rally* more than I had for a damp squib of a 1% down day I'm starting to think maybe the reason it didn't sell off was simply because there are too many bears & people on the sidelines, and the market is just plain sold out. Apart from the lack of "panic"/high VIX signal, everything else here seems bullish - lots of worries around, market is down a lot from the highs, S&P is way below the 200 day MA, cash is being pumped into the system and further rate cuts likely, the financials are starting to pick up a bid and some corporate activity. Was wondering if you had any thoughts on this? I made a post to your thread on similar lines: http://elitetrader.com/vb/showthrea...551#post1755551 Let me know what you think! --------------------------------------------------------------------------------