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Doublea's Journal
- Thread starter doublea
- Start date
Although I do not really like to call tops because we are in a major bull market, this market is ready for a correction.
Here are my reasons.
The last few days Russell has been underperforming SP.
Utilities unable to make a new high.
Bonds are back to where it broke-out from. It is especially alarming because bonds broke-out on the fourth attempt and last week we saw a major sell-off.
Sensex sold-off huge yesterday.
Market is expecting the Fed to start cutting rates early next year, so lots of good news have already been priced in.
I will still not short this market but if you are long, it is time to tighten the stops. Long-term support is around 1305-1315.
Here are my reasons.
The last few days Russell has been underperforming SP.
Utilities unable to make a new high.
Bonds are back to where it broke-out from. It is especially alarming because bonds broke-out on the fourth attempt and last week we saw a major sell-off.
Sensex sold-off huge yesterday.
Market is expecting the Fed to start cutting rates early next year, so lots of good news have already been priced in.
I will still not short this market but if you are long, it is time to tighten the stops. Long-term support is around 1305-1315.
Quote from doublea:
Nasdaq has been showing some relative strength compared to other indices. I will be buying some QQQQ here and add to it if it moves higher.
Bought some this morning. Going all in. The positive divergnce is absolutely amazing. I think Nasdaq will take the rest of the market higher.
Current Price: $44.16
Stop: 1% True Selling Day
Quote from doublea:
Here is what I see:
The economic fundamentals appear to pointing to an overheating economy.
4.4% unemployment
82% capacity utilization
Increasing wages, income and AHE.
Low real rates of interest
High PCE (personal consumption expenditure ) core deflator, the fed's preferred measure
Declining Energy prices
Consumer spending 3.1%
Housing starting to bottom (Not fully convinced)
Based on these factors, I do not see the Fed lowering interest rate anytime soon. I would not be surprised if they raise rates in the future.
I do not trade bonds or currencies but I would like to be long bond yields and long USD, preferably USD/JPY.
Still bullish on the stockmarket. Waiting for pullbacks on weeklies to enter long.
This was from 11/28. I'm just happy that my analysis turned out to be correct. Bond yields have been going up and long USD/JPY would have worked well too.
I'm long QQQQ. Bonds going down and stocks going up is a little scary. This usually happens during major turning points but that does not mean the market will reverse tomorrow. Usually it takes 9-12 months before a major crash/sell-off. I would like them to move together, if not it would be ugly around October 2007. Well that's still too far away and I'm sure my 1% true selling day will get me out before a crash.
I have tuned out the news and go purely by the numbers/charts.
I believe the market is interest rate dependent at this time. Last year, the ten year yield did not get past 4.8 until April. At that time, the indexes started to appear choppy. When the ten year passed by 5 in May, then there began a selloff.
Then the ten year yield hit a top at about 5.25 in July and started to recede, thats when the markets started to go on a bull run.
Then the ten year hit a bottom in December and started to go back up, thats exactly when the indexes started their sideways action.
Therefore, I believe the market is strongly correlated with the ten year. The yield went through a key resistance level on Friday. There is nothing on the chart until 5.25 that can be considered resistance.
In looking at bond fundamentals, foreign nations appear to be selling their bonds and strong economic reports egg the yield up higher with each report. The only event that might stop the trend is Bernanke and the Fed meeting. Most likely, they might even make the yield go higher, but you never know...
When the ten year yield crosses over 5 in the coming week (or weeks), thats when I would be extremely wary. I have a feeling, however, stocks might be a little tougher this time around due to stronger earnings and a persistent bullish attitude. The yield might have to rise to 5.25-5.5 to really scare investors.
There is a reason why corrections are talked about so much and why there is a paramount focus upon them. You see many people eager to call tops, but for good reason. The reason is that markets go down much quicker then they go up. The nasdaq's gains for the year in May were quickly wiped out in weeks. So what took 5 months to build was wiped out in a few weeks of time.
I believe a trader should take time off after any bull run. You never know whats going to happen after a run of this nature. Trading becomes choppy and unpredictable day by day. One day the indexes are up then the next day they tank. This is the type of trading to be expected until there is a noticable correction.
Getting short can be a difficult avenue because you dont know if bad news will make the stock go up like ACAT or if good news will send the stock down like APPLE.
I believe the market is interest rate dependent at this time. Last year, the ten year yield did not get past 4.8 until April. At that time, the indexes started to appear choppy. When the ten year passed by 5 in May, then there began a selloff.
Then the ten year yield hit a top at about 5.25 in July and started to recede, thats when the markets started to go on a bull run.
Then the ten year hit a bottom in December and started to go back up, thats exactly when the indexes started their sideways action.
Therefore, I believe the market is strongly correlated with the ten year. The yield went through a key resistance level on Friday. There is nothing on the chart until 5.25 that can be considered resistance.
In looking at bond fundamentals, foreign nations appear to be selling their bonds and strong economic reports egg the yield up higher with each report. The only event that might stop the trend is Bernanke and the Fed meeting. Most likely, they might even make the yield go higher, but you never know...
When the ten year yield crosses over 5 in the coming week (or weeks), thats when I would be extremely wary. I have a feeling, however, stocks might be a little tougher this time around due to stronger earnings and a persistent bullish attitude. The yield might have to rise to 5.25-5.5 to really scare investors.
There is a reason why corrections are talked about so much and why there is a paramount focus upon them. You see many people eager to call tops, but for good reason. The reason is that markets go down much quicker then they go up. The nasdaq's gains for the year in May were quickly wiped out in weeks. So what took 5 months to build was wiped out in a few weeks of time.
I believe a trader should take time off after any bull run. You never know whats going to happen after a run of this nature. Trading becomes choppy and unpredictable day by day. One day the indexes are up then the next day they tank. This is the type of trading to be expected until there is a noticable correction.
Getting short can be a difficult avenue because you dont know if bad news will make the stock go up like ACAT or if good news will send the stock down like APPLE.
I do not have any positions on right now. The market was able to make new highs but Nasdaq was underperforming S&P. This is the second time it has happend at a new high. I think the market is going to be range-bound to slightly lower from here. Although 2006 Q4 earnings were good, the earnings guidance for 2007 has been pretty dismal. Higher bond yields are not helping either.
I still think it is a little too early to be bearish because there is a good chance that the CPI and PPI numbers are going to be market friendly because of the huge decline in oil. It all depends on how the market reacts to that. If we go lower, I think 1320-1340 will be the next support. If the S&P can stay above 1400 till the numbers come out, there could be another rally.
Right now I'm just day-trading ES. Do not want to hold a position till after the CPI and PPI numbers.
I still think it is a little too early to be bearish because there is a good chance that the CPI and PPI numbers are going to be market friendly because of the huge decline in oil. It all depends on how the market reacts to that. If we go lower, I think 1320-1340 will be the next support. If the S&P can stay above 1400 till the numbers come out, there could be another rally.
Right now I'm just day-trading ES. Do not want to hold a position till after the CPI and PPI numbers.