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Yesterday's Market: Advantage, Bulls

by: Jeff Pierce October 07, 2008 | about stocks: QQQQ / SPY    

Jeff Pierce

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All traders are going to have a different perspective on how they view yesterday’s action. I’m looking at yesterday  from the perspective of somebody who is sitting on the sidelines, trying to determine when/if to put my money back to work for me. A trader who has been holding onto losing positions up until yesterday will be looking at the collapse through completely different lenses, and emotion was definitely a factor.

I’ll admit, I was surprised to see the markets recover as much ground as they did by the end of the day, but it didn’t change much in the overall picture for me personally with the primary trend remaining down. I even considered going long on the Diamonds, SPDRS, and QQQQ’s when we hit -800, but opted not to because I really felt like -1000 was acting like a magnet that we would gravitate towards.

The other reason I didn’t pull the trigger is I didn’t have a definitive sell point, as we are definitely in uncharted territory with volatility at historic levels where capitulation can cause stocks to fall further than anybody can ever imagine. I find that my trading is prone to failure when I don’t follow my system, and right now the market activity doesn’t fit into my system at all.

Another point worth looking at is all this talk of the bottom. I’ve stated before that the final bottom is going to come at a time when nobody is even thinking about buying stocks, however a trading bottom could have taken place on Monday.

Today’s action is very key as, if we continue to slide to new lows, then I feel that scenario is negated, but if we rebound and have a big up day, we could have a short term trend reversal. I’m seeing a lot of my indicators reach extreme, and some of them historic levels such as $VIX, Nasdaq New Lows/New Highs, and Dow Wkly RSI levels. We also breached the psychological 10k level on the Dow, and I was also watching the 1k level on the S&P that we failed to go below.

Maybe I was too bearish yesterday and it prevented me from entering into some long positions that I would already have significant profits in, but I need this volatility to decrease before I get back into the markets so I can sleep at night when I carry positions overnight. That’s it. Best of luck to all of you in these crazy times.

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This article has 4 comments:

  •  
    Oct 07 08:39 AM
    Dear youth, this is coming from a rather old lady, old enough to be your mother: please read 'The Bubble That Broke The World' by Garrett Garrett. It was written during the Great Depression. Mises.org has it in full or if you Google the names, it will come up, the entire pdf file.

    It clearly explains how these markets operate. You are in the middle of the process whereby BOTH bulls and bears are ground down to nothing while a downer market jerks to its ultimate bottom. The bottom can easily be a 90% loss like in the Great Crash of 1929. Stocks had their greatest record up days during this grinding process. They would shoot upwards and then slowly lose all the gains in less than a month and the general trend was, over time, downwards.

    This is why youth must learn the hard way how these things work. During the 1970's collapse and stagnation of stocks, I loved to listen to brokers who were survivors of the Great Crash, they were all in their sixties back then.

    One said, 'You don't try to get rich, you try to stay alive.' I decided to make money in other creative ways during that time and I stayed alive. I would strongly suggest you learn a life skill and use it for the next 5 years. Then, with some maturity and an idea of how the REAL world works, you can go back into finance.

    I suggest the heads of all the top investment banks be put in prison to learn about reality. Heh.

    Culture of Life News....cartoons and charts, full of information.
    Reply
  •  
    Oct 07 12:18 PM
    Good article Jeff, the sidelines are perfectly acceptable investment instruments these days.

    So far this sucking chest wound market takes from both sides, and unless you're nimble and lucky, don't hold anything overnight.
    Reply
  •  
    Oct 07 08:44 PM
    The bottom will come when Wall St lined with the vermin that enabled this scam, hanging from the peoples gallows.
    Reply
  •  
    Oct 07 09:04 PM
    Guillotines are useful. Put them on wheels.
    Reply
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