Tuesday, 10 January 2012

Treacherous Tuesday.

As I mentioned in the morning, it was the third push up from the triangle and the pushes are now complete. Before today, the last seven trading days was a churn. The market was going round in circle and was making it difficult to find any direction. With today’s price action the direction of the market is becoming much clear. I will have to wait for tomorrow to decide whether I will close my short position on January 12 or 20. But either way I expect the market to go down from here. But may be one last attempt to retest today’s high will be made tomorrow.

It was just 11 point gain in SPX for the day. And I think the market will soon give back those 11 points and some more. The interesting thing to notice is how the sentiment changes. Before the year end, when I was talking about Santa Rally, there was general skepticism around. Not many believe that SPX will come close to 1300. And yet today, there is talk of SPX crossing 1400!

But I think it will be 1240 before 1400. The picture will be clear at close tomorrow. The pivot point tonight is whether AUD can hold 1.0260. As per CBOE, the equity put call ratio today was 0.65, indicating retailers are ultra bullish and index put call ratio was 1.40, meaning big guns have purchased more puts and are hedging for a downturn. In the mean time various divergences are cropping up all over the place. $NYHGH:$NYLOW vs. SPX shows a huge divergence.
(Hat tip to Alex. Grant)

I am not a TA guy so I have problem finding positives and room for more upside from the current charts. I have difficulty in believing that the Q4 results will be great but that would not stop the Banksters to jam up the market.  I quote the following from Phil Davis;” This is, of course, a gold mine for the Banksters, who KNOW they are going to jack up the Futures so they just wait for a nice dip, buy from the Retailers (using the money we lend them for free through the Fed) and then they jack up the Futures and dump it on the suckers who chase the rally in the morning.  It's nothing more than a 3-Card Monty game where EVERYONE is in on the scam except the mark – and that mark is the retail investor!  “

But it is not our job to question the market. We just want to be the right side of it. We just don’t want to be fooled again and again. We do not want to chase the bus or fall for the trap. If the Gods of the markets want SPX to be at 1400, we have no quarrel with that and we will be happy to accept it. Let others scream and shout how impossible and wrong it is.  

On the other side, Elliot Wave guys are going all over the place. Their Guru is calling today’s move as end of cycle 2 and asking everyone to be super short with a stop loss of 1360 in SPX. (What a joke, another 5 % up). Some other wave guys who collect $100 per month are calling it wave 5.  I do not understand this theory of major wave, minor wave, infant wave even stillborn wave  and ignorant of this wonderful magical science. So I would rather stick with my own system which says not to worry.

My problem is I will be travelling to Asia on business tour from January 13 and will not be here in North America for about a week. And I do not want to keep open positions unattended.  So for me, it is very crucial to find out the direction of the market. I am sure about the correction but will have to get a hang on the magnitude of it. So, for me, tomorrow is very crucial.

Thank you for visiting http://bbfinance.blogspot.com/ and following me in Twitter. (@BBFinanceblog) Hope my trades will be useful to you and they will be profitable like they have been in the past. Please send your comments and suggestions and retweet / share it with your friends and circle.


  1. will do.. averaged down on some short ETF's today. maybe one more time in the AM if called for.
    Hope we seen the top
    thanks again

  2. Have a nice trip!

  3. Damn you got balls; I would never say anything against those Elliot Wave guys. But it's not like my comments are even enabled so whatever.

    When we talk about corrections, we are never wrong, just early LOL. Have fun in Asia!

  4. Mike, there will be correction but we have not seen the end of the bull phase.
    So we should get out of short position at the right time, which I would hopefully know tomorrow.
    Thanks guys. I am just not comfortable going on a trip with open positions.
    Anyway,I hope I will be able to do regular posts.

  5. You should give credit to Alexander for posting his charts !

  6. My Apologies. I did in Slope. Making amends here.Thanks for pointing it out.

  7. I wish you safe travels. Thanks for the post. TexEx

  8. WoF, what is your methodology for spotting cycle tops? Statistical probability or do you use any indicators?


  9. Your read on the market and the info you share is very valuable. Thanks. I traveled to Japan today and added to my shorts just before takeoff...all is good. Safe travel.


  10. Steve, TexEx, thanks. Safe travel to you as well Steve.
    Jure,for me, spotting tops & bottoms are more intuitive than an exact science. I use many parameters, some TA, some non traditional methods. Difficult to tell one particular thing.

  11. To world of finance....don't ever change,love your stuff