 So you think it is only the bulls that tip the ship over? Are we reliving 2008
Posted by Gary Dean 10/04/11 @ 6:40 pm
It feels like 2008, it is acting like 2008, are we reliving 2008? I have been seeing that talked about a lot in the blog world, that we are reliving 2008. I am NOT one to run with roses and rainbow glasses on and I am a bear at heart. But there is one thing that bothers me about this 2008 comparison. Back then, nobody knew we were in 2008 and kept buying the dips for the next move to Dow 20K.
Now we have everybody trading the 2008 road-map and it may very well turn out to be true, but dang if I have ever seen Mr. Market do what everyone is expecting, especially when everybody is running for the exits and already out of the market. I think that is the biggest difference between now and 2008.
To me, nothing has really changed since 2008 except we let our banking system brush the problems that took us down back then under the rug. Yes, businesses are doing much better, but they were doing much better before the banking system starting collapsing.
I was just watching Cramer tell his peeps how we aren't in 2008 and started comparing companies now and to 2008 and how much better off they are now. I think the true comparison would be to take the companies earnings-cash ect. and compare it to 2006/2007 and see how it matches up. (I haven't done that research, but I would assume it would similar to what we are seeing now)
My point is that we are not in 2008 yet, but we weren't in 2008 back in 2006/2007 either and everything looked real good then as well. But I will stick with the biggest difference between now and 2008, is that everyone is already trading the markets like we are in 2008. I am on the side that until that changes, we will NOT relive 2008. There just won't be enough sellers to take us down that far, as they will already be out of the markets.
But that analogy is definitely open for debate and can change in a heartbeat, as the imbalance of liquidity we have from the massive pump during the qe days, could more than make up for all sellers already being out of the market. But I will save that for another day, for now, you have to just trade this market and forget about whether the Dow is heading to 30K or 300 in the coming years.
During the massive qe pump, there were so many bulls on the buy side, that they eventually tipped the boat over. I think the bears that were calling the boat to tip back then forgot that the same thing could happen to them. There were.are too many bears out there.
Sentiment crashed and all of the bears ignored what was right in front of their faces. There were too many bears and they were going to have to cover at some point, unless we were indeed reliving 2008. But like I said, back then, we didn't see the sentiment crash until the actual market crashed and never recovered.
If you don't look at what is making headlines and what is being advertised, you can easily get caught looking the wrong way. So what caught my ears today? If the spx closes below 1090, we will officially be in a bear market. At 3:15, the spx was trading at 1080. Our sentiment reading from yesterday was a whopping zero and I am pretty confident that reading wasn't not above zero when the spx was down another 18 points with only 45 minutes left in trading.
Do you think the money that moves the markets wanted to see tomorrows headlines reading "the new bear market has arrived"? That would really have investors looking to invest money with them, wouldn't it? Was there enough news out there that would have caused our system to collapse like 2008? I guess one could say that if Greece defaulted it could cause a ripple effect, but would it freeze our system? I do not think so, but it would definitely cause a shock.
But Greece hasn't defaulted-YET and they weren't going to default during the last 45 minutes of trading today. So the boyz were safe to wait for that last bear to jump on the boat that tipped it over and put a bid under the indexes..and not take them off. So in the last 45 minutes, we went from being in a new bear market to the talking heads saying "stocks are cheap again"
What once took 4-8 days for a complete mood change has now been pushed up to just 45 minutes. lol I was seeing way too many things on my timing systems (daily-60 minute and 15 minute) to buy into the we are crashing view. We started buying at The close Friday which was early, but as you can see in the e-mail below, it was small and only 1/2 a position. IWM was trading at 64ish when the e-mail was sent out.
-----Original Message-----
From: Marketspath
Sent: Friday, September 30, 2011 3:58 PM
To: Premium Members
Subject: Very small..very risky
Hi Everyone,
I am seeing too many signals here that are NOT supporting
the decline. It is as high of a risk trade as we can make-as something could
blow up over the weekend-so please keep this trade small. I am taking 1/2 iwm
October 66 calls here or TNA. Still looking for 68 or higher as a target.
Please use only 1/4 size of your normal trading position..so if 10K on a
trade..only use $2500 on this. G-
So Monday was not a fun day and I even took the 2nd 1/2 of the long side trade on Monday and pulled it off with a loss the minute I realized, I had been had. But my timing systems continued to tell me that something wasn't right about the drop and continued to tell me to buy the dips. So we did just that at the close yesterday (Monday) with a 1/2 position normal size trade. IWM was trading at 61.40 at the time of the e-mail which you can see below.
-----Original Message-----
From: Marketspath
Sent: Monday, October 03, 2011 3:52 PM
To: Premium Members
Subject: OK..Buying 1/2 here
I am going to buy 1/2 position IWM 63 October calls and
or tna. The tick chart on the daily is showing a buy signal not seen since the
launch of qe2. Things still are not lining up with this drop and we have a
clear 5 wave move down on IWM from the daily charts-with bullish divergences
and a wolfewave pattern pointing to the 72 area. There is also a channel that
IWM is at the bottom of it and if going to head to the top, has a target in the
67 area. If we finished wave (1) down, that target actually makes sense from
the 86 high.
There is a chance we are just doing a wave 4 of the wave
5 down, but we should get a bump up here and the timing systems are still
telling me to look up, not down. I am using my regular size trade for this and
will leave the 1/2 position of the smaller trade open for now. This is a little
risky, but I believe less risky than the entry from Friday. G- So we now have a 1/2 position of a normal size trade open as well as a small 1/2 size position and when I woke up this morning, I really started thinking we were indeed reliving 2008 with the futures getting smacked again. Once the markets opened, I turned to my timing system charts and saw them now screaming to fade the drop again. That is very strange, for the indexes to drop more than 10% in 4 days and my timing systems telling me the drop was to be faded (buy the dips) With a system that hasn't let us down, I took emotions off the table and waited for the first sign that a bottom for the day was in. We took the 2nd 1/2 of yesterday's entry when IWM was trading at 60.50, which you can see in the e-mail below. But as you can see in the e-mail, we had a very tight stop in place for this 2nd entry.
-----Original Message-----
From: Marketspath
Sent: Tuesday, October 04, 2011 10:12 AM
To: Premium Members
Subject: Taking 2nd 1/2 of yesterday's trade here
I am NOT sure if that was the lows or not, so I am going
to fill the 2nd 1/2 of yesterday late day long trade and place a stop at iwm
60.20 for this 1/2 of the trade. I am seeing the inverted 15 buy signal again
and IWM made it down to the support line I pointed out in last nights update.
G-
I am using the IWM October 62 calls and or TNA
There you have it. We started buying Friday with a small position, trusted the timing system and continued to buy the dips. Would it of been easier just going short. You bet it would have been. Being a bear at heart and being caught in a long trade as the markets drop, was taring my heart out. But when you have a system and the system hasn't let you down for that long, you trust it. We are now very very green on today's entry. Took yesterday's entry off with a small profit and are now green on Friday's entry.
All in all, the system has remained true, even though this was a scare. I have come a long way from being a perma anything and I believe it is paying off for our trades and keeping members on the right side, even if we have to chew a couple of finger nails for a day or so. I am confident with our timing system and trust the trades we enter. So far, it has not given me a single reason to second guess what it is telling me. This time, it was to buy the dips. Good trading. G-
|
