If We Have Heavy Volume Soon, Look For A Major Breakdown
- Thread starter ByLoSellHi
- Start date
In all seriousness, I worry about this market too. We do need a bigger correction, if only to get people to panic and get out so there's more money to come back in later. We need people shorting and expecting the worst at any time. We need the wall of worry.
However, things today are different than they used to be. The reason things were so bad in 1929 and even 1987 was leverage and margins. The laws about what's permissible today is a lot different from what it was. In 1929, you could put up 10% cash and margin 90% to buy stocks. That's impossible now.
Even if we 'crash', we have measures in place to prevent serious the catastrophic kind from happening again. From gov't buy back programs (that Treasury dept plan of action) to simply shutting the Exchanges themselves down so the automated sell programs don't all kick in at once. What is it at? 10% crash and everything kicks in to stop a freefall?
While a correction may come, a crash isn't all that scary anymore. It's not the crash we need to worry about, it's the slow, slow, stairstepping down to watch out for.
And we're not there yet.
However, things today are different than they used to be. The reason things were so bad in 1929 and even 1987 was leverage and margins. The laws about what's permissible today is a lot different from what it was. In 1929, you could put up 10% cash and margin 90% to buy stocks. That's impossible now.
Even if we 'crash', we have measures in place to prevent serious the catastrophic kind from happening again. From gov't buy back programs (that Treasury dept plan of action) to simply shutting the Exchanges themselves down so the automated sell programs don't all kick in at once. What is it at? 10% crash and everything kicks in to stop a freefall?
While a correction may come, a crash isn't all that scary anymore. It's not the crash we need to worry about, it's the slow, slow, stairstepping down to watch out for.
And we're not there yet.
While a day like yesterday looked bearish to me it wasn't all that unusual. I think that the key to this market having a serious crisis is not going to come from equities, it will start in the bonds. Look for widening spreads and higher CDO prices as the tell. That will force funds to take money off the table which will hit the equity markets. Until then I don't see anything that will really precipitate a decline in equities and I have decided that until I see movement in the bond spreads I am not going to short this market. In fact I will resume buying the dips aggresively intraday until I see a change in the bonds/CDOs.
I agree. I've been trading Bonds from the short side since November and I see little chance of a meaningful rally. However as you know high yield shit has been on fire right along with equities. I've seen the Bonds-Equities disconnect go on for months i.e.1987 when Bonds were breaking for half the year (and HARD like 20pts) while stocks soared only to lose a year of gains in a single day.