Sucker's rally

trading is not about always being right

heck, many traders make good money only being right (trade hitting a target before a stop) 30% of the time.

regardlss, of trader methodology (scalper, position player, whatever), traders make money when they make trades with a positive expectancy. - is the risk well defined, is their compelling risk/reward, etc.

we had a 10% drop in the vix today. VIX got down to mid 18's!!!

this should tell you something. options traders are not putting a premium (pun intended ) on risk.

imo, the most compelling trade today was to go long volatility. you don't have to be RIGHT. but volatility has contracted so much that the risk/reward is phenomenally compelling. last time i saw a similar situation, i got some DIA puts that gave me 20-45 % return in a # of days ( i scale out of winning positions generally). that's a compelling trade, when the risk is (getting a fair amount of time in the puts) relatively small to the downside

imo (and that's not a what i want to see opinion, but a statistically based opinion), puts were a frigging STEAL today- specifically mar 2008 puts.

you can sit on them for a few weeks and lose little time premium, with the potential for volatility expansion or even one nasty 200-500 pt selloff making this quite a compelling trade.

but was it a "sucker's rally?"

NOBODY knows. it was a big gap, that barely retraced and ran mostly into the close. whether it balances at this new area, retraces, or continues upwards - NOBODY knows and anybody who tells you they do know is lying or deluded
 
I was not to take any positions into the NYE, however one could not help but to start buying Puts in the Banks and Brokers.

The leading sector, which could lead the market below 1300, are the Financials.

I placed my bet and will continue to place more if more rallies of this magnitude continue. However, I think this was a quick 'Santa Rebound Rally".

Looking for a strong pull back, to break 07 lows sometime in Spring of 08.

Recession reports in 08, more CDO bombs droped and Retail Sales with lower consumer confidence in 08 are my best friends.
 
We got plenty of room to go up and I'm quite sure we're on the way to make new highs. A bear market this is not, this is just a sideways market with large swings.

The subprime debacle is large and we got write offs left and right and yet, we're still seeing tremendous support in the 1400 area on the SPX.

A bear market will happen only when everyone least expects it. That's when:
a) we're at an all time high,
b) market keeps going up for consecutive weeks
c) you don't hear about subprime issues anymore and
d) that one huge reversal day after market makes new highs.
e) And you see everyone at a loss because they CANNOT come up with a reason why the markets turned

Just the reverse of Oct 2002.
 
Good thoughts. I agree and wouldn't be shocked if it happened in '08. Not necessarily a multi-year bear, like 2000-2002, but maybe something like 1990, a recessionary year and final washout of the S&L problems. Lots of parallels to the current situation.

Like you said, though, it will probably happen after another breakdown from a new high...not when everyone and their grandmother thinks they can short the next rally.

Quote from polpolik:

We got plenty of room to go up and I'm quite sure we're on the way to make new highs. A bear market this is not, this is just a sideways market with large swings.

The subprime debacle is large and we got write offs left and right and yet, we're still seeing tremendous support in the 1400 area on the SPX.

A bear market will happen only when everyone least expects it. That's when:
a) we're at an all time high,
b) market keeps going up for consecutive weeks
c) you don't hear about subprime issues anymore and
d) that one huge reversal day after market makes new highs.
e) And you see everyone at a loss because they CANNOT come up with a reason why the markets turned

Just the reverse of Oct 2002.
More...
 
Hello Detective. I have been looking for you at the various strip clubs in the city and I think I spotted you a few times yelling about look at her low overhead and I bet you don't even get health insurance baby... and what IRS? But now I see you are doubting my rally. Perhaps rather than view one days massive blast off it would be wiser to take a backwards glance at the day before.

We saw more strength in thursday's market than we initially thought looking at the averages. The bulls carried the day with advances in all eight Important Averages, five over one percent. Similarly, all 17 Breadth Groupings were positive, 14 of them Decisively.

However, we had an odd situation in Price-Volume Relationships. We had two dominating relationships, 1052 PriceUp on Rising Volume (bullish) and 1016 PriceUp with declining Volume (bearish); That amounts to a split between a bullish relationship and a bearish relationship... This might be a reflection of the strength in tech stocks versus the more cautiously advancing blue chips which embody a lot of financial stocks. A list of High Profile Tech Stocks contained 30 advancers and one decliner--conspicuously lopsided.

the Nasdaq bulls showed their holiday spirit into the close. on thursday and that's what counts. After gapping higher on the open, the major indices drifted lower throughout the morning, sending the S&P and Dow to test the previous day's lows and the Nasdaq to unchanged. Afternoon buying interest in the tech arena reversed the early weakness and sent the Nasdaq Composite 1.5% higher. Small-caps kept pace with the Nasdaq, propelling the Russell 2000 Index 1.5% higher as well. The S&P Midcap 400 rallied 1.2%. The S&P 500 and Nasdaq Composite both finished at their best levels of the day, while the Dow finished in the upper third of its range. Trading activity picked up 6% in the Nasdaq, enabling the exchange to score its second bullish "accumulation day" this week.

Total volume in the NYSE was 2% lighter than the previous day's level. Not surprisingly, turnover in both exchanges remained below 50-day average levels. With volume so light over the past week, it seems a lack of sellers, as opposed to an abundance of buyers!

Quite simply the selling pressure has evaporated Detective... that's not how Sucker's Rallies develop... It can be said that the S&P has been forming a "bear flag" formation on its daily chart. It has done so by sloping modestly higher from the December 11 to 17 sell-off. If it breaks below Wed's low, the lower channel of the "bear flag," odds are high that downside momentum will send it significantly lower. However, the same can not be said of the divergent Nasdaq. The index has retraced nearly 50% of its loss from the December 11 peak. Nevertheless, a lot of overhead supply remains, as well as resistance of the 61.8% Fibonacci retracement. We view the Nasdaq as now being in "no man's land," trapped between key support of its 200-day MA and a significant amount of horizontal price resistance. more than 10% higher. That's a nice air pocket above us with support close beneath us-- a good set up.

If I could generalize from what I hear when I dial around , the Street has one foot out the door, heading for the nearest beach or ski resort. They are frayed and beaten up and have walked away from the market. Hummm a chance for us little guys to get ahead and bring the big money in? Yup... This rally ought to take us into early January...

Don't forget. Our dollar is strengthening slowly but surely every day. Foreigners who are now scooping up art and real estate in the US will also invest in our stocks when it becomes ultimately clear that the dollar has stopped going down and their time on a two for one discount is running out. An influx of $'s is coming and will boost our markets up... non of this suggests a suckers rally at this time.
~SI
 
but , what about the consumer ? spending is drying up. what then? corporate earnings have been adjusted 1/2 already.
66% consumer driven economy gone. don't tell me you are counting on the foreigner's to be doing us favor's.

bgp
 
Talk to the counter girl at Tiffanys about the foreign money Talk to a realtor here in NYC about the Irish buying up everything... yes I am counting on the foreigners and as the far east has showed us lately they are willing to step in and scoop up all our so called distressed assets... which brings on the question how distressed are they really? These are smart investors...

Lets talk about the consumer. Everyone I know personally is working. Everyone I know who has a house is paying it off. No one I have talked to has been tricked into any mortgage they fully signed on to the risk. Most have refinanced. They still have jobs but gas has made times tight. They have cut back in eating out and fine wine... but still are doing their laundry buying their soap getting their kids to school etc... For the great part of America everything is fine. Consumers like sales and deals I think they will be around in strength longer than we think, the amount of disposable income after credit cards is becoming a concern and I am tracking that carefully but for now we have to focus out 1 year and say ok one quarter at 0% might be all we get... is that a recession? No.

In that year will housing get worse? No. Can it get better for some with all these fixes in the system . Yes. Will the troops coming home add a major flush to the economy? Yes. Will we have something to cheer about with a new president? Maybe- the current tax breaks on dividends and capital gains must be rolled on indefinitely; if they go.. we all go. ~ stoney
 
Quote from bgp:

but , what about the consumer ? spending is drying up. what then? corporate earnings have been adjusted 1/2 already.
66% consumer driven economy gone. don't tell me you are counting on the foreigner's to be doing us favor's.

bgp
More...

You ask too many questions and try to justify why this market SHOULD go down. You can see bad news if you really want to. All I see is a chart, a base formed, and the successive blast off to the upside.

Quite simple. Send me the sympathy card but only IF you can afford one by the time your imaginary bear market comes around. By then, you're probably buying.
 
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