Low Low Low Low Low…
I’ve been saving this video for a special day – crank it up and enjoy it while you count the insane amount of money you’ve made today – this one goes out to you, Tim Knight!
I’ll get right to business, because frankly I’m completely exhausted and I also don’t want to bore you with breadth stats and other technical mumbo-jumbo. The market completely tanked today, we all know that. So, let’s solely focus on the one question on our mind: What will happen next?
The boys over at the PPT (and the market) weren’t prepared for the curve ball (i.e. no-confidence vote) Congress sent them this morning and wound up taking the ball right where you feel it most. Ouch – that oughta hurt. So, what’s next? Don’t expect Hanky Panky and Helicopter Ben to take this abuse laying down – can you say interest rate cuts? Which frankly, wouldn’t make much of a difference technically as sources tell me that the true fed funds rate behind the curtain has already been around 1.25% – 1.75% for about a week now. But it would make a statement and I’m sure the PPT feels compelled to do ‘something’ as the alternative is to embrace the abyss which I have been predicting for months now.
So, my trusted chart above shows the variations we can come to expect going forward. Frankly, I intently hope for a rate cut because I’m sitting on a mountain of cash which I would like to put to work before wave 3 of 3 runs out. But there’s no way I’m buying a massive amount of puts while Mr. VIX is getting comfortable around the 45 mark – too much risk frankly. I also think that the market is shot to hell right now, but obviously that doesn’t mean much in a crash scenario. A lot can happen overnight, as our friends over at the Feds, the ECB, the BOJ, the Swiss Bank, etc. are surely sticking their ugly heads together to come up with yet another scheme to save their smelly behinds. We will just have to wait and see.
I posted this chart earlier today, and we have dropped to 10365 since, however the point I was trying to make remains. We are pushing through the lower boundary of a channel which has been the trigger zone for PPT panic action, that’s why I call it the PPTPL. Again, another indicator that ‘something’ might happen over night. It was also the reason I went completely into cash before the market closed. Tough choice to make, but we all know what happened on the evening of September 18.
There is the possiblity that this market doesn’t look back and keeps on dropping, due to the lack of short sellers taking profits. Talking about a dumb idea backfiring on the market – I hope this lesson will be remembered on Oct 2nd when this hare brained rule finally expires.
I do have some good news for you bearish evildoers this evening. It seems that the ‘trannies’ finally broke their trendline and are pushing towards those January lows. A close beneath those lows is needed in order to confirm the bear market signal that was triggered in November. Not that anyone in their right mind would doubt the validity of this bear market at this stage – maybe Beanie would. Just kidding Beanie – we all love you – hope you didn’t lose your pension today.
Incidentally, this is something I posted a few weeks ago about the DJ Transportation Index:
The popular belief is that the Dow Tranny Average’s June all-time high and relative strength vs. the DJIA’s October high is a bullish market signal. This is not necessarily the case. At 259 weeks, the ride above its 200-week moving average is longer than all but four similar trips. Those episodes culminated in 1929, 1957, 1987, and 2000. The closest parallel to today is 1929, when the Transports remained relatively strong versus the Industrials. In the fall of 1929, the Transports peaked with the Industrials on Sept. 3rd, but declined only 32.6% to Nov., quite a bit less than the Dow‘s 49% crash in the same period. A counter-trend rally in both indexes lasted through April 1930. But then the Transports’ break of their 200-week MA in May confirmed an across-the-board stock decline in which they led the charge lower, falling 93% to a 1932 bottom, the largest decline among the Dow averages.. The Industrials erased ‘only’ 86% over the same span. The Transports‘ months-long defiance of the downtrend now many signal an even more extreme downside fate soon.
So, I’m open to any transportation related plays you had your eyes on – time to give back you blood sucking leeches!
So, as the market relinquished 777 points today, Gold gained a whopping 30 points. Say what? Seriously, I’m not sure what to make of Gold right now. Obviously, the bullish trend is a non-brainer but we should have seen a 60-80 point rally at the very least. Something fishy is going on here and I think that some serious amount of TOMO/POMO repos are being used to put a lid on gold. After all, the Dollar actually surged today and certain people continue to do their very best to discredit Gold as a safe haven from a crashing market, plus perhaps even an alternative currency in those dire times. Frankly, I would be very careful with Gold long positions at this point – we should have seen Gold go bananas today and this tape is nothing but a wimper. I’m still bullish Gold, but don’t see a good entry here – if you feel adventurous I would caution you to at least keep your position size small.
These are exciting times for the bears, and many of us banked some mighty coin today. However, for the record – things didn’t work out the way I hoped. I would have preferred a rally before such a massive drop as most of us never had a chance to seriously load up on massive puts or short positions. At some point I expect to get a violent bounce back, which would be typical for a wave 3. If that happens, you must not hesitate and immediately load up on puts, the long term trend continues to be towards the downside. You know what to do – keep it clean and don’t get greedy or emotional – both will kill you in this market.