The bottom-picking thread (smelly fingers optional)

I'm not sure if the bottom will hold permanently. However, an "investable bottom" is kind of a contradiction in terms. The whole point of investing is you don't try to predict short/medium-term price movements, you just buy at attractive prices. In 5 years the price of the stocks you buy today will be $X regardless of whether we "long-term bottom" soon or it takes another 6-12 months. So IMO for investors it's irrelevant - just buy if you find good stocks at attractive prices, turn off your quotes for those stocks and sit on them. In 2015 no one will give a damn about this credit crunch, but they will care about good stocks that grew earnings substantially over that 7 years.

As for trading this - I see the following possibilities:

1) No crash, we are at/near the lows now. In this case today should close either unchanged or up, preferably up 2%+.
2) Crash by Friday close. In this case today should be down a lot e.g. closing 1125 or lower.
3) Crash by Monday close. In this case today could close say 1125-1150, tomorrow close at say 1080-1125, setting up for Monday meltdown (perhaps on news over the weekend).
4) Market just ranges around, maybe grinding slowly lower. I find this unlikely since the VIX is so high, I expect some big move either up or down.

So IMO today's action is crucial. If there's no weakness, or especially if we rally hard, then it'll be looking like the crisis was cured by the central bank action.

For it to be a crash, ideally we want to see bearish price action in the face of this intervention news. I wrote in my trading plan earlier that the perfect setup would be an up open that does not really follow through, and then a slow drift lower mid-session, with selling increasing and then breaking yesterday's low later in the day. A bearish reaction like this to good news would be a very negative signal IMO, and would set up for a major panic Friday.

So far, the rally has been a bit anemic. If this was the low I think it should have been up 2-3% and lots of heavy buying, but I don't really see that. By the end of the day the market should have showed its hand. A break of the recent lows (1157-63) and accelerated selling into the close (like we saw yesterday) would be a warning that the crash is on.

So, even if you are bullish, I'd say a move to 1150 and below later today is very dangerous and you should consider at least hedging with the Sep ES puts - they are cheap with only 1 1/2 days to expiry.

 

There it goes again. Looks like the trapped bulls will sell into any rally until the dust settles.

 

Friday or Monday...Im thinking there will be 100 threads started on monday with "Black" in it....then we buyyyyyyyyyyyyy...peace

 

This looks pretty nasty to me - no capitulation yet, despite the VIX at 41+. The selling is a slow, orderly grind lower. We need to see fast, disorderly panic selling before it makes sense to cover any bearish bets, let along get long. I would want to see that evidence of panic, combined with a spiking VIX.

If anyone is following this trade, my suggestion is exit puts once they get to at the money, then roll down 25-50% of that proceeds into lower strikes. That way you keep open downside exposure whilst locking in profits. Alternatively, go long a put ladder across several strikes, and just book profits once the underlying hits the strike.

VIX 41.6 now - if we hit S&P 1000 then god knows how high that VIX will be!

 

Another bottom to pick...

 

I'm not sure picking it is what I'd wanna do

Regarding the market, this big fast spike up brings in the distinct possibility things aren't going to melt down imminently. The last hour or two are going to be critical - if the price can hold up 1160+ by the close, then I think the trade would definitely be off. However if we sell off in the last 2 hours down to the lows or even lower, that would be ultra-bearish, to fall back so hard after such a big rally.

I would go with whichever direction prevails. Big selloff means the crash is still on. Strong close means fugeddaboutit.

 

cutten or others...why the reference to Monday as a market crash day?...

 

Stock is surging.

DOW is +450 points. 15 minutes to closing.

What are you guys buying?

It jumped mainly on rumor of Paulson's consideration of RPC solution.

Fundamentals are still there, banks owing major money.

 

man you guys sure tried to get me to puke my shares. glad I held

 

this is what I mean by injection of hope, I believe news catalysts are much more important than numbers