“Hope” is a Sell Signal
Both President Bush and Ben Bernanke spoke on Tuesday, and there were points when both seemed to be on the verge of tears. They know that the situation is hopeless.
During the week before the House first voted down the TARP, CNBC constantly ran a message on the screen: “Hope on the Horizon”. That was a sell signal. On the weekend before the House voted down the TARP, news stories were filled with the words “hope” and “hopeful” when describing the prospects for the House passing the TARP. That was a sell signal.
Numerous times we have seen various things announced and implemented. They have all been sell signals. Just today, the market rallied up a bit before Bernanke’s speech. The market was “hoping” that Bernanke would announce a rate cut, which never happens during such a speech. That was a sell signal. I shorted right into that foolish hope.
I’m thinking that I can short hope all the way down to the bottom. Once there is no hope, I will know to stop shorting. How does the hope end? The market beats it out of traders by slamming their heads into the concrete over and over. Which brings us to the next topic:
Should We Forget About Rallies?
We have all been trying to spot the beginning of the next rally. Perhaps instead we should be looking at the October 2002 low and trying to estimate when we will arrive there, and subsequently plunge through. This economy seems to be in far worse shape than the 2002 economy, so why not? The market seems intent on proceeding down in a straight line. Why argue?
How to Short Rallies When there are No Rallies
Suppose the S&P 500 drops 80 points in the morning, and then makes an intra-day bounce of 40 points? Guess what? You have a nice 40-point rally to short.
Maybe my pessimism here will be a contrary indicator. We will see. I dare this market to rally. I double-dog dare it!
Watch the comments for updates throughout the day.
I hope the DOW goes up a bit so i can liquidate and then just cheer the market on it’s way to the floor
I noticed that all of the three bond ETF’s that I watch (SHY, TLH, TLT) were down on Tuesday, if by only a little bit. Something to keep an eye on. If money flows back to stocks from bonds, we want to know about it.
Eli,
I see that SRS has finally popped. You’re still in it I trust?
Matt
Matt – think you’re more than on to something as usual. On the prior post my last comment was about today busted the 62% Fib to pieces and breached the top of the 950-100 resistance area (FusionIQ’s point as well as mine) so I ran a Fib on ’94-Oct07 and today broached the 50% retracement. The next level down is 870 or so. FWIW but consistent with what you’re saying.
Matt,
That was scary, I was going to post a very similar comment about the lack of rally opportunities.
As we head into, no make that crash through, earnings season the reality will finally start to set in on the last few bulls. I begining to think that the elevator won’t stop until the earnings multiples are cut down to size. At that point we just bounce along the bottom until who knows when. The Oct 2002 low DJIA ~7200 is about 50% drop from the recent highs. That seems to low, and at first glance unprecedented in last 30 years. Is this economy that much worse? My take away is that I can start a small short position and just let it ride, adding to it on any “rally”. I do think we have another 1000 DJIA points to go.
Wow another 1000 point drop will be this week unless the pace slows down, and earnings are likely to add gas to the fire not slow things down.
I sure am glad my name ain’t Ben or Hank!
Another grateful shout out to this blog. I have been too chicken sh*t to make much shorting this market. However, I have saved a substantial amount on my & my wife’s 401Ks by going more and more to cash throughout the year.
Nikkei currently down ~10%. US futures down ~2%. We might be testing those circuit breakers after all….
FYI – Sitting on a decent short position (SPY Dec. puts) since end of day Thursday…I’m riding this horse to the bottom (think Dr. Strangelove – Yaaaahoooo!)
Matt, thanks a lot for your posting. Really helpful to me.
Well I guess we all know what to do if we ever see that Bernanke is going to speak during market hours. What is he, five for five on speeches that tank the market? I do not envy that man.
At times I am happy we have a guy who basically got his PhD on the Depression, who better to lead us through this mess?…but then I hear whispers…slowly at first, barely audible…but steadily getting louder and louder, droning on and on until at full crescendo, “….appointed by Bush…appointed by Bush…appointed by Bush!”
Just gave myself the shivers….
Matt:
You are right on mark!
Bear market mantra – Short the rallies.
The book “Deep Survival” is very interesting. It shows again and again that the “training” someone has can prevent them from handling crisis situations because of preconceptions or errant beliefs in themselves or their knowledge.
Mr. Bernanke’s having written his doctoral thesis on the Depression does not comfort me. Rather, it gives me great pause. I fear his preconceptions have prevented timely institution of effective changes, while adhering to a plan which has proven step by step to be ineffective in dealing with the roots of the problems we face. The tenets I have been able to read make me wish our leaders would make other choices. JMHO.
Grave times, indeed.
Matt, thanks for your posts. Always enjoyed reading your intraday actions as well, when posted. Kudos for your efforts and for providing this forum.
Cut my losses. Now: 80% cash. 20% short.
Take that for a contrarian indicator.
Ben Bernanke studied the Great Depression like no other. Mmh,…it was simply a complete waste of time.
YAY am really FKED with DDM LOL
your instincts were right not to hold george. ouch starting tomorrow with shorts coming in this will SUCK
Have a Great Day. I will try and sell today at a Great Loss.
junglegirl;
The description you gave of training is exactly what it is supposed to accomplish. Repetition of the training is an important element that reinforces a mechanical outcome. In other words, there is no thinking involved, merely reaction to a predetermined problem or tactical situation. This is great for some applications and detrimental to others.
That is exactly why Microsoft seeks *fresh* recruits: They want employees with no training, experience or preconceived ideas of their own. Microsoft wants to create a culture within their organization with their values and methods. They want creative thinkers – not someone who knows it “can’t” be done. It works.
There’s a difference between reaction to an event with superficial cookie-cutter knowlege and problem solving. Similar to paint-by-numbers or creative free-form.
Bernake is supposed to be THE foremost expert on depressions. He’s literally spent his life studying and writing about them. I would suspect that each depression and financial crisis is different. It is difficult to believe that 30+ years of studying financial crisis, including depressions, will require the same solutions.
Fed Chairs have a difficult job. It’s easy to blame the economy on them, and to some extent it’s true. They have a consistant theme: extremes. Fed Chairman Paul Volcker is credited for ending the ’70′s stagflation. Oh, he ended it, but he went too far with policy and created the most unemployment since the great depression during the ’80′s. I remember farmers taking their tractors to Washington in protest of the financial mess. Sill, he went down a a good Fed Chairman.
Greenspan also went too far with policy and created the greatest bubbles (plural) in history. I don’t need to say much about him.
Bernake was “paper-trading” the Great Depression, now he’s “real-time”. What it takes during these difficult times is “horse sense”.
Matt, Dressguard, towelie, junglegirl, others;
Did you folks say this was going to happen, or what!???
You failed to mention it was going to happen in 1 week!!!!!!
Maybe capitulation today? What say ye? Just let us know.
I thought short-selling restriction ended Thursday.
I hope the market isn’t closed today.
K;
You’re saved. “Coordinated rate cut from Fed, ECB, and others” (Source:MarketWatch)
Good for you. See, you never know.
The only thing I got going for me is my high cash reserve. Humble pie. Good luck folks.
Let’s hope FRE takes off now. I’ve been waiting on this. Christmas profits.
Larry;
Put it to work. We’ll have a relief rally soon, could be starting now. It should go up significantly. But everyone is programmed to sell when it peaks.
george that is what I friggin bet on. the had to do it soon. with short sellers beginning tomorrow….. they need an uptick rule still I think hehe. there has been none these past couple of days.
lets hope I can get out with breaking even or a small profit. def not feeling a hold over the weekend. I feel another major collapse until all the bailout money goes to hankies friends.
K;
I’d watch the charts. If we do have a good rally, your trade will make $. I’d raise the sell certainly above break-even.
I almost bought SSO at EOD yesterday just for this reason – a possible rate cut. But the news was that Bernie “hinted” at it and like he was not committed.
He’s an inflation hound and that is blinding him from deflation and other bombs being dropped. Heck, I’d think he would welcome inflation to get out of this mess. But he’s been given a mandate to keep inflation down so the Government doesn’t have to pay all the social security, military, and other federal employees COLA increases.
I’ll take deflation.
Did I mention I bought house wood siding boards from Home Depot 6 weeks ago and paid $12+ dollars PER BOARD.
Today, those same boards are $5+!!!!!! I think I’ll take them off the house, return them, and buy them back again.
I gotta shut up today. I’ll limit myself to 1 post per hour.
I agree rate cut is an opportunity to exit long positions, Matt may be shorting this rally, but I am too chicken either way, will stay in cash.
ICE will be a good watch for today. The daily has a positive stochastic with MACD cross moving up. Now, could be a down day in an up move, but probability is it will be an up day.
The futures have made a spectacular pop-and-flop overnight. They hit a low of 963 at 4am, popped to 1045 after the global rate cut 3 hours later, and are now back in the red at 991.
I have been losing too much sleep trading futures at night, so I slept through this one. Now that I’m awake, there is no rally to short.
Hey George,
we appreciate your posts!!
BTW.. futures lost their steam and now are all in negative territory after the coordinated rate cut announcement. The likes of SKF, SRS, FXP are all spiking.
I think that governments need to let this thing run it’s course. It’s too late to save someone once they have jumped out of a building.
Yep, the impact of the rate cut seems to have been absorbed quite fast. We had a small retrace on the futures but now they back in the red.
With the clarity of hindsight they’ve thrown in the towel last week. Elliot wavists are joyful about wave 3(3)3 – the big bad one – crushing them all. Hmmm, I should watch this stuff more closely…
Dax today sofar has made 8% swings. Looks like we are getting an interim bottom in today. Little bounce after that, retest, bigger bounce and then final journey next week or week thereafter. I try to adjust to the current market speed as it has outrun me during the last weeks – eg I ran out of puts and opportunities to reload. George will be dissapointed when the velocity goes back to an elevated normal level.
Charlie;
Thanks. Sorry to hear about the futures. If they look like they are merely completing another cycle, then the next move will be up(?).
For long positions, I’d rather the futures be down before cash opens cause there’s a better chance of a turnaround and move back up.
Newbie,
I’m glad that you dodged most of this carnage. During the next bear market in 2015, you will do much better on the short side!
I didn’t understand your comment about the parrots yesterday.
Matt
Yerk;
Yes, I’d rather have the voalitility. The TNX (Ten Year Yield) is down about 1 basis point. Usually that happens when the market is already or about to go down.
Geeze – according to Scottrade, MZZ, SDS, QID to gap up ~$10!!!???
I like it.
Matt & Company have kept me out of harms way, that’s for sure.
If AAPL goes any lower, it will only be a apple core. SKF to gap up $15?
Wait… I see buying coming in.
This maybe on contrary indicator but:
I took small short positions on DIA and FSLR this morning before the opening. Small enough I can take a big rally and add more if I am early, big enough to make me smile if I am correct.
This is the best attitude I have had in a long time about the market. Scary I was up 6% in less than 5 min on the FLSR trade.
you better see buying I might buy more today of ddm and be a retard or just so I can average down and next recovery get the heck out. watcha think? good to buy on gap down? or wait till later in the day.
Matt,
Parrots: Lots of companies will be parrotting the “I blame the economy” line. That versus many real parrots are endangered. Sorry, I was just trying to be cute.
I would only buy a down gap if it begins moving up with the stochastic method. Watch the 15 minute stochastic relative to its MACD.
I wouldn’t get out on a down gap, but that’s just me. Too much of a chance of it reversing.
newbie – I thought you were a Monty Python fan and talking about dead parott bounces.
Off to take a shower, I will miss the opening and the drama. Been up 6% then flat twice in 30 minutes
george am on mobile in economics class and teacher is ranting about taxes and the debate lol
will check this chat later.. hey if it reverses then good
This is turning into a frigging nightmare. Just the same crap we’ve seen in February/March. Now the only difference is that nobody cares what the FED, the treasury or anybody else does. No bullets left. It’s getting bloody scary.
dressguard you scaring me enough I want to sell FAST
Matt
sorry for the delay, just woke up here in California.
Still have SRS, intially was a hedge for a small Real Estate Mutual, but have sold that and kept the SRS.
I have only added to it once since the rout began, but a lot of negative news srating to come out on commercial real estate, so will be adding on any pullback (if we get any)
The gap down is getting bought, but the NYSE TICK is deep underwater in the -500 range and trending downward. Looks shaky…
eli,
Nice trading.
Matt
OK, the TICK is improving now, though it is still in negative territory around -200.
Matt – can I ask you to explain the TICK a bit ? Like where we could look at it or if it has a symbol ?
Matt, are you trusting the TICK count again? You didn’t mention it for quite a while!
I have a downtrend line drawn across SPY’s tops on yesterday’s 15-minute chart. To break above that line, SPY would need to hit 103 or so. The buying volume is very strong so far.
There is an explanation of the NYSE TICK here. It is a very common indicator. The symbol on my system is $TICK.
Yerk,
Yes, I like the TICK. It’s the TRIN that I haven’t been using lately since I think it works best when the market is moving in more than one direction.
Matt
Matt,
are you getting long in this market?
Seeing some huge swings on the SPX right now. Not sure what to make of it.
The market dreams are made of.
Matt – thanks. Tried to look it up and search didn’t find it. Appreciate it.
Is ICE a fickle pickle, or what? Mind of its own.
SPY popped over $5 since the open, so you have to expect that it would consolidate a bit before moving higher, if that’s what it’s going to do. The selling volume over the last 5 minutes wasn’t too severe, and the intra-day downtrend line is now around $102.
Solars are on fire today. So are fertilizers… They were oversold anyways.
Thx, Matt. If we break higher, we should turn around at about 1050, 1100 max. Credit conditions have not improved – that’s meltdown. A friend told me a story from a commercial shipbuilding company with full orderbook going down because one customer did not pay in time and the banks have no money to spend…
SDS still the BOSS on the 15 minute.
It’s starting too look like the gap traders have taken their profits and headed for the exits. The TICK is diving deep to -900…
SPY’s selling volume in this leg down has been light, so it’s still breathing.
In the first 30 minutes of trading, we saw another good example of a 40-point intra-day rally on the S&P that was short-able.
Stocks making new 52-week lows on the NYSE are at 1,612. So this is yet another major heart attack. That number far exceeds the levels hit at the January, March, and July lows.
Marty Chenard at StockTiming.com said this morning that the big funds wanted a 1% rate cut and an extension of the no-shorting rule. Otherwise, they would be sellers today. It’s starting to look like the big funds sold into this morning’s pop.
Matt
I have a 5 min SPY trendline drawn, with a current break slightly above 101.44 if you want to use that with the 15 min.
Also, SPY retraced Exactly 50% of the drop from yesterdays high to todays low at 102.12. That may be some resistance for today as well.
Double top SDS 5 minute
Sure lots of sellers.
Waiting for ICE to go to the mid-70s or high 60s.
TNX is upo .89 basis points… S/B some buyers.
SSO 1 minute almost trending up. With 5 minute.
Watching ICE
Did you buy ICE George?
Charlie;
Yes, scalp but will scalp again.
Looks like ICE topped for now and is ready for a pull back now. Topping candle forming on the 5 & 10 min charts.
stoch didn’t cross yet, so not fully confirmed yet.
That was about a $3 scalp on ICE. .50 on SSO. In SDS now.
$2 scalp on SDS. Waiting on SSO.
Im in DUG and got some goodie from SKF this AM. No QID though.
No BBT either. Bad chart. Very bad. Crap shoot.
you’re going nuts George!
Got out of SDS too soon. Dont care.
large volume bars printing on SSO on the 1 minute right now. Bottoming sign?
I should have gotten a core position on SDS based upon 15 minute. Let it ride then scalp the pairs to boot. But too busy with other stuff.
Here comes SSO maybe anyway.
Besides something strange about the market today. Like it has no conviction or tenative, something like that. Wierd.
I know what you mean. The market has swung up and down huge, but there is clearly indecision right now. I get the sense that people would like to buy, but they are scared cause another drop could occur.
TNX +1.40 basis points but no buyers? That’s one wierd thing.
Charlie, that may be it. There’s so many money managers selling and others saying sell at any rally. That could be part of it.
Makes scalping easier though because it is telegraphed.
Yerk,
Your story about the shipbuilding company is an excellent example. Even perfectly good companies with lots of business are in danger. It’s hard for stocks to rally in such an environment.
Maybe those shipbuilders could go door-to-door and raise money like George’s Korean dry cleaners!
Matt
You know, you read all ove rthe papers that this is the worst thing ever… Did they write that stuff before the crash in 29 or 87? Does not feel right. I see value investors starting to buy – these against all odds guys.
Best stuff I read today was from unicredit. They said meltdown without historic example, so fast, indicators at worst levels etc. but: mid- to long-term indicators quite normal. I noted that as well, long term vola has not risen that much. They conclude that folks have still not understand what is coming over the next months. They say we are in wave 2 of 3 down since January.
No matter the time frame, when SDS has hit support yesterday and today, it’s a buy.
When it stops doing that, the trend will reverse.
Ice is cute – it’s parked ~ 97 waiting to get a boost.
I mean ~79
Just got a nice scalp off SSO. 0.60 cents.
George,
I see what you mean about the TNX: it’s up 4.5% today while SPY is down 2.5%. The three bond ETF’s that I mentioned above are also down again. Stocks are being skeptical.
Matt
Looks like we might get some support on the double bottom today. Market is intent on testing that level before any sort of bounce can be mounted. It could of course crash through it. All supports are theoretical at this point.
Market going down, TNX going up – now, that’s crazy. Unless traders are w/d funds from treasuries to buy stocks at the low thinking this is the bottom.
….-OR, maybe they’re buying inverse stocks? HEHE
Matt;
I know there are times when the two don’t invert and that is normally a market directional change the best I recall. I used to swear by the TNX while swing trading and got away from it when I got into day-trading.
Look at IRX – it’s reliquifying. It was way done early but is picking up more than a bit and was up yesterday. Have to see how LIBOR and TED do but if the wheels start turning again….and traders notice….might get our bounce.