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Black Monday?

By Red, on February 5th, 2010

black-monday

Look out for next week… we’re about to start a large wave 3 move down!  Destination… Unknown?  Monday is an “iffy” day, as we are now in a smaller wave 2 up inside of a larger wave 3 down.  So, it might not rollover until Tuesday, (but I created the image above just in case it does… as I thought it was cool looking).  I’ll have more on my weekend update, but for now we bears might have to endure a small amount of pain while the tape pushes up to 1080 or so Monday morning.

That’s about as high as I can possibly see it getting.  Honestly though… I don’t think it will even come close.  We very well could drop Monday afternoon and not stop until we hit 1020 or so.  I waited all day for a chance to get in short and the tape looked so weak that I didn’t think I’d have a chance to.  So, I got in around 1pm and the rally in the afternoon (unexpected… of course) put me a little in the negative on the position.

But, I’d already planned to hold it until OPX if necessary.  It’s a 106/101 SPY put spread.  That means I bought the 106 and sold the 101.  When we hit the 102 area (not “IF”, but “WHEN”), I’ll get out and wait for a bounce to occur.  About 102.50 is where the 200dma is on the daily charts.  That should give the market a couple of days of a bounce, before more selling happens.  We could hit that level Monday if people start to panic in the afternoon?  Who knows?  It should be there before the week ends though… so don’t panic!  Stay short!  We have lots more downside to come.

As for the bounce from the 102 area, I don’t know yet if I’ll play it back up or not, as it’s too dangerous to go long right now.  I might take a small position, or just wait for it to peak and go short again.  We’ll see when will cross that road.

Red

P.S. I know that it might seem like you have missed the big move and it’s going to rally back on you… well stop thinking like that and relax!  The Monthly, Weekly, and Daily chart’s are all rolling over.  Were going down to the low 900′s… before the March expiration most likely.  Hang tight, the drop hasn’t started yet!

Up As Expected...

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  • Michigan

    Red, thanks for your insights (and terrific pictures!!!).
    I think today's sharp bounce was a trap for bulls. Some market observers felt that late day bounce was a short covering rally. I tend to think too many people following EW and moving markets up and down in anticipation of different waves.

    • http://www.reddragonleo.com Red Dragon Leo

      Yes Michigan… I agree. EW is really hard to predict before the move happens, but easy after it already has. A person could look at this move, and think that the bottom is in, and it's back to rallying again.

      I don't think so… everything is rolling over now. This is only the start of a larger move down. This move will fail and trap a lot of bulls long… thinking that Monday's are always bullish! What if we crash Monday afternoon? That would surprise a lot of bulls…

  • Scraoppy

    Red

    It seemed today was more then Short Cov – looked like buying came in pretty big. Could it set up a possible 50% or 62% retrace of entire move Spy 110-112?

    Perhaps Monday tells the tale

    thanks for your insight and blog

    • http://www.reddragonleo.com Red Dragon Leo

      That's exactly what they want you to think… that the bull is back. Don't believe it! All indicators are pointing down. This is headed to the low 900's within the next couple of months.

      • Wendy

        Low 900s yes, but probably need to wait until summer. my oppinion.

        • http://www.reddragonleo.com Red Dragon Leo

          Wendy,

          Look at the Monthly, Weekly and Daily charts. ALL pointing down now! We have awoken the bear, and he is hungry. Don't get caught long in this market. It will fool you!

    • SC

      Market reverses when the selling is done. It seems that all the reluctant, gunshy, burned manytimes bears finally threw in the towel this Friday. The fear of missing the PeeThree became too unbearable, not to mention the dreaded Black Monday. It is very likely that 1040 is the short term bottom. Data indicates that Nasdaq and foreignstocks will lead a rally, first to 1100, then to 1150. Pee Three will have to wait till Summer. :)

      One step at a time. If and when the rally materializes, any decent trendfollowing indicators will pick it up. It isn't that people fail to pick up and follow a trend. It is their bias that causes them to dismiss a new trend. :) Dont get married to your Pee Three. lol

      • http://www.reddragonleo.com Red Dragon Leo

        I don't know if this is P3 or not SC? We could rally to 1200-1300 in the summer months… I don't know? But, I do know that the Monthly, Weekly, and Daily charts are ALL rolling over and pointing down now.

        This is not the time to be bullish… that time is over for now. We have about 2 months of the bear ahead of us now. Any longs are for short term bounces only. I wish you luck my friend, but I'm staying short.

        • Yes Man

          You are very correct…and the dollar shows no signs of
          stopping til at least 81.50 or so ….

          • http://www.reddragonleo.com Red Dragon Leo

            I think it's time to shock everyone, and that's what I think the government is going to do! What do they have planned next?

            Something to blame the correction on… hmmm? Another terrorist attack, or an epidemic outbreak of swine flu? I don't have a clue, but something is coming, and it's not friendly.

        • SC

          My trend indicators are in sell mode. I use systematic trading, not discretionary trading. Thus, no worry of being caught on the wrong side. I just think that the odds favour a rebounce here. It appears that a rebounce is very likely with 1040 being the bottom. If the market does turn up, I will have to go long, per trendfollowing rules.

          I think you are being early for the P3. A word to the wise. If you are to bet the farm, then make sure you own more than just one farm. LOL

          • http://www.reddragonleo.com Red Dragon Leo

            Yeah… short term, a day or two… maybe? I can't see any higher then 1080, and then back down. I'm a little early, but I'll be find. Glad to see that you will too. Just keep you ears to the news, as I'm thinking some big event will happen and scare the markets. No idea what, but it's just a feeling…

  • MobyDoc

    you mentioned about a week ago that you had heard from a reliable source that early next week was being targeted for a big selloff,, can you tease us with that again?

    • http://www.reddragonleo.com Red Dragon Leo

      It's still on for next week. I'm looking for 1020 area first as that area is where the 200dma is, and we should bounce for a day or two?

      Then, I believe we will fall though it like a knife cutting hot butter. Don't be fooled by anything the media says. We are going down… to where, I don't know yet.

      If you're not short already, you should have a chance to get short Monday morning. The highest I can see us reaching is the 1080 area. If we rise in the morning as I expect, then by 11am-noon EST, I believe we'll see the high. It might be pushed to Tuesday, but if you get the chance to get short anywhere between 1070-1080… you'd better take it.

      I'm telling you… we're sinking! First stop… the 200dma around 1020, next stop… the Twilight Zone?

      • MobyDoc

        yup,,been short for awhile…and agree we are in for a huge drop,, 1 of 3 was some 60 s&p points,, which makes 3 of 3 to be about 100 points,, just was curious about what that little birdie was chirpin about. any hints about what you were told?

        • http://www.reddragonleo.com Red Dragon Leo

          Nope… Only that's it's going to be HUGE! I'll close my put spread on the hit of the 200dma, and then wait for a small bounce. Then, I'll probably buy straight February puts, that are “in the money” by at least 2 point (spy).

          That way I'm protected if it starts to rally against me before OPX on February the 19th. Understand that what I'm doing is not for everyone. It's high risk… but HUGE Reward. Short term puts can go against you, if you're not right on top of the market.

          But, all the indicators are pointing down, along will other reasons that I can't discuss here. You could lose it all if I'm wrong, or make 10 times your money if I'm right. I'm betting my farm on it… but, it's up to you what risk you want to take?

          • MobyDoc

            aww shucks,, thought I could weasel sumpthin out of you,, huge is good…:) thanks.

          • http://www.reddragonleo.com Red Dragon Leo

            LOL… I don't know the answer? I wish I did? I'm expecting some type of event that the government will create to blame the fall on.

            They need it as a scapegoat, so they can tell the people how we were recovering from the recession but now “this?” had too happen, and will set us back again.

            It's kinda' like the guy who's house is in foreclosure, and he just lost his job too. What does he do to bail himself out? Set fire to the house, and collect on the insurance.

            It's just a big game they play. They have to blame the correction coming on something, as they don't want to tell people how it was really a fake rally, with no earnings to back it up with.

            Just don't take any vaccinations as that's how they control the expanding population. Look up the history of 1913 worldwide flu epidemic. More people died taking the flu shot, then those that didn't… Coincidence? I think not.

  • Michigan

    Red,
    Thanks again for your insights and blog.

    My friendly suggestion is don't bet farm on short-term trades. If you place aggressive bets, have an exit strategy if market goes against you. You know this market is rigged daily. TrimTabs openly says that it does not know who the buyer was all these months pushing markets up. So, desperate buyers can influence markets short-term with bogus news and Ponzi schemes. People are buying stocks all these days knowing this ponzi game well. Everyone knows job numbers, GDP etc all are fake, yet people cheer those numbers by moving markets.

    • http://www.reddragonleo.com Red Dragon Leo

      None of that matters. We're still going down next week! I don't bet the farm on just anything. This is the real deal! Don't listen to the boso's on TV. They are paid to be bullish. WE ARE GOING DOWN NEXT WEEK… Join me if you can.

  • Michigan

    Red,
    Alternate count to keep in mind, but less probable, is that the move until today's low was wave v of (i). If this alternate count were to be true, a bigger counter trend move (ii) up to 1100 in S&P is possible, but unlikely. As you know Elliott waves can be interpreted many ways. I request you to address this possibility.

    • http://www.reddragonleo.com Red Dragon Leo

      I'll put up some charts on my weekend post. For now, it's not looking likely that we rally up to 1100, but I'll know more by Sunday night.

  • gcocks83

    rEd, nice post. I hope you are right.

    • http://www.reddragonleo.com Red Dragon Leo

      G… whatever you do, DON'T get caught long in this market. We are going down next week, and it's only the beginning! We haven't started the real selling yet…

  • Michigan

    I believe someone is manipulating markets every day and all night. The evidence is overwhelming. So, I don't expect any serious market correction. I believe today Market moved higher because someone rigged. No sensible investor will come to buy at the close at higher prices other than to push prices even higher.
    Goldman never lost money even for a single day, how is that possible?

    An article on Market manipulation – What other people are saying…
    http://www.financialsense.com/editorials/droke/…

    • http://www.reddragonleo.com Red Dragon Leo

      The move higher at the end of the day Friday was only for show. They wanted the keep the Dow above 10,000 for the last day… before the real blood bath starts.

      Please don't get caught long in this market. We are going down next week, and that's just the start of it. Stay in cash or get short.

      • Michigan

        Red, you are very knowledgeable, certainly knows well how to play markets. Keep up great work….Thanks for your insights.

  • sundancer390

    Red,

    I hope u didn't bet the farm, u betting on a down week doesn't carry very good odds. It hasn't happened in the last 250 weeks, yes even during the darkest hours of the bear market there was never 5 down weeks in a row.

    If your theory of a down week next week is based on R's theory of Legatus, then be careful I saw people get destroyed in May & October of 2009 on his “theory”. The way I look at it is R figured out Legatus and became famous during 2008. Like with any cartel, if someone figures out your game, u either silence the person that has figured out the game or constantly keep the game in a state of flux so nobody truly figures out the timing.

  • sundancer390

    important to note:
    de-lever points hit on the market yesterday
    SPY 105.48 indicated December 14,2009
    SPX 1047.28 indicated January 11,2010
    http://www.flickr.com/photos/47091634@N04/43257…

    • sundancer390

      when de-lever points get hit and massive volume shows up as in SPY biggest volume since march 6, 2009, yes that's the day the SPY made its final low

    • http://www.reddragonleo.com Red Dragon Leo

      I had almost forgot about the fake 97 point misprint. I also caught it, and posted a picture back on January 11th…

      http://reddragonleo.com/2010/01/11/97-point-drop/

      I don't think that is their way of telling their friends that the bottom is in… but instead, telling their friends that the fall has begun.

      This is not a small correction sundancer… all charts are point down now. This is a several month sell off event coming.

  • sundancer390

    also important to note SPY closed @ 106.66 yes triple 6 indicating the sacrifice to the SUN is complete (666/Pi=212)

  • sundancer390

    don't forget the Olympic ritual (Zeus/G-Zeus) is coming up starting this coming friday, the last time the market topped the following trading day after the opening ceremony. the market proceeded to crash 36.4% in the following 33 days.

    • http://www.reddragonleo.com Red Dragon Leo

      The market has already topped. Monthly, Weekly, and Daily charts are all pointing down. That wasn't the case back in May or September of 2009.

      I'm expecting the 200dma to be hit this week, and then a small bounce. It will still be a down week though. The Olympic ritual next Friday could just produce a larger down week into OPX.

      That's hard to predict. I only know that everything is point down now, and it should last a few months. The government will come in with another stimulus plan when we hit the bottom. At that point, I'll be looking to go long… but not until that happen.

      It's going to take the banks a couple of months to sell all their shares. This isn't over sundancer… it's only beginning.

      • sundancer390

        like i said in my other post, betting on a down week is dangerous since it hasn't happened in the last 250 weeks when there has been 4 straight down weeks, since this is a numbers game i can only go by the numbers.

        yesterdays low came off the 200 ema (algos use ema's) plus 1045.66 was the absolute boundary for the market
        http://www.flickr.com/photos/47091634@N04/43343…

    • bensjoyce

      Wow! 33 days after. That's the Masonic #, like 33rd degree. Pope John Paul I was “killed” 33 day after taking office. The significance is the masons signaling that they are in control!

      How's that for conspriacy. (I nearly believe it too)

  • bensjoyce

    Wow! 33 days after. That's the Masonic #, like 33rd degree. Pope John Paul I was “killed” 33 day after taking office. The significance is the masons signaling that they are in control!

    How's that for conspriacy. (I nearly believe it too)

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