Pump & Dump Deluxe

I think the evil Pump & Dump brothers escaped from their cage again this morning and created all kinds of havoc:

What I like about this drop is that it continues beyond the usual oversold snap back point. I look at various indicators that measure extremes in very short term momentum fairly well. In the past few weeks usually a sell off or buying frenzy ensued when those extremes where touched. Today we have pushed beyond that obligatory u-turn point which might be a precursor signaling an end to this 2 month buying frenzy.

We touched my trusted diagonal at the open and turned around immediately. I don’t have a single doubt that the rest of the day will bestow us with the regularly scheduled chop fest but at some point we’re going to pick a direction. Orange means we are now in Minor 4 and will probably complete Intermediate (C) in the 950 region. Blue suggests that we completed (C) this morning and are now already in (X) or – much less likely – in {3}. Again, for you rats who didn’t see last night’s update – the Primary {3} scenario has a very low probability at this point as we have only spent a bit over 60 days in Primary {2} compared with over 500 days in Primary {1}.

The uncle point for Soilent Blue will be the 900 mark. Not because of a fib or because of some EWT rule – it’s purely psychological and expect the mouth breathers to make a stand at their beloved 9xx mark.

Disclosure – due to the new short term count I dumped my index puts around 915 with tiny profits. I expect us to either churn sideways or even attempt yet one last rally in the coming hours. I will most likely use those to grab a small amount of May puts, a larger amount of Junes and mabye some Fujisan inspired spreads (feel free to chime in hana).

UPDATE 11:25am EDT: Fujisan points out what may just turn out to be today’s most important chart:

I wont back up the truck here but will wait for a retest of this diagonal.

UPDATE 1:01pm EDT: While we wait for the sideways grind to break here’s a nice quote from Bill Cara:

“…in a time of financial crisis, bankers will do what any cornered animal will do to survive. They will do whatever it takes, including illegal insider trading, illegal naked shorting, front-running trades, stimulating trades by rumor-mongering, pump and dump, misrepresenting their financial condition, obfuscation of important information, invading government to attack the Treasury, and a host of other no-good tricks of their trade.

“It was scandalous that, during the present crisis, the leading bankers were (and still are): (i) acquiring assets without any understanding of the extent of the liabilities behind those assets (ii) supporting their peer group bankers with higher stock ratings (iii) hyping real-estate markets and companies they knew were and are in trouble (iv) turning their clients into the enemy by trading against them, as the hedge funds have seen (v) putting their key people into the most powerful positions in the Treasury Department, while covering up the greatest theft of all time, and (vi) too many other bad practices to list here.

“The smell test, not the stress test, needs to be applied today. Market stability will return when the people smell fresh air. “

Okay, I’m suddenly seeing some long ass candles to the downside. Could it be that those GS prop desk XBox boys have now switched sides and joined the bears? Time to run my ‘overbought candidates’ script in ShortSqueeze… geee – think it’ll be a long list? 😉