Monday, October 3, 2011

Worth Waiting For

It was a Monday. Enough said. Posting will be light this week as I have to take training for the incoming robots we are getting at work so I am not sure what time I will getting home most of the week. I am a part of the robot revolution cog, I have no choice!

Worth Waiting For
Markets took another hit today. There are plenty of danger signals and while I do not get the feeling that real fear has arrived, people are rightfully frustrated at how non-constructive the markets are for anything but quick trades. Even I, the most patient of the patient, am getting both bored and annoyed with all the churn.

I am going to start with a couple of charts and then discuss what could be waiting on the other side of this long market correction.

This is a weekly chart of the S&P 500:
The boxed areas are the bottoming process for the 2009 low (5 months)and the 2010 low (3 months). We have been going down for 2 months now in the current iteration of market chaos. I have noted 1065 as the next support line and that one goes back over a year. S&P closed at 1099 today.

The next chart is for the inverse S&P 500 index fund, SH:
The green arrow is when I had opened a position in SH. I was shaken out of that in my trading account (along with PSQ). I have noted that a run to the $50 range is likely.

So what do both charts say? Unless we are about to enter into some kind of massive recession, it is my stance that markets are closer to finishing up the downside move than just starting to crash. As Josh Brown says, a recession is not the end of the world, but they hurt.

Earnings season is starting next week (Alcoa: AA reports October 11th) and that is where there is going to be some clarity given to the markets. Has a slowdown started? How severe? What about guidance going forward? Big questions that need answers.

I have been in cash for the trading account pretty much all summer. This weekend I allocated more funds to the account. Why?

I think we are 2-3 weeks from seeing closure. My bias at this point is for a washout bottom to occur, then some basing through earnings season. With that pressure relieved, I think things can move higher. If not, and things deteriorate even more, then shorting via index funds is a viable way to make trades.

Keep in mind Europe is closer to bailout approval, the FED must be getting nervous (Bernanke speaks tomorrow, watch for some hints at QE3), and I think people are getting pretty sick of feeling like shit about the market. Very scientific, I know.

It's worth waiting for the other side of the tunnel here. Instead of scalping pennies on fast trades, better sentiment and better numbers could make good stocks move 10-25% in weeks going into years end. Maybe I can catch that move and then all the momentum players piling in toward years end can make finding winners easier than since the new year. It's very possible. In any case, a few more weeks of waiting and watching is not that hard to do. Plus if there is a crash, I would miss that too!

Have a good night.

11 comments:

Watchtower said...

Looks like whoever asked the Magic 8 Ball if the 1120 support line would be broken got their answer today.

Watched 'No Country For Old Men' last night for the first time.
No wonder it's called a modern day classic.
Can't wait to see Javier Bardem in the 'Dark Tower' series now, he should make a good Roland Deschain.

getyourselfconnected said...

Watchtower, you just "No Country'????? Great flick.

Watchtower said...

Yeah it was a great flick, I could watch it again.

David Batista said...

I heard the Dark Tower project had been scrapped by the studio. Of course, maybe they will find another studio to pick up the option . . . but it doesn't look good. I doubt very much Bardem is still attached, at any rate. Bummer!

Personally, I would love to see Timothy Olyphant as Roland. Or, actually, maybe as Eddie Dean. Either one would be fine with me. :)

Oh, and GYSC -- how about that Hugh Jackman movie coming out this Friday, Real Steel? It's like something straight out of your worse nightmares, man . . . robots taking over BOXING! *gasp*

The Sovereign Bohemian said...

GYSC, thanks for the explanation on the charts.

David...hush yo mouth...robots taking over boxing? Yikes!

Watchtower said...

You are correct David, Universal Studios scrapped it.
And like you say, that is a bummer.

GawainsGhost said...

I snagged my mother's copy of the Limbaugh Letter off the stairs this morning and read his interview with Gretchen Morgenson about her new book, Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon. It does sould like required reading.

Morgenson goes into detail about the events that led to the financial crisis, subprime loans, mortgage backed securities, colatteralized debt obligations, and the like. But apparently she focusses on the corruption of Fannie Mae by one Jim Johnson, who politicized the organization and used, shall we say, questionable accounting gimmicks to enrich himself. Good enough for government work, I guess.

I'll have to read it to get the gist of it. This will probably be my next book review.

Speaking of movies, you know, for someone who as a kid was a Tolkien freak--I read the Hobbit and the Lord of the Rings five times--I never have seen the movies. Don't know why, several people have told me they're really good. It's just that there are some books I don't believe can be effectively transformed into films.

getyourselfconnected said...

You would be surprised how good the Lord of the Rings movies are, try them out.

David Batista said...

My favorite trilogy ever, surpassing even the original Star Wars trilogy (don't kill me, GYSC!).

GawainsGhost said...

I can't do it, GYC. I just can't. I can't bring myself to watch them.

You have no idea how much those books affected me as a child. I even taught myself how to write in Elfin rune.

It's the same with Star Trek and Batman. I grew up on those shows. But when I saw the first Star Trek movie, I thought, psst. The Wrath of Khan and the Search for Spock were pretty good though. Every Batman movie sucked, until Dark Knight. The Hulk was incredibly bad.

Spiderman, X-men, Iron Man, meh, they were okay. I haven't seen Thor yet, because I'm afraid to. I was also a freak for Norse mythology when I was young. And because, back in the day, Thor was the best comic Marvel published. Great characters, conflicts, long convoluted plots that went on for several issues, I'd hate to see Thor ruined for me.

Oh, and by the way, did you know that J. K. Rowlings, the highest paid writer in history, attended the same college at Oxford as J. R. R. Tolkien and C. S. Lewis? Yep, that's why her books contain so many Christian motiffs, if you know how to read them.

The thing with me is that I'm all about character, plot, conflict, resolution, the stuff literature is made of. I'm not much for special effects.

getyourselfconnected said...

DAVID!!!!!

Gawains, trust you you will not be dissapointed.

New post in a bit.