Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Trading Around Volatility Transitions

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Back in April the market experienced a similar sell off for 63 points. What happened after the initial major down day was a few days of very large gaps (10pts and greater), before the market settled down and eventually resumed the up trend. Also in late February the markets went through a similar increase in volatility before stabilizing and continuing to the upside.

Ultimately there was shock from Bernanke’s comments about toning down QE and last night the Nikkei made a splash of its own. Which has put the market into a state of increased volatility and uncertainty in the short term. Ultimately there are two scenarios likely to unfold; the market remaining in a state of relatively high volatility, leading into a down trend. Or the market will stabilize and slowly revert to historically lower levels of volatility, possibly leading to further upside. Either way, we can expect a large trading range to develop over the coming days with plenty of opportunities to be both long and short.

My expectation today is for a gap size of roughly 15pts, which puts the gap fill below a 40% probability of filling. Typically expansion leads to contraction so I wouldn’t expect much today. I am going to sit today out, see how the market behaves around already established key levels and then proceed from there.

Over Loved, Over Emotional, Over Bullish

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We have a bunch of economic data on tap for the market to get emotional over. Jerk to the left, jerk to the right; as if any one period’s data is anything other than a reason to game a market running on pure momentum.

And then we have Huey, Dooey, Louie and even a couple more popping out to dump even more signals on the market as we go full frontal Jawbone today: (more…)

Sentimental Journey

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Well, I’m going to get some work done this evening, but I wanted to sign off with an intriguing chart from over at Elliott Wave. It shows the most recent sentiment figures for the stock market. I’ve never seen optimism like this – at least not since late 1999. All the bears are either dead or – – like me – – bleeding and screaming in pain. If you think this a dynamite time to gobble up long positions, I won’t stand in your way. See you tomorrow, where another all-time high is sure to greet us.

0508-sentiment

On a Dime

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My goodness, the sentiment around these parts changes in a big hurry! Yesterday the bulls became mimes (although they were not dressed as one; that’s strictly my department). Today they’re crowing, smirking, and pointing.

Looking at the trend of the IWM, I really don’t see what all the high-fives are about. People want to keep buying the dips? Be my guest. I’m shorting into strength. It is completely understandable why people would think buying every dip makes sense; they’ve been deliberately conditioned to do so. Sort of like lab rats.

0502-IWM

The Bland Leading the Blind

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I am, more than ever, vox clamantis in deserto.

The Jim Cramers of the world are saying two things now: (a) buy, buy, buy; (b) we all know this is going to end badly, but you might as well make money now.

Part (a) they've said all along. After the market collapsed in 2008, and the Cramers of the world all looked like completely inept assholes, they realized they needed some insurance. So they added (b). This way, whether the market has topped out today, or it tops out three years from now, they can always jab their chubby little fingers at the past and say, "See? See? I told you this would end badly! I told you so!"

You can't have it both ways. You are either buying, selling, or on the sidelines. The Cramers and Roubinis and CNBCs and USA Todays of the world are saying "buy." And that is what they need to defend in the months and years to come. As for myself, chart after chart after chart tells me that anyone buying equities these days is utterly oblivious to history and, for the eight billionth instance, believes that this time it really is different.

0312-SPX