Lundy, we all make trades that are contrary, and we all watch for expected pivots. What most of us do not do is point to the chart and announce this will be THE pivot day and then load up the boat willy nilly. I don't mind missing the first part of the move in order to have greater confidence in catching the rest of the move and avoiding a false signal.
Technical indicators aside, from a macro view i think the bulls are completely and totally screwed here. Let's take a look at a few things: PE ratios on tech stocks are still way too high, double what they should be even after getting crushed. Historical PE for stocks as a whole is around 15, PE for S&P is around 40. The dollar is in freefall and could be setting up for a multi-year decline, which is freaking out foreign holders of US investments. With the dollar cracking wide open we have the setup for a highly inflationary environment, which will require raising interest rates. But the fed will find that raising rates in this environment will kill stocks like raid kills cockroaches. As foreign inflows and public inflows into mutual funds ceases and even turns net negative, mutual funds will start selling every day instead of buying every day. The virtuous cycle of incoming capital put to work will turn viciously in reverse. As the public starts realizing their 401K's are toast and boomers realize they are going to be retiring on peanuts, spending will decrease dramatically. Bankruptcies will keep rising, as they have already been for past year or so. All over the country there are housing bubbles waiting to crack. Hundreds of thousands of people have taken out second mortgages and spent the money. What happens to all those folks when their mortgage note is suddenly worth more than the value of their house? The US has actually had a net NEGATIVE savings rate for the past few years. Short term traders don't really count because we are in and out so quickly, but in the battle of the elephants, the bulls are in deep trouble. They've spent a lot of dollars bumping up the last few declines. This has killed off weak shorts in the process, leaving mostly strong and pissed off mega grizzlies in the ring. They tried to kill the bears with multiple shotgun blasts and now the cartridges are empty. Then on top of everything else, we can count on the government to somehow make everything worse. Not sure how but they haven't let us down yet. We might see some rallies here and there, maybe even a few that last for more than ten minutes. But they are basically not much more than sweet honeycombs for the ursine crowd. You don't just have the biggest bubble in history where cab drivers are making a mint and then get off easy. Greenspan blew it bigtime with all his easy money, and the Y2K money infusion made it that much worse. Short term bounce/tradable rally? Maybe. But the big picture, technical analysis or not, is awful. Bad bad mojo. There is one ugly piper to be paid.
Well Jeff Cooper of TheStreet called the pivot correctly. The S&P just bounced off of 985 which is supposed to be some super Fibbonacci/ Gant magic number thingy.
well lets talk about this whole "fading" thing that most people do whether they realize it or not. If you buy a gap down or sell a gap up in the morning you are by definition picking a top or a bottom. We all do it sometimes, even daytraders.
i wonder if some prophecies aren't self fullfilling...its odd, the elliot wave seems to make sense and then people see that it does and they trade accordingly (except the market doubled when it was supposed to crash at Dow 4000-5000, but other than that...) and poof!
considering the cash only got down to 985 in the last ten minutes of the session, i'd say its a bit early to christen it a pivot point
Puffy, You can't pre-assume that ! You need to give it at least 2 more trading days before confirming a bottom ... these are just shorts being covered before the weekend ... the S&P closed at 989 ... do u call that a rebound from 985 ? That is a close near last week's low at 982.20 ... let's see what happens next week ..
I don't know whether it's a top or bottom, all I do know is that shorting is becoming too easy and so many shorts are getting brazen and complacent. I've even heard someone say they short at 9.31am monday and cover at 3.59pm friday. Goodness Gracious Great Balls of Fire, it's just like the rampant bubble days. If Lundy has a stop loss and his homegrown magic says that it's a bottom and he goes long, then that is just as good a trading system as any other I've seen. The trend is your friend. Don't fight the fed. We'll never see a prabolic bull move again. etc etc. but wdik.
i would say that technical forecasting ability is comparable to weather forecasting ability. A meteorologist with the proper tools can give you a high accuracy forecast for the next few minutes or hours, maybe even a day or two under the right conditions. A week out he starts getting fuzzy. A month out? Forget it- he is only relying on past trends and extrapolating by that point. the farther out you go, the more hidden variables come into play, the more new variables come into play, the more variables affecting variables comes into play. conclusion: If you want to make big predictions, you have to assess the macro. TA is just as useless for long term as fundamentals are for short.
we could definitely have a rally, especially if Monday is a big blowout "capitulation" down day. Of course I can say that because I am flat right now and glad of it. Remember today was triple witching and may be nothing but noise.