Sometimes you just gotta take a leap…

If you are visiting iBC or reading this page for the first time, then it is very likely that you have a higher than average understanding of our financial situation than the general public.  You understand that what is happening right now, is something that will be written in our history books for generations to read about.  You understand that leaders of the most influential countries in the world are meeting together to discuss America’s economic woes signals that it’s bad out there, more worse than any other economic turmoil you’ve lived through, and naturally, you expect something unexpected will happen when you least expected it.  With that, I leave you this perplexing indicator on every major index:

Bullish or Bearish Technicals on Dow, SPX, NDX, Russell XXXX (small caps) as of Friday 11/15:

1-day:  very bearish

3- day: bullish

1- month:  very bullish

3-month:  bullish

6- month:  bearish

1-year: very bearish

2- year:  very bearish

5-year:  multi-month short cover rally

… now what should I do with my money here?  I guess sometimes you just gotta close your eyes and jump:

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On the day trade, this was a clear bull trap.  I guess Fly said it best… “market rallying on nothing.”

 

I took the window here…

 

 

So, the important question is… what happens Monday?

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oıƃ-

˙dod suıǝʌ ɹnoʎ ǝɹoɟǝq pɐǝɥ ɹnoʎ ɟɟo ʇǝƃ ʍou ˙ʎzɐɹɔ ǝɹɐ noʎ ǝɹǝɥ ʎɐʍ ǝɥʇ ןןɐ pɐǝɹ oʇ pǝƃɐuɐɯ noʎ ɟı ‘ʎɐʍʎuɐ

˙suosdɯıs ǝɥʇ ɯoɹɟ ʍoɥs ʎɥɔʇɐɹɔs-puɐ-ʎɥɔʇı ןɐıɔuɐuıɟ ǝq ןןıʍ ʇı ˙ʞɔɐq ɯǝɥʇ ǝʞnu ןןıʍ sɹɐǝq ǝɥʇ uǝɥʇ ‘sɯqɔı ɥʇıʍ ʞɔɐq ǝɹıɟ ןןıʍ sןןnq ǝɥʇ uǝɥʇ ‘ɯǝɥʇ ǝuoɹɥʇǝp ןןıʍ sɹɐǝq ǝɥʇ ʇxǝu ǝɥʇ ‘ƃuıʞ ǝq ןןıʍ sןןnq ǝɥʇ ǝʇnuıɯ ǝuo ˙sɹɐǝq ǝɥʇ puɐ sןןnq ǝɥʇ ɥʇoq ןooɟ puɐ ʞɔıɹʇ oʇ ǝnuıʇuoɔ ןןıʍ ʇǝʞɹɐɯ ǝɥʇ ʞuıɥʇ ı ˙sdoʇs ɟo ɹǝןnɹ ǝɥʇ sı ǝɥ ɹoɟ ‘qɐʇ s,ɹǝppǝɥspooʍ ǝǝs oƃ ˙˙˙ʎןsnoıƃıןǝɹ sdoʇs ǝsn ˙ǝןqqıu ʎןuo ʇnq ‘ǝɹǝɥ ǝןqqıu oʇ ʎɐʞo s,ʇı ןןnq ɐ ǝɹ,noʎ ɟı ssǝnƃ ı ˙ƃuıddıןɟ puɐ ƃuıʍɐsdıɥʍ ǝɹoɯ ʇɔǝdxǝ ı puɐ (ɯopƃuıʞ ǝɥʇ ʇno pǝʞɔıʞ sı xıʌ puɐ) ƃuıʞ sı ʎʇıןıʇɐןoʌ ‘ʍou ɹoɟ

˙ʎןןɐɹ ʎɐp-ıʇןnɯ ƃuoɹʇs ɹǝɥʇouɐ ʇǝƃ ןןıʍ ǝʍ s07 ɥƃıɥ ǝɥʇ sǝɥɔɐǝɹ xıʌ ǝɥʇ ɟı ǝqʎɐɯ puɐ ‘ɟɟoןןǝs ɹǝɥʇouɐ ʇǝƃ ןןıʍ ǝʍ s04 ǝɥʇ oʇuı ʞɔɐq sǝɥɔɐǝɹ xıʌ ǝɥʇ ɟı ǝqʎɐɯ ˙sʇnu ǝɯ ƃuıʌıɹp sı ʇɐɥʇ ɹoʇɐɔıpuı ǝuo ǝɥʇ sı ʇɐɥʇ ‘ƃuıɥʇʎuɐ ɟı os ‘ʎןǝʇɐן ʎʍǝɹɔs ןןɐ ƃuıʇɔɐ uǝǝq sʇı ˙xıʌ ǝɥʇ uo pǝʇɹɐʇs ǝɯ ʇǝƃ uǝʌǝ ʇ,uop

˙ʇǝʞɹɐɯ ǝɥʇ ƃuoן ʇǝƃ oʇ ƃuıʇuɐʍ ʇou ǝןdoǝd ǝɹoɯ ɥʇıʍ sʍoן ǝɹoɯ pǝǝu ǝʍ ˙˙˙ǝʇısoddo ǝɥʇ ɟo ǝɹoɯ pǝǝu ǝʍ ʎɐs ןןıʍ ı os ‘ɹoʇsǝʌuı uɐıɹɐɹʇuoɔ ɐ ɯ,ı ‘sǝʎ ˙ǝɯ oʇ uoıʇɐןnʇıdɐɔ ǝʞıן punos ǝʇınb ʇ,usǝop sıɥʇ ˙ǝןqɐuosɐǝɹ ǝq oʇ ǝʌɐɥ ǝʍ ʇnq ‘ooʇ ɯɐ ı ‘ǝsɹnoɔ ɟo ˙ƃuoן ʇǝƃ oʇ ɹǝʌǝ uɐɥʇ snoıxuɐ ǝɹoɯ ǝɹɐ ǝןdoǝd ʎuɐɯ ‘sʍoן ǝɥʇ oʇ ǝsoןɔ os ʇǝʞɹɐɯ ǝɥʇ ɥʇıʍ ʇɐɥʇ sı ǝɯ sǝsıɹdɹns ʇɐɥʍ ˙sɹɐǝq snsɹǝʌ sןןnq ˙ǝɹǝɥʇ ʇno ǝןʇʇɐq ɐ s,ʇı ʍou ʇɥƃıɹ ‘ןןǝʍ

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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

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Well, I guess a Vix double spike is a Vix double spike.  Its still not a good reading for a confirmed bottom in the medium term, but it turns out to be an EXCELLENT spot to cover shorts and get long, at least for a wicked day trade.  That’s exactly what I did at Dow -270…

Covered all shorts (note, I re-entered some of them at Dow +240) and shorted FXP (sold EEV too.  phew).  Anyone there with me?  Congrats!!

Anyway, here’s the chart I posted, just minutes before the market decided to rally a few hundred points intraday.  It was a bold call to make while the Dow was trading almost -300 points.  But it at least illustrates how effective the Vix has been lately.

Think of the Vix as an alarm clock.  Note though that this was a weak alarm, but my instincts took over and decided to agree with it.  Normally I would like to see at least 12%-15% spike.  However, the 18% jump from 58 to 70 in 3 days was “significant enough” to force me to make the trade.  If you’re having trouble reading the Vix, or want an alternative way to use it, then check out Danny’s tab for his LoBV indicator which measures short term changes in trends.  It is very similar to how I read the Vix.

Aloha!

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