Monday 9 April 2012

What's Next?

While it is always possible that we continue to go down from here, rarely the bear market starts on bad news. On the contrary, the top is always reached on euphoria. Let’s factor that into consideration.

Everyone is expecting a pull back now. Isn’t it wonderful to watch how quickly the sentiments turn sour? No longer we hear talks of SPX going upto 1550. Now it is SPX going to 1250. And if making money in stock market was that easy, we will all be rich and retired.

My cycles continue to point to the top around April Op-Ex.  And I continue to get the fall off the cliff timing around May. That does not mean we will continue to go up. More likely, we will chop around 1375-1450 level for a while.  Between now and April Op-Ex, there is still a possibility that we will go up.

Today’s gap down was expected. But the market recovered quite a bit barring the last hour sell-off.  Today was the 4th consecutive red day and VIX closed outside the upper BB 3rd standard deviation. If past patterns are any guide, we may have topped here in VIX short term.
And McClellan Oscillator is quite negative as well.

So further severe sell-off from this point is little difficult.

On the weekend report, I had mentioned the chart when SPX is down 4 days in a row. And almost in all cases it has been followed by a short term bounce.

However, this time is not quite like January or February. The weakness in the market is evident. The top is close by. The sell signal is almost there. But there is no confirmed sell signal yet. It is said that once bitten, twice shy. So I am waiting for confirmed trend change. Now may not be the time to be cute.

Thank you for reading . I look forward to hear your views and comments.


  1. Obviously it's not cooked yet - Apple casino still has doors wide open. Wait till they announce "last bets" and people will rush to half-closed door.

  2. Thanks for your daily comment BB - I also believe chances are to see SPX move higher from here on, at least for this week.

    You seem to use the 20 day MA for calculating the Bollinger Bands. Did you played around with this and is 20 what you usually use? Is there any book/paper you would recommend on trading with BB? Thanks!

    1. Hi Ringo,
      I am trying to change my approach to the stock market as going forward I will not be able to spend too much time monitoring the market. So the focus now will be to find dominant trends and just follow the trend. May be trade 3/4 times in a year.
      When the market is choppy, I would like to stay out. Lets see how this works out.

  3. Bought TNA today 63 and change. Will buy more tomorrow.