Click chart to enlargeThe chart above is a daily chart of SPY, the S&P500 index. Despite yesterday's nearly 900 point Dow rally, this chart suggests that the descending triangle hasn't been broken yet. We'd hate to think that we'll be back near recent lows sometime in November, as we were hoping at some point in October we'd launch a rally back to the moving averages to relieve the market of its oversold condition. Of course today is all about the Fed, but as far as the bigger picture is concerned, we're watching to see if we can break this triangle. Either way, the market is moving sideways overall, and if it countinues to move sideways instead of lower, it will eventually meet up with its moving averages. At that point, the oversold condition would no longer exist, and our inclination would be to go short. It's the same as buying near the averages on a dip in a bull market, just in reverse. If the market does go sideways instead of rallying back to the average, it certainly gave the bulls little chance of profiting from its oversold condition, as no sustainable rally has been launched since SPY's fall to 835/836.
13 comments:
The Fed has cut/raised the interest rate countless times. Of course in doing so, the market has always responded. What makes this cut so special? Why is there the perception that this one will turn the tide?
Here's another thought: It looks like we've been in a brief period of financial triage that shows signs of continuing. Has this ever occurred before? I remember the lament from the former head of Lehman that he couldn't understand why they were left to the dogs while others benefitted.
Here's a picture for you: Hundreds of thousands, perhaps millions of people poised at their computers, their fingers poised over the sell or buy keys, leaning just a bid farther forward than other days, wondering what the other guy is going to do. You're right, Snot, for sheer entertainment value this can't be beat.
You're too smart to be a builder:) Kidding, but you must be at the top of your field. Seems when you go to a meeting to land a job, you're talking about such things as resale value, local demographics, visual logic, and the luxury quotient rather than 2x4's and plywood! You'll probably not only survive in this market, you'll thrive as many of your lesser counterparts go under.
Instead of placing a bet ahead of the Fed decision, we're going to let the market tell us what to do. If it rallies, we sell some or hedge more. If it tanks, we see if we can sell FXP above 150.
This Fed move is of course no different than the others, but there's the end of October, the election, etc, all in the pipeline. This Fed move is the first in a series of things that people know could help sustain a rally. Considering we rallied huge off the bottom going into this cut, people are curious to see if this rally can be sustained, despite all the others failing.
We could see Dow 6,500/6,000 perhaps happening, but these calls for 4,000 or 5,000 are really out in left field.
Let's just plunge plunge plunge today, tomorrow & Friday and have the spookiest Halloween ever!! Let's tap the 2002 lows of 7,200/768 and shake out the last of the exploding hedge funds and finally put this biotch of a bottom IN!
That's my "vote"!
1.00% FFR, yeah! Housing is 33% of the American economy. Wall Street is only 5% of it.
The only way to ignite the real estate market is with lower interest rates, so hats off to the Fed. Only problem is that the government does not control mortgage rates, and the banks have been hoarding this extra cash, not passing the lower rates on to their customers.
The government is working on eliminating this activity, which should go a long way toward helping revive the economy.
The housing market should come back fairly quickly in most parts of the country, except in places like Calif, where prices were not at all connected to reality, and Florida, where the inventory is very excessive. Many foundations for new homes were laid in Florida and never built on. The inventory was so excessive there, that they already have enough for well into the next boom cycle!
snot,
what would your recommend % of holding in fxp at this point?
snot,
i have some small holdings in DIG which i bought at mid-34 from last week, will you be selling them today if you were me?
Already we're up at the first resistance level, the highs of 10-17,20 and 21.
If we close up here, there is no more descending triangle.
Anon, you have to enter FXP very slowly. Only go in heavy if you get an absoultely ridiculously low price that you never thought you'd see. FXP accounts for 3% of our portfolio right now, and we wouldn't think of buying more until it's in the low 90's or so.
Why sell-off the end...?
What a close! Just the opposite of yesterday.
Ya that last 5 minutes was vicious.
Anyone have any good information on volume yesterday and today? I heard something on CNBC, if I understood it correctly, that part of yesterday's rally was calendar related from retirement funds buying and the volume was low, and that it will happen again November 15th. That buying, coinciding with the run-up to the FED, might account for yesterday's rally, if I heard that correctly. If so, that would help explain the sell-off at the close today. There is no conviction in this rally and we are back to uncertainty and conflicting data and opinions. Opinions? Reasonable or stupid?
This market is so crazy that no one can predict anything, from day to day or from minute to minute. Volatility make the use of stops almost impossible, except for extreme ones. At the end of the day I find myself in the unusual position of being 90% in cash and 10% in FXP (bought at $107.72). What a weird feeling. What advice do others have for moving in and out with this volatility if you are a day and short-term trader?
DIG... no clue other than that it's chart looks exactly like the indexes. We would exchange DIG for SSO because that way if the worst case happens, you will at least have the diversification to allow you to feel that it will come back eventually. The feeling of being in a specific sector that is going down is psychologically very difficult, and could cause you to sell near the bottom. This is a time for small trades, extreme diversification (indexes only), and buys and sells placed at ridiculous levels that you don't expect to see. Other than that, we don't see anyone turning a profit in these times.
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