We took out the August 7th low today on the DJIA. The Technical damage has been extensive. We have what is called a Dow Theory Primary Bearish Trend Change in play. The market continues to look for a bounce. I am operating under the assumption The Top is in until the market goes to a new high or we get full confirmation of the top. We hopefully get a bounce soon. This is merely a suggestion but those who are long should lighten up into the rally. Bears who missed this leg can position short into the rally. Worst case is we get a very weak bounce and then crash. My fear is that many people are offsides on this market correction and the margin clerks seem to be working their delicate evil behind the scenes.
I talk to many different market participants. The level of incoming phone calls has increased because many know my bearish inclination. Ridicule and laughter have turned into “Hey what are you thinking here?” My answer: “Sell and raise cash into the counter trend rally!”
My goal in writing this blog since May 7th was not to be proven right but to hopefully help some people avoid big drawdowns. I am a reluctant bear and would rather be picking stocks than talking about a looming bear market. However, I have been humbled over my career and have learned to surf the market and take the waves presented to me. I have been scared out of my mind to go long due to this QE induced levered advance built upon a foundation of sand. The speed with which this market is descending is truly frightening. I hope we don’t crash but I believe the possibility exists given the structure of this advance. The 1929 analogue is actually more relevant today than it was when I wrote about it last week. We appear to be on our way to point h having seen point f on October 2 and point g on October 6th. Again in the graphs below 1929 is on the right and 2014 is on the left. The 2014 graph is not updated from my last post but price has taken us below point b. The advance out of the pending low is key into point i. The shorter the advance before we fail the worse it is going to be on the other side. Good luck everyone. I am still short but I hope we bounce soon so that the rest of you can get on the right side of the trade if you think I may be on to something here. A crash does not have to happen but at the very least it looks like the beginnings of our first meaningful correction in two years.
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Like you’re posts BS. My model flasshed a move to cash on October 1, which I have heeded. As I run and update the model daily there is little changed the only sector that has been introduced are the Utes. Otherwise Cash and paper in the 7-10 yr.
Getting the same reactions as you from others as in “what’s the model say today?”.
How does the Sovereign Debt issue play into your bear thesis? The reason I ask is Martin Armstrong has been writing for some time that government debt issues will cause people to flee from government bonds and into stocks. This will lead to a blow-off top in the market, and then, the market will crash afterwards.
Ann,
read Martins blog. He is saying we go lower into November and then from there we need to watch price. We may have what he calls a cycle inversion.
Cetainly the global economy economy
marches lower while America
shows growth.Sometimes fundies
just don’t matter if the crowd runs for
the exits .And after they have left
where to put their money.Morgages maybe?
Bond buyers are smarter, since late 2013 they have been moving out, when SPX was around 1755. With the glut of commodities and China not being able to get easy financing I still can’t understand why people buy? Agree Blue, 1929 is in cards. I see nothing good out of this.BTW, I really wish EU court does something to limit OMT, Germany Broke my heart when they passed the ball. House of Sand Yep. Trillions spent and you can’t even get a half decent Markit PMI.
Blue,
are you short nov or dec puts.
Blue, any opinion on how much of its own foot the House of Saud will shoot off to depress the price of oil?
I see the Saudi budget is based off $87/bbl oil so I was looking for a floor around (plus/minus $10/bbl) there but I also have heard OPEC is having internal struggles with Saudi, Kwait and Qutar fighting about production levels (i.e. Saudis refusing to give up market share as prices drop).
You seem very in tune with these events, wondering if you had any thoughts?
I have only seen move like that in energy names once before … I have tried to trade it it than lol had no clue what I was doing, wasn’t fun.. different now.
Amazing that we can still have this kind of volatility, I am actually loving this, I am afraid many would not understand.
OK Blue, so INTC hits the buy back accelerator. What does this really mean for the economy? Basically, all this hype over the last couple of years of the forthcoming CAPEX coming has vanished. Tells me CEOs see zero opportunity to expand business is they are doing buy backs.
First step was cut all expenses to the bone to meet EPS, Now use ZIRP and cash on hand to reduce float and increase EPS. This actions with global capital flows pointing to the US looks like a green light to get long the market and prepare for the blow off top.
What thinks ye?
TJWP,
I view this as a demand and supply issue. oil is crashing because China is imploding and shale oil supply. I heard the rumor that obama and the Arabs are colluding to screw russia. That rumor is a joke because our president is an idiot and that kind of subterfuge is above his cranial capacity.
Mr. P,
Bounce soon or lower?
Jimmy,
I say no but lets watch price. price will lead the way. my gut is that we are done.
I LOL’ed at cranial capacity
No bounce… even if we have one.. will be sold of .. too many black swans are flying over out heads..
1818 target remains
Blue,
Thanks for your response, I agree more supply is coming online but my understanding is Saudi, Qutar and Kwait are refusing to cut production as they try to maintain their respective market shares, also exhibited by their increased aggressiveness in the European markets in contract negotiations. This was an interesting article: http://blogs.platts.com/2014/10/13/oil-price-collapse-history/
As always, appreciate your input.
Blue, taking a little profit here… just a bit.. Remaining net short of course.
Blustar, have a read of this
http://theyflyblog.com/2014/10/15/billy-meiers-update-isis/
Mr. P, SPX 1755ish, last weak longterm Fibo support/resistance out there. Still can’t understand why we went above it this year.
I don’t ask questions as you know… I just follow my nose… HUGE $$$$ day
Mr. P, Good Day for me too, even my gold hedge is working. And you know, lol, all I do is ask questions.
Bravo Blue, you got your wish. You’re probably back to flat for the year like the rest of us now (assuming you’re short positions earlier in the year closed out before this downturn).
So do you think we bounce? Or is this it? Are we somehow instantly in a 2008 type environment?
TN,
Easy on that gold hedge, dollar is the king… one day pullback doesn’t make a trend.
Mind you everything is ok in moderation.
forget alpha,
Up 17% YTD. Was up 9% in April. Swung down 4% covered. Scratched my way to flat in august. Went short in September. Cash today. We bounce. Then I short again. Primary trend change is bearish.
Juice thanks
Mr. P,
We hit your target today. I say bounce. I went to cash. Nice profit.
Bill,
Cash today. will Renter with some December. look for a bounce
Blue,
I love cash.. good position.
Mr. P, Agree Gold shouldn’t work on a strong dollar. Just hold some as part of my mix. BTW GREAT CALL on SPX 1818ish, but I will get my 1755 soon, lol.
Nice trading Blue!
By the way, can somebody please tell Le Fly to add Blue to the iPhone iBankCoin app? That’s where I read blogs in commute.
Following your blog with interest. Like-minded. I starting going to cash 09/19 and have been 90%-!00% cash for all of October. Small positions in SLB, NOV, HAL and RIG, all of which I bought yesterday to play a bounce in energy. Running and gunning.
Robster Man,
Thanks
bushwaker2,
Nice job going to cash on the Alibaba wall street screw fest.
AMZN going to be the next NFLX. It looks to open lower tomorrow in sympathy. I’m praying for a bounce to sell into.
It is a company that is spread way too thin. It should’ve had a much worse reaction to the Walmart guidance news today. Earnings will not be good and guidance should be a disaster. This is my top short, just want it higher.
Quality,
You know how i feel about AMZN. I covered a little early this week. I plan to buy yolo puts day before earnings. This thing is done. I might short cash on the bounce. I think we should bounce to 315
What were you short that you’re up 17%? Didnt you short, then cover, then short again? Would be great to see trades, not P&L.
BlueStar I’m with you on the yolo. I already purchased some of next week’s 285s just incase we start a move early. Willing to sit in a bit of a loss on it. Going to buy a whole lot more next week. Looking for at least a 10% move.
I bought IWM puts on 8/30 and 9/4. I covered on 10/3 then took profits and renetered shorter expiration and lower strike. Total profit 150%. That trade is the bulk of my 17% gain.
Quality control,
Same 10% move lower.
Well done Blue! Think we are going higher short term but I agree with your thesis
Theedge111,
Thanks. Much of what I spew is based in statistics. I marry fundamentals with technical analysis. Very powerful voodoo.