Click chart to enlarge After looking at the charts again, we still feel that the market is within striking distance of a tradable bottom. We would like to see Dow 9600 to know that the damage is over. At that level, the Dow would be as far below its moving average as its been since the start of this correction. GE (the chart above), is already there. The computer-generated linear regression channel shown indicates that GE is short term oversold. Most stocks are in a similar position right now. Your best bet right now is to avoid the market alltogether, because it is times like this that spawn the most vicious crashes. But if you're like us, and cannot resist the challenge of trying to successfully swim upstream, both the Dow and GE are ripe for accumulating. We've already begun doing this, but are aware that a massive capitulative selloff could take both charts considerably lower, if only momentarily.
Dow futures are down 170 (10:00pm EST), indicating more selling pressure Monday morning. We would love to see a rapid loss of 700-800 points Monday or Tuesday, at which point we would be doubling our positions. It's a dangerous game, and certainly not the advised course of action in a bear market. However, two things stand between us and 9600. The first is perhaps the most influencial technical/psychological support level at 10,000. The second is government intervention. If the market does start to collapse, we'll likely see an emergency rate cut and token rally. After all, it's an election year, so critical market levels will continue to be defended.
14 comments:
Don Worden sure nailed it when he called this "ongoing capitulation". I've never seen so many 52 week lows violated in a pre-market session as I've seen this morning.
DDM/SSO are the only things I'd dare touch in an environment like this.
And even they are death traps lately. We just added some GE at 20.5, yield of 5.7% if you can believe they'll pay it.
At 10,000, we're further below the Dow's moving average than we've been since this bear maket began. Can't say it's true of individual stocks, but the indexes snap back to their moving averages at regular intervals. We're due for a return to the average, for what that's worth. This whole "accelerating global fear" phenomenon could throw a monkey wrench into the whole thing, though. This feels like the Asian Contagion, building up to a real crescendo. Should be fun!
As insane as it is for the market to freefall right through 10,000 and right through the bottom of its channel and just keep on going, this is what the market desperately needs. A drop with no government intervention... finally!
Scaling into more SSO @ 38.5 here, feeling good about it too because the VIX just spiked over 50.
But I must admit this still doesn't feel like capitulation. What will it take? 1,000 pts down on the DOW?
Actually the VIX spiked over 56, and it hasn't been that high since 2002.
Snot, do you have any interest in OIL? Sure looks to me like it's forming a "W" bottom, but that may be wishful thinking.
Thanks for your blog!
You may just get that 1,000 point drop today. If not, then maybe Black Tuesday finally comes.
So, do we get a full 2 point Fed rate cut to put a bottom in at 9,500?
We thought the last bottom in OIL would hold, so we no longer have an opinion on where the bottom will be. Maybe it will still hold, as it's only broken it intraday so far. What irks us is that there is no change in the price at the pumps after OIL has dropped over 40%. Something is fishy there.
GE is holding up very well. Maybe Buffett knows something we don't... lol!
MOS to 14 cents seems to still be a good mentality to have. Those poor longs in that stock, what a ride. SMN has really been the place to be over the past few months.
Hi Snot,
Are trading GS. This stock also Buffet put money in. Any idea to trade this one? thanks. S&P must hold 1000 or we have big problem here!
Just added to DDM at 42.5
Maybe we're the only ones that don't realize we're headed for a global depression?
No opinion on GS other than that we always avoid the sector that causes the bear.
After today, we're at about break even for the year. Can't complain considering what the market has done, and considering we cannot short individual stocks.
Nevertheless, we're not happy with our performance because we wanted the bragging rights that come with making 10% in a year like this. Go GE!
I agree Snot, you've done better than most. I've been much more cautious than ever before over my 11 years of trading and I'm 7% in the red for the year as I type this.
But still adding to my SSO on the way down even though the decline is finally getting scary. Added some more at 37, but I'm beginning to think 1,000 on the S&P might not hold. I'm starting to feel a migraine coming on!
It's when it gets scary that it's actually the safest time to buy. An old client of ours called today and said they felt like puking. We added some DDM on that comment because we've lost that puking feeling. A loss of 3,000 points on the Dow might make us feel that again, but short of that, it's all business as usual. It's nice to get calls from people reminding us that we're in puking territory.
Looks like Dow 10,000 was defended. Nice work, Paulson.
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