Overlay 1997-1998 chart & The Fed Statement - SPX, VIX break to 1997 Options

[Trend-Signals]

1997 VIX pattern de ja vu, 1997 ^ 1998 VIX level 37.50
http://www.traders-talk.com/mb2/index.php?showtopic=74898



http://www.traders-talk.com/mb2/index.php?...74889&st=20

CAPITULATION - "R"eversal DAY, Screaming "R" Day




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[b]The Fed Statement 8/17/2007

Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.

Voting in favor of the policy announcement were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Richard W. Fisher; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; Eric Rosengren; and Kevin M. Warsh.




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Market Summary

Dow jumps 233 on Fed's discount-rate cut

After a wild ride Thursday, stocks skyrocket as the Federal Reserve cuts the discount rate by half a percentage point. Hewlett-Packard reports a jump in profit. Dell restates earnings. Whole Foods can move forward with its purchase of Wild Oats.
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Top GainersSymbol %Change
DFR +36.13%
RARE +35.88%
TMA-C +31.71%
Top LosersSymbol Change
ARAY -25.57%
HSOA -23.46%
WNS -16.53%


Exchange RatesCurrency US Dollar
British Pound to US Dollar 1.982500
Euro to US Dollar 1.348000
Japanese Yen to US Dollar 0.008700
Canadian Dollar to US Dollar 0.942600
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"Here I come, to save the day . . . "

It wasn't Mighty Mouse who came to the markets' rescue Friday morning, but Federal Reserve Chief Ben Bernanke.

After a wild week, the Fed cut the discount rate to 5.75% from 6.25%. The move is intended to help ease fears that have been causing wild swings in the markets over the past few weeks.


Stocks, especially financial stocks, soared on the news, climbing nearly 322 points right after the open, after a heck of a roller-coaster ride on Thursday.

While gains had pared back a bit at the close, they were still big. The Dow Jones Industrial Average was up more than 233 points, or 1.8%, to 13,079. The Standard & Poor's 500 Index was up nearly 35 points to 1,446, and the tech-heavy Nasdaq Composite Index also rallied, up 54 points to 2,505.

Stocks that had been battered all week, such as Countrywide Financial (CFC, news, msgs), Washington Mutual (WM, news, msgs) and Lehman Bros. (LEH, news, msgs), saw big gains. Countrywide led the S&P 500 with a 13% gain to $21.43. Washington Mutual was up nearly 8% to $38.37. Lehman Bros. jumped 6.1% to $58.11.

Countrywide's problems financing its business operations in the last two weeks were a major reason for the market's recent turmoil.

http://articles.moneycentral.msn.com/Inves...817markets.aspx


I remember quite a bit about both years. The picture to the left is me in the CBOT's then newly opened Dow pit on 10/27/97 . The photo appeared in Time magazine the week after the '97 crash. Greenspan was the cover and I'm on the index page, pictured between Slick Willie and Hunter S. Thompson. biggrin.gif

There was also an interview with a guy I'd never before heard of. Jim Kramer.

'97 was just a one day deal. A more volatile Feb. 27th. All off Asia. And Niederhoffer, lol. In fact another trader who'd been a subjet in the first Market Wizard's book sold into the subsequent rally, kept adding and lost millions.

'98 was more like today. The bad news about LTCM, Russia, Asia, Impeachment and Treasury spreads went on for months. It all ended with the biggest bang I'd ever seen. Around 2:30 on October 15 the Fed cut by 25bp. Dow futures rallied 500pts into the close. It wasn't until the trading days following 9/11 (almost 3 years) that the market saw those prices again!!!!


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Anyone can elaborate on 1997-1998 to now? The financial crisis similarities?



VIX high 37.50 +/-, 2002 or 1997 de ja vu when market rallied 60% after making the bottom at 730 then rallied to 1170.

Then, another VIX spike in 1998.

This post has been edited by Trend-Signals: Aug 18 2007, 10:25 AM

[Trend-Signals]

As commented that RE/subprime bubble is burst, so now we can resume reviving Economy.

Bernanke's Master Hand to manage the health of Economy given the current condition.

We are in good global economy which is my position as I noted during the last few years and I do not think that we are in bear market.

IT'S GLOBAL ECOMONY!!

Remember the Buffett and CSCO Chamber's comments

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Good reasons"

by Tor - TT

For me, I have to admit this is probably the most interest point in the stock market in my whole career or 15 years.

I think the weight of evidence goes to the upside. Putting aside technicals, which we all see and know here.

The equity pool is shrinking.
Hedge funds as an asset class are less attractive.
Policy has responded early, and quickly. Expect more to come.
I find it difficult to accept a repeat of Nov 2001, post tech bubble.
Liquidity and money supply strong.
Downside protection is high.
What other assets are there to buy? Bonds? not really. Hedge? What are you buying is the question and people are sceptical now. Commodities? Maybe a bit long in the tooth??? housing? No way. Cash? Possibly.

Equities compete with cash, but I dont think we are there in terms of consumer preferences.

What exactly is out there? A credit crunch based on sub prime lending spreading? I have heard of a few funds losing a lot of money and closing shop, but that is a rich mans issue.

Does the mainstream consumer remain in tact? For the moment it seems so to me.

This post has been edited by Trend-Signals: Aug 18 2007, 10:48 AM

[Trend-Signals]

The insider buying information is extraordinary as we can see that it reached very high level unlike the street sentiment.


http://www.sentimentrader.com/subscriber/c...SIDER_SCORE.htm

[relax]

always interesting work

what do you think the odds are of a retest of the lows or a new low (wave 5 down)

thursday's candle was on very high volume, so seems like a retest is in the cards

or did we already get a sort of retest in the futures friday

do you have any time frame for things to happen

interesting, the distance between 1998 bottom and march 2003 bottom added to the march 2003 bottom gives a date of august 23 2007, so maybe we see some bottoming action this week

as i've written in another post, imagine the panic a new low would create, which would be the perfect setup for new highs

[Trend-Signals]

always interesting work

what do you think the odds are of a retest of the lows or a new low (wave 5 down)

thursday's candle was on very high volume, so seems like a retest is in the cards

or did we already get a sort of retest in the futures friday

do you have any time frame for things to happen

interesting, the distance between 1998 bottom and march 2003 bottom added to the march 2003 bottom gives a date of august 23 2007, so maybe we see some bottoming action this week

as i've written in another post, imagine the panic a new low would create, which would be the perfect setup for new highs

Hi DK, Thanks

As I commented on the link below, the current support is "THE BULL/BEAR line", therefore, Bulls rush in as we have seen on 8/16 climactic reversal.
http://investorshub.advfn.com/boards/read_...age_id=22156370

The bull defense line as noted on the link is THE LINE which bulls need to defend at ALL COST.

As for retest of the low, I do not think that it is necessary; however, it is not a critical issue than the fact that it is THE BULL/Bear line.

My position is that bulls will defend the line; therefore, until proven otherwise, I don't see that we are going to trade to lower.


Where are you referring to?

as i've written in another post, imagine the panic a new low would create, which would be the perfect setup for new highs


Some bears are insisting "Retest of the Low" as if they need to get out of the short position ===> "TRAP"?



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A retest of low is more likely when we have a reversal low with low volume

thursday's candle was on very high volume, so seems like a retest is in the cards


~~~



btw, do you have a web blog, I have come across alias under " DK" before.

[Trend-Signals]

I commented on VIX breakout in Jun-Jul 2006 bottom call that market is showing similar pattern of 1995.

The current price pattern shows that we are in 1997 pattern when market corrected 10% after a correction of around 7% which is Jun-Jul 2006 low.


In 1997, we didn't have a restest of the low after similar "W" formation with lower/low with 10 %+/- correction which is the VIX level 37 which we have seen. After 1997 10% correction, market rallied 60% before 1998 correction of 20%.

In 1998, after 1997 bottom followed by a rally to 60%, we had 20% +/- correction with higher VIX level to 47.

This post has been edited by Trend-Signals: Aug 18 2007, 12:27 PM

[relax]

no i don't have a blog

thanks for your input

what's also interesting is that we have not seen five black candles in a row in S&P, which previously has been a great indicator of more downside to come

so looking for higher prices, but am just constantly hearing the word "retest" and good arguments for it

in that respect i think it's important that we do not close the nasdaq gap from friday

[Trend-Signals]

I commented on the extreme breadth level and also showing positive divergences.


http://www.traders-talk.com/mb2/index.php?showtopic=74680


As noted below:

IT'S 1997....

http://www.traders-talk.com/mb2/index.php?showtopic=75006



1997 Price Action Pattern:


I commented on VIX breakout in Jun-Jul 2006 bottom call that market is showing similar pattern of 1995.

The current price pattern shows that we are in 1997 pattern when market corrected 10% after a correction of 7%+/- which is Jun-Jul 2006 low.




In 1997, we didn't have a retest of the low after similar "W" formation with lower/low with 10 %+/- correction which is the VIX level 37 which we have seen. After 1997 10% correction, market rallied 60% before 1998 correction of 20%.

In 1998, after 1997 bottom followed by a rally to 60%, we had 20% +/- correction with higher VIX level to 47.

[Trend-Signals]

1929 speculation is an old news:

Isn't many others claiming 1929 case with very high level of shorts and "Squeeze" on Friday. The short squeeze is just started, I think.


Now, I commented that housing market topped in 2005, yes, I called "Housing market top" in 2005 and commented extensively on RE/ARM/loan problems such as "subprime drama" during Jan-Mar 2006 comments.

As commented during Jun-Jul 2006 bottom call with VIX breakout pattern in 1995... now we have the 1997 pattern.

Well, will see, Squeezes will go on since we have many are already shorted.... nothing unexpected since the 1929 case is already an old news.


What's not old news is that it is 1997 case with the Fed intervention.....

Why do you think that we had the Fed intervention!! It is because, I think, that the high speculative manipulation of short side for "1929 case"!

Well, it is nonsensical to compare Apple & Orange. We are in GLOBAL ECONOMY.




http://www.traders-talk.com/mb2/index.php?showtopic=75014

This post has been edited by Trend-Signals: Aug 18 2007, 01:30 PM

[relax]

exactly this is not 1929

if i was short i would be thinking man is this really worth it - fed will mess my position up if the market drops more

and if this is about US and global growth i simply do not see the issue

go and look at www.drybulkindex.com and you will see record import and export levels of coal, iron ore, grain, steel etc.

and let's not forget that IMF some weeks ago revised up their estimates for US and global grwoth

the fact that all this happened from wednesday to next opex friday, makes me think this was once again a manipulated move that lost some control

which shows that the market after taking some hits in february and june was a bit weaker than previously

but we've all said what we wanted to say - let's see the action next week -

but if you were short I don't think you could sleep well knowing that Fed could mess you up at any point

all those stories mess me up - focus on the charts, which are still bullish IMO
enjoy the weekend trend-signals ;-

This post has been edited by relax_dk: Aug 18 2007, 02:09 PM