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Update on my models & analysis


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#11 Entropy3.0

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Posted 13 December 2008 - 01:44 PM

Its all a bit of a yawn at the moment IT wise -
- we did get the swing top wednesday I was looking for
- we got back to lower end of the range 830's thursday overnight, but yet another ramp job and gap fill

Like I said a week or so back, stuck in a range, likely until January now.

The best short term read I have, is monday is more sideways/up in a 'b' wave short of the recent high to say 900spx, then 'c' down to come
tue/wed to take us back to 850-860....ground hog style ...then another rally back in the range.

The thing holding the market together are the internals. They had some serious momentum off the low,
but they have now PEAKED, which means they will gradually roll-over to an IT sell in the next 2 weeks.

Sentiment is already a major sell, price structure is not helpful beyond it rules out a major low.

Some observations -
- every gap down is bought, usually from the very first tick
- gaps ups hold up, and chop up never filling that day ( look at last 2, still haven't filled the one below after endless tries)
- up moves are choppy/overlapped 'corrective' that 'break up' instead of down most of the time.

Majority read that as bullish, euphemisms abound such as 'throwing off bad news, strong tape, bad news priced in'
So the majority are increasingly bulled up - but has the market actually broken out? or does it just keeps threatening too?
forcing shorts out and bulls to get more confident over and over

I believe were in another roll over exhaustion top formation like March-june, and july-sept...likely top of the range
has moved down now to 940SPX now, and trading ST is the best option until end of the month.

best,
Mark

BTW - here's some slightly off topic comments in reply to some views abounding in the matrix -

Longer term Market FF
Next few months 1 year FF - The SPX is ultimately going to at least 600, and alot lower cannot be ruled out. There will be no miraculous recovery, we will have a severe and long recession. There will be rallies, I expect ONE big one due to HOPE (as bear market always are) that Mr President elect can do the impossible, and when that hope breaks, the final decline will occur to end the bear market, likely 2010-2012. That rally I'm looking for has not started yet according to my models.

The Economy - hope springs eternal?
KISS principle - we had a historic series of bubbles - stock market, housing and overall credit bubble. They have all burst in 2008, how likely is it that everything is back to normal by 2009? 2010?..2015?....every other bubble in history has taken as long to deflate as they took to build, and gone to the opposite exteme called REVERSION TO THE EXTREME.

Maybe this doesn't, but your betting against the odds.

Ask yourself - what is it that is going to drive the economy up? the last 10years, it has been a series of bubbles, so unless the credibt bubble is going to be 'reinflated', what REAL growth is going to cause this miraculous economic expansion?

Hang on though Mark, economists say XYZ....wait..economists? did they see this coming? did they see 2000-2002 coming, did they know we were in historical bubbles? reality - economics is joke discipline of ivory tower academics with no real world application as its results have proven.

- traders - which traders? which ones saw the potential for a systemic crash AND got the timing remotely right? ...interestingly to me, most of the ones that never saw it coming, argued with me it could wouldn't happen, are now all bulled up again.


Whilst we on the economy, here's my responses to some comments/questions I've read the last 6months, no importance to the order.

Q. Where are those catastrophe predicting bears who were proved right finally!
A. Broke? ...if I predict my own death every day, when I finally die am I a prophet?

Q. What happened to the PPT, how can there have been a PPT if we crashed?
A. Because the PPT failed? its like believing how can there be a FED if we have a recession, since its their job to avoid one.

You have to be a long time 'tick watcher' to see it, you develop a 'feel for the tape', but I can always tell when prop up jobs are going on, that a maybe swing/IT trader wouldn't. I note that all those who staunchly disbelieve our markets are intervened with, not a one saw this crash coming. I did see it coming, explained why it happen and my logic has proved correct, see comments from August 2007 below.

Infact, we crashed largely because of the 'agents of the matrix' propping it up for at least a year or more (2007 but starting in 2005). It created precisely the moral hazard necessary i.e. all the big players knew there was a guaranteed floor, each 'correction' got closer to a crash, and

each time it was 'saved', reinforcing this belief. For the record, this I pointed this out during 2007 - here's the warning I gave in August 2007 -

"
AUGUST 17 2007 - This now confirms the degree of crises that prompted my post a couple of days ago. We now have confirmation of absolute panic in the halls of 'leadership', similar to LTCM debarcle.

Maybe this buys 3-6months of 'relief' like the choppy rise in 2000 after the intial drop, until the real drop began in the fall, but I doubt it. [
it bought 3months, exactly like that choppy rise in 2000, am I psychic? no, its simply the rally from 2003-2007 was an echo mania.]"

http://www.traders-talk.com/mb2/index.php?showtopic=74778&st=0

"In my view what we are living through is an a GRAND EXPERIMENT IN ECONOMICS like nothing that has gone before, the phrase 'house of cards' comes to mind.....
...clearly higher potential for what euphemistically called 'dislocations', hmm, like the financial equivalent of dislocating your manhood, not a pretty picture.

..After LTCM in 1998, then technology bust of 2000-2002, and Sept11 ...each 'panic' required a
bigger creation of fake reality ( or credit ) to maintain the illusion of a 'sound economy' - I ask, what kind of 'sound economy' requires such enormous infusion of credit to prevent a depression?

Again, we are back 'at it', with the latest crises, predictable to anyone with objectively in the
housing area.
The desperation and pleas of the 'financial matrix' are deafening aren't they, what are they so scared if our economy is so sound.?

What is 'different' this time, is that 'all the eggs are in one basket', we've had a stock bubble, and when that crashed we used a housing bubble to maintain the illusion, but now thats' cracked, its the end game - you cannot reinflate bubble until its deflated first, but it seems some need reminding that despite the omnipotent FED ( that's sarcasm in case you don't recognise it
),

Does this mean a crash?
It is certainly possible, and unlike 1987, I believe it would be a kick off like 1929 more than an end point - remember, rule of inversion, that is, if we do crash everyone and his brother will pull
up charts of 1987, or 1998 and show the bottom, with logic and arguement so convincing even
Prechter will turn bullish, ok, I'm kidding of course, about Pretcher :-)



Q. We have to bail out XYZ as what's the alternative?
A. Capitalism - where successful companies who make money survive, and failing companies who don't go bust, allowing new companies to try to their luck. The ones with
a successful business model will make money.

** No one can make money long term when the market space is full of failing business models, propped up with 'bail outs'.**

There is infact no 'bail out', that implies a problem is fixed, it isn't.

Take any example you like, airlines, auto makers...these companies have failed business models since pre-2000!!! they used all sorts of credit(debt) based alchemy to fake profits/earning. You cannot fix and OVER SUPPLY problem by keeping everyone in business, that is just going to repeat the problem.

Of course, bail out also implies someone has paid off the debt, they haven't. The debt has simply moved ownership from the people responsible for it, to innocent people i.e. future generation who must now pay off the debt they had no part in.

Q. We can spend our way out this with 1930's style Keynesian policy

No, It never even worked int he 1930's. It can cause a long slow painful grind down to a lower point rather than a quicker deeper one.

So called demand-pull eocnomics cannot work, because the problem is oversupply of everything due to a decade of excess credit beyond our ability to pay off the debt - its absolutely no different to you borrowing 10Trillion from the bank, and a bunch of businesses spring up to sell you stuff. When your money runs out, the business are unecessary. Gov't/FED allowed American to borrow Trillions beyond what they can pay back, and business relying on that are simply 'over supply'.

Plus this is yet again dumping more debt on innocent future generation to continue to maintain reduce the oversupply based of the excessive of this generation. Also this policy did NOT work in the 1930's, by 1937 the economy was still stuck in major recession, but the 2nd world war came along and destroyed supply, and stimulated demand.

This was proven in the 1970's when the policy was tried, and failed AGAIN, causing stagflation...it was precisely this failure that led to monetarism( the currently failing policy).

When I first came to post on TraderTalk from longwaves board, I took alot of time to try to explain economic system and why it would fail, many said it was irrelevant to markets...right. This post in 2004 explain this, and what is going on TODAY, I decribed exactly what were seeing now.

The stage were in RIGHT NOW, I described back in 2004 -
http://www.traders-talk.com/mb2/index.php?...ubble&st=10

2004 -
"... Poor quality lenders have gone bankrupt, that's OK. There are still plenty of lendrs, there's no serious trouble until banks have large loan write offs, we can't let the banks fail or have to reduce lending or the games over - so! The FED/Govt' assures it that should it fail, it will get bailed out, because the banking system is 'too big too fail'.
The FED can pay off
the bad loans, becauese it can monetarize any debt it likes, simply be 'creating money from thin air' in electronic accounts.
I often referred to the Enron Economy to get this idea across -
"... that's why i keep repeating, this is the 'Enron economy'...the whole economy is a gaint enron debt model, and it works until it doesn't ."

Here's my very old site with millions of charts and some explaination in 2003 of the 'story so far' of the credit bubble.

http://markdavidson....ame1Source1.htm


I remember how ALL but a very few of us on TT believed the US economy was sound, that

this could never happen, housing prices could never fall nationally...I won't embarrass anyone with those threads.



Q. What can we do that doesn't involve more credit/debt/bailout?

A. I havent' heard anyone asking that, I wonder why? right, because the alternative is WE HAVE TO ALLOW A MAJOR RECESSION, and of course, the FED/GOVT have spend the last 10+ years socializing away all risk/fear of recession, absolutely refusing to allow these natural purging of excesses. One must enjoy the hilarity of their pretend SHOCK at what is occuring, because of course, this TOO BIG TOO FAIL disaster is all of thier own consious making ever since 1998(LTCM) when they refused to allow the natural order to occur, and essentially lost their collective minds in a historical experiment with the economy, that could only ever end in this disaster.

I and many others tried to point this out, but the plugged into the matrix masses didn't want to hear a word of it as greed took over, yet now they also hilariously claimed to be shocked, just like the Dot-Commer's in 2000-2002.

Edited by entropy, 13 December 2008 - 01:48 PM.

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#12 mss

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Posted 13 December 2008 - 03:29 PM

:) Very nice thread indeed. Not much more to say, but there were warning signs all around for us "older" folks, but some of us were "dissed on" and/or completely ignored. I will say I think you said more and earlier than anyone else. Thanks for all your work and sharing with us. Very best to you and yours, mss
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#13 Tor

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Posted 13 December 2008 - 04:19 PM

Great work, but a bit long. Could you abbreviate it next time. Overall, I agree with your conclusions, so good work.
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#14 VolPivots

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Posted 13 December 2008 - 06:53 PM

Good summary about the 'Enron' economy ;) Funny how so many are pounding their fists suggesting what a wonderful long-term buying opportunity we have at hand. Of course, the vast majority of them gained their experience during the greatest debt-financed "boom" seen. None of them have ever seen the long-term 'unwind' effect unless they are intimately familiar with the Japan experience. So the ongoing grand experiment can only be successful to the extent that developing/emerging nations pick up the slack while the developed nations extreme-revert.....without self-sustaining middle class support, I highly doubt it......still too US consumer-centric........

#15 Entropy3.0

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Posted 13 December 2008 - 07:25 PM

Great work, but a bit long. Could you abbreviate it next time.

Overall, I agree with your conclusions, so good work.

Thanks Tor.

Oh and this WAS the abbreviated version. :o :lol:

Perhaps you could increase your attension span. :P

best,
Mark.

Edited by entropy, 13 December 2008 - 07:26 PM.

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#16 Entropy3.0

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Posted 13 December 2008 - 07:46 PM

:)
Very nice thread indeed. Not much more to say, but there were warning signs all around for us "older" folks, but some of us were "dissed on" and/or completely ignored.

I will say I think you said more and earlier than anyone else.

Thanks for all your work and sharing with us.

Very best to you and yours,
mss


Thanks mss.



Good summary about the 'Enron' economy ;) Funny how so many are pounding their fists suggesting what a wonderful long-term buying opportunity we have at hand. Of course, the vast majority of them gained their experience during the greatest debt-financed "boom" seen. None of them have ever seen the long-term 'unwind' effect unless they are intimately familiar with the Japan experience. So the ongoing grand experiment can only be successful to the extent that developing/emerging nations pick up the slack while the developed nations extreme-revert.....without self-sustaining middle class support, I highly doubt it......still too US consumer-centric........


..Ah indeed MN the 'Enron' economy, I know you remember that catch phrase well as you were one of the few not plugged into the consensus. ;)

Talking of Japan, I heard Fleckenstein of Japan bubble teachings has closed his short fund, so based on his timing we should look for a bottom around 2020. :rolleyes:

best,
Mark.
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#17 leverage4

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Posted 13 December 2008 - 08:36 PM

Entropy, Wow. I'll save the link and refer to it often. Full of insight and wisdom. Thanks so much for sharing. :clap: Lev

#18 VolPivots

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Posted 13 December 2008 - 08:36 PM

Yep....the writing on the wall was very visible last fall.....if I'd only known then what I know now......and on it goes ;)

One addendum....."Enron had become a victim of its own 'system' (along with the cavalier attitudes) and the smartest guys in the room were no longer....."..............unfortunately, there will likely come a day when the same is said about the US 'system'

Edited by marketneutral, 13 December 2008 - 08:47 PM.


#19 Entropy3.0

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Posted 16 December 2008 - 07:46 PM

I can't resist posting this, following on our little discussion of the 'grand experiment', todays FED statement and media matrix 'code dissemenation' to the plugged in masses is
one of the funniest things i've read in a LOOOooong time - here's my favourite media article so far and quote:
<H1 class=storytitle id=StoryContent_TopPageNavigation_Headline>The Fed goes to Defcon 1

http://www.marketwatch.com/news/story/fed-goes-defcon-1/story.aspx?guid=%7B8DA1A356%2D2B0F%2D4C8A%2D9396%2DEFDFAC959357%7D

"Critics will say Helicopter Ben has taken off and is now prepared to drop billions of dollars across the landscape, destroying the economy with a hyperinflationary spiral. But cooler heads will counter: What choice does he have? "

..just read that again.....the matrix doesn't DENY that's what helicopter Ben is doing, but says that's our best choice!!! ....phew, I thought
we were in trouble there with risk of a depression!, thankfully we will only risk destroying the economy with hyperinflation. :o :lol:
....but the killer punchline ...that this view is from the 'cooler heads' ROTFLOL ....these must be the same cooler heads that created all
the bubbles that caused this mess? ;)

Can you imagine the kids 50 years from now reading the history books and these quotes?
Do you think our generation will be called 'the greatest' or something a bit less flattering as 'we' sacrifice
American's future to avoid paying for our mistakes..hmm.

We truly have entered a world of Monty Pythoneque leadership....it always was of course, just now its out the
open for all to see....all those who want to that is.

best,
Mark
</H1>
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#20 Tor

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Posted 19 December 2008 - 08:26 AM

:)
Very nice thread indeed. Not much more to say, but there were warning signs all around for us "older" folks, but some of us were "dissed on" and/or completely ignored.

I will say I think you said more and earlier than anyone else.

Thanks for all your work and sharing with us.

Very best to you and yours,
mss


Thanks mss.



Good summary about the 'Enron' economy ;) Funny how so many are pounding their fists suggesting what a wonderful long-term buying opportunity we have at hand. Of course, the vast majority of them gained their experience during the greatest debt-financed "boom" seen. None of them have ever seen the long-term 'unwind' effect unless they are intimately familiar with the Japan experience. So the ongoing grand experiment can only be successful to the extent that developing/emerging nations pick up the slack while the developed nations extreme-revert.....without self-sustaining middle class support, I highly doubt it......still too US consumer-centric........


..Ah indeed MN the 'Enron' economy, I know you remember that catch phrase well as you were one of the few not plugged into the consensus. ;)

Talking of Japan, I heard Fleckenstein of Japan bubble teachings has closed his short fund, so based on his timing we should look for a bottom around 2020. :rolleyes:

best,
Mark.


Seriously thoough Mark, really good stuff and thanks for sharing.

Was just 'pulling your leg' in my last post.

Merry Christmas BTW.
Observer

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