I was thumbing through my Tim's Trading Tome (volume 1……..) and I noticed a printout of this posting from Karl Denninger back early this year. He opines that although he originally believed the S&P would push its way much higher before resuming the tumble, he had changed his mind and decided the S&P would be heading toward 210. Your first instinct was the correct one, Karl.
I made my own "bold prediction" that the S&P would be heading toward 950 (OK, that isn't as bold as calling for 210……….) in the near future, and I still believe that. I hope I am not making too much of my 1937-1942 analog, but that is the market direction which makes the most sense to me, and it calls for something quite different than what a lot of bears are expecting: whereas they are looking for a repeat of last autumn (a terrifying plunge into the abyss), I am anticipating – as I've bored everyone to tears repeating before – a long, slogging, multi-year grind down lower than bottoms not-that-far-beneath where we bottomed in March. No fireworks; no explosions. Just an inexorable, slow grind downward. My kinda market.
Last week was a pivotal one for me. The market changed from indecipherable madness to sensible and predictable. From mid-Wednesday forward, I felt like my old self again – – comfortable placing trades, taking profits, and hanging on to the endless flow of thoughts from the Slope stream. And it's not because we had some mega-crash that saved the day; the Dow was down only 1.15% this week, for Pete's sake – but I was able to make a lot of cash even with that small move downward, and it made up for weeks of pain.
For myself, hanging out in the Slope comment section and staying on top of things is proving to be invaluable. Over the course of time, my brain builds a matrix of coefficients ranging from -1 to +1 for all the regulars on Slope. If one pays attention, they learn whom to completely fade (-1) and whose words are gospel (+1). Of course, all of us fall somewhere in between. But the hive-mind in Slope – – and the sheer quality of the comments and articles shared – – is a miracle, to me, and has become essential to my good trading.
The next two-three weeks are going to prove incredibly interesting and important. Have we made a top, or is another top in store? I'm leaning toward the latter. Giving the bulls one more lollipop in the form of 10,000+ on the Dow would finish setting the trap. I have allocated my positions to take advantage of the anticipated last, desperate lunge higher – – – my IRA account is 100% long now (all lottery plays, and a big OIH position) and I've got a handful of large long positions in my trust account. My options account remains strictly in puts, and I'll augment those positions if/when we climb higher.
Thanks for swinging by, and I'll probably do a post on Sunday.