Archive for November, 2009

Has the market really topped?  What’s in store for next week?  Those are the two biggest questions that are going through my mind right now.  To answer the first question… I’m not sure yet?  It all depends on how far down we go in the next week or so.  If we take out the 1030 SPX level, then I will have to say that the market has most likely topped.

Now… with that being said, I don’t think we will take it out on this coming down move.  Christmas is coming up soon, and that means that traders will be going on vacation.  This will leave the market with very light volume… and we all know that light volume usually equals an UP market.

Regardless of the light volume or not, the end of December is usually Bullish… which is why they call it a “Christmas or Santa Claus Rally”.  But, for the nearer term… meaning next week, I believe we are headed down.  I’m going to present 2 different Scenario’s, but both are pointing down.

Scenario ONE

We open Monday and rally up a little more as Monday’s have been bullish lately, plus some of the traders will still be out for the holiday.  Light volume is also common on Monday’s.  Let’s not forget that the governments around the world have had the entire weekend to come up with a plan to ease the fears of default over in Dubai.  Trust on this one… they will announce something positive to curb anymore heavy selling.

However, the rest of the week should have lots of economic news coming out… and most of it should be negative.  Any rally on Monday should be shorted as I expect the rest of the week to sell off.  If it’s really bad, then the target is 1030-1035 SPX.  The “not so bad news” target is 1045-1050 SPX.  If we rally up on Monday, then the 1045-1050 SPX area is where I’d expect the low to be this week.

Scenario TWO

We continue down on Monday to the 1070 area to fill the gap, then rally back up on Tuesday to hit the 1085 support turned resistance level.  Then fall the rest of the week to 1030-1035 SPX.  This is the most bearish forecast, and I really don’t see it happening.  But, anything is possible?

Ok, as you can see… both Scenario’s call for the market to be quite a bit lower toward the end of this week.  As I previously stated… I’m am now short the market, and will remain short regardless of how high the possible rally on Monday is.  I’m sure that the market makers will try to scare all the shorts out of the market by taking it as high as possible.

Come to think of it… they probably have a lot of people short right now, which could be the fuel they need for a nice “short squeeze” on Monday.  Again, I will ride out any push higher!  The maximum that I can see is for one big “Hell Mary” push to touch the 1120 level.  I don’t really see it happening, but it’s possible.

Looking forward, I think the more probable scenario is for a nice sell off this week, and then a rally next week, that could simply form a lower high, or possibly a new high up to that 1120 level.  I don’t think they will make it this week.  Simply put, this week should be down, and next week should rally back up.

K.I.S.S.

Red

The dollar had a huge gap down on Wednesday, but the market didn’t really rally up that much?  Could a big “disconnet” between the two be starting?  The market should have been up 100-150 Dow points on such a big sell-off in the dollar.  But, it struggled to make it too 1110 SPX?  Something doesn’t smell right, that’s for sure.

Regardless of whether we make to 112.30-112.50 spy, or not, I still believe the market is ready to tank next week.  So, I will take a short position Friday even if it doesn’t make it to that area.

Cancel that Post…  NEW IMPORTANT INFORMATION!

WOW!  Futures TANK over Dubai…

Looks like I missed my chance to go short on Friday, as the S&P Futures tanked 23.75 points to 1085.00, in response to Dubai’s Credit-Default’s.

Click here for more detail… (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHSgyg6MVqGw)

This is HUGE folks, as it clearly tells me that “The Top” is almost surely in!  I just can’t see them making it back up, and going above the current high.  I think Primary Wave 3 has now started!  I’m trying not to bitch too much, but I’m really quite angry right now, as they did this on a holiday when the markets were closed.  That keeps the bears from jumping on board and making some money.  Never forget that the Market Makers are evil and will alway try to keep you and me from making any profit.

I’m sure they were already positioned short, and will profit nicely while most of us have missed the big move down.  So what now?  Do you go short on Friday, and try to catch this falling knife?  I can’t answer that question, as I’m very frustrated right now, and angry at myself for not seeing the signs on the wall yesterday.

You definitely don’t want to go long at this point.  It looks like the best play is to wait for a bounce back up and then go short.  We could be looking a some really big selling the next few days folks!  If you are already short… hang on tight as this roller-coaster is going straight down!

Where this ride stops is any one’s guess?  There is support at the 1070 gap area, and then 1040.  If we break through the 1030 intraday low from the 1st of this month… we are in for a whole lot of trouble.  That’s the level that Mr. TopStep said that needed to be broken to send this market back down to the 900 area. Here is that video again… and by the way, that’s his latest video. I’ll put up his next one when he does it.

The post I was going to do, which is crossed out above, was going to talk about how the banks weren’t rallying up with the market these last few days.  In fact, they have been selling off quite a bit.  Since the financials were the one’s who started this whole rally up from March, it only seems logical that they will be the one’s who cause it to crash back down too.

Moving on…

I think there might be a small bounce Friday (I hope), that will allow me to get into a short position.  Monday could be brutal as traders come back from vacation to read the bad news in Dubai.   As they always say… “The toughest time to go short is after it starts falling without you”.  Just like going long is tough after it has already started to rally.

If this downturn is anything like the rally up, then there won’t be many bounces to get short from.  Remember how many people were waiting for a 38.2% pullback (or any normal fib level) to happen before they were going to go long.  From the March low to the high, all the pullbacks were about 5%… never giving any bulls a chance to get on the rally up, or any bears a chance to switch sides and profit on the rally too.

They never allowed us any chance to go long a make a decent profit.  They always wanted people to buy the high, and hope it would go higher.  It’s just like now… we will have to go short after the big fall, or wait for a bounce that may not happen as technicals indicate they should.

Don’t get trapped with “in the box thinking”…

I really need to “think outside box” on this one, as once they have every bear thinking that “it’s just a pullback before another rally higher”… that’s when it really is Primary Wave 3!  I remember thinking that same thing with P2 (Primary Wave 2…up, of course).  I just thought that every up move was just a bounce before the sell-off continued… but it never happened!

P2 had begun, and most bears had no clue!  Every bear thought they were still in P1 down, and of course none of the bulls went long either, as they too thought we were still in P1 down.  Everyone expected the market to continue lower then the 667 spx low… but it didn’t.

Now, everyone is expecting 1120 area as the high… will history repeat itself?  I think it will.  I think this is the start of P3 down, and any rally back up will not take out the current high of 1114.  This Dubai issue was release on Thanksgiving for a reason folks!  I promise you that our government and their’s planned out every detail possible, before making it known to the public.

This “Cat and Mouse” game that our government, and every government around the world plays, is going to spiral out of control once it collapses… and that’s really soon I believe.  As I said above, I think we will find support at the 1070 gap area, and then 1040.  After that, well… it’s all bad news!  Breaking the intraday low around 1030, will put the finally nail in the coffin of what the P2 top is, as P2 will be officially DONE!

Bring on P3…

Sorry this post is so long, but sometimes peoples’ thoughts are more important then just a bunch of chart’s and technical data.  Anna, over at Hot Option Babe, (my close friend… by the way) stated to me over the phone yesterday that my posts are too long and she gets lost and falls asleep reading them.  We’ll if you’ve made it this far, then thanks for not falling asleep on me.

I try to entertain my reader’s and as well as inform them.  Lot’s of other great blogs to read for TA’s, Elliottwave, Astrology, etc…  This blog is about putting all the pieces together and trying to make some money from it.  Since “People” are the driving force behind the buying and selling of this market, I have to try and figure out what they are thinking ahead of time.

Remember this… ultimately, after all the technical analysis’s, elliottwave counts, fib retracement levels predicted, and astro turn dates discovered… people still make decision’s based on “Fear” and “Greed”!  So, you have to ask yourself this question…

What is everyone going to do when the Dubai news becomes well known by the public and all the other traders?  Do I think that next week will bring more good news or bad news?  If I’m already worried about the Dubai problem, am I likely to view next weeks’ news as positive or negative, if it simply comes in “as expected”?

I remember how all the news that came out during the March rally up was still bad, but some how it was viewed as “less bad”… which gave the market the “juice” to rally some more.  Now… let’s look back closer at that time period some.  Was the market over bought or over sold back then?  It was extremely over sold, from all TA’s and Fib levels, and Elliottwave counts.  By all means, it could have, and should have turned back up for awhile, to rally and work off some of the over sold conditions.

Now, let’s look at today.  Would you say that we are over sold or over bought?  Clearly most people will agree that we are over bought (from a longer term outlook, like the weekly charts).  At this point, any news that is released… even the exact same news as in March, could now be view as negative.  Why?  Because we are so over bought now, as opposed to over sold then.

During the rally up, all the news was spun as positive if it was only slightly failing to meet expectations.  Now, I think the reverse is going to happen.  The news will be spun as negative if it only slightly beats expectations.  I believe from here on out… you shouldn’t be “buying the dip” as much, but instead “selling the bounce”.  This is a start of a big change in mood.

I haven’t even talked about the dollar yet, but I’ll try to keep this short and sweet.  Once the falling dollar no longer creates an opposing rally in the market… the rally is over!  I think that has already happened here folks.  At some point, the dollar collapsing is going to be viewed a negative, and the market will sell-off too.  Then when the dollar rallies hard, the market will sell-off there as well.  Either way you cut it… the market is screwed!

Rapping up…

Going into tomorrow, I don’t like the idea of going short after a big fall, but I’m going to go with my gut on this one and go short sometime tomorrow.  Of course I want it to bounce some tomorrow, but if it doesn’t then I’m going short anyway.

Of course I missed getting in at the top yesterday, which means I’m not the first person out the door.  But instead, it’s kind of like being the 10th person to hear the story being passed around, not the first person… but also knowing that there are 100 more people behind you that haven’t heard the story yet!  What are they going to do on Monday morning?

Think like the retail trader here… does “Fear” ring a bell?  In the video above, Mr. TopStep says to “K.I.S.S. it” or “Keep it simple stupid”.  The market did “seal the deal” at 1108.30 when it closed above it at 1110.63 yesterday.  Is it time to “sell the farm”… I believe so!

Red

Just as I guessed would happen, the market was flat.  A sell off in the morning, and then the usual slow grind back up in the late afternoon.  This seems to happen day in and day out.  Yesterday the market gaped open, and then rallied up some more in the first hour, only to slide back down the rest of the afternoon into the close.  The end result was a flat day.

So, ask yourself this question… If this Friday kicks off the big holiday buying season, and the government wants you to believe that the worst is behind us, what do you think the stock market is going to do?  Crash?  LOL!  Not on your life!  What do you think a 400-500 point DOW down day would do to the confidence of the shoppers about to go spend a bunch of money on Thanksgiving… and start their Christmas shopping too?

The best we could hope for is about 100 points or so down.  But, I seriously doubt that will happen as the market is dead set on making that 50% fib level around 112.30-112.50 spy.  If there wasn’t any major goal in the cards, then a small down day could occur.  However, I believe the news out tomorrow, on the jobs and everything else, will be “cooked”.  That’s right folks… the government will get out their erasers and fudge all the important data tomorrow, so the market will rally some more.

If we don’t hit that 50% level tomorrow, then Friday, or even possibly Monday it should be hit.  If this market wasn’t so controlled by the dollar, (which the government controls completely), then I wouldn’t put so much effort into writing and focusing about how the news is spun and the dollar controlled.

The technicals do work, but they can be delayed by the obvious manipulation by the government.  Many times when we should actually retrace to a 50% or 61.8% fib level, the government intervenes by dumping the dollar, and the market only sells off to the 38.2% level.  This will eventually catch up to the market, as you can only take so many hits of speed before you crash… and you will crash hard!

But, for now, I still say that we will hit the 112.30-112.50 level before any sell off will happen.  We might even push a little higher intraday to an even level like 113.00?  That will be the ideal place to short for a nice 5% or more pullback in the market.  It should last 1-2 weeks, before a Santa Claus rally starts and pushes the market back up some to end the year.

Red