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.