The big question on everyone’s mind is when is the bounce? I think we may have seen the start of it today with the reversal. The IWM has outperformed three days in a row, we are due for a trading cycle low, and everyone’s special oscillators are showing positive divergences. I don’t think we are crashing from this point. I may be wrong and we crash or maybe we extend lower over a few more days. However, I have studied crashes and you always get a multiple day bounce (5-10 trading days) that fails before you get a crash. I have never seen an inverted v shaped top in stock markets. I am expecting a bounce of more than a day or two this time around. This market has been straight down basically since the top on September 19th. I covered all my shorts today and I am now cash. I am not going long because I believe we have entered a Bear market and the onus is the the Bulls to prove otherwise.
When the bounce fails and I expect it will, I am going to load up on the short side. On this most recent down draft I did not use a lot of my precious capital. However, the next set up is when, as a bear, you should really strike because then we will have structural confirmation of the Bear market. If we should go to a new high I am likely wrong but I will have protected myself by being in cash and not short. I may also take targeted action on stock puts into earnings if I see a pattern of deteriorating fundamentals in the overall market. I think we have already begun to see that pattern emerge with some of the reports I have seen lately (NFLX and MCHP come to mind).
I have been stalking this Bear since January when I went to all cash. I took a stab in April and failed. Now I find myself comfortably in the green for the year. I believe the Bear is here and I intend to ride it. I will become a Bull someday. Just not anytime soon. As I write this it is 3:00 AM EST and the futures are up. Lets see if it holds.
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With the election coming up a relief rally makes sense. Sloppy one filled with earnings blow ups that frustrates everyone. Imagine a extra 100 cases of Ebola could cause the next leg down or the greenback shooting the moon again.
Talking of bounce. Is oil going to the 60’s? I got long around 80 and am starting to wet my bed.
Only one more DNA marker left and this failed bounce will seal the deal. I’m all in short on a failure then wake me up in January 2016 so I can cash in.
Blue,
I have canceled all bounces.
It’s a bear market you know.
No target just solid down trend… liquidation to come shortly, I expect many funds to blow up his week and next, some good size funds.
Mr.P
Mr. P,
You know we need a bounce. Today should be very interesting.
Yes i have traded yesterday bounce.. hopefully today too,, Good luck blue.
BlueStar, I was wondering if you had any recommended reading for someone who wants to learn about the bond market and how it can help interpret signals and trends for the equity market? I know you said you were involved in fixed income at one point, so I’m all ears to your advice. Thanks for the help.
Excellent post. My thesis is that the next sustained SPX rally will set up the right shoulder of a H-S pattern. The Russell already has formed a H-S with double heads. We ten experience declines into 2015. So we seem to agree on that.
I can’t understand why were not getting
any credit for an improving U.S economy.
Is the rest of the world just overwelming us.
Bluestar, if we do bounce do you have an S&P level targeted that if breached would indicate that the bull is not yet over?
Also, enjoyed your interviews with Tim Woods at cyclesman.com.
You are killing it with your calls. Will be loading up on shorts into the bounce as well.
This markets need balls to trade both ways.. and don’t forget the brains… amazing tape.
mr.partridge, well, I’m out of luck on the first part. Jury is still out on the second part.
GO LONG NOW!
bluestar has the ball! nice call both ways 🙂
Mr. P, Why go long? China is moving into a massive liquidity crisis of speculation money. Even talk of China Govt in stopping Corp Bonds being issued out of State Owned companies. Russia sanctions are forcing cheap sales of oil to china. Nothing Pretty. And Copper, lol, no demand.
GN haha it is called trading 🙂
amazing day.. why cause it makes me $$$
Back to cash of course
The move in bonds has been ridiculous .
Shorting the next bounce is too obvious. I think Mr. Market might have a few tricks up his sleeve for you bears that are going into hock to short the next rally.
By definition, you can’t make uncommon gains by doing what everyone else is doing…which right now is selling.
boyaj,
No book comes to mind. you can look at high yield spreads or absolute yields on treasuries. when high yield widens it usually is a warning for stocks. Strong bond prices are a sign of inflation worries.
bushwaker,
thanks
gorby,
our economy is not that good and bonds, high yield and now stocks are telling you that the economy is getting worse.
Ann,
If the internals improve and we go to a new high I am wrong. if the internals still stink and we go to a nominal new high I believe that we will roll.
bushwaker2,
if you short too early I agree. if we get a failed rally then we are going much lower. I wait until I see the whites of their eyes.
bushwacker2,
I disagree. there are not that many shorts in the market. they have died over the years. People have taken years to build up their positions to be levered long. It will take some more time to unwind. We have a lot more pain to inflict on this market.
Mr. P, You get all the fun. I really want to master Macro.
I might just start trading using this, lol.
http://www.naaim.org/newsresources/naaim-exposure-index/
TN, I just want to make $$ … be reasonable in what you wish and you will get it 🙂 GL
Appreciate the response BlueStar. You should look into writing one then, so many “DIY” equity books but no good fixed income. If you do pursue, dibs on being your agent.
Mr. P, The only source I could really find for this rally is SPX catching that 55MA at your 1818ish level. Nothing really has changed, if that is the only reason, shouldn’t that fade soon? BTW totally perfect great call of yours yesterday. 🙂
and IMHO that Russian Gas Deal was such a weak deal. Putin won’t stand by it. Not really a good reason at all for buying.
Or Mr P were you looking at the increase of Margin to short Oil that CME announced yesterday?
Blue,
If you have to play amazon through put spread how would you play it. thank Bill
I know Mr P, you are just following movement and I am over thinking it. :-). BTW China Govt rumor of money to banks still won’t trickle to shadow bank speculator loans. PBOC is really getting tight on having proper security for loans fwiw.
Blue, what did both you and Mr. P see for the bounce coming?
Oversold bounces are part of bottoming.. nothing more or less.. it is over now.
Market is in correction mode, RUT leads…TZA closed in green… back to trend soon enough ..
I need 1818.. firm rest there.. just a guess on my part as always can wrong.
Go see Blue 1929 chart .. bounce? yes bounce.. they do bounce many times before fail.. I need reasonable valuations,and stupid stocks like social media trade where they belong…
Have a good weekend all.
Bluestar:
Thanks for your response.My whole
portfolio is based on an improving U.S
economy.The google miss was a big
surprise to me.I need to be more
diligent.
TN,
A few days. Sometime next week.
Bill,
I am going to buy a 1 week yolo lotto ticket. Why? Because this quarter is going to e a shit show.
Gorby,
Look at the chart of the DJTA. The transports have never been this stretched. Look at how the chart has fallen apart. Stocks are what is known as a leading indicator. By the time you find out the economy stinks we will be 20-50% lower.
BlueStar:
The DJTA is not in a good place for sure.Scary in fact.
Do you think a outsized portion of the nervousness of the market is the
anticipation of the end of QE .
So when it does end and the markets
pause (fingers crossed)do you see a big
bounce
Blue and Mr. P..It will be nice to get back on the downtrend, bounces are rough.
Blue
with oct y.e. closing in on the bankers any thoughts on a push higher to secure bonus?
Gorby,
Bounce in progress. When it fails and I am very sure it will. I will be shorting.
Jimmy 2 times,
Street can only manipulate for a short period of time like they did for Alibaba IPO. When the real selling begins they can’t stop it. If we go higher it won’t be because of the street. My crystal ball says lower.
“They” sure are trying to jawbone stocks higher everyday.
Helicopter Ben,
Yes can you smell the fear and desperation. The faithful central bank worshipers are about to lose their faith. New religion will be cash.
PTJ at Robin Hood Conference is very bullish into year end. Says this is not like 87 at all. I disagree, but then again he is PTJ.
Thomas,
He is the man.
BlueStar,
Seems like a good day to enter AMZN YOLO put. Or are you waiting till Thursday?
Thomas, He said that USA equities would be better then ROW, but he also compares us to Greece and said there is a massive credit bubble that he doesn’t know when will pop. He is so not a fan of the Fed. BTW, trivia, me an PTJ share the same birthday…as he said “The piper will be paid one day,” he told the crowd, saying the timing is unclear”.
I went short today, short GPRO TWTR KNDI PLUG YELP MBLY Long $UVXY jumped the gun a bit perhaps, should have waited for 193 like I had anticipated but playing for the swing. I’m with you no more QE, no more increasing money supply and we find ourselves in a bear market. Just need some more dip buyers to get the rug pulled on them. One more time ought to sufficiently flip them bearish. This rally was clearly central banker induced and these stocks are castles in the sky..
The OEW road map as of Tues 10/21:
“Volatility continues. We are still counting the entire rally as Int. wave A of a Major wave B uptrend. The Int. A price targets we provided in the weekend update were either the 1929 pivot or the 1956 pivot. After that we expect a very sharp pullback for Int. wave B, followed by another sharp rally to end Major wave B. Short term support now rises to the 1929 and 1901 pivots, with resistance at the 1956 and 1973 pivot. Short term momentum is extremely overbought, with a very slight negative divergence.”
Tony Caldero has been spot on calling the market thru this volatility.
Blue … you short or in cash?
I started getting short today some November SPY puts.
boyaj,
Tomorrow or Thursday.
bensteinmoney,
cash….stalking…watching waiting…will buy a put on AMZN into earnings. Once we get swing high I buy put on indexes. How about you?
Blue,
Believe it or not, when the correction started I was long UVXY Oct call options and they did quite well.
Market waves have been too fast (3-5 days) now to play vix options (XIV/UVXY), so I too am holding out for the C wave before another bite of those UVXY calls.
I like your AMZN put idea and have been watching VIPS as another put idea.
bluestar, hope the correction is seeing you well.
What will be your sign of a failed swing high? Ie what are you looking for or what levels to get back on the short bus.
So Mr P, we kiss the 55MA daily on SPX around 1950, fail to take out resistance and we get back to our sell off?
I mean 1960ish
TN,
we are going higher before going lower.
thinking 1980.
Still am long.
Im following you into this one Blue,
Bought the AMZN Jan 310 Put.
Thanks Mr P. With Commodities dropping so hard, I am still amazed everyone is buying this junk?
I am involved again on IWM put and a weekly AMZN put.
Plans changed.. terrorist attack in Canada.
BlueStar: Contrarian Investor
YELP .. need I say more?
BlueStar: what’s your price target for YELP in lieu of today’s earnings drop?
BlueStar:
So far ,everything you touch is like
Tiny Tim among the tulips-it’s just right..
Me I’m hoping this is just a worry
obout the end of QE.
If I’m right I get to buy seriously discounted securities.If I’m wrong well-
Cruise what Cruise.
Bunk,
I am short again. Lots of dry powder. IWM outside daY was enough for me. I think we could drift higher on other averages but this leads.
bchu12,
over time much lower…back to IPO price
The move on bonds has to mean something last time I seen a chart blow off like that was when silver topped? strange to me that not many people are talking about it
browneye33,
I think bonds are going higher. I could be wrong. That move was a panic buy due to what was going on in the stock market.
Gorby,
Yes I am on a run. All runs end. Mine will too.