Market View: Not Sure, Skeptical At Best

November 12, 2008 7:55 PM

I have been warning for a week that we had exactly zero lows on the SP all the way to the low and that once the trend turns, there is nothing to stop the fall. I also said that 900 was “buying on a big number” and was simply not believable. Both of those views have been proven correct.

However, I am not sure beyond this. Many people believe in the SP low put in. I do not and have said so since it was put in. The Dow low is important, the SP low is not, IMO. On one hand the Dow low should try and hold. on the other I believe we need a new low on the SP. The problem is that if the SP low clears many people will get very nervous. In addition, the monthly charts - and history - strongly suggest the lows have not been seen. I have also said this day after day. Looking back at history, it would be very unusual for the ultimate low to be made when the monthly chart strongly suggests it is not the low.

Anything is always possible, as I like to say. But the markets tend to follow history. It becomes a self fulfilling prophecy. For instance, if we clear the lows put in, in November, is it likely that we have seen the low if we once again reverse? No. November opened at 968 and we would need to close out November above that to maybe have the low in place. That would seem very unlikely if we take out the lows here, but possible. i said that I believe that the low will be put in, in January at the earliest, and I will stick to that view, regardless of bounces. I also said i believe the November high was already seen, and I will stick to that view also.

As I mention about 100 times a week, managing risk is essential in this market. If you are wrong, in whatever reasoning you have, then exit. Let others guess. Your trade may become a 5 year investment in this market. Like today, i thought 865 would hold and we “might” rally into the close. Did it hold? No. Did I exit once 865 cleared? Yes. I have no interest in guessing on this. I was wrong, I hit my head against the wall - so to speak - took the loss, and moved on. I took a 70 cent loss on SSO on that trade and live for another day. Could it have reversed again and shot up to positive? Yes. Was it likely? No. Time was running out on the day. Could we gap higher tomorrow and make my move appear stupid? Yes. Is it likely? No.

Trading the market is educated guessing. People also have a large variety of trading styles in what they believe. That is why there are always buyers and always sellers. People disagree. Someone is right - and someone is wrong. That is the market. Every single trade someone is wrong. Either certain lows will hold - or they won’t. Being long 865 on an intraday chart appeared to be the correct call. The problem was that it was a risky trade, to say the least. I knew we had to close positive on the day, or at least above 877. I knew the risk, I knew what had to happen, and decided to take it. It obviously proved to be the wrong call.

At any rate, enough crying about my stupidity today. Let’s look at the future. Will the SP lows hold or not? I am not sure - now that helps a LOT, lol. I just do not like the SP low, it is as simple as that and will not change my view on it, but others do. Who is right and who is wrong is the question. Considering I am just some dude that likes to watch the market, well unless I am wrong, then I hate the market - ha, perhaps they are right. Then again, every single person on TV was saying 1200 was the low on the SP. What did I say? No way, they are wrong. That’s why we have a two sided market.

Let me close this post with this. Look at the SP. Does it appear that the low is more of a double bottom than a clear rejection of price? I say yes.The October 28th low was just above the SP low, which was just below the lows of the previous two days. This is simply not believable as I see things. But again, I differ than most anyone as I do not believe in double bottoms, on any level. Others do. All that double bottoms tell me is that the market is trying to clear that price, but cannot - for now. Others see them as”support” and a successful retest of a low. I strongly beg to differ. Lows that need to be retested means they aren’t the lows. If they were the lows there would be no reason to retest them.

But again, my perspective is far different than most on this issue. My only suggestion in this market is this. Whatever you believe, and whatever method you use for being correct - or not - use it. If you are wrong, and you know it, hoping it will “come back” is dangerous at best. This is exactly why almost all day traders went poof after the bubble. They were confident it would come back. It never did. Know when you are right, and know when you are wrong. You will NOT be right all the time, nor will anyone. Be cautious, use stops, manage risk and ignore TV and analyst hype.

Written by Tom@StockBlade.com · Filed Under Pre-Open

Comments

2 Responses to “Market View: Not Sure, Skeptical At Best”

Scott on November 13th, 2008 10:45 am

Some of the worst job numbers I have ever seen and the market opens up? Are we living in fantasy land or what?
Tom@StockBlade.com on November 13th, 2008 12:15 pm

Another of my issues with the market is this…. we are above the 2002 lows…yet the economy is FAR worse are going down fast than in 2002… so why should the market be at these levels? This is just a basic simple question…

Got something to say?