SPX top at 1150-1250 at most, then im going short

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Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
SPX top at 1150-1250 at most, then im going short

This rally can continue until the 1100's and 1200's, basically filling a cup on the SPX. I have considered going short at 950, 1000, and 1050 but every time the momentum scared me and thank goodness that it did.

 

Bear market rallies do come to an end and in this environment this IS a bear market rally. The economy is a mess and will continue to falter as credit contraction in the household sector will continue. Moreover, more layoffs from local and state governments will continue including small business which is getting hammered. Just as my dad he can tell you about his worst month ever in 30 years of business this September.

 

As a trader i have escaped the worst short squeeze in US history. Now its time to take the contrarian approach and go against the mainstream, just as the smart money went long in March of 09.

Again, if the rally continues until the fall,  which i see that it will probably do so, im going short. This rally may last a year as wall street will celebrate the year anniversary on March 6, 2010. 2X (short) SPX is my preffered shorting vehicle as i cant get a call to buy back the shares by straight shorting. Also, put options expire and frankly scare the hell out of me. The most approriate chart for this market is the Nikkei 225. The N225 has insane rallies and drop offs. We can expect something similar here.

Oh, and with those who fear rampant inflation driving up the market higher, there is too much credit destruction taking place for that to occur. The federal reserve flow of funds shows this happening. Credit will continue to evaporate as job losses continue. My buddy is a bankruptcy lawyer and he personally signs off $500,000 worth of credit card debt everyday. Just him alone every month helps destroy 12.5 million worth of credit every month. Imagine whats really taking place out there.

We will look insane shorting in a few months, but when we do, we will be rewarded greatly.

 

Til next time

The hibernating bear

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: SPX top at 1150-1250 at most, then im going short

Good Luck BMT, I hope you succeed. 

I relinquished management of my capital a few months ago, so I'm not "in the game" any longer. If I was, I would be shorting the market indexes with you. I do still have a significant cash allocation remaining however, so I could still indirectly profit from a market decline.

Today's rally after the Fed's conflab looked like it might lead to a good short entry, but it quickly reversed. I've made some good money in the past by fading Fed inspired rallies, but I'm not sure this one qualifies.

For the sake of speculation, I'm picking DOW 9,999 (+/- 10 points) as the top.

All the best....Jeff

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Did The Market Just Protest?

BMT, just came across this decent bearish argument put forth at zerohedge:

Did The Market Just Protest

That 88 week moving average is a b**ch whether your a bull or a bear.

FOMC day=Market Turn date?

Like I stated in the previous post, the day or two after a FOMC day is historically a good time to short, at least in my experience. Too soon to tell on this one, but you might want to put of that hibernation for a few weeks.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2606
Re: SPX top at 1150-1250 at most, then im going short

JAG -

Today was exceptionally nice since we were in March 2010 OEX and DIA puts that were already profitable.  Kind of like being short except you don't have to own the underlying stock to buy and sell associated options.  Just pay attention to time decay, don't get greedy with the profit and pull the exit trigger as soon as a reversal backs up onto your principal (if not sooner).

The meltdown may now occur.

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
Re: SPX top at 1150-1250 at most, then im going short

I dont really get fazed by daily movements in the markets, i look at investor sentiment more. Technical indicators dont really help swing traders like myself very much. With that said, i would like to point out that we are in a truly unprecedented market environment. Sentiment is just as volatile as the indexes. We went from jubilee, to despair, now to frenzy buying. It wont take much for the sentiment to turn negative. If anything, the higher the market goes, the faster it will come down. 1250 would be a blessing as it would give 401k holders a chance to get out, and sharks like us to enjoy the ride down.

Everyone, and I mean EVERYONE knows in their heart of hearts that this rally is a HUUUGEEE bounce off the bottom. The market is massively overbought at the present moment. Look at JPM, 142 PE ratio!! Thats just sick. WFC, PE of 36. GS PE 39. BAC 39. The madness continues. Nevertheless, many speculators are waiting to push that SELL button.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2606
Re: SPX top at 1150-1250 at most, then im going short

BMT -

Interesting (but not surprising) that we look at different things and both work - I could care less about EPS, P/E or who the CEO or Board members are or whether or not the company is 'good' or has a good product or service.  I only care about stock price movement.  Once the trend is established and technical indicators confirm the expected movement direction, that's the entry point.  Take a chunk of the movement and be gone. 

Of course it's a bit more complex a trading approach than that - it took years of practice on paper to hone the techniques - but it works.  It also cuts down the noise I 'have' to listen to from the so called experts to zero.

Cat is even better at it than I am, I just hope she keeps me around.

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