A Bounce Seems Quite Likely
Although I still believe in the forthcoming bear market, I sense the selloff is probably done for now and we'll see a bounce upward. I still have a ton (dozens) of put positions on stocks that seem to have good solid "down" patterns, and I imagine if a bounce does come, it won't do great things for these positions. But I'm going to wait out the storm and, at the same time, go long some indices to soften the blow.
Before getting into those index charts, just a quick mention that my Meritage recommendation mentioned last January seems to have panned out nicely. Although it hemmed and hawed a bit before starting to fall, it finally did so in earnest.
The S&P 500 Volatility Index ($VIX) has spiked up recently, indicating that perhaps the bears might ease off for a bit.
Looking at the Dow Industrials ($INDU), there seem to be a few reasons for this to be a short term bottom: (a) the Fibonacci retracement (b) a fair bit of support in the green shaded area (c) the fact that when this level was last reached, the bears were turned away swiftly. Obviously if we're going to get seriously bearish, this level will be breached at some point, but my gut tells me it would take something extraordinary very soon to pierce it.
The Russell 2000 seems to be at the support line of an ascending channel.
And it's the same story with the S&P 500.
Again, this lines don't simply travel upward into infinity, allowing us to trade these markets whenever they bounce off these lines. Trends do end, and it's very hard to predict when that will happen. Stay sharp!
25 comments:
Cristi25,
Your post the other day implied that you want things to get "messy" in the Middle East this weekend so you can make money. As a soldier deploying to Iraq this fall I can assure you that you don't want things to get "messy."
I trade to make money, same as every body else. I know that markets go down as well as up. I don't wnat people to get hurt so I can profit.
When things get "messy" people die. These people are military and civilian, husbands and fathers, sons and daughters, women and children.
Since I'm in the business of killing, I'll spare you the lecture and leave you with a thought, "the soldier, above all others, prays for peace."
Peace
If your reading this, thank a teacher. If your reading this in english, thank a veteran
"If your reading this, thank a teacher. If your reading this in english, thank a veteran"
First, English is a proper noun, so it should be capitalized. Second, "your" is a possessive pronoun. What you meant to write is the contraction "you're".
So I guess we could append that with "If you're reading this and it's spelled properly, thank Tim."
:-)
Thanks for the grammar lesson. My problems are not due to lack of education, but to bouts of laziness.
Cristi25,
Thanks for your service.
How about this: If "your" reading this, thank a public school teacher...
Seriously though, thanks for serving and preserving our freedom (to trade, among other things). Means a lot.
Anonymous - as is uaual, spot on with your view on not wishing any hurt to come on people and in particular linked to any gain in resultant market movements. Sure it has been frustrating for things to start moving the bears way again and the Israel situation was a catalystic on the face of it. But quite frankly, if it wasnt for that, then eventually something else negative would have become the focal point for a fall - lets face it there are so many economic negative to choose from right now! None of us must forget that it isnt actually individual events that drive the market up or down, although at the time it appears to be so, but it is in fact the charts that provide future clues as to what will happen anyway. The news breakers merely act to provide a timing for those movements and perhaps a degree of compaction into a very short space of time, that might otherwise take a lot longer to happen if such a new breaking story didnt happen. As to this week, I cant help but agree with the majority - there will be an upwards swing with the 11000 level tested if there is good news, but if there isnt then it is likely to happen anyway but may take longer to occur
volvosan - agreed, support was 10700, however that was on Friday. Monday may not turn out to be a bounce - the futures trades are not up, as you normally expect before a sharp bounce. In view of the dire world situation - dont forget n. Korea maniac as well as escalating Israel/Lebenon conflict could all drive oil up to a new high which in turn means the support level is likely to drop still further. hbarr posted similar comment earlier today here. This really is so difficult to predict, and boy do I sure need to get it right Im massively down on my open long positions.......
downosedive im down on my open long positions i took on thursday, your not alone, im hoping for a quick relief rally so i can exit out of those trades and go long PSQ the only ETF that I know most people are buying for a drop in the markets. Earnings will be the driver of this market this week. Very big names reporting that are going to move the markets. CPI and PPI also going to be big. Any signs of inflation and the markets will most likely selloff again. Would rather be in cash then long any position at the moment. I just dont feel that there is a relief rally in site. I just cannot see it if earnings dont show great results.
Adam
the week of July 17th will look like this.
Monday - short-covering
Tuesday - stoopid bulls buy back thinking the selling is over
Wednesday - Israel always stirring shit up, will get more aggressive
Thursday/Friday - more selling
= DOW in the low 10,600's
I love the variation of what people want to do in this situation. Everyone is calling for a rally.... well what is earnings are bad...what if the big companies miss? What if the inflation data is through the roof???? Are people going to run stocks up??? I don't think so. Look at the volume.... it is fading.... not as much volume to support huge moves. Whether or not we get a one or two day bounce, the trend is down.... and will remain bearish for the next 3 months......most likely. For me, I may throw some change on an index long ....but is it really worth it- not for me.... the risk is to the downside not to the upside.
Interesting to note that some oil stocks/drillers can't even get above their 50 day MA's while others can.....that is amusing...typical bear market behaviour. Too much emphasis on the war, and not on earnings.... look at pre - earnings...majority of the were downside warnings.... from major companies that lead the indexes.....
Look at the charts... to me it looks like they are still in the first half of this leg down....just my opinion. I can find more stocks to bet against then I can to bet for....
Don't forget to keep the big picture in mind. Slowing growth= missed earnings= contracting multiples......+ geopolitical concerns, rising inflation, Oil @ $78..... this is the worst possible scenario to be long
Enjoy
longs on the dow GAME over ! look at the weekly chart that is the trend. plus the last time we got to this level we had 8 days of selling we are just in day 3 of selling so we should but through any trendline like a hot butter knife ... just maybe then we will have some juicy buys.
BA should be a drag this week
http://biz.yahoo.com/ap/060716/britain_air_show_boeing.html?.v=5
short TIE and ATI
Anonymous,
Thanks for all you do. I can assure you no one could have written it better.
wow!
Well, its been one heck of a long time since I posted, and that is probably because right now im sitting in an internet cafe in the heart of Paris.
And WOW. I hope everyone enjoyed the last little dip, and made tons of money, because that is what I would have done if I was back at homebase, and working.
But its a toss up, make money, or spend amazing time with two buddies partying every night, and meeting a lot of women!
Anyways,I know my study is a little foggy, since I check the markets maybe once a week, sitting in mostly cash, and gave myself a little kick today because I see the market has tanked the last little bit.
But, I agree wtih Tim, the market is ready for a bounce, and that sets things up for a further fall.
Does anyone else see the huge, HUGE support level on the Dow at around 10718ish?
Things are getting ugly! or should I say, STARTTING to look like things are going to get ugly.
Take it easy, And maybe when I get back, you'll see some nice pics of Paris (and the rest of Europe) on my blog when I get back
i heard a car backfired in Paris last night,
whole country surrendered
haha :)
any long plays here are high risk, so do it on a limited fund basis. This week we will try to stabilize, but a lot depends on earnings, more bad news from big co's will definitely kick this market right in the nuts!
Frank
went long PSQ this morning at $73.86 to hedge against my QLD long. Market headed back down..
the selling has begun yet again!!!!!!!!!!!!!!!!!!
sanjay i think your kind of right. Im about 35% stocks and 65% cash at the moment. I think there is more downside than upside especially ahead of the CPI and PPI...earnings are going to move the markets along with bernanke speaking this week as well. I figure nasdaq 2000 soon. Market up on lower oil and AAPL
I'm relatively new to the investing game, and I play mostly on short sells in the penny stock arena. I know that there is quite a bit of volatility in the markets right now, but I can't get a foothold on the right side of it. For no known (or, at least, understandable) reason that I can think of, several of the stocks that I considered investing in on a downward trend spiked heavily upward, netting a cumulative gain of about 1,100% in nearly six months. The problem is that they did it with no support from the news media, earnings forecasts, sector swings or any other perceivable eye-openers. My gut told me to run with it, believing that it was just a matter of time before the upward corrections took place, but I was always steps behind. I got in on some of the upswing (I'm sitting on a 52% gain on my current buy if I sell now), but compared to 1,100%...
What am I doing wrong?
I agree with potential bounce. Not good to go long, but good to cover a few shorts for insurance.
Costas, I agree with your comment regarding speaking English in this country. I thank veterans for their service, but don't think we have been near foreign invasion. After a year traveling abroad I've come to realize the good fortune in this country for its economic opportunities and political stability, but we should remember that our good fortune came at the cost of great misfortune (to say the least) to the prior inhabitants of this land. I'd also be just as content speaking Spanish or French in this country, so long as it is not the result of foreign domination. Anyways, this isn't a political blog, so enough with that.
Has anybody seen some stocks in a solid downtrend to recommend? Most shorts I'm looking at have high risk entries. A bounce would be nice for some good entry points on new shorts.
I thought I'd chime in today:
Today's lack of a technical bounce is not a good sign for the bulls, but it's not beneficial for the bears, either. The bears NEED that false rally to build up new short positions. In my opinion, it would not be prudent to take out any new shorts today, especially with a large number of earnings reports coming out in the next week or two, plus the CPI/PPI readings tomorrow and Wednesday. The market is clearly in a holding pattern, as if anyone couldn't guess.
Anyways, if the market does rally on earnings or CPI/PPI data, then it would be a perfect opportunity to get OUT of any remaining long positions in anything except Utilities, Consumer Staples, or Heatlh Care. In those sectors, if they sell off on "good earnings news", then it would be a good time to add to long positions.
I wouldn't go near commodities with a 10-foot pole right now. They seem to have nowhere to go but down. At least in the short term. The old "throw the baby out with the bathwater" will come true if we see any negative news on the earnings front or with the CPI figures.
Anyways, I think it could be quite some time (several months or more) before a new market leader emerges. Or the market could sell off and go into hibernation for a while, who knows.
All I know is that Kash is King right now if you don't already have short positions in the green.
Still waiting for my target for gold. Today's weakness could be just the beginning. The huge increases in the COT-reported short positions in the past week or so spells trouble for the gold longs in the short term. The Big Boys do NOT intend to lose on their short positions. And with a strengthening dollar and the war-inspired reaction/panic buying just about finished, I think gold could soften considerably in the short term.
Good luck out there.
-Tony
oil falling hard today, energy and oil related stocks really falling, watching PXJ, would like to get in PXJ around $17.75-$18
wait till thursday ... ppi and CPI could spoil a bear market bounce.
i dont understand why people think we have support here, a bad cpi or ppi could sink this market even though there is "support". I wouldnt consider thinking "support" with CPI, PPI, Bernanke speaking and earnings. Support is nothing when these things are in favor.
Thanx, bsi87. I'll check it out.
Side note: a little scared of bounces. historically bad for me in terms of entry/exit.
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