I determine my belief about the stock market's direction mainly from three sources:
- My analysis of major index charts;
- My analysis of individual stock charts which I consider good opportunities in either direction;
- The opinions of a handful of site which I respect (already listed here)
The trouble is, all of these sources are conflicted. Index charts show virtually no support beneath, yet they are astonishingly oversold; I have a mountain of individual stock charts whose own "bear market" has only just begun, and an equal mountain of charts which – – although not classically bullish – – certainly suggest a very strong bounce ahead; and the sites I follow have all manner of opinion, ranging from multiple sequential days of 500 point gains on the Dow to an imminent crash.
So, for the moment, all the easy money seems gone. It's no longer feasible for me to sashay over to a computer and pull a few tens of thousands of bucks out of the market. It's very, very hard to trade right now.
Looking at the SPY over the past few (astonishing) months, it would seem conceivable that there might be a tiny bit more upside Monday morning, but the overhead resistance is very substantial. To put it another way, if any kind of meaningful (that is, greater than 1-day) bounce is going to happen, the SPY must make a decisive and unapologetic push past $83. The action on the SPY from $83 to $100 represents a formidable barrier to upward movement (setting aside the fact that there seems to be no rational reason to buy stock in this market).
It's the same story with OIH. If we zoom past the $80s, maybe we're finally entering the elusive wave 4; but all recent activity suggests a rise to no higher than $77 or so and then the resumption of the plunge.
Looking at the SPY in a larger context, as I've pointed out, the rise in the late 1990s was pretty relentless, but that also means there's virtually nothing in the way of price support on the way down.
My dread fear is really simple; there's nothing conflicted about it: the market rockets higher for a few days, effectively (a) blasting me out of my shorts and puts, their profits having turned into losses and, simultaneously (b) being completely empty-handed of any long positions. My nightmare would be for any meaningful portion of my substantial (but hard-won) gains of 2008 to get nuked. I just won't stand for it. I have thus (yet again) hedged my bearish portfolio with a few large ultra ETFs and some stocks which, in the context of a strong push higher, would zoom up in value. Some of these are items like ANF and AA, which have simply gotten creamed over the past couple of months:
And others, like BAC, are at "interesting" technical levels of support:
Most stocks – – indeed, a very large percentage of those that I follow – look like AES. That is, (a) long-term bearish pattern; (b) short term "churning", suggesting an attempt to base; (c) the potential for a set-up of an incredible short opportunity, if equities in general do push higher.
I'm not usually a person who pays a lot of attention to sentiment indicators, but those I have seen recently make a strong case for the bullish argument. Just about everyone has assumed the world is about to end. With that kind of mentality, it's easy to understand how the simplest (and, frankly, irrelevant) smidgen of news, such as the candidate of Treasury Secretary, can suddenly make the market blast 500 points higher in the span of an hour. That's not the kind of windstorm I want to be caught in with a 100% bearish portfolio.
Anyway, I can't say to you if I'm feeling really bearish or really bullish. If pressed, I guess I'd say my feeling is we'll get a final plunge in the early part of this week and, at long last, can start to push higher in a big wave 4. I hope it works out that way, because this market is absolutely dying for some kind of consistency, since it has been chewing virtually all traders to pieces lately.
