What started out as a nice consolidation day turned into more of the same: A vicious sell-off.
It is time to start considering whether things are different this time. In a previous post, Examining Market Tops, we identified the typical correction pattern of several series of moves down with bounces in between. It is possible that this pattern may not come to pass. Traders should be developing a plan that includes the possibility of a steeper sell-off, with very little consolidation.
We know that history shows a bounce should be forthcoming. The fact that the market continues to sell-off in the face of oversold conditions is a telling sign. Remember, these moves down typically end in a capitulation or panic event. We have had neither, yet. It may be that there is no bounce, just a steeper move down, ending in a panic or capitulation day.
With many traders waiting (hoping) for the retail sales to provide a tradable bounce, and the same traders now realizing that a bounce from the Black Friday sales is not going to happen, my guess is that the panic sets in sooner than later.
Instead of watching for a bounce, the key indicator will now be watching for capitulation and panic. Unfortunately for the bulls, today’s sell-off did not have enough volume on the move or enough negative sentiment to be considered panic or capitulation.
Instead of comparing the current market to 98′, compare it to the top in 00′ and the three year move to a bottom …. show us how long the legs down were and how brief the rallys were in terms of points and days and let everyone know what that could be like …. sure we have idex hedges now but the market had programmed trading and other support sytems then that all seemed to fail …. so what happens if the current hedges fail and we experience 00′ again? Show us what those falling knives look like on the Naz Comp so everyone remembers and those that didn’t experience it can see how tough it is to find a bottom!
the pieces are coming together for more than 4 hour a bounce:
1. Fly pukes stocks & his bullish bias …. & says Lord Duc is correct., again.
2. Massive infighting & tempers flaring in comments section.
3. Kass’s bullish call is getting long enough in the tooth to actually work.
Now all we need is some actual blood in the streets.
On another note: How about Barton Biggs call of a massive hedge fund buying melt up run to end the year because of performance anxiety? That fucker nailed the top like a freaking rookie.
“Plus Ca Change, Plus C’est La Meme Chose”
History repeats, it just doesn’t wear the same outfit. The bounce long will come, but, as always, it will catch many leaning the wrong way.
If markets were predictable in short timeframes, who would be left to work in McDonalds?
Dude, we’re broken and headed lower. Unfortunately, my optimism is misplaced…
Price action in stocks illustrates that equities are not going higher and the best move is to move to cash or get short. Companies with excessive valuations are the most vulnerable to the 30-50% correction that will occur in share prices.
Protect profits and capital is the name of the game going forward. Unfortunately us perpetual optimists will get our day of reckoning because the inept mother fuckers running this country are going to send us down the path of ruin.
The fact that they have been able to manipulate the media, etc to prop our markets will only serve to exaggerate the move to the downside…
I hate being in the camp of Kasshole but recognize when my optimism is comparable to pissing into a headwind. It might not be until 2010 until we recover.
I hate being a bearshitter.
Who doesn’t? At least try to make some money while you’re grousing.
Wood– somewhat ironic that not two weeks back you were questioning your trading capacity, and now it seems… you’re pretty damn right!
Employee8, I’ve considered doing that. That will be fun to look at, and I will try to get it done.
Grant- C’est vrai.
Kid, you can profit from this, I’m sure.
Jake, there is a big difference between being right and being able to profit from being right. My timing is often impeccable, but my psychology is damning.
This doesn’t feel like 98.
It feels like 2000. However, many veterans say it’s more like 90.
It feels like 2007 to me. It’s the price action now that counts. No one will ever catch the apex of the bottom, though they dream of it all the time. The market reveals itself, always. Don’t pee yourself waiting for it to do so.