Art's futures biases for Oct 10.
A "1" means bullish bias. A "-1" means bearish bias. The total is the sum of biases. A positive sum will be long bias. A negative sum will be a short bias. A sum of zero will be a neutral bias.
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I am urging everyone to not consider any of my signals for at least the next two days. As a mechanical trader, I haven't had a very good history of making seat-of-the pants decisions particularly in the face of unprecedented shelling. I have to cop to something in all honesty however. Every system I trade has been tested in relatively normal market environments, the occasional singular shock (Black Monday, 9-11) notwithstanding. What we're seeing now goes way beyond that. Certainly "reversion -to-mean" systems have been getting killed as the market goes into relentless freefall. Momentum is distorted: it may work relative to the huge arcs that are now mandated, but who can sit through them?
You hear a lot about a necessity of a "washout"--a capitulation point where the last of the panicked share holders demand to get out at any price. Again, I only trade off historical results, but the closest thing I can reference to our current environment is the week leading into Black Monday. The volatility was relentless and the point drops unprecedented. The Friday prior to Black Monday was the first day ever that the Dow lost more than 100 points on the close. It looked like the end of the world right there, but of course, the infamous Monday lost several multiples of that amount. (Remember, the Dow was only in the low 2000's going into that event). The next day was even more precarious for the overall economy although few people remember that. The markets opened sharply higher on unprecedented higher gaps. Then the market started a steady slide until it broke through Monday's lows and seemed to be heading for oblivion. That's when they closed every index market for a brief inter-day period except for the Board of Trade's Maxi contract. Buyers came into that pit with a flurry--the result being that when the other markets re-opened, the shorts were handed their lunch.
That day, Tuesday, represented the ultimate market low. Trade wasn't great after that mainly because volatility went 180 degrees to the ultra-light level for several years. The slope from there, however, was relentlessly upward.
I'm going to go out on a limb based on that mere one-time model to suggest that there is much pain coming on Friday--perhaps the first ever Dow quadruple point decline. Monday will be worse. Tuesday will see lower intra-day prices still, but the close will be sharply higher. I think that may be the ultimate capitulation. It's based on a singular event, but I can't think of any other one (or group of them) that is more plausible.
One final thought: it's 4 p.m. central as I write this. If you can get access to the Asian markets, start monitoring them at 6 p.m. If they're going to melt as a result of our activity, I can't imagine how the indices won't start a huge swoon of their own in the overnight session. On the other hand, overnight stability here and abroad might be the best clue that the markets won't fall Friday after all and I'm probably dead wrong about everything.
I guess it will be good news if I'm dead wrong. Then again, the washout will still be ahead of us.
