The S.A.D. Indicator

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They say that no one rings a bell at the top of a market. That isn't necessarily true.

In the basement of Slope Labs, I have discovered a vitally important new market metric called the S.A.D. indicator, which stands for Snark And Despair. The mathematical operators and relationships between the components are proprietary, but it is based upon:

  • The quantity of nasty comments and put-downs on the blog (or on other blogs about this one);
  • The sudden re-appearance of JakeGint, who was mysteriously and utterly absent when I was raking in cash but sees fit to burst back onto Slope to chortle when times are tough;
  • A barrage of emails from anguished traders who are getting killed by the fraudulent and deceitful mayhem of the U.S. government's printing presses;
  • The barrage of emails that this "proptrader" clown has been sending me packed with hateful images and text, delighted at the mayhem in the markets.

I have been doing this long enough to not only take it in stride but to consider it a helpful revelation as to where things stand in the market.

So on a scale of 1 to 10, the S.A.D. hit a 9 recently, and today's turnaround confirms its efficacy. I only hope it never reaches a 10; I don't think I could stomach that much bile.

Now, today's action was very, very, very significant from a psychological standpoint. Let's assume for a minute those bullish bastards got their way and the market closed at, say, 10,010 and there were smiles all around. It would simply affirm:

  • No matter what hare-brained insanity the government engages in, the investing masses will continue to bid equities up;
  • There is always a bid under the market;
  • It would assure the idiots in the U.S. Government that they can always just keep puking trillions of dollars of money that will never be repaid at the world with absolute impunity.

Instead, we got the best of both worlds. The FOMC whored itself, as everyone expected, and the bulls got into a lather and bid things up and gorged themselves on /ES at 1075+. Then, right out of the blue, the floor disappeared, and suddenly a plethora of bulls found themselves with something they had forgotten existed: Losses.

Good.

So now we've got a bunch of bulltards underwater on their positions. Isn't very comfortable, is it, ladies? And you've got a huge mass of activity between 1065 and 1070, which means that if we bid up to that level again, the bulls will be squealing and tittering and getting the hell of those positions as fast as they can in order to ameliorate their losses.

Does this mean the top is absolutely in? No. But to my way of thinking, it increases the odds of a top being in from about 5% to about 25%. The disappointment that the bulls must be feeling today has got to sting, since they got accustomed to free money over the past seven months. That is going to introduce a skosh of worry which was absolutely absent before today.

The Emperor Has No Clothes, and we're about the only ones who recognize it. Today's action isn't a game changer, but it's a very positive sign. At this point, additional good signs would be the @ESZ9 breaking:

  • 1051.50
  • 1035
  • 986.50

If we get some serious selling, I think we will slow down and turn around somewhere in the high 900s – I can't see us getting below my "bold prediction" of 950 any time soon – but if indeed we do slosh our way down there in the coming few weeks, I am highly confident the bears will have regained control, and we can play off a series of lower highs and lower lows.

Thank God.

So that's it from me. I spent the first half of my day worrying about and dealing with FOMC madness (which turned out great) and the second half of my day making my network into a Robust Network With Wonder-Twin Powers. I'm off to read my kids their bedtime stories. Good night.

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