SP500

Stock Market Crash Day Four and Five

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Today’s market action sure felt like we either had a Fed decision or options expiration, but this was not the case at all.  It was simply slow sloppy directionless Monday in late June trading.

I think the market today succeeded in keeping most bears and bulls completely clueless about what the next direction will be. 

It has seemed as though in recent days that most if not all of the bearish bloggers I follow and other traders have turned neutral to long this market.  Or they have closed out shorts and are waiting for 1150 or October 2010 before re shorting this market.  My personal take is that neither of the above two will happen.  My take is still that this market will collapse in the days and weeks ahead based on my indicators, chart pattern analysis and tape read of this market.

I can come up with plenty of reasons why this market could rally from here from a technical standpoint right now (at the bottom of a swing trading range, relatively low volume decline, oversold readings, full right shoulder not formed yet, poor seasonality for a new decline etc etc.)  But I can also come up with a good bunch of reasons why the market could still collapse from here as well.

By the way it is nice to see that Bill McLaren on CNBC Friday sees very similar to what I see coming.  He mentions about a move to 1040 and then a big one day bounce and then a total collapse after that.  Actually I see instead a move down in the market the correlates with 14 day RSI (relative strength index) getting to 30, then a big one or two day bounce from there and then a total collapse.  The most concerning aspect of this forecast is the fact that he actually came public with it on CNBC from a contrarian standpoint.

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Stock Market Crash Day Four

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It seems as though a lot is riding on tomorrow’s price action.  As of today’s 6/24/2010 close it would seem that everything is lined up for a hard down weekly close as I indicated before was an important requirement to continue the crash scenario.

But when I look at the current sp500 trading channel on an intra day chart one can clearly see that as of today’s close we are in a spot were a huge upside bounce could come in.  In addition 1076 is about where a 61.8% fibonacci retracement comes in from the June 8th, 2010 low.  So there is some support and enough reasons to cause a big bounce.  This really is a key area we are at right now.

So the issue is, do we bounce dramatically tomorrow early on and then fail at the end of day for a weekly close near the bottom of the range ?  To me that would be the most ideal scenario going into the supposed bearish Astro Monday the 28th of June, 2010.

Closing weekly hard down right before the weekend has a way of allowing the market to build up energy over the weekend to accomplish a break of important support (in this case) or resistance.

So clearly the most ideal scenario for those bearish on the market is a close near the 1050 range tomorrow.  Already being down 4 days in a row makes it seem unlikely we would get another down day tomorrow.  However I have seen many times markets run up repeatedly 5,6,7,8 or 9 days in a row to the upside in the most bullish environments, so why can’t the market get a string of 5,6,7,8, or 9 days in a row of downside moves ?  It is possible, but not highly probable.

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We are in the 11th Hour Now

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My call for a stock market crash seems to have almost turned into an obsession.  And to be quite frank uttering the words obsession and stock market in the same sentence is never a good idea. 

This site is supposed to be about finding the best risk reward trade setups.  I have to be honest and say that if I just started to look at the market today for the first time in many months I would have to say that there is really no trade to be had.  The indices look very messy right now, we are situated in ‘no mans land’ right in the middle of a big trading range.  Those are the areas where it is usually wise to completely avoid taking a position because a lot of the time it will just boil down to a 50/50 probability you are right.

But since I started talking about stock market crashes so much I am already standing very deep in this mud and need to finish what I started. 

I am going to write a few more times about it with the following qualifiers:

  • The market MUST close next week HARD DOWN and preferably near 1040-1050 on the sp500
  • The market MUST at the very latest start to turn down hard by 2:15PM on Wednesday of next week (June 23, 2010)
  • Preferably the market will be down BIG (2 to 3%) this Monday, June 21st.

If we do not see all three of the above conditions met starting next week then my days of writing about crashes and collapses are over.  So this may be my last ‘crash post’ I ever write depending on how things shape up next week. I will write about other stuff though (like going long AAPL at $275 maybe? 🙂 )

Why am I doing this ?

Because I feel as though we are in the 11th hour now.  Based on all the indicators and the whole spectrum of different markets I look at it all boils down to next week for me.  Next week is the ‘decider’ as George Bush used to say.  If things do not start to fall apart next week very badly then the market will have evaded a dire crash scenario and it will just be business as usual, or perhaps business in slow motion instead of fast motion (ie. fast crashes).

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A lot can happen in 8 Trading Days

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My impression of today’s trading action is more of the same.  We are rallying on fumes (lighter and lighter volume) and it is an urgent warning to me that the market can retrace the rally that began on June 8, 2010 very quickly.  I still doubt that the next leg of the decline will start this week, but I suppose one could say that the heavy volume of options expiration this Friday could lead to unpredictable price action.  My take is that we somehow manage to stay afloat the next two trading days and maybe even blast up in one last ‘hurrah’ to close this week strongly higher.  But then next week ought to start down very hard and be relentless if my accelerated bear scenario is to stay in force.

A lot of price action (or price destruction) can take place in just 8 trading days leading up to the June 28th target date.  It seems too convenient that so many have forgotten the 1000 point 1 hour plunge that occurred in May.  I guess I cannot blame anyone as I cannot remember what I had for dinner last Friday either.  But my point is that this market can once again surprise with a speed that is unthinkable to even the most bearish of bears. 

If the June 17 to 25th, 2010 astro aspects are to have any real credibility then this market should start to show us something dramatic sometime next week and into the 28th. 

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The Market Could Initiate a Total Collapse at any Time

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The words that make up the title of this post are not mine.  They are Larry Pesavento’s words and I happen to agree with him.  I continue to believe that this is an extremely dangerous market and that it is an environment of a weak and nervous bid.  We literally could start to collapse at any time.  We were able to drop almost 1000 points in a handful of minutes on May 6, 2010.  Dropping 2000 points in double that time does not seem impossible either.  This market is building a catapult or a spring board for the next big move.

I have spent a good amount of time over the weekend contemplating the bearish and bullish sides of the market and so I am just going to write out a potpourri of thoughts in the paragraphs ahead  and also comment on today’s closing price action.

Why Should the sp500 go to 1150?

I think it is an important question.  It seems like every technician in the world expects the market to zoom to 1150 to create a right shoulder of a larger head and shoulders topping pattern.  I admit I have considered this possibility and wrote about how I was expecting that as well after the reversal of a week ago.

But after some contemplation I am starting to think this is much less of a possibility and that the advance that started a week ago may have either topped out today or by the middle of this week. 

Why?

The sp500 going to 1150 or 1170 would make it much too easy for those who are currently trapped to recoup a large portion of their losses.  Since when is the market Mr. Santa Clause giving previously greedy bulls all kinds of second and third chances to bail out break even ?  It does not make any sense for this market to do that if it is in a persistently impulsive bearish trend as I predict it is.

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