The Coming Rally Will Be Monumental

Discussion in 'Trading' started by Daal, Oct 8, 2008.

  1. The short sale ban expires tonight at 11:59 pm ET and will not be extended. After tonight, we will still need to follow locate procedures and the stock may or may not be available to short.

    However, the 'enhanced delivery requirements' will continue indefinitely and probably become regulation.

    reference: http://www.sec.gov/news/press/2008/2008-238.htm
     
    #11     Oct 8, 2008
  2. Cutten

    Cutten

    Every mean-reversion indicator - public bearishness, oversold, depth below the 200 day moving average etc - is saying buy right now. However, the indicator that matters most - market action - is saying sell. We've had 2 bull points (Fed intervention yesterday into commercial paper; global central bank cut today) and both times the market rallied initially, then reversed and traded lower.

    So it presents a dilemma - do you trust reversion to the mean, or do you defer to the market action and stay flat with some puts? The latter is the more conservative option, the former may work but you are certainly taking on a lot of risk for the reward you seek.

    Respecting price action gives the following results:

    1) Rally = 0% return
    2) Crash = 10%+ return, and chance to buy at the definite bottom for another 10-20%.

    Doing mean reversion gives these results

    1) Rally = 10-20% return
    2) Crash = -10-20% return, and probably you'll be too freaked out to stay long or double up at the bottom, in fact you will probably puke the lows.

    Perhaps the best play is long deep OTM puts and deep OTM calls - even at these high implied vols. That way you make money on a huge rally or a crash, and your risk is limited. You can ratio in favour of the calls or puts depending on your bullish, neutral, or bearish bias.
     
    #12     Oct 8, 2008
  3. I think there will be some kind of bottom today.
    EDIT: I will be long but not hoping for a huge home run like most bottom catchers right now.
     
    #13     Oct 8, 2008
  4. Cutten

    Cutten

    At 960? Or 760? :)
     
    #14     Oct 8, 2008
  5. Right now I think 940-960 area, waiting to reach there to fine tune targets. I am also trailing buy stops just in case there is another stupid government missile launch.
     
    #15     Oct 8, 2008
  6. Daal

    Daal

    bernanke said that on the testimony before congress. they will keep trying and trying, the fed and treasury have been acting like pimco's bitch so it must be a matter of time till they became a clearinghouse and start to guarantee transactions
     
    #16     Oct 8, 2008
  7. I don't see what value mean reversion has in unprecedented circumstances. I think it's a faith play in the best of circumstances. These are not the best of circumstances.

    But maybe that's just me. In any event, my row boat is docked. You more courageous captains of the sea best don your brown trousers.
     
    #17     Oct 8, 2008
  8. Daal

    Daal

    bonds are crashing. 30y down 2%, this seems pretty bullish
     
    #18     Oct 8, 2008
  9. Stocks should rally soon. If you look at the economic numbers objectively the economy hasn't weakened at all between September 2007 and now. There is no evidence that anything except for the financial and transports sectors has been affected by this so called crisis.
     
    #19     Oct 8, 2008
  10. wait for stock_trad3r to turn bearish.
     
    #20     Oct 8, 2008