Wednesday, November 19, 2008


During the neutral range, I was thinking to myself, "there are two options available for the market: 1) we form a long tedious rounded bottom, or 2) we form a very large bear continuation flag. #2 came really quick in the last hour. Over the weekend, I also stated that I had those two conditions that needed to be met. It's Wednesday, so both have expired and have not been met (not by a long shot). The bottom line is that we have broken our critical support level and the S&P 500 is reaching the 2002 lows which are currently around the 775-785 level. Unfortunately, this suggests that we have at least a very possible short-term 3-5% additional downside move. Whoever is still buying and holding...should probably stop. It doesn't make sense. Want some advice? Buy once we make a higher low (that means you might not be buying for a while). Don't be stupid. This is exclusively a traders market, all others will get/are getting killed and it's all your fault.

I, on the other hand, made a sweet 7% today adding to a 5% gain yesterday. This is a tricky market and I still remain mostly in cash overnights. There is too much uncertainty and the risk associated with holding overnight. I could hedge, but I just prefer to be in mostly cash. The $RUT, $SPX, and $COMP are all in trouble. The $DJIA is actually sitting at Thursday's lows, but this divergence will soon be corrected. The VIX is trading in a upward range and today's candle suggests additional upside. The financials are in some serious trouble and there is no possible way for the market to rally without them, so don't forget that. What's the only chance left for the market? We have to cancel out today's loss tomorrow (gain 400+ points), and that is highly unlikely. Today was just an all out bloody day and longs got mauled by the bear demon or the cartoon blood drop.

SPX 1-day

SPX 3-day

SPX 10-day
SPX 6-month

VIX 10-day

VIX 6-month

Don't forget to try the Free Trend Analysis. It's FREE, so give it a shot!


Bob said...

Any crystal ball ideas if the SPX will hit 600?

Complacent Panda said...

Again, think the 2002 levels will hold in the long run? I know you don't have a crystal ball, but I'm guessing that this thing won't be able to be supported like it was back in 2002. We have way more debt as a nation than we did back in 2002. We also do not have much else to stimulate the economy. Throwing more money (aka debt) at the problem isn't helping, and people don't want to let things go bankrupt and reform. We've surpassed the 1929 bear market in terms of percent lost in a year. I'm amazed. And somewhat frightened.

Bob said...

Do you know about BGU and other new triple plays?

John C. Lee said...

Morning. No, I don't have a crystal ball. Technically, I think we'll get a small bounce, but I seriously doubt that we will be able to reach our Oct 2007 highs. The long-term chart is too jacked up and the spike down cut through a key support level since the 1990s. The 2002 lows are support, however, so I'd anticipate a bounce.

John C. Lee said...

oh yea I forgot, yea I do know the 3x ETFs. They are fit for day trading or trending action but they suck during whipsaws. I've seen my 2x ETFs gain more than them. The volume is still a bit low.

Bob said...

Thanks John.