Quote from hels02:
Well, I have to admit I'm getting more concerned about the market, and people like Blue make me happier about it. When I first came to this forum, it seemed everyone was bearish. The majority of the threads were top calls, "the S&P will top out at blahblah", and people were bullying bulls, not bears. The market kept rising.
The one bull who was unabashedly bullish (StockTr3der) was being pounded by nearly everyone. People were saying the SAME things said on this thread about Blue, the super bear. My first post here was really to defend bulls, and it wasn't long ago.
My first post here stated my unbiased bullishness. 2 months ago, I was REALLY bullish. When I got here, I was even MORE bullish... because so many people were turning bearish. I knew from that that there were still a few good months to go in the rally. And I've made some good money these last 2 months.
The entire tide has turned, you can see it on this forum alone. Now, the one bear who is willing to admit his bearishness is jumped on and smothered by the bulls. Instead of recession news and how the dollar was falling, and how gold, bonds and emerging funds were the place to put your $$, today's news is.... "there's more run in the bull market". There are a lot more stock pick advice. "The DOW will lead the way". While this doesn't prove anything, and I DO still think there's more to go to this bull market, I'm getting nervous and for the last week have been more nervous.
The market is 100% about timing. Every stock eventually goes up, and eventually goes down. The ONLY thing that matters is when. Fortunes ride on when, and being wrong 1 day can cost a lot of money.
The only true 'edge' is someone sitting at a trading desk who can see all the orders/stops/limits before they're filled, or works for the company who's about to announce something no one else knows... and they can buy and sell before the news is out.
So how do we gauge WHEN the market's going to do what? Think about it and let me know how you do it
.
It's all in the charts
Here's one take(grain of salt).
November 2006
As we approach the top of this bull run from 2003 the question naturally arises as to how big a drop will we
see in 2007. Will it be a very modest 15%-20% or a full-fledged bear market 40%. The shape and pattern of the
drop is also of concern since a drifting bear market is easy to trade but a 1987 style collapse and panic could
catch a lot of investors off guard and result in a huge derivative blowup. In my work this is a two or five-year
primary bear market starting so the drop ultimately will be quite large but first we have to find out where the top
is. Natural squares of numbers usually give pretty good approximations and 111 x 111 is 12,321 for the Dow
Jones and the 111.50 squared is 12,432. The S&P squares are 37.50 x 37.50 =1406, and 38 x 38, which is the
magical 1444 number, with the midpoint 1425. The seasonal date for the top is December 5th and these numbers
were hit on this date so thatââ¬â¢s a strong warning if the market trades below those numbers for more than a week.
Historically when you have this much upside momentum you get a one to two week scary plunge and then
another spike to a slight new high. That high if it comes would be January 3rd or 8th. That was the scenario from
1972 to the ââ¬â¢73 January top and that would also tie in with the year 2000 with the Dow Jones January 14th high
and first top for the S&P on January 3rd. The ââ¬Ëfoolerââ¬â¢ in 2000 was the huge short squeeze in March for the
record S&P high and this next year has another top due for March. The million dollar question is whether the
March high is a lower top or the primary one. My thinking is that it is a lower ââ¬Ëright shoulderââ¬â¢ like the 1937
pattern but there are those who think the four-year cycle hit early this year in July and will go straight up into
March. Thatââ¬â¢s a 30% chance so Iââ¬â¢d only short prices below the December 5th levels or the January 8th levels.
Iââ¬â¢m a believer in the theory that the four year cycle did not hit in July and came early, but actually came late in
December and itââ¬â¢s a classic ââ¬Åbottoms to bottoms to topââ¬Â pattern with lows in October ââ¬â¢98, October 2002 and a
potential high in December 2006.
The long term cycles are quite obvious to me with the real estate collapse and weekly economic numbers
getting worse, not better. Christmas sales will be another key and I suspect they will be weak. The bond market
wants to trade higher and thatââ¬â¢s in the face of a weak US Dollar so foreign selling is more than absorbed or not
afraid of the Dollar. I think the bond bulls know the real economic story out there and itââ¬â¢s not pretty.
Coming from a trading background on Wall Street I always look for the technical arbitrage reasons for why
a market doesnââ¬â¢t do what itââ¬â¢s supposed to do. It took me years to fully understand why and how the Wall Street
firms could willfully manipulate the markets with futures, options, and ETFââ¬â¢s , and why they basically have
unlimited buying power when they do that. In our present situation it seems more than plausible that big
institutions put on large short stock baskets near the June / July lows expecting a big second leg down and they
were forced to go long the December futures to lock in those shorts until the inevitable correction came. When
you donââ¬â¢t get a correction and the market goes straight up it usually goes to the quarterly futures expiration
when those shorts are forced to cover. If that covering comes at year end it can extend the up move, until just
after year end. The last time we saw something like that was the year 2003 where everyone went short in June
with the big bond market high and they were not only trapped until the December expiration but those shorts covering before year end capitulated the market much higher the last two weeks of the year. There is a 40%
chance we could see a replay this year.
December Activity Calendar
DATE UP /DOWN
DAY
DAILY WEEKLY HOURLY
11 D * * 11
12 D 10
13 U 2
14 U 11
15 U * 10
18 D 3
19 U 1
20 D 11
21 D * * 11
22 U 3
26 D 3
27 U 12
28 U * 1
29 U 3
Notes: U means up day, D means down day. Trend changes indicated by the * will
generally be more accurate than the frequent U/D day indications and will usually trend in
the same direction until the next *. Hourly turns are given in local New York City
(Eastern) times, i.e.10=10 AM EST.
Cycle turns:
KO
12/11
GM
12/11
MSFT
12/12
SLB
12/12
PG
12/12
EBAY
12/13
BIDU
12/13
AAPL
12/13
INTC
12/13
AMGN
12/13
CAT
12/14
GOOG
12/14
KBH
12/14
CSCO
12/15
EK
12/15
LEH
12/22
GE
12/22
APA
12/26
AIG
12/27
CME
12/27
MMM
12/27
XOM
12/27
ALL
12/28
AMAT
12/28
FDX
12/29
IBM
12/29
EWJ
12/29
Summary
The market is still in a rally phase but at an important cyclic time period.
Resistance is 1416 and 1425, then 1444 S&P. A break of 1406 S&P would
imply a test of 1365 which is now the 1 point per day angle from 3/12/2003
and when broken implies a new bear market.
Of course you know that my favorite master cycle is the 100 year cycle and this year marks the 100th
anniversary of ââ¬ËThe Financial Panic of 1907ââ¬Â. Could be a derivative blowup year- 1887, 1907, 1937, 1987,
2007?
