“Behind every Stock Index there’s a
dragon waiting to be unleashed!”
Trading the stock indices is like having a pet dragon;
when you attempt to put it on a “leash”, it gets pissed off and does what it
wants anyway. So goes the current state of the U.S. markets, where everybody
and there brother is bearish, pumping out articles and posts of “imminent
crashes”, doom & gloom reports, fake earnings, fake accounting, and only
the “dumbest of the dumb” would be long the indices.
Then you look at the prices and realize that the
Dow30, at roughly 20950, is about 1% and change from all time record highs, set
on March 1, 2017. “Ok pet dragon, I want
you to come over here and go this way … No? … I said go this way … wait, what?
… why are you dragging me the other way”? Now, this doesn’t mean prices
can’t go down … she’s a fickle pet … it simply means the “big one” isn’t
anywhere in sight. “Go ahead, be the next
brave soul on “the street” to sell everything, go short, buck the FED planners,
take on the corporate buyback schemes so much in vogue in corporate America,
and then tackle the “Plunge Protection Team” IF prices start falling; at some
point you have to get out, and when you do, your pet dragon will be there to
inflict more pain on you than you can imagine. And if you don’t believe me, go
ask the “wizards” who sold with abandon on the night of President Trump’s
election victory; ask them how that worked out”.
Again today, for the umpteenth billionth time, ZH has
got a slew of articles pointing the way to financial Armageddon just around the
corner; only problem is the same guys have been saying this for years, decades,
most likely before most of you were born. Sure, at some point in the future
there will be a wicked bear market in the stock indices … it comes when it comes,
and no amount of “economic and/or financial chart porn” is gonna change that.
Been there, done that, seen that, heard that … and all it ever does is go up!
So unless something happens that threatens the further
ability of the U.S. economy to grow, corporate earnings to grow, and changes
the “mindset” of the people investing, those old enough to remember will simply
hold through the fundamental rough patches and wait it out … they ain’t gonna
sell unless they are convinced the “system” has been threatened. In fact, they
will continue to buy dips … “alas, the
BTFD folks who are derided every day by “smart” money, but whose track record
proves they are right, up & until something proves them wrong.” … add
money to their 401(k)’s, buy more ETF’s and index funds, and treat stocks like
Apple & Amazon like religions that can’t ever be abandoned. And it will
drive many traders to a rubber room, cuz they can’t take the perceived
stupidity!
In a normal world, if I was a disinterested party in
the stock indices, I’d make my case with facts at my disposal and then rest;
but that’s NOT what we see on forums like ZH, where bearish articles have taken
on a zeal & righteousness bordering on “hyper inflated paranoia” by those
who either are short or have a vested interest in seeing prices go down. “Nothing ever changes; talking heads gotta
talk, and analysts got to promote their firm’s recommendations. Nobody at the
table brings clean hands.” Keep this in mind next time you hear the sky is
falling.
Turning to today’s market … again very quiet overnight
in Asia & Europe … very small ranges in everything traded … today starts
the FED’s May meeting, which culminates in an interest rate decision tomorrow
at 2 P.M. EDST, and then on Friday we get the most important jobs number evahhhh from the Department of Unicorns
& Fairy Tales. ADP also reports on private sector employment tomorrow
morning @ 8:15 EDST as well, with the last few months’ numbers moving the
markets substantially. Maybe we’re on “hold” until then … you know the drill … “Hurry up & wait”… we’ll see, but
again, we continue to hang up here in the SP500 between 2385 – 2395, and are
within easy striking distance of breaking through 2400 – 2402; if that gives
way it’s gonna be a complete clusterfark on the way up.
Here at the New York open, some light buying interest
… that gives way to more “loose lips sink ships” talk from President Trump,
which promptly sees the Dow30 go down 20 points in under a minute cuz “we need
a good gov’t shutdown in September to fix this mess” [meaning the budget]. “May you live in interesting times”!
New low for the day saw a bullish engulfing pattern on
the M1; after 9 minutes it’s unchanged, but range for the day is still way to
low to pick bottoms this close to the open aqua line. SP500 is stubbornly
hanging onto the 2390 handle, but really needs to see sub 2385 to flush out
sell stops; that more than likely will be a good long point.
And @ 14:44 it’s one of those, “hey, the Dukes know something … let’s get in on this”! Only the
Dukes don’t know squat, cuz that 20 point Dow30 rally in 2 minutes out of
nowhere, went exactly nowhere, and 30 minutes later the market is right back
from where it started [drip, drip, drip right back down]… I can’t begin to
describe how pitiful trading conditions have become … and it ain’t only in the
stock indices … everything traded across the board just sitting; doing nothing
with ranges for the day you can barely see on a daily chart … I realize we got
ADP employment tomorrow morning, the FED in the afternoon at 2 P.M., and NFP on
Friday, but this is ridiculous.
Well, about time; somebody somewhere got an opinion
and shoved the Dow30 through the New
York open, and that produced my first trade of the
day. Of course, once it got through there it couldn’t do “Mr. Jack Squat”, so I
liquidated on a failure to break to a new high; directly below the trade.
Yesterday, I was having problems with my image copy
software “Snagit”; it would let me copy my chart screens, but it wouldn’t let
me save it to file as a jpeg or png file. So, last night after my tubby, and me
and the dog got settled in the study while the Mrs. watched Caribbean soap
operas on TV [don’t go there, Ok?], I reinstalled “Snagit” and today it works
fine. So, problem solved.
I have said before, “doji’s”, when they start showing
up on the daily charts, have a nasty habit of clustering; meaning of course
multiple days in a row or something like 3 out of 4. Once again today, we get
the “Flying Wedge of Death” with Doji action; open, go down, go up to open, go
make a new low, and off of that new low rocket straight up through the open and
… do absolutely nothing but drift and then start the slow move lower. In case
you were wondering, got caught in this crap yesterday, and seeing the market
fail up at the high, I didn’t hesitate in liquidating.
In the last 27 years, going back to 1990, we’ve only
seen the VIX close below 10 three times; yesterday it closed at 10.11, and I’m
betting if things don’t improve by the close, we’ll see a close with a “9”
handle; that’s how bad things have
gotten. One other thing caught my eye this morning; if you strip out the
French election open on Sunday night and the following Tuesday before the open
melt up, and the Easter Monday quasi Holiday melt up, the Dow30 has only been higher 4 times [out of 21 market days] in the
New York session from the New York open. And only one of those days … exactly one … was there any gain of
significance; the rest of the time it’s been grudgingly lower with very sharp
rallies that fizzle out as fast as they start.
Which brings me to my next point; namely, for those of
you who haven’t been around this biz very long [less than 10 years], bear
markets produce some of the strongest bull market days ever seen in stock
indices market history. You’ll have completely insane melt ups that will
convince 99.99% of all traders that the “bear” is dead and a new bull market is
beginning; not the case, cuz what happens after that blow off day up is the
market starts to drift lower and within a week or two completely takes out the
range of that melt up day and shreds it to pieces. This produces another wave
of selling, and the process rinses & repeats, and starts over until the
end.
Bull markets, on the other hand usually don’t melt up;
instead it’s a steady climb up the “wall of worry”, until shorts can’t take it
anymore and throw in the proverbial towel and the market spurts up. It’s that
slower action that gives the shorts “hope” to stay in losing positions that
makes it so tough to stick with long positions.
Now, take a look at what’s been happening in the indices
lately, and you tell me; “what kind of
action are we seeing now”? To me, it looks very much like bear market
action in the Dow30 over the last month or so; and yet, here we are sitting
with the VIX in single digits and the market within about 1% of its all time
high. And if you’re wondering, this is why a substantial proportion of the
investors out there are confused as hell and why the action lately has a lot of
them dumbfounded. “Speed of light trading … then
crickets”! isn’t something anybody figured could happen, and adjusting to
this has been rough for many investors; especially hedge funds, who continue to
go out of business faster than Pols cash campaign donation checks.
Half hour from the close … well, here we are again …
another day of “WTF was that”? imitation
version of a trading day. Unless you were watching this in real time, it’s hard
for me to explain how pathetic this day was; hopefully with ADP & the FED
tomorrow, the market can get a healthy range back, and along with it some
trades that matter and produce some good profits. We’ll see what happens
tomorrow.
PAMM/MAM spreadsheet directly below.
Ok, time to hit the beach … I’m outta here … until
tomorrow.
Have a great day everybody!
-vegas
OUR ‘TURNKEY FOREX’
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