They say misery loves company. I’ll start by providing our Bear Club for Men with this little ray of sunshine:
from WSJ Money Flows: Selling on Strength
I’ve run several studies this evening, and they all suggest a short-term (about 3-5 days being optimum) edge to the downside. Beyond the short-term, they are all projecting a bullish edge farther out.
To be succinct, my short positions must be exited soon, or I will be at risk for much larger losses.
My stop is not a hard stop, meaning that if the SPX closes above it, I will cover my shorts on the next open. The stop is fewer than 4 points above today’s close, so I may be exiting as soon as Thursday morning.
The topic for our Bear Club meeting tonight is Irony.
Isn’t it ironic that Wall Street is bidding up companies that were able beat on EPS (with lower revenues) primarily because they have shit-canned thousands of people? Are these shit-canned people not the very same folks who now cannot contribute in any meaningful way to the economy which supports the company that fired them in the first place? Ironic, I tell you.
In case you didn’t like the first example, how about his one…
Isn’t it ironic that Obama threatens to use his first veto on a bill that would result in spending $1.75 billion for F-22 fighter jets, yet he has allowed a 24 trillion backstop of the Too Big to Fails? Ironic, I tell you.
Discuss amongst yourselves. Any remotely bullish comments will be met with swift chagrin.
Hi Wood,
I see there is some hope out there for the bears – AMD is showing their cards. As for the money flow… I totally see what you’re saying, but I’ve been watching WSJ’s money flow index for over a year and it doesn’t seem to correlate with market price action in any meaningful way. It very well might indicate there are sellers, but in the past I’ve seen it post negative numbers for days on end without a correction. Tomorrow might be different just because of the extreme nature of this last move up.
I’m on the trigger here waiting for a pull back to support for a long entry – this sucks unless you were long into that gap up last week.
Best luck!
R.
Renn, I’ve noticed the same thing re: Money Flow. I more or less posted it for fun.
I think the long entry, when we get one, will be a great trade, and I will certainly be joining you, for just another trade, of course.
Let’s not forget this wonderful health-care “legislation” that is now the subject of daily pep talks. Just some specific items to remember…
Pg 126 Lines 22-25 Employers MUST pay 4 HC 4 part time employees AND their families.
Pg 145 Line 15-17 An Employer MUST auto enroll employees into pub opt plan. NO CHOICE.
Pg 145 Line 15-17 An Employer MUST auto enroll employees into pub opt plan. NO CHOICE.
Pg 149 Lines 16-24 ANY Emplyr w payroll 400k & above who does not prov. pub opt. pays 8% tax on all payroll.
pg 150 Lines 9-13 Biz w payroll btw 251k & 400k who doesnt prov. pub. opt pays 2-6% tax on all payroll
Pg 167 Lines 18-23 ANY individual who doesnt have acceptable HC accrdng 2 Govt will be taxed 2.5% of inc
Pg 170 Lines 1-3 HC Bill Any NONRESIDENT Alien is exempt from indiv. taxes. (Americans will pay)
Pg 195 HC Bill -officers & employees of HC Admin (GOVT) will have access 2 ****–>>ALL Americans finan/pers recs.<—***
Read the last one carefully a few times…
This little pretty will be a cram down just like the “stimulus” (porkulus) bill…
Manuel, you are now the Treasurer of Woodshedder’s Club for Bears.
Nice work, my friend.
Obama’s health care plan scares the crap out of me. Again, the market has not begun to price it in. Of course, it probably means no one thinks it will pass.
Sorry for going backwards, but here’s more pain…
Pg 22 of the HC Bill MANDATES the Govt will audit books of ALL EMPLOYERS that self insure
PG 24 Sec 116 of HC bill Govt effectively sets prices for ALL private health plans.
Pg 42 of HC Bill – The Health Choices Commissioner will choose UR HC Benefits 4 you. U have no choice.
–>>PG 50 Section 152 in HC bill – HC will be provided 2 ALL non US citizens, illegal or otherwise>Pg 59 HC Bill lines 21-24 Govt will have direct access 2 ur banks accts 4 elect. funds transfer.<–
Pg 98 HC Bill Line 8 – Americans u will be paying 4 others HC while paying 4 ur own.
PG 109 Sec 207 – Health Trust Fund. The Govt will raise taxes on EVERYONE 2 fund HC as they see fit.
PG 110 Lines 7-12 HC Bill Employment taxes on ALL employers NOT offering Govt HC. No choice.
Pg 110 Lines 13-18 An excise tax on ALL goods from companies not offering Govt HC. ALL Americans pay.
Pg 287 Line 14-25 PROOF that Govt will ration HC by mandating waiting periods for readmission.
Pg 306 L 3-6 The Govt can expand the scope & size of Post Acute Program Svcs anytime & as they see fit.
Pg335 L 16-25 Pg 336-339 – Govt mandates estab. of outcome based measures. HC the way they want. Rationing.
Pg 341 Lines 3-9 Govt has authority 2 disqual Medicare Adv Plans, HMOs, etc. Forcing peeps in2 Govt plan.
Pg 354 Sec 1177 – Govt will RESTRICT enrollment of Special needs ppl
(no more…I promise)
1. Health care bill won’t make it through in the present form.
2. That doesn’t change my short term bearish outlook.
Wood,
How do you look at ” damned if you do damned if you don’t?”
Is there a point where you’d consider getting long if there’s not a pullback? I keep thinking the probability gets greater for a pullback the more days in a row that are up.
However, I’m wondering if there’s point where one throws that thinking out the window, and if so what would it be?
I’m thinking maybe a few ticks above resistance say 957-9 might be viewed as a breakout. Although, my damn logic says the probability has just increased for a pullback.
Do you know of any better way to reflect on this here dilemma?
Five-O, I’ve thought a lot about the dilemma you have outlined.
There is no point I’d consider getting long if there is not a pullback.
I’ve been looking at the SPX, INDU, over the years, during times that look similar to the last week or so. In most cases, there is a pullback. They tend to be pretty orderly but there have been some violent exceptions.
In very few cases, it keeps going up enough to make you wish you went long, then it pulls back.
Your logic is correct, and it constitutes the paradox of the mean reversion system: The farther the trade moves against you, the better the chance that it moves in your favor. You must define your max risk, and stick with it, no matter how much the probability increases.
Finally, I have made only a few discretionary (not system/mechanical) trades this year. Currently, I have no system or signal that is in anyway suggesting it is time to get long. To get long, without some sort of a pullback (a consolidation, even time-based might be acceptable) would mean me breaking my own rules, and the only times I consider doing that is to add alpha, such as adding to my existing SPY short as the probabilities of a pullback increase.
I understand what you are feeling, where it seems like the market will just keep going up and up. I can guarantee you it won’t. However, it is possible that we correct sideways, consolidating with time (which would be like being in a pot of water as it is slowly brought to a boil for the bears.)
Wood,
Thanks so much for you insight. I know you’ve been at this game alot longer than me.
So, when you say time based consolidation, you’re saying sideways action for several days?
Yep, sideways, tight range, just loose enough to let the oscillators back off of overbought.
Take my insights, but please set your own risk. It is entirely possible that what happens over the next 3-5 days has never ever before happened, in the past 100 years of market history. I doubt it, but it is possible.
This trade, although it has been frustrating the hell out of me, still feels like money, but I’d hate to have anyone get caught off guard and lose $$ from following my rationale.
An assist from OEW:
“With the new high today at SPX 957 the market has rallied 88 points from the 869 low. This rally is quickly approaching the length of most of the rallies during the Major wave A uptrend. If this uptrend unfolds in a similar fashion we should get about a 50 point pullback soon. Resistance is at the 961 OEW pivot, which indicates a potential rise to the 968 level before the pullback begins. Medium term it appears this market should uptrend into August to end Primary wave B. Probabilities suggest a potential high between the OEW 1018 and 1041 pivots.”
Thanks E8.
We won’t see direction until the major earnings weeks (this week, next week, and half of the following week) are over. Until then, chop-n-scoop.
Manuel, NICE health care analysis my man!!
I agree with what you’re saying because it makes sense, but we know how much “sense” things make right now in general. A market breaking out of a long range with one of its indices up ten days in a row doesn’t make sense, but it doesn’t mean it can’t happen. A pullback would be perfect here for going long but is it too obvious, just like the head and shoulders of a few weeks ago?
I’m probably overthinking here. Anyone find themselves overthinking everything they do now because of the way the market has acted this year, rarely making any sense?
I just hope the market isn’t setting up a situation where it does pullback like expected but then it doesn’t stop pulling back (because everyone is thinking it will be a buying opportunity) and just falls all the way back down to the bottom of this God-awful range on the S&P around 875, trapping a lot of late bulls just like it trapped the early shorts two weeks ago. I think back about ten days ago when the market looked really bad, and I did not short because I was going to wait for a bounce, but when the bounce occured like I expected, it just kept moving higher and was a disaster for those shorting it. I really hope we don’t see the same thing in reverse if we pullback. It would be beyond frustrating.
Maybe the fact that we are all seriously considering that there will be no pullback is the tell that it is coming soon?
maybe. but also, “don’t fight the tape”.
I lost tons of money doubling up shorts at key resistance levels during the whole first half of the march rally, primarily reading Danny’s blog. I learned some valuable and expensive lessons from that.
It’s good for the trader to read bullish and bearish viewpoints, no matter what he currently thinks/hopes– your resilience forces me to stop and think, instead of taking the huge breakout we’re going to have soon for granted ; )
I’ve had this exact thought yesterday and today, as I have almost convinced myself that a pullback (of any significant) will never happen. So therefore, I continue to hold on to the hope that a correction is coming since everyone seems to be getting into one camp, which can be sign to be careful.
Woodshedder – just want to thank you and completely agree with Hammy – I read all you guys here as much as I can, but spend more time on CA’s blog since I’m basically a day / swing trader during these times, but I don’t know anywhere near enough about shorting yet to do anything more than hit the iETF’s. Getting the benefit of your perspective and others here is fantastic.
Doc, all I do is swing trade, but it is done mechanically.
Glad you’re enjoying the blog and glad that it is helpful.
I like Obama … however he is paradoxically a fucktard of sorts.
It appears there is a change in the force.
The idiots on Squawk Box seem to be a bit more pessimistic, and the overnight futures market has shown the first weakness in over 5 days.
OK – This is officially the George Romero Zombie Market. It won’t die.
Bullish trends take a good bit longer to reverse than do bearish trends. While today is a little disconcerting, it is not yet a slam dunk on the bears.
Hi Wood,
Quick question… can you pull the historical “most up days in a row” for NASDAQ or QQQQ on your system? I can’t seem to find any periods where it was over 10 on my system, but it doesn’t go back very far.
Renn, I can, but I can’t do it until this evening. I did run a test on that a day or two ago on the Qs, and I believe it was 9 days, but don’t quote me on that. I’ll run it tonight and reply here.
TraderRenn,
sorry, the maximum number of consecutive sessions with a higher close for the NDX was 19, not 18 (from 04/25/1990 to 05/24/1990).
Best,
Frank
Thanks Frank! By the way, if you all love this odds-based way of decision making, make sure to visit Frank’s blog. It is very excellent. Just click his name and it will take you there.
Thanks Wood and Frank,
Yes this odds-based way of decision making is what I know the best along with several trend following systems.
Usually once I determine the trend, I wait for a pull-back or a bounce depending on trend direction and get in and out depending on the size of the move.
My systems showed an uptrend around July 16, but I have yet to buy in.
Damn frustrating!!!
$spx -.56 YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYEEEEEEEEEEEEEEEEEEEEEAAAAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
lol, your exuberance broke the comment window/template!!!