BEARISH CONVICTION

It befuddles me that so many had found strong enough bearish conviction in today's action to carry a full load of unhedged short position over the weekend. If anything, today's message reads like TBD (To Be Determined) to me.

After more than 8% surge in just 3 sessions, it's not at all unthinkable for the market to take a breather on a low volume Friday. The top 3 most active SPY weekly options put/call volume ratio is in a virtual tie. And, the VIX options volume appears neutral to slightly bullish.

The "continuation" flag pattern below also indicates this is a day of consolidation. It's kind of comical that the market did a "double take" on the breakout at 3:00pm. I guess it's not quite ready to make that commitment to the next level yet. The hourly chart that I had posted this morning still shows no breakout to either side.

The logical assumption should be to the upside after the consolidation.

Edited by TechMan, 07 October 2011 - 09:08 PM.

1150 needs to hold. Odds favor a bullish quarter still. I think if it fails this time though we could get a crash.

Wow, I can't believe I found my password after all these years. Thank you very much, TM. I always look out for your posts, even if we happen to be on opposite sides occasionally. I had a short signal going into this morning's cash open but it did not trigger and am still long from ES 1117 from two days ago. Monday is going to be really interesting. Have a good one and see you next week.

Techman, that's what makes the market and what's not to like?! When I see that NAAIM chart and so many folks leaning bearish, it almost makes sense to play the contrarian regardless of what charts look like. But if on top you have non confirmation by bonds, internals solidly positive and price action exhibiting bullish pattern, how could you not take the bull side? While I'd like for market to take off right from the get go on Monday, I think it makes the most sense for price to come down and clip that 1150 pivot at least once and then turn up. Regardless, I am prepared for both. I understand that Mr. Market is sinister and can slap me down at any time but this is how I see things right now. IMVHO

This is getting funny, and I'm having fun with it…. 3-4 hours went by without a new thread posted here. And, as soon as I start a new thread, there we go again. 2 new threads within minutes. :=) ================= pilover - Aloha and Mahalo for dedicating your very 2nd post in 4 years to this thread. I'm hoping to read more about your "signals" now that you've found your password. Well said. I guess I disagree with most people most of the time :=), but that doesn't mean I don't enjoy reading a well written commentary. That's what makes the market. ================= CLK - Even with the pullback today, the Dollar's still hanging below the daily trendline (per my chart this morning). I've got a hunch that Monday could be the real deal. And, I don't think a crash is probable at this point. ================= RM - Thanks for your input. I normally don't like to trade much on Friday afternoon, not to mention the Friday AH session. But I've got some long positions set up for Monday, hedged, of course.

Since my indicators are all long term they are useless to a lot of traders. One indicator that is more of an observation is that the number of stocks in downtrends keeps getting bigger. Very few stocks are breaking out above downtrend lines when the market rallies. However, when there is a rally, stocks where shorts have big profits, rocket up out of proportion the rest of the market the first couple of days and then start dropping again. I am convinced the rally of the last few days has been an event sponsored by the Fed and possibly other central banks. All it takes to get me out of a short position is for a downtrend line to be broken. It just isn’t happening.

JQ - Thanks for the input. How do you come up with the number of stocks breaking below their respective trendlines? Do you look at every SPX stock or us a program? What time frame do you use to draw your trendline?

JQ - Thanks for the input.

How do you come up with the number of stocks breaking below their respective trendlines? Do you look at every SPX stock or us a program? What time frame do you use to draw your trendline?

So what’s going on!

While talking head on TV and in news paper, which includes fund managers (ranging from giants to diminutive), economists, journalists and eyeball grabbing anchors, cannot see beyond India growth story. The real story is capital has no color, so it doesn’t come in tri color or star spangled flag as main stream media would make you believe. Only two colors capital knows: Greed and Fear. Period.
So let me put the perspective right for everyone here on what stage of crisis or evolution we are:
a) World’s top 5 banks have about $ 250trillion (that’s five time the worlds GDP) in notional derivative exposure ranging from interest rates, currency, equity to bonds. I know the familiar refrain is that when netted this amount would reduce to manageable quantity. AIG was bailed out by USA to net out the payouts to Goldman last time
Europe is still in phase of denial about severity of this problem. A bear market has three phases: Denial, Concern and Fear. Europe is still to make the transition from denial to concern; phase of “fear” is long way out. Indian markets for that matter are in concern phase but yet to enter the fear phase.
c) European solution being envisaged have two basic tenets: a) Greece can be ring fenced by backstopping rest Backstop can be guaranteed EFSF jointly backed by Euro States. I would request readers to google difference between “Jointly backed” to “severally backed”. So currently envisaged EFSF is a toxic CDO where it will get the rating of its weakest backer.
d) One of the biggest and most successful democracies USA with its just two political parties can’t figure out its left from right. How do investors expect Europe which is commotion of so many countries to set aside its internal and external political motives to come together and screw their citizenry in one swoop? Yes!! EFSF or any other form of intervention to “Normalize” markets is one or other form of public funded bailout preventing natural market action of destruction and construction take place.

Just to be fair and balanced....

One of my favorite consumer sentiment indicators, the DSM (Discover U.S. Spending Monitor).... For September, 2011, a 4-year-old daily poll tracking economic confidence and spending intentions of nearly 8,200 consumers throughout the month, recorded a 3.5 point drop to 77.0 percent. This is only 1.3 points higher than the record low reported in February 2009.

We can see it as glass half full or half empty.

Edited by TechMan, 08 October 2011 - 08:26 AM.

When markets sell down into Oct. it's an IT buy. The window of time for shorting has passed I believe. I'm hedged so I don't care, either way a trending move is due next week. Late December would be a good time to start shorting again.