Tuesday 16 October 2012

Terrific Tuesday.

Last Tuesday was “Terrifying Tuesday” and this one is “Terrific Tuesday”. Of course I am talking from the point of view of the bulls. It is no fun investing or trading in a bear market. Bear markets are treacherous and difficult to make money. Not many can short the market, either because they do not know how or they do not have the mental make-up to short. Short selling is not for mom and pop. The only vehicles available in the market are the leveraged short ETF which loses value over time. All in all, bear market sucks! But we will have to play with the hands that we are dealt.

I keep writing that while the longer term prospect of the market is dim, let’s not get caught up in macro economic analysis and bear talk while the market is going up. My favourite conspiracy theory is that the “Rant blog” which screams of immediate demise of the western civilization from morning till night, is actually a mole of GS and other TBTF banks. Planted to create a fear psychosis amongst the retail, so that retail always sell cheap.

When the bear will strike again, it will come un-announced and in the height of euphoria. When the opportunity to short will present itself, we will find that we have run out of ammunition because we have fired them in the sky.

The last two days have changed the storyline of last week. It never amazes me to see how a 50 point sell can make every one think that the end is here. After all, it is just cycle topping or bottoming. Today Pandit of Citi resigned suddenly without any explanation and the financials barely budged. If the cycle was down, there would have been a sell-off of all bank stocks. Did not happen today! Since 2009, when Bernanke started to pump liquidity in the market, it has become impossible to trade based on TA alone, leave alone investing. And now we have unlimited liquidity. What will cause the fall and return of the bear will be something which is beyond the control of Bernanke. The liquidity will find home in the unlikely places and will have un- intended consequences, like increase in the price of gold and silver and run on the bonds.

Yesterday I had given out the market outline as I see it. I also outlined the broader outlook in the weekly report. So far things are as per expectations. I think tomorrow  and day after we will see consolidation and/or a minor correction and the up-trend will resume again thereafter. Already I am hearing renewed call of 1500+. But the market has run way ahead if it-self. In two days it reversed the damages done in earlier four days.  The earlier high is not very far. If SPX is able to close above 1470 before 25th October , then it is very likely that we will see 1500 -1550 by mid-November. You see, unless we have tested the all time we cannot say that end is near.

Only a quarterly chart, it seems that 1550 is a reasonable target.

I am making some changes in the blog. As a good number of our readers do short term trading and active in options, I plan to start a separate and dedicated blog for options.( http://bboption.blogspot.com/)  Please, options are not for everyone and don’t get carried away by the stories of easy and quick money. Most of the time, it is a losing proposition and only the sellers of premium make money. They are our beloved TBTF banks. But if folks want it, folks will have it. I will find good plays every day from different places and experts and put it out in the dedicated option blog. It will not be my own play. I would rather have the best ideas from the real experts.

I also plan to do a quick post in the morning to update you about the market as I see it. The focus of the morning post will be more short term while the focus of the evening post will be longer term. That way the readers will have more value and incentives to come back and check the blog more often.

Only, I am yet to see the results . Since last Friday things are little down and today we have another Presidential debate. Last debate was bad for the blog. I am not sure how this one will be. So my request to you dear readers: please support the blog. Your help and support is absolutely critical to keep the blog running. Do remember to disable Adblock.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls.  And if time permits visit and comment on http://artofbetterlife.blogspot.com/


  1. BB, very much looking forward to your options blog! just wondering how you plan to manage all that content....! thank you!

  2. I am not going back to work till Jan. So kind of unemployed and have some time to spare.
    That's why ask for support:)
    Thanks my friend. Hope you will like it.

  3. I disabled adblock on my google reader and this site as well. Thanks for this blog. It's a must-read every day for me.

    1. Thanks D. Adblock is blog killer. And the funny part is the markers of Adblock are asking for donations from people!

  4. BB - I have a questions on these trend lines connecting peaks on the time scale of many years - why would anyone expect them to work? On such long time frames inflation should play a role - i.e. the 1500 level a decade ago and the 1500 in the near future have nothing in common. Or is it all about psychology ?

    1. Only reasonable explanation is that for some reason trend lines hold. No body knows why but I think it is mass traders pyschology.