Monday, April 13, 2009

Random thoughts ....

Ok someone had asked on Thursday if the major bottom targets I refer too are still possible or if this is the turn around. Well I am going to make 2 major statements here, not with an "if" or "should" be state very clearly.

Will we hit 480 at some point this year? Yes, there is nothing to prevent us from this target this year. My initial targets in October 2008 were towards the end of 2009 and beginning of 2010. I had revised my forecasts earlier this year and moved up the 4XX target towards September. Additionally I had warned that even now it is very possible that this target will be moved up even further. Based on my time cycle calculations I have seen accelerations occur during most of the year, accelerations that are getting more drastic. The time cycle moves we have seen here are not sustainable long term and will come to an end soon. The question is whether or not we will stop here, or once we reach the first major bottom target. I feel very strongly that our accelerations have not yet stopped and will not stop for some time to come.

So the next point. Will 480 be the final bottom of this market? No it will not. Again this is not a "maybe" or "should". We will make lows below the 400 range. When will those occur? I do not know, 18 months, 2 years, maybe 3 years. At this point it does not matter when they will occur because it is not a target we can trade against.

So why am I so strong on the bearish side? It seems we have improved a bit here, the government is doing the best it can to stabilize the market, improve liquidity and allow investors to do what they do best - invest into companies that will provide growth and stability.

But here is where we have a substantial problem, a problem that will take many years to unwind. Investments in the past, and when I say in the past lets turn back into the prev 1980 time frames. Money was put to work for companies with a strong business model, money was invested and returns were realized. When the major retirement plans and 401K's starting following this model many had amazing returns and economic growth helped them to support further investments. So why are we going to such extreme lows? Well, first off, the model used today is very different, we have huge amount of leverage in the market place. I am sure many know about the total size of the derivates market - staggering and completly uncontrolled. This is not investment - this is speculation, on a major scale. Instead of investing money many started to speculate and set a new mark for investment models. Investment models in the past 20 years have been heavily built on speculation - many do not want to admit to this but the amount of leverage that had been built up is more then we can even try to understand.

So lets leave that aside for a moment, lets talk about our lovely economic indicators that are showing signs of improvements - or do they? Yes we had some surprises but look at our base for expectations. Were those positive surprises? As a sales person you can put a spin on any fact and make it seem like its a positive number. But in reality, its just as bad as before. The market has lost objectivity from what is good and bad. Is the market a constant? Nope, are economic indicators a constant? No they are not - why is this question important you may ask? Well, quite simply, one cannot expect the market or any indicator to just move into one direction. All of those indicators are driven by human nature, companies making decisions - people, like you and me. What we considered bad not even 2 years ago is now positive. A big change in sentiment, objectivity and sensitivity. When expectations will be lowered due to constant downward readjustments any number that is not quite as bad as expected all of the sudden gives hope - again human nature.

Fundamentally, what is different from today then last week, last month, last year. Are we seeing any signs of improvements? None, in my opinion we have barely completed the first leg of this economic crisis - with another 4 legs to follow. One thing I know for sure is that this crisis we are in, its uncharted waters. Risk was rewarded and more risks were taken with even more rewards. This did not just happen over a few years - it has been a process that has slowly build itself up over decades - yes decades. The last 3-4 years have merely been the last push, but the problem that we are facing now has been building over a much longer time frame, much longer then anyone would like to admit.

I understand we are getting a bit away here from facts and I am making statements that do not have a lot of factual support here. I started collecting some links over the weekend that I will share in a much larger summary that describes this problem in more detail. Unfortunately after a few hours of trying to put everything together I realized it will take me a bit longer.

In the mean time some other news. There has been a lot of buzz on the net about this article from zerohedge. I invite everyone to give this a read - while it may go into an area of the market many know little about it is written easy enough to get a decent understanding. Read it again after you did it the first time =)

On another positive note, one of my favorite blogs is back. Give this blog a read as well, similar to here with daily reviews, forecasts and support and resistance numbers.

I finally got myself a twitter account. I will be posting trades and other important news in there. Its my first twitter so lets see how it plays out.

I will be posting more updates shortly with graphs and scenarios for the week. Wanted to get this post out first.


  1. Hi, Thanks for the update, appreciated.

    How do you see today? think we will establish a low and trend back upwards for the week? Im thinking that the earnings this week from Goldman, JP Morgan and Citi could be the driver for a short term climb??

  2. Most likly trend lower and create new low but not by much. I am looking to exit my longer term SDS position soon here. Too afraid of GS earnings tomorrow. Rather wait and remove the risk.

  3. we seem to be stuck in a narrow you think weve seen the low for the day?

  4. possibly. We had a setup for a new low earlier when I had posted the update via twitter. However did not materialize. Volume is pretty much non-existent considering its still considered a holiday weekend.

    Big action will start tomorrow off the open.

  5. Yeh,twitter is a great idea and glad you managed to get it working.

    i'm tempted to go long in anticipation of tomorrows GS earnings, would love your thoughts on it.

  6. nope stay out. May work out but its a gamble. A lot of the earnings are priced in and I think they will be positive. We are on the upper end of the range so we have to respect the market there. If it breaks out above, possible but you are risking quite a bit.

    During times like this we have to be patient. Our chance will come, I know how it is with the itchy fingers on the buy/sell button. Better to have the discipline to wait on the sidelines as we have no clear trades at the moment.

  7. wise words as always..thanks again.

  8. How do we get your twitter? Is it listed under Chaugner?

  9. Got it. Idid not scroll up to see.

  10. It looks like moving towards 880? did you sell your SDS? Or do you think another Bear attempt for the low?

  11. I got stopped out of SDS mid day - I had moved stop after the break I had advised on twitter.

    878 is my next target here all dependent on GS earnings tomorrow. I will post a picture of the current range. It seems we are creating more of a wedge then a trade channel.

    Really do not know how the market is going to react to the monster earnings from GS. I think 878 is definitely possible here. We need to establish a proper retracement to get ourselves out of a wedge for the bulls to continue.

    Not easy to make calls at the moment and I much rather wait a bit and give up the points we "could" make here for a proper trend.