Tuesday, August 11, 2009

Expectations

This is just a random non-technical post but merely meant for observation purposes. Many readers here are also following all the other financial blogs out there, primarily slope, evil, acetraders and maybe even xtrends (poor guys there).

The one thing that strikes me is the big disconnect many are having. I remember very clearly that 2 months ago many were in the same camp of bearishness with only a few here and there calling for higher prices. From my perspective we have seen quite a change in the financial blog world. Not only do we have quite a few bulls with us now - but the price levels that many are calling for are getting to quite extreme levels. Regardless of who is bull or bear, converted bull, short term bull, bear - whatever you want to call it. Almost everyone has price targets of at least 150-200 points away from where we are today.

Everyone knows what my price targets are on the downside and I still hold to those numbers as they are fit fundamentally and even technically. However, as you know me I keep targets more focused on the short term and where we see ourselves in a few weeks, at most a month out. Many other authors and blogs have been quite similar in the past and we are currently seeing quite a different tone. No one is really focused on our surrounding prices anymore. By surrounding I am talking about the key GAP at 970, the 1014-1022 range or even our key support at 870. All I read is 1150+ (with some even going into the 1200 range). Very few are even considering the 870 or even the 800 range on the lower side.

The other thing to consider is that many of the blogs we frequent have been primarily bearish, and still are, but we are seeing a larger number of bulls, converted bulls and traders choosing to minimize capital exposure and remaining on the sidelines. No one can deny that this market has been extremely difficult to trade, yes easy money has been made on the long side, and bears are continuing to get the shaft on any attempt to short this market.

Why am I saying all this? The end result is pretty clear to me, there does not seem to be a single person out there that is confident in where the markets will move this summer - yes we have some stubborn people that keep on shorting but I would not necessarily consider that a call for market direction but more a gamble to be able to try to get in at the top.

Overall - I have no idea where we may head, we are faced with a large overhead supply that at this point has only materialized through sideways action but could turn out in more upside. Additionally yesterday represented the lowest SPY volume day of the year. When looking at the markets on the 1-min chart we see price moves limited to 30-60 minutes of the cash hours and remain totally flat after those moves are over. Consider this - we are at key resistance and key levels and the market is able to stay within 1 point range for more then one hour - something we have not been able to see in over 2 years time.

I want to tell myself its the quiet before the storm but that again is just another justification for a point of view that had losses written all over it.

12 comments:

  1. took a long via futures using NQ @ 1592.25

    hedge ratio is 3 short to 2 long.

    ReplyDelete
  2. Chris here is a similar viewpoint. your call for long may be a good idea.

    On the watch: Last week, we mentioned how the NASDAQ 100 was very close to Major resistance levels. There are two resistance lines just ahead of us now on the NASDAQ 100. We are talking about a 10 year and 2 year resistance line here, so this is a very big event. These resistance levels move lower during the week because of their down slope. The 10 year resistance was at 1636 Monday and it moves to 1629 this Friday. The 2 year resistance was at 1702 Monday and it moves to 1698 this Friday.
    For the NASDAQ 100 to break above and trend above those levels would depict a fundamental shift in the 10 year down trend and the beginning of a new, powerful Bull market. Or ... a failure at resistance point 5 would be the start of another leg down in a Bear market.
    From one perspective, you would think it should fail and go down as consumers are still in too much debt, not spending, and can't tap their home equity for more to spend. Corporate sales are still falling, but not as fast.
    On the other hand, a recent study suggested that "the world's consumer confidence was rising", while the U.S. consumer confidence was falling. Is the U.S. somehow lagging a worldwide change that is positive ... and, are we going to join the world for a new Bull ride? Who's the dog and who's the tail? Will the tail wag the dog, or the dog wag the tail?
    I don't have the answer, but we do know that this 10 year NASDAQ chart is saying that we are very close to an important clue to the answer.

    ReplyDelete
  3. its time to retire chausgy. time for you to retire...

    ReplyDelete
  4. took some partial profits for NQ

    ReplyDelete
  5. closed the rest of NQ as well.

    ReplyDelete
  6. twitter broken again otherwise I'd only post it there.

    ReplyDelete
  7. sorry been busy with some personal items the past 2 days and had zero time for the markets. Still in my ES short at 1012. Stop now placed at break even for this position.

    I did re-enter half of the puts that I had closed out earlier in the week. At this point we have tested the previous high overnight on SPX (while NASDAQ made a new high), however are unable to break through even with positive news out of europe.

    It is my feel that we may give the absolute upper range at 1021-1022 one last test before heading lower.

    At this point I am pretty much flat and my ES short with a break even exit. I still have some puts but exposure is less then 5% at this point so its not too bad.

    ReplyDelete
  8. I agree. within the next couple of days we should see the top whatever it is. 1022 --1032 range. Good time to get in the short pposition is Friday- Monday high.

    ReplyDelete
  9. My thoery is: all technical indicators are now calling for a new bull market. It took 3-4 months to achieve and 300 spx points.

    same scenario could unfold on the bear side. It may take another 300- 400 spx points on the down side to confirm the bear market. But by then it is too late, the damage is done. .

    ReplyDelete
  10. Chris,

    What are your thoughts about the headlines which report "Recession ends in France and Germany"?

    Thanks,

    ReplyDelete