The -300 to +500 move yesterday was insane indeed. And as much as I want this market to turn around and start moving higher, I still think its too soon for that. A lot more stuff has to hit the fan before we can start rallying.
1) The way I see things is that after having 3 distribution days in the past week, it’s only natural that we get a good short cover rally.
2) The “Turkey Rally” concept only exists to scare the weak bears. I would hate to put my money down on a turkey bet. That’s lazy trading.
3) I think we need a follow-through day on a follow-through day on a follow-through day to get a strong bottom.
4) We simply dipped under 8,000 on the Dow, which looked like a spot many people were waiting for to get long.
5) Market is forward looking, and there cannot be to much to look forward to as long as we are in a sitting lame loser duck position. If you read my President-Election post, usually a bear market bottom happens on the second year of the first term… the first year has too many promises, and “forward looking” is too fuzzy. The second year there is more policies in action so investors have a better feel for the market…
6) Now more than ever we must pay attention to Government action… don’t forget the big bailout package that went through the checks-and-balances system, AIG being owned at 80% by you via the government, and interest rates that eventually need to be raised again. We’ve only sat through the beginning of these historical and decisive actions and interventions. The market can and will get an unexpected uppercut to chin.
So anyway, I just thought I’d give you a fundamental perspective on our current economic position. A lot of people are focusing too much on technicals here. Even that doesn’t impress me either (I’ve noted in the past 3 days, the unusual complacency in the market as measured by the Vix).
Go ahead and play the market’s volatility, but always keep your mind open and question all your trades, question every move in the market… search for leadership in stocks (the best indication that a new bull market is ready).
Aloha!
gio
Great minds think alike…technicals do not matter much in a thinly traded market….if the S&P could just hold 900 for 3-5 trading days I’d be happy…but this is an opportunity to take profits , reduce losses, and wait ‘n see…
No bull trap, imo. A couple consolidation days. Probably some lingering bad news for Monday morning creates another buy opp. Watch how bad news will now be bought. We’ll get a confirmation follow through day by next week, mid week. Then the Turkey Rally will be on.
Begin establishing longs that you plan to hold for 1-3 swings. Use lose ATR stops, with small positions. Plan to add to those positions after some consolidation and/or when the next pullback is orderly.
This one is going to take us to the 50 day at least, and maybe even farther.
^loose ATR stops
GW, thinly traded? Did you see the volume yesterday?
I’m am 100% with the Woodshedder.
Yesterday was a retest of the lows? That was capitulation? I don’t think so. There has to be a wash out and that wasn’t it. The TV bottoms never hold. None of them have any skin in the game. They are all clueless.
We will bottom when no one wants to buy it. Not when everyone is hot to jump in. Yesterday was panic buying, today will be some buyers remorse.
When the buyers are fearful and scared to death is when we bottom. Everyone on this site is too bullish for this to be the bottom.
There has to be a wash out and that wasn’t it.
It was for this cycle.
We will bottom when no one wants to buy it.
Ultimate bottom, sure, but that’s some time ahead.
For now, enjoy the brief return to normalcy.
Report back in February.
_______
^ What Jake said.
This gap down should be bought.
What Woodshedder said. Looking to reload QLD (sold yesterday afterhours) from 27 to 28ish. Will then be 100% long the market.
A contrarian who can’t see this obvious reversal (in its beginning stages–will be interesting to see the technical pattern it will take) for what it is becomes an idiot and not a contrarian–the real contrarians are buying a hated market. Experienced traders, and there are a few here, are not gullible, and when a trend reverses, they jump on it. And bloviators who raise the contrarian cry (i.e., too many bulls bullshit) as frequently and as glibly as the boy crying wolf usually are not experienced traders.
I believe your opinion on where we’re located on your above graph is incorrect…. the bull trap was Q407-Q108 as the subprime issue was “contained” and there was still question as to whether we enter a recession or not. That was the “Denial & Return To Normal” stage…
Fast forward to fear and capitulation which over the past 2.5 months we’ve had…a drop of approximately 35% or so after maxing at ~42%. The “trap” was already set because we’ve still got nearly every hedge fund manager getting roasted by the recent declines… now many are shutting down and plan on reopening next year when the high water mark is gone and there’s some stability in the markets. We are neck-deep in despair right now. The bulls are at your door – I suggest you make friendly.
This doesn’t mean we won’t retest these lows again in early next year as retail data is horrendous and the true impact of the layoffs etc is felt/realized. However the best inflection points are the ones few if anyone trusts… we are at the inflection point.
The volume was good, but overall its is a thinly traded market….if your and institutional buyer why didn’t the bellweathers post great gains?…great reversals, but not real gains….
Did you guys read my post earlier about December 14? That is a very very dangerous day. We have quadruple witching on the 16… i expect volume to really really pick up starting the 12th to the 14th in anticipation of quadruple witching day.
I cannot say what will happen during those days, but it should be big, and I’m leaning on the bearish side only because I’m calling what I see on the tape right now; don’t get me wrong, i do realize if a FTD would come, it would come around there too.
Go back and read point #1… i cannot understand why we would get 2 distribution days in a row (institutional selling) with the Vix being so “flat”. Its ridiculous. Maybe because volume was thin those days? someone enlighten me. but the fact is as long as we have these strange rallies, they will get easily shot down with those news events i mentioned.
I am waiting for the next Vix spike down to begin shorting aggressive again.
One reason alot of the institutional money isn’t here is because it’s waiting for 2009 to reopen shop. I wouldn’t expect great volume in a rally here nor do I expect we won’t retest. However this does look like a legit rally for the time being and did people actually expect another strong day up following the 550 points we got?
… isn’t that why stocks went up so fast? in anticipation for the next day? for a legit rally, you need much more consolidation days followed by a FTD day, then another FTD.
Thanks for the compliment Michelle. I would not want to be called an “expert trader”:
http://www.gurufocus.com/ListGuru.php
Here are their returns BEFORE October melt down:
All data is as of June 27, 2008:
Manager…………………. 6-months ……………….. 12-months
Marty Whitman ……….. ( – 43.38% ) ………………( – 34.61% )
Mohnish Pabrai ………… (- 41.20% ) ………………( – 36.88% )
Bill Miller ……………… ( – 37.05% ) ……………… ( – 40.90% )
Joel Greenblatt ………… ( – 37.00% ) ……………… ( – 37.00% )
Eddie Lampert ………… ( – 28.95% ) ……………… ( -33.94% )
Robert Bruce ………….. ( – 25.00% ) ………………. ( – 19.16% )
Bruce Sherman ………… ( – 24.68% ) ……………… ( – 30.55% )
Charles Brandes ……….. ( – 24.58% ) ……………… ( – 29.51% )
Robert Rodriguez ……… ( – 22.20% ) ……………… ( – 17.75% )
Mark Hillman ………….. ( – 21.53% ) ……………… ( – 25.40% )
Carl Icahn ……………… ( -21.00% ) ………………. ( – 3.98%)
Edward Owens ………… ( -20.94% ) ………………. ( – 16.74%)
Irving Kahn ……………. ( – 20.75% ) ………………. ( – 24.68% )
Brian Rodgers …………. ( -20.48% ) ……………….. ( – 24.68% )
Arnold Schneider ……… ( -20.39% ) ……………….. ( – 27.25% )
Bill Ackman …………… ( – 19.38% ) ………………. ( – 23.06% )
Chris Davis ……………. ( – 19.17% ) ………………. ( – 19.75%)
Bill Nygren ……………. ( – 17.80% ) ………………. ( – 27.96% )
Richard Snow …………. ( – 17.68% ) ………………. ( – 19.77% )
Hotchkis & Wiley …….. ( – 17.28% ) ………………. ( – 25.02% )
Richard Pzena ………… ( – 16.27% ) ………………. ( – 25.22% )
David Dreman ………… ( – 15.82% ) ……………… ( – 11.87% )
Tweedy Browne ………. ( -14.73% ) ………………. ( – 17.23% )
Arnold Van Den Berg … ( – 14.67% ) ……………… ( – 22.32% )
Robert Olstein ………… ( – 14.46% ) ……………… ( – 21.05% )
Wally Weitz …………… ( – 14.31% ) ……………… ( – 23.00% )
Third Ave. Mgt. ………. ( – 13.84% ) ………………. ( – 11.83% )
John Rodgers …………. ( – 13.57% ) ………………. ( – 21.47% )
Mason Hawkins ………. ( – 13.51% ) ……………… ( – 20.88% )
Dodge and Cox ……….. ( – 13.17% ) ……………… ( – 15.01% )
Bruce Berkowitz ……… ( – 12.26% ) ……………… ( – 3.68% )
David Swensen ……….. ( – 12.19% ) ……………… ( – 12.23% )
Ron Baron …………….. ( – 11.70% ) ……………… ( – 12.80% )
Ian Cumming ………….. ( – 11.05% ) ……………… ( – 11.68% )
David Tepper ………….. ( – 10.68% ) ……………… ( – 14.87% )
Jean-Marie Eveillard ….. ( – 10.62% ) …………….… ( – 7.23% )
NWQ Managers ………. ( – 10.46% ) ………………. ( – 13.39% )
Ron Muhlenkamp …….. ( – 9.58% ) ………………… ( – 13.39%)
Glenn Greenberg ……… ( – 9.45% ) ………………… ( – 15.22% )
Michael Price …………. ( – 9.26% ) ………………… ( – 13.87% )
Tom Gayner ………….. ( – 9.19% ) …………………. ( – 17.50% )
Richard Aster ………… ( – 6.73% ) …………………. ( – 5.00% )
George Soros …………. ( – 6.56% ) ………………… ( – 9.43% )
Ruanne Cunniff ………. ( – 6.40% ) ………………… ( – 10.61% )
David Einhorn ………… ( – 5.91% ) ………………… + 3.18%
Chuck Akre …………… ( – 4.00% ) ………………… ( – 11.08% )
Warren Buffett ……….. ( – 4.00% ) …………………. ( – 3.60% )
I am glad I didn’t follow their advise.