Wednesday, October 8, 2008

10.08.08 - S1 Holding/ VIX 58+

This spring is now highly sprung (let's hope it doesn't break!). You don't need me to tell you that neither statistics, technicals [Add: OK, save straight-up momentum] nor fundamentals have provided much of an edge in this market, but if you step back and consider the nature of the forced selling we've been seeing, the added uncertainty of elections ahead, the absolute panic sell overseas last night, and the significant and meaningful intervention afoot, this increasingly looks like the spot to make a play.

Of course, it's hard and would be foolish at this time to ignore what happened in 1987, but even if you do consider it and unless you are a complete doomsday adherent this go, look where that market was a year later.

o Quantifiable Edges - CBI Spike
o E-mini Addict - SPX 800 Here We Come
o Traderfeed - A Look at the Volatility

So What Did 1987 Look Like?

Big picture, something like this. Note that sell off came on the heels of a strong bull, rather than the extended decline we have already seen. Naturally -- the root cause, trading nature, and recovery of every market shock is different.

Why is this not getting any mention! -- Alright, CNBC just did a focus on it... Anyway, one hopeful sign. Lord knows where people are getting their financing!

11:30AM PST: Price is pausing at the Pivot (SPY) and 5-Day (QQQQ). An obvious measure of the potential of this move will be whether we can bust through these levels today as day-traders and mechanical trading programs will be 'asking' themselves whether they are in for the swing or the scalp here. It's going to take people/ investors to tell the machines/ algorythms where to go -- if that can happen, the program traders will re-establish long positions and maybe we'll get parabolic on the last third of the day.

12:00PM PST: Doesn't feel like it will go. Sure hate to see another try at a sell. Even a hold would be positive. We'll see, and manage your size as we get through this.

1:00PM PST: Wow! Someone put it more eloquently on-air than I did above -- "the marginal buyer/seller remains the day trader." See you tomorrow. RSI(2) = 1.27; SPY -38% off of nearly exact year-ago highs.

o Traderfeed - Historic Market Weakness

Never Investment Advice

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