Monday, May 27, 2024

The Bulls Are Running Again…

bull-run

Look out bears, the bulls are back!  NOT!  I don't believe that for one minute.  This is simply the larger wave 2 up that follows the wave 1.  We are still on track for larger wave 3 to start down next Monday or Tuesday.  I was wrong about today being a flat consolidation day, as the bulls just kept on charging.  That's fine with me as I'm not short anything right now.  (Still in my USO long though).

I can't really see tomorrow continuing to rally without a pause day, but it could.  A slight pullback, and then another move higher on Thursday or Friday is the logical thing to do... but who's says the market is logical?  Regardless, I swing trade, so I'm just waiting for the short term indicators to start too rollover again.

I'm still thinking that they will surprise everyone on the job's numbers Friday.  Of course I could be wrong, and they start to sell off after they are released, but my gut tells me that every trader already knows that the numbers are horrible.  With low expectations like that, it wouldn't be too hard to beat them.  Plus, they have a habit of tricking the bears a lot too.  Never under estimate the government.  They will fool you every time.

So hang tight everyone... our time is close now!

Red

P.S. I'll be buying straight puts on the SPY on Friday or Monday.  It depends on how high we go, as to which strike price I'm going to buy.  I'll be looking to buy February puts, as the move down should fall into this coming expiration on the 19th.  Everyones' risk tolerance is different (mine is quite high), but I'm looking for a strike price that is "out of the money" by about 2 points from the high.

So, for example... if we hit 112.00 on the spy by Friday, then I'll be buying the 110.00 strike price.  If we are lucky enough to hit 114.00, then I'll be buying the 112.00 strike price.  Remember, I'm looking for about a 100 point move down before option expiration.  That's a 10 point move on the SPY.  That's a HUGE move folks!  You could make 5 times your money in a 2 week period... or you could lose it all?  It all depends on what the market does, and I believe it's going to crash.  What do you believe?

Red
Author: Red

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DJ
DJ
14 years ago

Red, which month you will be buying your puts against? march?

Red Dragon Leo
14 years ago
Reply to  DJ

Well March is the safer month to buy, but my forecast tells me that it will start moving down by Tuesday the 9th. The move should be fast and hard, with the first major stop around 1030-1040 area.

I'm expecting it to hit that level on, or before the February option expiration date of the 19th. So, for me at least, I'm buying the February puts as I don't believe I'll need that much time for the fall to play out.

It's up to you, and risk tolerance, as to which month to buy. But, I'm expecting a bounce back up from the 1030-1040 level. That could bounce back as high as 1100… it's hard to tell at this stage, but after that bounce, you can expect more selling into March.

I looking for the 910-930 area as the final bottom before a larger spring/summer rally to happen. It should be choppy and hard to trade, as I expect it too take its' sweet little time going back up.

Then late in September or so, I'm expecting another crash down. That will be the big one! I suspect that it will re-test the March 2009 low of 666. It might not take it out this year, but next year is going to be hell for the bulls.

Michigan
Michigan
14 years ago

CRASH!! …. WHY?
Why do you expect crash, when all things are getting better including employment.

Red Dragon Leo
14 years ago
Reply to  Michigan

It's the way the elliottwave patterns are lining up. Wave 3's are super powerful, and that's what is coming up next. By looking at the charts, I think we will peak on February 8th-9th for the larger wave 2 up… which is happening right now.

We could be up to 113-114 spy by next Monday or Tuesday. Then the wave 3 down will start and should take us down to around 1030 by opx. It will go hard and fast, as all wave 3's do.

I guess you could call it a mini-crash as a 100 point drop isn't exactly a “Crash”, but it's still a scary drop… if you're caught long of course.

Crash Gordon
Crash Gordon
14 years ago
Reply to  Michigan

not just the Elliot Waves and technicals that show things paddling down Hogan's Alley – I have never seen so many stocks so expensive compared to earnings before fundamentally its been a ponzi scheme since like last summer.

The greater fool theory has been rampant for too long now the only thing is that the risk of ending up being the greatest fool landed with worthless stocks when it inevitably corrects rules me out of any long positions

Rick
Rick
14 years ago

Red, yor sure don't hedge your predictions (like some). What do you think of beat up etfs like FAZ, SKF or VXX? Downside appears low even if wrong.

Red Dragon Leo
14 years ago
Reply to  Rick

Any 2x or 3x etf is only good when you have a large move in one direction or the other. During the consolidation periods, they all erode and fall lower, if when the underlining stock that it follows is flat.

I lost a lot of money on FAZ, and if I every did play them again, I'd only go short… never long. That way, even if the market starts going sideways for awhile, your etf will gradually fall lower. It's designed that way, so you have to take that into account before you take a position in one.

If you think the market is going up, you would go short on the bear etf (which is basically going long), and if you think the market is going down, then you would short the bull etf.

Time decay wouldn't hurt you as much, as they would naturally start to fall if the market trends sideways before it makes the move you want it too.

Hope that makes sense?

Captain_Koons
Captain_Koons
14 years ago

In the area where I live, which is the Southeast US, things are getting worse, not improving. Unemployment is increasing and the housing market is about ready for the next leg down. Many banks have not forclosed on properties that are 12 months behind on payments. The lenders already have too many foreclosed properties up for sale. It's not looking good from my perspective.

Captain_Koons
Captain_Koons
14 years ago

In the area where I live, which is the Southeast US, things are getting worse, not improving. Unemployment is increasing and the housing market is about ready for the next leg down. Many banks have not forclosed on properties that are 12 months behind on payments. The lenders already have too many foreclosed properties up for sale. It's not looking good from my perspective.

Rick
Rick
14 years ago

Red, yor sure don't hedge your predictions (like some). What do you think of beat up etfs like FAZ, SKF or VXX? Downside appears low even if wrong.

Red Dragon Leo
14 years ago

Any 2x or 3x etf is only good when you have a large move in one direction or the other. During the consolidation periods, they all erode and fall lower, if when the underlining stock that it follows is flat.

I lost a lot of money on FAZ, and if I every did play them again, I'd only go short… never long. That way, even if the market starts going sideways for awhile, your etf will gradually fall lower. It's designed that way, so you have to take that into account before you take a position in one.

If you think the market is going up, you would go short on the bear etf (which is basically going long), and if you think the market is going down, then you would short the bull etf.

Time decay wouldn't hurt you as much, as they would naturally start to fall if the market trends sideways before it makes the move you want it too.

Hope that makes sense?

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