Market Fails to Crash
The market failed to crash today as I predicted last week in “$150 Oil to Crash Stock Market on Monday.” Was I crazy to predict such a thing on a specific day? Of course, but what do I care? I have no paying subscribers, no advertisers, and no boss, so I can write any crazy thing I want!
But oil looked like it was going to break out there for a while today, right? So, I was close, and if you would have bought oil and shorted the S&P 500 the morning after I posted, you would have made some nice money.
The oil chart remains in a strong pattern. The same bull-flag that I charted in my post is still in effect.
So far, my “Sentiment Sinks, But So Will Market” post seems to be working well. I’m hoping that today’s feeble gap-up open won’t be the week’s only rally since I have some cash that I want to deploy short. But the meme got around fast and I think a lot of traders planning on trying to buy the negative-sentiment this week had second thoughts.
The good news is that the end of the quarter is coming up, and we can expect the big funds to engage in some serious mark-up. Perhaps they will try to paint the Fed’s meaningless announcement on Wednesday with a bullish brush, and ignite a short squeeze. Don’t forget that when volume is light, they can do this any time they feel like it. And there is indeed plenty of short kindling for them to work with right now. So, I will be keeping any eye out for their buy-programs to take advantage of the low, low prices on put options that they create, and hopefully deploy my remaining cash short on Thursday afternoon or Friday.
I have 18% cash at the moment and am just looking for a nice rally to fire it into. Some of that cash was raised this morning when I sold 25% of my SKF position. Doug Kass (this link should be a freebee on TheStreet.com) seems to have barfed up his Citigroup position, so I think that might be a good contrary signal on the financials. Maybe the XLF can mount a throw-back rally up to the March low, where I’m sure it will be rejected. If it can, it won’t be with the help of the big funds who don’t want any toxic financials on their sheets as the quarter ends (as Jim Cramer pointed out today), but short-squeezes can happen at any time. If we get such a rally, I would likely by some more SKF there as it approached the March-low, which is now resistance.
Last week I said that the Russell 2000 was toast. Today it cracked, by my reckoning, as it closed under the “third fan line” from the March low. (I made a lot of money today, so you will have to make your own damn charts!) But look at the SPY, QQQQ, and IWM, which now all have well-established down-trend lines. The SPY is actually threatening to break out of its down-trend channel to the downside.
Ladies and Gentlemen, after this week’s bogus mark-up rally, I will likely declare this market to be a free-fire zone for the bear army.
Yes, it is that ugly.
UPS’s bomb after the bell was no accident. I have been saying that just about all of the news will be bad going forward, and UPS is just another specimen. But there are a lot of idiots that still think that the economy will turn up in the second half. In fact, Maria Bartiromo interviewed two of them after the bell today. The two fools actually stated that the business cycle was turning up and stocks will do well. Idiots! Is the cycle turning up when Detroit is going out of business? When airlines are shutting down? When banks are falling off the face of the earth? Don’t the home-builders usually have something to do with a recovery?
Yes, it is that stupid.
June 23rd, 2008 at 10:36 pm
The idiots that expect an upturn in the economy need to listen to the ECRI. Short-term leading indicators have flattened and ticked up a bit, but long term indicators are still down. The latter has to bottom before the former will truly bottom.
I think 2009 will be worse than 2008 for the markets. And I think it will shock the hell out of the CNBC crowd.
June 24th, 2008 at 2:01 am
BTW, these ECRI people till a couple of months ago were stating that there won’t be a recession.
In general, I agree with you about markets. We may see a rally with Saudis creating noise about Oil and Fed with its hawkish tone on Wednesday. Good recipe for Oil down, stocks up.
We may see pullback in some of the double short ETFs this week.
I would be taking this opportunity to short.
June 24th, 2008 at 6:50 am
Hi Matt,
what about today?
European markets severely down. Futures are down, too. Looks very good for the shorts.
Tomorrow the FED won’t change the rates but say they have their finger on the trigger. Just tough talk, no action. I can’t believe there is a positive spin on that. After all this crap we heard the last weeks about “the worst is over” who will believe the bulls any more? I wanna quote a famous analysist: “The S&P 500 Bear-Market Rally is Over.”
June 24th, 2008 at 8:12 am
Hi Matt - Many of these “dumb” economists are probably just shilling for big institutions that need to hold the market up so that they can dump more stock.
Hi SK - Yes, I am hoping for a rally too. Let’s hope this market has one left in it.
Hi Dressguard - We *should* have a mark-up rally this week, but the way Art Cashin was talking on CNBC this morning, it sounds like bids are very close to being pulled. I might have to update my blog motto to something more dire very soon. And with Larry Kudlow sitting in for Mark Haines, it would be poetic justice if the Kudlow Crash happened today!
Matt
June 24th, 2008 at 8:38 am
SK,
I e-mailed ECRI about their “delayed” recession call and they pointed me to a Forbes article: http://www.forbes.com/2008/04/19/lakshman-recession-origins-oped-cx_laab_0421lakshman.html?partner=email
Basically, they seem pretty ticked off that action wasn’t taken earlier to counter the recession.
OB
June 24th, 2008 at 2:27 pm
Matt T,
You were just a little early. Oil is building a solid base to launch from, and the dead cat bounce from the markets today couldn’t even sustain a gain. With all the banks up (although they are losing their gains FAST right now), the market still lost. Tomorrow could be ugly.
June 24th, 2008 at 3:55 pm
Hi Danny,
Yes, today’s action was remarkable. I will have more to say on this later.
Matt T
June 24th, 2008 at 3:59 pm
In the ECRI’s defense, they actually didn’t say there was no recession. At the beginning of the year, they said recession was likely but could be avoided if the government really wanted to avoid it.
Instead of stimulus checks, they should have canceled withholding paycheck taxes, etc., to do something immediate. Washington is too stupid to think that quickly, though.
Business inventories were lean b/c they expected a downturn. Unfortunately, the government decided to fiddle around with interest rates in a way that didn’t promote liquidity and pander to the public with the big check in the mail WOO WOO.
June 25th, 2008 at 3:59 pm
[...] Monday, I wrote: “Maybe the XLF can mount a throw-back rally up to the March low, where I’m sure it will [...]