I am going to change it up a bit today and present some more longer term numbers. Most of my posts have been short term based and focused on the immediate nature of the market. As some of you remember I had posted a fairly negative message last week about the overall outlook so I wanted to elaborate a bit more on direction and challenges we see in the current market place and conditions.
The First Big Crash – ok let’s address the month of September and October. As some of you may remember back in July I had indicated the lows of the year being formed in October – we have a few days left and I think our current down cycle will find its bottom at the 764 level, the level we adjusted down to back in 2001 at the end of the dot com boom. We have been holding up fairly well over the last few days but you can sense the market sentiment not accepting the 839 as the bottom. Our bottom is imminent and will develop over the next few days and I am pretty confident we will find it at the 764 range where we will trade very very short. From here on out the market will rally in a dramatic move on the short term and stabilize in an uptrend that should find the top around the 1040 or the 1100 range – it is possible to hit the 1180 but that I need to determine once we get closer to the range based on momentum. This cycle should find its end towards the end of the year and may reach into January. The overall sentiment of the market, investors and consumers are based on the buy and hold still. In September and October a large amount of the down volume has been caused by the redemptions and de-leveraging in hedge funds. In a down trend environment the first positions to get hit are the higher risk ones and those have come to an end.
The next Big (orderly) Crash – the next big event we have to deal with is the redemptions out of mutual funds and 401k’s. I see huge risks with the average investor being sold on the idea that the bottom is in and we will continue on the upside. Seeing the DOW at the 10K levels again will bring back huge amounts of confidence, investors are more comfortable now that they have recovered some of their losses and greed will step in again with low risk investments being moved into more risky ventures to get in on those “undervalued companies” that are begging to be bought and bring huge returns back how we had them in 2007. After our top around the turn of the year our downtrend will continue in an orderly fashion, nothing like we had seen in the past 2 months. Sense, with a hint of fear, will slowly set in again when we will trade back towards the 700-800 range. Here is where I believe we will start to see a huge change in the market place with more redemptions coming from Mutual funds based on 401K liquidations or moves into bonds and other stable investments. This will be a long process and by the time we are done we will have our 400 mark on the S&P towards 2009/2010. You may call me crazy and yes I agree I am worst case scenario kind of guy but I rather prepare for this event and be called out in 3 years about how wrong I was then to blindly follow a path that has risk and loss written all over it.
Wednesday, October 29, 2008
Friday, October 24, 2008
WOW ....
Nothing more to say ... if we are to reach 764, get your money ready, your parents money, your grandmas money, ask your neighbor, ask your wife/girl friend, your best friend, your employer. It is possible today if the SEC will allow trading this low - today we could see the first trading halt in a long time. Futures contract are at their maximum permissable level for pre-market.
Thursday, October 23, 2008
Oh we had a decision alright ...
Yesterday
Well the decisions is there, it can;t get any clearer then this. Violent move to the downside and fear setting in again.
Today / Time and Price
Watch the bottom at 839, if we are to break we have one more chance to find support around the 820 range. If we are to get support at the 865 it should be short lived as we are so close from the previous bottom.
Mid & Long Term
We could be on our ways to form a double bottom, however, this is not something I anticipate. During times of a double bottom technicals and fundamentals are more neutral allowing prices to stablize around the previous bottom and gather strength for a rally. At the moment fundamentals are very negative, earnings starting and reports have been very negative, with guidance being adjusted downwards for pretty much any industry.
I am starting to get worried about where we are headed. Looking at it from a big picture of society and the last decade - this could be the big crash, the big adjustment or change that will come. Presidential elections with a fairly left candidate that is most likly going to win, double top from our previous dot com peak, the end of wall street and investment banks. The days of the US being the poster child of capitalism and opportunity could be at an important turning point. The government is doing everything possible in an attempt to fix a problem that is in reality not fixable. Now even more then before I believe that we will be headed for a lot more lows in the next 2 years. We will see the 400 mark on the S&P long term, not this year, maybe not in the next 6-12 months but it will occur.
When looking at the markets and investments from the average consumer - the past 30 years have shown one and only one message - start investing into the market place, 401K's, put your money into companies and you will be able to build your retirement without any worries. What will happen if we drop another 40%? Americans and many others who have relied on this strategy to retire will be left with nothing to retire from. Look at europe and their way of retirements being supported by the government - no one is waiting for this big payout from investments - you work hard you entire life and will be taken care off. This concept does not exist in the US, nor did it need to exist - but what will happen to those, who depend on their 401ks, retirement accounts and other investments when they will have lost 75% in value and nothing else is there to support them?
I am concerned, very concerned ...
I apologize for given such a grim negative message today, I hope I am wrong in many of my points but we have to start to accept the fact that this is possible - the sooner we realize this and do not get caught in denial the more able we are to do something about it for ourselves.
Well the decisions is there, it can;t get any clearer then this. Violent move to the downside and fear setting in again.
Today / Time and Price
Watch the bottom at 839, if we are to break we have one more chance to find support around the 820 range. If we are to get support at the 865 it should be short lived as we are so close from the previous bottom.
Mid & Long Term
We could be on our ways to form a double bottom, however, this is not something I anticipate. During times of a double bottom technicals and fundamentals are more neutral allowing prices to stablize around the previous bottom and gather strength for a rally. At the moment fundamentals are very negative, earnings starting and reports have been very negative, with guidance being adjusted downwards for pretty much any industry.
I am starting to get worried about where we are headed. Looking at it from a big picture of society and the last decade - this could be the big crash, the big adjustment or change that will come. Presidential elections with a fairly left candidate that is most likly going to win, double top from our previous dot com peak, the end of wall street and investment banks. The days of the US being the poster child of capitalism and opportunity could be at an important turning point. The government is doing everything possible in an attempt to fix a problem that is in reality not fixable. Now even more then before I believe that we will be headed for a lot more lows in the next 2 years. We will see the 400 mark on the S&P long term, not this year, maybe not in the next 6-12 months but it will occur.
When looking at the markets and investments from the average consumer - the past 30 years have shown one and only one message - start investing into the market place, 401K's, put your money into companies and you will be able to build your retirement without any worries. What will happen if we drop another 40%? Americans and many others who have relied on this strategy to retire will be left with nothing to retire from. Look at europe and their way of retirements being supported by the government - no one is waiting for this big payout from investments - you work hard you entire life and will be taken care off. This concept does not exist in the US, nor did it need to exist - but what will happen to those, who depend on their 401ks, retirement accounts and other investments when they will have lost 75% in value and nothing else is there to support them?
I am concerned, very concerned ...
I apologize for given such a grim negative message today, I hope I am wrong in many of my points but we have to start to accept the fact that this is possible - the sooner we realize this and do not get caught in denial the more able we are to do something about it for ourselves.
Wednesday, October 22, 2008
Decision day ...
Yesterday
I am still off by a point of two but overall numbers are starting to make sense again. Hit the first high right at the 985. Unfortunately we broke the 970 fairly hard and as mentioned it brought us to the next level at the 952 (first low was off by 2 points). I mentioned I wanted to see at least one test of the 985 and we were able to test it one more time in the afternoon - However we had a fairly large sell off that brought us right back to the 952 which marked the low for the day. This unfortunately was not a good sign and indicates that we will find ourselves on the lower end again.
Today
Unfortunately we are already down premarket so the 940 will be broken on the morning. If we are to continue on the upside we need to try to stay above this number and at least attempt to get back to the 952 range througout the day.
Time and Price
970 - if we can get to this number today we will continue on the upside, though I do not expect to even get a test here
952 - we need at least 2 tests of this number today, if we cannot break this on the upside the market will continue lower
940
919-921 - expect quite a bit of support here
A break and close below the 940 will send is back into the 800 range and possibly retest the lows.
I am still off by a point of two but overall numbers are starting to make sense again. Hit the first high right at the 985. Unfortunately we broke the 970 fairly hard and as mentioned it brought us to the next level at the 952 (first low was off by 2 points). I mentioned I wanted to see at least one test of the 985 and we were able to test it one more time in the afternoon - However we had a fairly large sell off that brought us right back to the 952 which marked the low for the day. This unfortunately was not a good sign and indicates that we will find ourselves on the lower end again.
Today
Unfortunately we are already down premarket so the 940 will be broken on the morning. If we are to continue on the upside we need to try to stay above this number and at least attempt to get back to the 952 range througout the day.
Time and Price
970 - if we can get to this number today we will continue on the upside, though I do not expect to even get a test here
952 - we need at least 2 tests of this number today, if we cannot break this on the upside the market will continue lower
940
919-921 - expect quite a bit of support here
A break and close below the 940 will send is back into the 800 range and possibly retest the lows.
Tuesday, October 21, 2008
Ohh yeah .... we starting to act normally again
Yesterday
Impressive, we are slowly starting to trade with sense again. Opened in the 948-952 range, hit the first high at 970, hit the low at 940 (off by 3 points) and went to retest the 970 with a final break to close right at the 984 (off by a point). This is what we need here.
Today
After our monday last week we did some attempt to retest the lows and created a fairly wide penant formation which is a fairly bullish sign. We broke the trend line late afternoon in trading and need to ensure to stay above this point today.
Time and Price
1005
984-985 - I would like to see at least a test of this number today.
970 - as you could see yesterday this turned out to be a fairly important point now. This needs to hold today or we will head back to the lower side.
948-952
940
Impressive, we are slowly starting to trade with sense again. Opened in the 948-952 range, hit the first high at 970, hit the low at 940 (off by 3 points) and went to retest the 970 with a final break to close right at the 984 (off by a point). This is what we need here.
Today
After our monday last week we did some attempt to retest the lows and created a fairly wide penant formation which is a fairly bullish sign. We broke the trend line late afternoon in trading and need to ensure to stay above this point today.
Time and Price
1005
984-985 - I would like to see at least a test of this number today.
970 - as you could see yesterday this turned out to be a fairly important point now. This needs to hold today or we will head back to the lower side.
948-952
940
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