SP500 Setting up for Another Bearish Weekly Close going into End of Week

Today was yet another interesting day in the market.  I went short the XLF near the close with a bunch of put options and also went long the TZA again.  The bears in my opinion won the day.  We continue to see a market that keeps doling out positive news and yet the market continues … Read more

US Dollar Leopard versus The Wildebeest Herd Complacency Trade

Did you ever use to watch those nature shows on PBS where they showed massive herds of animals in Africa?  I used to watch those shows as a kid and it was always somewhat fascinating to see those large herds of animals feeding there but then suddenly get spooked and almost ALL at ONCE start … Read more

SP500 Retraces Most of October’s Gains Sets up Bearish Monthly Reversal

As predicted, the SP500 is on track to retrace almost all of the month of October’s price gains and set up a very bearish looking monthly price bar going into this Friday.  I continue to remain short and will look to add new shorts to any type of bounce that arrives either tomorrow or Friday. … Read more

Stock Market Crash Ahead ? Let’s Keep an Open Mind

I think we need to keep an open mind about at least the possibility of a crash type move coming up the next week or two.  There was an article on the safe haven website talking about a price pattern comparison between the 1987 SP500 and the Current Dow Transports.  I have been studying the two charts and I do see the striking similarity.

But there is more to the story than just the simple comparison.  I see evident ALL OVER THE PLACE broadening topping patterns which is a specific and rare price chart pattern that is highlighted in the technical analysis of stock trends book by Edwards and Magee.  In my opinion the most crucial element of these patterns are the fact that they are very bearish topping patterns and the nature of the price decline down out of these patterns.

There are a few examples in the book that show severe price plunges out of this type of pattern and I think it is important to consider this as a possibility for the current market.  The hard part of any decline is predicting the NATURE of the decline.  How fast will it be, slow and choppy? or vertical spikes with fast consolidations.  Based on everything I am looking at now I can see us at least having a chance of doing near vertical down with a speed which could surprise most people.

There is still too much complacency and everyone is still numb from the Amazon Google and Microsoft Earnings.  And yet some of the economic numbers coming out lately are less than bullish.  If we do enter into crash mode it will likely be almost impossible to position oneself for such an event.  The decline that occurred in October of last year, while severe was still somewhat orderly.  So could it be part II is the more severe type decline that catches people completely off guard?

The nature of the price decline during the next month or two is going to be very key in determining if we are in a super bear 1929 to 1933 scenario OR instead a more lame 1975 normal slow 15% correction scenario and then eventual resumption higher next year.

IF we get a severe shock type price decline now that is rapid and relentless, it will be a big hint that we are going into a scenario of 1929 to 1933 where we keep breaking down below the March lows and continue into a perma bear until mid 2011.

I really think the next few months of price action are going to answer this question and I am just going to have to wait and see to find out!

Below is the chart comparison:

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US Dollar to Tell the Tale of the Tape Last Week of October ?

If you think about it, Friday’s Market action (10/23/2009) was extremely revealing.  Just forget about technical indicators for a moment and pretend you could only make a judgment call about the future market direction from the tape action of this single day on Friday.  What would you conclude? Microsoft was gapping up, Amazon.com was doing … Read more