Market Direction: While The Chart Still Says Long….
August 26, 2008 8:34 PM
While the chart still says long above 1261 cash, 1260.50 futures, I have a belief probably not widely shared. Most seem to believe the more times an area or trend is tested the stronger it becomes. I believe the exact opposite. It tells me the market wants to break it and likely will, at some point - but nobody wants to be the lone ranger in taking it out.
If we revisit the lows soon, I do not believe they will hold next time around. The market continues to test the 1261 area. I am a firm believer that the first test of an area will almost always hold. The second test is questionable, the third test is likely to fail. The market has pooked around the 1263-1265 area the last two days to see the resolve. It appears weak, at best. I could be wrong, but do not expect the next visit to this area to hold if and when we get there.
Market Recap: 1261 Held once Again
August 26, 2008 5:13 PM
Sometimes I make this far more complicated than it needs to be. What did I say before the open? The trade is long unless we clear 1261 and cannot immediately reverse. Period. Today’s low? 1263. Once again the KISS principle should have come into play. KEEP IT SIMPLE.
I was long early on once I saw 1263.25 hold on the futures but was surprised when it backed off 1275.75 and never challenged it again. It did, to some extent as it ran back to 1272 and reversed. Then I knew 1272 was an issue to the upside. It ran up to 1271.75 and I warned it HAD to clear 1272 to be long up there. It ran all the way down to a new low off that number.
Tomorrow we have Durable Orders before the bell. It will be same story different day. 1261 (cash market) HAS to hold OR immediately reverse if cleared or we will be heading for a retest of 1200, which I have long felt is coming anyhow. Theoretically (my theory anyhow) 1200 is NOT the low on the SP. I will stick to that view until proven correct, which I believe I will be, eventually.
I need the Grasshopper for this post as I obviously need to learn from my own comments.
Market Update: Market Was Bought Early, 3:00 EST Is Likely Key
August 26, 2008 2:08 PM
The market was bought above 1261 early as I thought was very likely. It rallied to 1275 and change. If we clear 1260.50 to the downside after the release of the number of banks in trouble at 3:00 EST, we will either IMMEDIATELY reverse or we will close at the low of the day. I would guess the latter is FAR more likely.
2:20 Update: They released the list already for some reason. 117 banks in trouble, up from 90 last quarter, but based on the size, no huge banks can be on the list. This “may” save the market today from a big selloff, not sure.
Closing Update: We held 1261 on the cash market and moved up above that. The banking release helped the market into the close because apparently no big banks on the list (they do not list names, just asset sizes). That was a relief to the market and prevented a big selloff.
Market Open: 1263.25 Early Low
August 26, 2008 9:43 AM
I mentioned yesterday that 1263.25 was likely the next level to hold. It is the early low. We need to reverse off this low with some force and take out 1272.25 to the upside to possibly put in a low as I see things.
I am long at 1268.50 early on, but we have to clear 1272.25.
Morning Call: Futures Flat, New Home Sales At 10:00, FOMC Minutes Late
August 26, 2008 8:53 AM
The futures are flat 45 mins before the open. We have New Home Sales and Consumer Confidence at 10:00 EST. A bigger market mover may be the FOMC minutes at 2:00. Not sure what they could have said that may move the markets other than financial concerns which clearly exist anyhow. But it may reinforce the idea that a “second wave” of financial crisis is coming. Consumer debt and prime mortgages is the second wave and is clearly coming, IMO.
People continue to be shocked by this. But as I have said for month after month, it is the result of declining real incomes NOT by the initial crisis related to subprime. The crisis was simply masked by massive borrowing via the housing bubble.
At any rate, if we clear 1261 on the SP we HAVE to reverse. If we cannot reverse and go positive we will likely close at or near the low of the day. Opening flat is going to make the call more difficult as either can happen. if we opened up 10 or something and then cleared it, we would obviously be in trouble.
If you want to be long, the trade is long here above 1261. If it clears then you will have to know what you are doing on an intraday basis.
Market Recap: My Gap Rule Ruled The Day
August 25, 2008 6:47 PM
My gap rules once again ruled the day. It also outlines why I strongly dislike trends. I mentioned early on that the trendline was in the mid 1270’s. It tried to hold 1275 area and once that cleared down she went. In retrospect it should have been an easy 8-10 point day to the short side and then just “leave it alone”. Once we cleared 1282.75, which was the gap low from Friday, my theory suggests that the gap should fill. Therefore, we should have gone to at least 1277 area before “possibly” reversing. That is another reason I thought 1275 or so would hold. 1260.50 (1261 cash) did hold as I said in an intraday post was a MUST hold today or there likely would have been a massive panic down.
Tomorrow is a different story. 1260.50 is still critical, but is not an absolute must hold. It depends when it clears and the market reaction if and when it clears. If we open higher, I would be skeptical and today’s high should be a lid. If it clears todays high, then Friday’s high woul be the next test. If we open lower and take out 1260.50 early, the market may reverse in the 1257 area - or it may not.
Keep in mind that I have said repeatedly that I do NOT believe we have seen the low on the SP regardless of what everyone has been saying on TV. They are wrong, IMO.
Market Update: 1261 Should Hold - If Not We May See Panic
August 25, 2008 12:05 PM
We should not go much much lower here or there could be a big, big problem. 1261 on the cash market HAS to hold today I believe and it should. If not, I believe panic will set in.
Open: 1285, 1282.75 Still Important
August 25, 2008 9:30 AM
The open is 1285. 1282.75 is “reasonably” important. In addition, the market may try and bounce if we make a reversal low. Existing Home Sales 30 mins in. This is likely to be a difficult day to trade. The high should be near 1290 based on trends opening in this range. Friday’s high is key. We would have to clear that high and HOLD it to advance.
Closing Recap: Yes, it was a difficult day to trade IF you did NOT follow my gap rules - like I didn’t. I was convinced the market would try and reverse near 1275 and was long and got smoked there. I then reversed course and went short. I then got head faked off the initial low and was long above it. The bottom line is this. There was ONE trade and ONE trade only today if you follow my gap rules. The gap was SOLD. Period. When a gap down is sold, do NOT try and pick a bottom - ever.
Morning Call: Decision Time
August 25, 2008 8:23 AM
The futures are about 1290 an hour before the open. Therefore, the market has to decide today, most likely, whether we are going to go past 1300 and stick, or not. If we clear Friday’s high watch out for a reversal. If we cannot take out 1302 on the futures, they we should get pressure late in the day. The market is likelt to try and bounce early unless we immediately take out Friday’s high and reverse.
We have Existing Home Sales at 10:00 EST that may determine if we reverse early or not.
Open Update: 5 mins before the open the futures have weakened. SP down 8 plus. This appears to be a trend break in this range. This is going to make things more difficult. I wanted a clearing and reversal to get things rolling to the downside in coming days. However, we do have a pattern of rejecting this 1290-1310 range. Credit crisis issues are still weighing on the market.
Market Update: Typical Trend Day Higher Early As Predicted, Now The Outcome Is Clearly In Doubt
August 22, 2008 12:32 PM
I do not like what is going on at all. We made a firm high at 1293.75 on the futures. If we clear 1282.75 here, we may get severe pressure, especially if it happens into the close. At the very least we should revisit 1280 or lower. A severe selloff into the close is not impossible.
12:42 Update: 1282.75 held by a thread at 1283. The outcome is still VERY much in doubt and big action into the close is very possible. It looks like if we clear the high we will challenge 1302. If we clear the high late shorts should scramble for cover. But it looks like we have seen the high, possibly. But still early in the day.
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