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It was an ugly close today – especially the last 30 min trading took us 45 S&P points down. In the last 30 min, bull flag on 2-day chart, cup and handle formation on the 5-day chart, and potential inverse H/S on the 5-day chart were voided. Only saving grace for today’s close is that we are still inside the pennant (Craig) expanding triangle as Tony C. called it.
SPY volume of over 530 mil is on the high side, which is lower than the 731 mil on yesterday’s reversal of over 800 points. So, technically you can call this “consolidation.” But we cannot ignore the ugly last 30 min dumping. I don’t want to insert any G20 news and talk on options week here. Market knows this already.
When the market was up over 50 DOW points circa 3 PM, some of the regulars on the intraday commentary thread today felt that that was a bull trap. It sure was! Great call. Another saving grace is that the last 30 min dumping was not indiscriminate. Pharma, food and consumer staples stock did fairly OK. Surprisingly, Dell was up.
This is crazy market. I have done well as long as I stayed with the primary trend. Even though I was very successful with my contrarian trades in normal market conditions, I am not at all comfortable with this counter-trend play.
Pennants, expanding wedges, critical supports and resistances – nothing seems to give proper guidance. If you are a bear, and waited too long as of yesterday, you got killed. If you were long as of yesterday morning, you got killed till the last hour yesterday. If you are long as of this morning, you had about 30 min window to close.
Personally, When things make me feel so uncomfortable, I would take a time out or stick to what worked for me. Today, I tried unsuccessfully to reduce my SSO options exposure for the weekend. Only a tiny fraction of my order was executed. Early next week I will try to position my trades back on individual stocks (which worked for me better) rather than mother market via SSO.
That said, today I came to the same conclusion I come to almost every time markets humble me. I know jack.
Have a nice weekend everybody.
Good post. Now go enjoy your weekend and don’t think about the market!
I may take Tony C’s advice & stay out of this market until it calms down.
November 14th, 2008 at 7:20 pm
Give Tony C credit. He did say in his video yesterday this market would be very volatile. Boy was he ever correct.
Pete
Thanks for the post Mohan. I made most of my money on the year when I just held short through the intraday corrections and not tried to time my entries and exits based on intraday movements. I got out at my pre trade exits points.
My game plan is to stay in cash until I believe there is a cannot miss trade out there.
November 15th, 2008 at 3:41 am
smart move baby….playing this as a bull here is potential hari kari….i will hold small short position in eev and fxp….may add on down trend but not much…market very dangerous for everyone………but neva eva ignore ….we are in the BEAR of bears and it likes to eat……
maybe im just luck to have a friend over my shoulder but i got long at 873 and sold at 905 when i thought id hold over the weekend. he said… take profits. right after i sold, the sell off picked up pace …. amazingly ugly. got long again in the final minute. this is the pattern i was calling for .. down to 870… up to 920…didnt quite make it to the top and thank god i got out. took a small position in the last few minutes long. was this a trap for the shorts? or the longs? we all know this market should be going down harder than it is… so.. do we gap up on Monday or gap down? im sure it will be one or another. im using psycho analysis and trying to think about how the market makers would like it. today played out exactly how i thought except the sell off was a bit faster paced than expected. now we will see if im right about a gap up on Monday. took a very small position for a gap up monday… we will see how much they can manipulate this bull run. they sure set it up nice with the amazingly perfect double bottom formation … followed by high volume up and lower volume consolidation but the tape reads ugly on that close. key: small position on this psychological market play.
November 14th, 2008 at 6:52 pm
Richard,
Well done. I normally do an internet live radio show on Fridays (ethnic Indian). I wasn’t paying attention much during the day. I had about 5-10 min window to close. Didn’t press the button.
Looks like that’s all we are going to get – 5-10 min windows.
BTW, the odds favor a gap up on Monday. Usually such ugly closes are “worked out” overnight, especially over the weekend.
Maybe being a novice is helpful for me. I like ETF’s. I bought SSO yesterday, but was too greedy at close to take my 10%. By the way, most of the time, I am happy with 5%. Yes, I did luck out today, I thought the market would go back up because of the G20, and for what ever reason it went up, I was very happy with 12% gain. By listening to all you people that are much smarter than I, I try to find market direction. I still let the charts tell me when to buy. I usually use confirmation above the 20 MA on 10M or 15M charts, whichever suits the ETF the best. On iffy days, I watch, but do not buy, I just try to learn something. I hope to keep learning from all the sharp chartist that like to share. Thank all of you.
Mohan, have you heard reports of a hedge fund dump due to some type of Saturday deadline? I am stuck in SSO as well. Just can’t bring myself to sell because I feel like the crazy bull/bear battle must be marking a change in trend. Would you expect this type of action to form right before a drop off? I am just not sure that makes sense…
It would not surprise me if the market gaps up Monday. What do yo guys think of Tony C call on a short term bull move up, I know he is bearish long term. He has been pretty solid on his analysis so far.
November 14th, 2008 at 7:41 pm
his video yesterday called for a full blown ralley today…I don’t think anyone even him thought the last 30 minute drop would happen. I hope he posts a new video this weekend. If the G20 does not save the world, which is can’t….then what? Up?..hmmm…time for a new pattern.
Is it really this obvious? Everyone is calling for Armageddon next week, with a small gap up Monday at best. People are going into the weekend with a terrible taste in their mouth.
I feel like the only person on this site willing to stay bullish for longer than 15 minutes. Selling late this afternoon felt almost like a capitulation, and if we hadn’t recovered during the day, many would be calling it that.
The contrarian in me thinks that the ONLY way we see new lows in this market is if first people are proclaiming that we’ve seen the bottom for 2008. Once people start blindly buying and greed kicks in, bears will trap the longs at extremely high prices before taking the S&P sub 700.
I’ve gotten thrown around in this market a lot over the past year, but this is one thing that I have conviction on. At least consider it a possibility. It’s never been this easy to predict a monster selloff, and I don’t think it will start now. They’ll hit you when you least expect it.
November 14th, 2008 at 8:22 pm
Josh,
I’m with you man.I believe we will have one final rally up to the 1000/1030 mark were I will hen get short. I picked up some SSO at the close for a steal. I’m bullish until that pattern takes place.
November 14th, 2008 at 9:49 pm
see thats the problem…everybody and their brother will be shorting around 1000-1070…
True capitulation brings everyone to their knees…so we might blow beyond that…say 1100…really put the squeeze on bulls…have them convert to bulls along with other bulls panic buying.
Or better yet…take the current trend down to 812 again…have everyone jump on short and then rally this monster back to 1100…then boom…its really gonna come when we least expect it.
November 14th, 2008 at 10:45 pm
I like your thinking! Take no prisoners, either way.
November 14th, 2008 at 9:48 pm
I am not calling for an Armageddon next week. I think that is at least 10 days away.
The close is ugly but, as I have told elsewhere in these replies, more often than in the past such ugly closes were a nice set-up for big gap up the following trading day.
My regret is not being able to have a clear money management plan with SSO.
November 14th, 2008 at 10:23 pm
Mohan, we are in the same position, I just simply could not sell my SSO either and I am long at 26. I think we will be near bottom when we are all just completely frusterated with this market. I know I am, and I am seeing this show up in sentiment. looking at the increase in volume and fakeouts it sure makes me think this market may be ready to heave upward. Talk about both bears and bulls getting slaughtered…
November 14th, 2008 at 10:42 pm
You got that wrong. Bears make money, bulls make money. Pigs get slaughtered.
November 14th, 2008 at 11:28 pm
My pig was bacon today. Missed most of the signs. Sigh. Didn’t dare to re enter long near the close. Should have straddled 60 long 40 short. Oh well, still have the kids and a wife.
Glad for all of you making nice comments and analysis, thanks.
November 14th, 2008 at 11:03 pm
You are not the only person who is bullish. You have plenty of company as of yesterday.
http://www.schaffersresearch.com/streetools/market_tools/rydex_nu.aspx
The undisputed ‘trigger’ that started World War 1 was the assassination of Archduke Franz Ferdinand and his wife by the Serbian Black Hand terrorists in Sarajevo on June 28, 1914. No one will know what caused this crash either. I am staying short….so that I can sleep.
Guys and Gals,
Another thing to consider as well, not sure why I didn’t think about this till now. The drop in the last 30 minutes of the day, very well could have been the last of the Hedge Fund liquidation. The last date for them to liquidate for the year is by the 15th of November. Would explain the increase in volume/increased selling into the close. Have a good weekend all!!!
November 14th, 2008 at 10:18 pm
Matt, I read something like this today as well. Can you post some more information about this and links. If you are correct then this is of major importance.
November 14th, 2008 at 10:44 pm
I think this hedge fund liquidation is over hyped. I looked at some past hedge fund darlings (like POT) some tanked and some didn’t.
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.” -Andrew Jackson
Pokerden gives you the correct perspective………myself i will not be surprised to see us crash to 750 mon tues or wed intraday and push skyward for opx….fri….
Mo you said alot more than you might realize in the sentence about “back to individual stocks you know rather than Mother Market via SSO”. I left SDS/SSO 3 weeks ago and am back to day trades with the handful of stocks I know. I can watch the SSO contortions from afar thank you. My un-asked for adv ice: trade what you know for now and watch Mother Market from a distance. She’s going thru one of those darn moody phases. Disclaimer: I did trade EEV a few times last week.
November 14th, 2008 at 11:01 pm
I traded EEV, SRS, SDD with some mixed success. SKF gave me ulcers so I stopped touching that.
BTW, bullish sentiment came down a bit. But still in danger zone. This sentiment chart indicates that the market could crash from here or may have one last push upward.
http://www.schaffersresearch.com/streetools/market_tools/rydex_nu.aspx
Here is a historical look at returns during options expiration week.
http://www.schaffersresearch.com/commentary/content/an+historical+look+at+expiration-week+returns/observations.aspx?ID=89160#89160
November 16th, 2008 at 12:46 am
After four positive OE weekly returns, the coming one could be negative. GM goes under put everyone on pressure.
Just to present the bear case among all this talk of bullish and gaps up…
Kenny’s charts for doomsday
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3095409
Not sure if this is as bad as the count that Bad won’t tell us about because its too scary but I’m sure its kinda similar.
Just be careful either way, both these rallies were nothing but short covering and even without TA this market “feels” like it is on the edge of a cliff and can fall at any second.
November 15th, 2008 at 9:33 am
Yes, it certainly feels like that market is on the edge. A perma-bear like me wanting to squeeze the last upswing certainly validates the sentiment measures.
Just keep in mind that we only retraced 50% from the Thursday low’s, to the high..
So basically it could be considered a pullback..
Volume was very threatening though.. So I’m becoming very cautious here..
Technical analysis video: S+P, Oil, FTSE.
http://www.cnbc.com/id/15840232?video=928673476&play=1
pmesdjian…that is from Thursday night…Interesting how they were wrong…..Do you know of any new ones out there after Friday close? I’m not finding much..
November 15th, 2008 at 1:39 pm
Actually it was done Friday mid day before the selloff. I’m not aware of any new videos since Friday’s close.
I’m getting bullish down here. I’m thinking at least rangebound for now. I wouldn’t be surprised to see us trade 850 – 960 range over the next few weeks. I did go long again S+P Futures at 880 five minutes before the close on Friday. I was a bit too early because they closed right around 860 (13 handles below the cash price of 873). I believe the late day selloff had to do with nervousness of the G20 meeting.
So I’m long from 880 and will not stop myself out till 795. I will look to take profit sometime next week near 950.
Pete
disregard my last comment..I found a good new chart video on Youtube.
November 15th, 2008 at 1:40 pm
Can you post the new video here please?
Thanks.
November 16th, 2008 at 11:29 am
video
http://www.youtube.com/watch?v=SakscCX44tg