Wednesday, October 26, 2011

Not a Bear Market Anymore

I did not have too much time to post lately. In fact, this will be the case from here on and I am thinking of discontinuing this blog or post much more sporadically.

Meanwhile, the so called bear market rally has metamorphosed into something else, invalidating my long term expectation of a bear market. Here is a reliable indicator suggesting the move up in October has been more than a bear market rally: percent of S&P500 stocks above their 50 DMA.


The purple line usually contains this indicator during bear market rallies. Notice the recent strength above the line.

This is not the only indicator suggesting the same thing. So, from here on I will buy daily pullbacks, at leat until the 5 day ema of the total put/call ratio moves towards the upper part of my inverted chart below. In fact, I already bought today at the 1216.5 daily ES support.



Wednesday, October 5, 2011

Covered Long at 1117.5

I missed the exit at 1123 and the rally above 1120 is failing.

Down, Then Up

Nice move up yesterday but, looking forward, today the market may fall back below 1100. Here are some previous cases of strong one day reversals and what happened after them.

The pattern is down today and up again starting tomorrow. The only time this pattern failed is when the day after the reversal opens with a big gap up. Today, this will probably not be the case.

The NFP report on Friday might also deter buyers, since recent numbers have been quite bad.

Thus, I will take profits on my longs on a rally, even before the US open, if the market rises back to 1123.

Tuesday, October 4, 2011

That's more like it!

A 50 points rise in the last hour of trading must mean something. As a side note, that usually happens in bear markets.

Still, given the very strong close, a trend day down tomorrow is not excluded, but, generally, the market is headed towards 1250 over the next weeks.

Long again at 1081.5

Out at 1076

the market has been very weak after the lunch. There is a possibility of a last minute surge but the downside is too menacing

long at 1079.5

Turnaround Tuesday?

I am a little tired of buying this falling market. The fact is that I did not know where the fall would end. It might have ended on Monday, or make new lows and the bear market rally thesis would still have been intact.

However, the moment of truth is very close. I still think that a big multiday rally is just around the corner. The Ben Bernanke speech today might offer some excuse for such a rally.

In the mean time, here is a similar situation from 2010. The market rallied after making new lows, but it took a few days.

Back then the bottom took place a few days before a NFP report. If today will prove to be a turnaround Tuesday, we may finally see the bottom.

Monday, October 3, 2011

Out at 1100.25

The market refuses to rally today. Maybe it will do so tomorrow after a break of the August lows

Long at 1105.75

last try for today

Out at 1115.5

The market is very weak. If a low is formed today, it will happen from 1107 or even 1195

long again at 1120.5

I do not want to be left behind. This time, I will exit at a loss only after a 30 min close below 1114.

out at 1118

Strength was sold.

Long at 1121.25

Fuel For The Next Rally

The Chinese PMI is turning from the lower bound of its interval of variation. I think this will be associated with some economic activity acceleration in the US over the next several months. This will support the equity markets before the next leg in the bear market.

With the stock market near the lows of its recent range, I will look for long entries today and/or tomorrow, keeping in mind that a low may be marked by the NFP report on Friday.