The market appears to be at a very important juncture. We have gone to new highs on the S&P and the Nasdaq. We are flirting with new highs on the DJIA. However, the IWM which is a proxy for risk continues to lag. I use the DJIA when I talk about the market because it has the longest trading history. Since the bottom in 2009 there has not been a topping set-up in the DJIA according to the way I look at the world until this April and July. Once the set-up completes the top is in and it is game over. We have not seen the set up fully complete yet. The set-up in April was negated and the July set-up is in danger of being negated very soon.
To get bearish in the short term, we need to see the DJIA fail soon and start to roll over. It can even go to a new high but it would have to roll very quickly. We are in month 65 of the current 4 year cycle advance which is the longest 4 year cycle advance in the history of the DJIA. In addition, tapering ends in 48 trading days. The next 6-8 trading days are very important. Should the topping set-up disappear there is a chance this market goes into full on melt up mode for a grand finale. Hedge funds are underperforming the market YTD and active mangers are sucking wind and they are behind their benchmarks. If we melt up a huge performance chase could ensue. However, I remain a skeptic since the last two times the Fed ended QE the market rolled quickly and they had to reload QE. Cash allocations are a good decision right now as it gives one options should we get a resolution soon.
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Too soon for a final melt up. We are just completing Primary Wave3 and have Wave4 (10-20% correction to follow) and then the blow off Wave5 to end it, most likely next Spring when interest rates begin to rise in earnest.
bensteinmoney,
10-20% correction makes more sense to me.
wow … early on it looks like bombs-away friday, follow-thru monday with no relief till tuesday? or will be another kick-save & a beauty?
developing …….
Thanks BlueStar. I enjoy your posts. This market continues to amaze me.
Correct me if I’m wrong but isn’t the reason the market has had this long of a bull run because the powers that be know that, because of the leverage in the system, the markets can’t handle a 10-20% correction?
Draghi and Kuroda more important to hear then Yellen at Jackson Hole. Sept 4 is our cross roads date but Jackson Hole will give us our taste. IMHO BoJ’s hands are tied and ECB shot too much in already. Copper imports in China are fading, nothing looks good, this darn Bubble has to pop cuz there are no more Arrows left out of the global central banks…I hope?
Nymph, you’ve been saying that for two years … you must be broke by now or you should be unless you are just a paper trader.
bensteinsmoney, I have held the same stupid etf’s since 2009 and haven’t added to position because as Paul Tudor Jones says “loosers add to loosers”. I promise myself I would follow this bubble until it pops, since 2009..as you know I have been saying since Feb 2009, China has been Importing more copper then they ever needed causing a bubble, bubbles always pop, and I need to learn what causes it. FWIW, the Port Scandal seems to be it…we will see.
should have proof read…lol. Anyway, bottomline, waiting for that bubble to pop to understand it’s anatomy.
Bensteinmoney,
What do you need to see to get aggressively short here?
Trading_nymph
Don’t be too religious about these things. Price is the ultimate arbiter of these situations.
helecopter ben
you are not wrong but when the top is in even the Fed can not stop it. What they are doing is delaying it, making it worse by stretching it and ultimately causing a crash.
BlueStar, Have to keep my religion for now. 🙂 In Oct 2008 I was pure fundie/bottoms up micro and great stocks sold off hard. I had to dig deeper to see why and what controls it. A computer can just follow price action better then myself, I know there must be a big picture that I am missing…mixture of Commodity based liquidity mixed with central bank historical action…and will end badly, but I have to see how it all falls apart.
Blue,
still seeing a lot pressing here. Confirms your active manager trail. I am in the same boat, usually tracking ahead or right on.
I think this has to do more with capital flows being directed at the mega large caps like OEX.
My model is just showing a rotation to div payers and mega caps.
jimmy_two_times,
I agree. At the end of a bull the long only’s can’t go to cash so they sell mid and smaller caps and go up the quality and market cap scale on the margin.
LULU & TWTR … I like it when the OA & the BlueStar are on the same page .. good stuff 😀
juice,
I have four positions: lots of cash, lulu calls, twtr calls and stock and short a boat load of LVS.
Bleustar – where you think LVS is headed, trading-wise, 60ish?
Juice,
low sixties if market is going to creep higher. if market rolls 55. I like this as a hedge to my longs.
Hey Blue,
What kind of price target to you have on LULU?
thanks!
Market maker,
50 short term, 60 long term. Shorts have issues
Shoot, I only have sep 5 lulu calls. Hope this is enough time??
show me da money,
so do I. I will roll
Thanks blue!
Sorry to bother u again, but at this juncture, do you think LULU or TWTR is the better play here? Thank you again!
show me da money,
That is next to impossible to tell. But be careful. remember I am bearish overall. I am prepared for these calls to go to zero as they are not a large part of my capital. also i am short lvs.
Awesome, thanks again!
“What do you need to see to get aggressively short here?”
I need a confirmation that Primary Wave3 has ended. When we make new highs up around 2020 then we will be close.
In any event, you’ll know by my gravatar which will change from the “Wild Bull of Pampas” to a warning from “Smokey.”
bensteinmoney,
Love it.
FYI … wave count as of today’s close per OEW;
“When the market opened below SPX 1995 we updated the Minor 3 label to dark blue [Confirmed top in that wave]. When the market formed a positive divergence at the SPX 1991 low we posted a tenetative green Minor 4 label at that level [Expecting that could be low for this wave down]. The 14 point pullback, 2005-1991, may have been enough for Minor wave 4. However, if Europe continues to slide the SPX could still hit 1985 or even the 1973 pivot [If downtrend continues this would be worse case scenario for this move down if extended]. Any new high would of course suggest we are in Minor wave 5 [Tonight’s futes seems to be predicting the end of Minor Wave4 and the start of Minor Wave5 tomorrow].”
Minor Wave5 when completed will complete this move up (Primary Wave3) but the hard part will be calling it’s high since there are no parameters for a top. Based on earlier wave activity in this minor wave move, this final wave should consist of 5 mini waves and one of the up waves or more could split and extend till the buying drys up. Pivot points which are good zones to pinpoint a top include SPX 2005 and 2019 for now but could ultimately end up higher.
Still a bull with only one sale this week to raise cash. Will be selling my non-movers and small losers into the rally tomorrow and early next week anticipating a top soon but letting winners run as long as possible. Will probably start buying a double or triple inverse SPX ETF or buy puts on overpriced stocks.
You have any favorite short ideas?
Bensteinmoney,
I like LVS as a short. chart and weakening fundamentals line up. I am also thinking apple on product launch date. Plus all the expensive broken tech stocks
Bluestar, any change in your LULU position given their downgrade yesterday which messed up the nice upward momentum?
Noni,
losing money like you
OEW provides some targets for the top of this leg up before the corrective P4 leg down to follow;
“With wave 1 travelling 40 points (1905-1945) the upside limit for wave 5 would be about the OEW 2070 pivot. The minimum upside would be marginal new highs above SPX 2005. Assuming the short term count is correct, no Primary III extension, the uptrend target range is between these two numbers. Our next pivot is 2019, with a range of +/- 7 points. Within this pivot are two fibonacci relationships: @ SPX 2014 Int. v = 0.618 Int. iii, and @ SPX 2016 Minor 5 = 0.618 Minor 1. With all the indices setting up for potential negative daily RSI divergences at higher highs, let’s see how these numbers work out next week.”
http://caldaro.wordpress.com/2014/08/30/weekend-update-463/
Blue – You covering any $LVS here?
nice , on the LVS !
Fryguy,
I am letting it ride. I see 55 in the future.
Juice,
Thanks
Blue –
I covered about half at 62.80. Will add to it if/when it trades up.
fryguy,
I hear ya. Its a hedge to my longs. I bought some SLV calls on friday and today. I see a counter trend move coming soon.
how far out did you go? Oct?
I’m trying some SLV Oct 19 calls 0.25
Juice & Blue – I got into the Oct 19s as well
Fryguy, Juice
I bought 10/3 19 Strike. It either a big win. or a zero shot.