This is more subjective and will be used just as a map, and not definitive tool for day-to-day trading. The question is "where are we currently in the context of 1995-2000 bull market)?"
Let's see. The baby-boomers had two assets for retirement - money saved in 401K and partly paid off homes (home equity). In 1995-2000, Fed raided 401K. Now they raided the home equity money. In the meanwhile, there were heck of parties with their money.
(a) Easy money came in the hands of VCs. They 'invested' the money to risky companies, flipped them to the public and then used the proceeds to invest in more companies. Most of the companies were internet and networking-related. At the end of the day, the word in the valley was 'next big thing'.
How did it end?
Internet retailers - AMZN, YHOO topped in Dec 1999. It coincided with time magazine putting Jeff Bozos ( ) on its cover. Nobody cared, and there was a big party in NASDAQ from Jan-Mar, mainly led by optical networking crap.
There was a crash in March-April. CSCO, SCMR, etc. topped along with rest of NASDAQ. The crash came with Fed hike. It was the initiation of bear market.
June-September, there was another big rally (kill the early bears? ) By then, some of the economic data turned out to be negative. Some of the companies like AAPL started to feel pinch in sales, but they were written off as exceptions. Fed stopped raising and Goldilocks came to town.
Oct-Dec 2000. Gas price at pump shot up, although crude peaked in Sept. Clinton opened strategic reserves. Recession talk and call for rate cut started to get louder.
Big cut in rates. Stocks were down a lot and had big comeback rally.
Current scenario. This is how I describe it.
homebuilders==internet companies ??
They topped in Aug 2005, when the cover of the time magazine came. Rest of the market did not care.
May 2006 crack == March 2000 crash??
Yield curve flattened by this time. Many sectors showed severe decline and never recovered.
Aug 2006-Dec 20006 rally == bear killer rally of last time (up to Sept 2000)?
1. Goldilocks with fed pause.
2. Led by SPX.
SPX made higher high than May. NDX made marginally higher high. This may be related to having too many bears this time.
Feb 2007 crack = Sept 2000??
By now, yield curve is definitely negative. Economic numbers (ISM) are getting negative.
Subprime sector (equivalent of AAPL warning) crashed. The main question of the market is whether it is a bad apple or there is something more scary?
If the above map is correct, Feb was THE top. The next rally will be with Fed cut, but by then stocks have to fall much more.
I am expecting a flat (doji) on monday. Seems like everyone is expecting a big move.
Why??? My option is not even there.
Expecting Tuesday down a bit, Wednesday down more, and then big move on thursday.
TRINQ is on a buy (overbought). It typically needs three days to go to full sell (thursday).
Internals (NAMO, NYMO, NAHL) diverging with price.
There was no sell off this week, because of holidays. We are now approaching big earning season (reality season). AA starts on tuesday.
TRINQ 2.6 !!!
That entry about biggest down day of the year was meant to be for NDX. Seems like SMH is the one getting hit. Well, the day is not over yet.
[edited by admin due to gross violation of TOS]
I just hope the board allows me post once in a while.
to be biggest down day of the year. Who knows??
Plan is to go back to sleep, as soon as all my stox are red
Have been holding SRS since posted here, with a nice gain. My calculations suggest tomorrow and day after (in fact next five days) should have gigantic declines. However, some things are getting me worried about the bearish case.
1. Even the village idiot is calling for a decline. Will there be any bull left???
2. NDE went up today. What's wrong with junk? Too many people shorting subprimes?
3. IYR did not close at the bottom, although NDX did. Why this difference in relative strength?
1. BKX and XBD are leading the market down. They retraced entire Fed rally. LEH closed at lowest tick.
2. SMH going down fast.
3. TRINQ sell signal active. Usually, it is followed by 5 days of selling.
4. CPC, internals all point to more selling.
Real estate sector had less retracement than others - looks weak.
Will cover, when:
either NDX runs my mental stop,
1. TRINQ buy signal is generated,
2. seven sentinels (stress on NAMO) give another early warning buy.
3. Junk stocks (NDE, DSL, BZH) do not get sold (especially watch DSL around lower weekly trend line).
4. Perfect trio covers.
We had an extreme TRINQ day. TRINQ 2DMA is 0.5. Usually there is some kind of follow through of the rally for 1-4 days.
Also, we got no sell signal from IYB's seven (NAMO etc.), or other internals (NALOW, NAHGH etc.)
Best case scenario for bears is to have TRINQ rising tomorrow, and NAMO falling. We can get IYB's early warning sign. Qs, IYR are slightly below Oct trendline. MICC, WYNN, LVLT are already there, and SBUX may have crossed it. BBH at 200DMA. We need to watch them tomorrow.
My guess is rally early tomorrow, and then, maybe, a small decline. Even better is gap down and rally, but close negative. Builds up bullish sentiment. Sentiment now looks very frothy, hmmm...fits perfectly with the map drawn yesterday.
EOD - watch TRINQ, NAMO, High, lows.
What if -
The above pathway makes sense to me, because of the following reasons:
1. I am expecting Fed to cut rates around May 10th (just using the same timescale between market topping and rate cut, as we had in 2000).
2. Media has to raise alarm of recession by then. That means there needs to be substantial drop in the market.
3. The terminal rally has to reverse and go further down, just like in 2000. So, target QQQQ=32.
This is the mental map I now have, but will let the market show where it wants to go.
All good ST traders I follow are flat now - denleo, Jnavin, Tparty.