Click chart to enlargeThe market's descending triangle is harder to see on a daily chart, so we're posting the above hourly chart of DDM which shows the descending triangle which began forming a few weeks ago.
For all of the naysayers of technical analysis, there is a reason these patterns repeat themselves so many times. They are a map of the psychology of investors... a graphic representation of collective fear and greed playing out in real time. We suggest you do your own DD because this market is unpredictable, but the above pattern usually leads to a breakdown rather than a breakout. With the Fed expected to cut rates tomorrow, the election only a week away, and the Plunge Protection Team (PPT) aggressively guarding the market's support, this pattern could be hijacked before it gets to take its natural course.
The only certainty with triangles is that because their lines converge, you know when they are reaching a boiling point. This triangle has very little time left before it breaks resistance or support.
13 comments:
Hi Snot,
Would you say the crash would most likely be after the rate cut tomorrow if there were to be a crash?
Thanks.
This market is weird! There is no direction yet but the trend is still down??? Stay CASH IS KING
Maybe there is a collapse coming, but i'm betting on a raklly first. I closed out my Citi Short on that dip this morning (at a profit) and sold my Google put at a loss. BOught more long positions and also some short term call positions in YGE. Right now i have no shorts left so i'm hoping my timing is good. I'm betting on a rally into the rate cut tomorrow and ill make a call on weather to hold the position depending on the mood before the cut (if there is one). A big run up will probably make me move back into cash somewhat beforehand, the market holding steady will more than likely encourage me to hold through the announcement
I think we Will have rally tomorrow but will sell on the new after that
Just added a sliver of FXP at 114.6
Hi Snot,
What is your thought about the rally with low volume? Will it have follow through tomorrow?
Guessing the next move of this market is nearly impossible. There's no rhyme or reason for anything right now. All of the "normal" rules don't work. We added FXP just as insurance because we haven't sold any DDM or SSO. No rally can be trusted. We hope the Dow gets right back into its downtrending channel, so some normalcy can return, but we're not willing to ride it up without adding insurance as it rallies.
We couldn't pass up FXP at 114.6 seeing as how it was 184 just yesterday. No doubt some people lost big on that today.
DDM closes 35.65, after mkt 30.82; QID closes 68.85, after mkt 81.57; SSO closes 30.2 after mkt 26.36, but you get the idea. What on earth? Yesterday a head fake at the end of the day, today 2/3 of the gain goes away aftermarket, tomorrow....? I'll stick my neck out here and say that the market WILL tank. Not that I want it to. Just that I looks more and more like the inside guys are trying to protect what little of their backsides are still covered, and don't seem to care about the mess they leave behind. I almost bought QID at the end of the day. Like hk22, though, I've got a big yellow streak painted down my back right now. (Is that right, hk22? I don't want to presume too much.) Another reflection is that normal trading cycles/practices/timelines are discintigrating. Bottom line is this: I think faith in the market is eroding.
sbbuilder,
We're getting DDM at 35.25 after hours, and SSO at 29.85. But AH quotes can be all over the map. Faith in the market is eroding, but today's rally came out of nowhere. We envy you being out of the market. We could have gotten out today at break even, but chose to buy FXP instead. Not sure why something stops us from joining all of you on the sidelines. We keep hearing economists (a nobel laureate economist today) calling for Dow 4,000. Roubini from rgemonitor.com is calling for a similar scenario and has been correct on this bear thusfar.
Not sure what to think at this point. We still stick with the theory that Wall Streeters think the world is ending because the bear affects their own companies this time. This bear is in their backyard, and so now they're not so brave jumping back in.
At least every day is exciting. If nothing else, you get entertainment value from any stock you own nowadays. If the rally continues, we're going to add more FXP and maybe lighten up on the longs a bit. If we can get FXP back in the 80's, we're going to back up the truck. The slightest hiccup here, and Asia will tank again.
sbbuilder,
p.s.- the spec market around here (NY) has completely dried up. Houses built on spec that were expected to fetch $10M are now going for $7M. The thinking until recently is that a European would scoop them up with their strong Euro, but now that the U.K. is in a recession, that mindset is changing.
What an interesting day..
I suppose the market will go up tomorrow, just to follow up on today's gains or for the hell of it, right? rate cut might have to do with it.
If so, I will start a position in FXP.
If it goes down, I won't start a position :-) Like Snot, looking at getting in in the upper 80's or low 90's. We will see how that goes, I just like bargains too much.
sbbuilder,
I got rid of my yellow stripe when I sold my last position, I just didn't like the crazy volatility :-), and I agree with you, Mr. Dow Jones is about to go for a long ride down the hill. The party is over.
The market is hoping the Fed will cut interest rates a full 1% currently they are at 1.5% . If they cut less that 1% look for a huge sell off tomorrow. The markets are getting too volatile to make any rational sense. Cutting by a full percentage point will leave the Fed very little room to maneuver if at all. Assuming a cut of a full basis point and it doesn't have the anticipated effect what then is the Fed to do ??? They will be out of ammunition with only a half point left, the market will seize on this too and sell off further. This is desperation by the Fed plain and simple ...
Hal, a full point seems excessive. They are deperate, but they always have emergency speeches to fall back on:)
We expect a half point cut, which gives them a little room.
If we don't sell off after the cut,
then this rally may just have legs.
It will be a good indicator of this rally's strength.
It should be extremely volatile, swinging to extremes in both directions this afternoon and tomorrow morning, as traders won't know what the correct reaction to the Fed's move will be, regardless of what it is.
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