Thursday, October 9, 2008

10.09.08 - Price Holds In Spite of...

...strong negative tick and AD line slopes. It's funny, as this market has gotten crazier, I have reverted more to of a day-trading mode, while consummate day-trader Brian Shannon from AlphaTrends is at least considering longer-term historical stats for a swing.

My observation is that it may be more difficult to bounce when everyone is expecting one, particularly in light of the continued forced institutional + emerging retail selling -- again, keep managing size. In any event, it's undoubtedly helpful to gather multiple perspectives in this environment. In that regard, don't miss Dr. Steenbarger's article on trading one's ego instead the market. Meanwhile, GM's market cap at 1929 levels, my goodness.

P.S. -- Dear Shorts: Welcome back, we've missed you! Of course you've been doing it synthetically all along, but now perhaps you can cover without getting busted? The VIX is signalling a potential move of 15-20% in either direction ahead; which do you think it will be? We are down nearly -38% off our highs from almost exactly a year ago (and my goodness how much in just the last month?), which side are you willing to bet on/risk? Sure, we could and likely will go lower before this is all over. But governments around the world are pumping unprecedented levels of liquidity into the system. Are you feeling even the slightest bit nervous? We've been wondering why the market hasn't been behaving normally in your absence...

Yield Curve

o Ted Spread at New Highs?

11:35AM PST: Breaking down, in case you hadn't noticed. Still above the (new) lows for the moment. If we could hold around here, it would then appear that the new lows are losing momentum. Six successive days lower for the SPY? Over an hour to go.

11:40AM PST: TNX Rising quickly... rotation? More steepening? Just higher return requirement.

12:15PM PST: SPY $93 represents the 1998 LTCM crisis lows and the trough highs from 2002/2003. SPY $80 represents the reversal lows of the post-Internet bubble during that same period. We are nearing a full retracement of the last five-year rally. RSI(2) = 0.57; VIX will likely exceed 60 before this day is over.

Keep trading "what you see", but ask yourself, do you think earnings will be revised down (yes), and then, how much worse can this news cycle get? Amazing.

12:45PM PST: Just broke S2 at $92. I believe it's an overshoot, but a scary one at that [and maybe we'll see more for a day or two, then again, we could easily be up 20% in a week or less!] I'll knock it off with the levels and support talk, obviously they mean nothing on a day/times like this (unless it's resistance). VIX is nearly 64.

Close: Capitulation, Crash? Call it what you will. Believe it or not, SPY volume was lower than yesterday. No sign of this being over, hang tight. RSI(2) = 0.17.


o How Shall We Bounce? (Yikes!)

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