Click chart to enlargeThe chart above is a logarithmic chart of the Dow going back to 1970. The support line drawn may not be perfect, as we had to draw it freehand, but you get the idea. The Dow has broken the longest trendline it's had in its 112 year history.
So when you ask, "Snot, where will the market go next?", we don't have a clue. We usually have an opinion on the market's next move, but since it broke through the bottom of its channel yesterday, we feel that it's in uncharted water, and we have no opinion on its next move.
The market is no longer trending "gradually" lower (within a well-defined channel) as it has been doing since the beginning of this bear. Its recent action is similar to the days leading up to the largest market crashes. Sleep tight!
14 comments:
How could it breaks the 112 year trendline if your red line is only from 1980 to present? Note that your red line is bias in that most points are above your line. I draw one from 60 to 2008 and the major outlier is the internet bubble. As of now, the DOW has not deviated dramatically from the red line I drew from 60s to now.
It isn't a 112 year trendline. There have been many trendlines over the past 112 years, but this has been the longest in the Dow's history. Make sure you're looking at a logarithmic chart, because arithmetic charts are only good over the short term.
hey Snot,
If the market goes down again tomorrow what would your next move be? Add to your position, hold or liquidate your 32% that you have invested in DDM.
Just wondering.
Also if you look at the chart of SMN looks like a bubble about to burst. :-)
Thanks.
hk, that's a tough question. There's an old saying, "When in doubt, get out."
We're in doubt right now because a 2,000 point drop wouldn't suprise us in the least. This whole crisis is coming to a head, and is now a global phenomenon, making it far more dangerous than when we thought it was domestic.
In short, if the market starts to plunge uncontrollably, we'll be locked in and looking to buy. As long as it stays within a 200 point range, we'll hold. We can't be all that far away from an interest rate cut, so we're going to try our best to hold out until then. DDM is one of those issues that you can theoretically hold on to, although it does deteriorate over time. Something about its double percentage not equating correctly over time.
Futures were down 350 prior to this morning's coordinated rate cut. No doubt the Dow would have been down easily over 1,000 points today without it. They "only" did 1/2 point to keep some ammo, which should keep shorts on their toes.
Just a guess, but we'll gap up, go up a little (200 points at most), then plunge. And because of the rate cut, we'll get a rally after the drop (a late reaction to the rate cut), which puts the Dow in positive territory at the close. Depending on the size of the drop, if it happens, we'll be adding to our longs. We may even sell some DDM if the morning rally is substantial enough. Just don't be suprised if there is a head fake. The market could be off 400 points today, then close up 400, and tomorrow's headlines will read "Dow Adds 400 On Coordinated Global Rate Cut", never mentioning the ride.
Looks like SNOT will be covering all of his short positions in the morning. Massive short squeeze about to happen.
Snot covers all of his AG shorts today?
Whatever IBCNU- just because you're STILL waiting for LDK to get back to $70 so you can be "whole" (which by the way will NEVER happen) doesn't mean you need to try and spread your conspiracy theories here. Yaaawn. No one cares.
Added more SSO @ 34...I'm going to keep buying all the way down to 15 if I have to because no way can this pace of selling be sustainable.
Cover that POT Snot.
Who cares? Seriously. Snot has said that if he could have been short he would have been short. I wish I'd have taken the plunge and shorted anything Ag when he first said he was out. For the record I don't ever believe he was short, for numerous reasons. Anyone who follows this blog knows those reasons so they don't need repeating.
The one good thing about your "concern" with short covering shows that the shorts in general may finally think the risk/reward ratio is beginning to favor being long instead. We shall see.
The market is way oversold, there is no doubt about that. Problem is, this fear is very real and it's global. The possibility of an actual market crash (we haven't had one since 1987) is a reality. Fortunately, now that the Fed and other central banks have cut, they've opened the window to more coordinated emergency rate cuts should the market have another close call with complete disaster the way we were looking last night.
We havent had a "crash" crash like in 1987, but the market has lost a larger percentage than it lost in 1987, crash or no crash. The percentage loss is actually 50% greater than 1987's loss. It's just a slow crash, due to the PPT. All the PPT does is keep the crash from making headlines. But it is still happening.
http://seekingalpha.com/article/31195-leveraged-etfs-a-value-destruction-trap
Hey snot, heres the reason why a fund carrying a steady leverage detoriates after time.. Basically the problem is that trying to maintain constant leverage necessitates selling when the overall portfolio drops (to reduce your leverage back to the mean point) and buying when the portfolio increases in value (to increase your leverage back to mean.
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