Financial history doesn't repeat itself, but it often rhymes. You can't be stupid enough to trade off anything I say.... I'm lucky they let me out of the straight-jacket long enough to trade.

J. P. Morgan

"Sell down to your sleeping point"

Friday, December 18, 2009

The Real Snoozfest for next week

How about those 2 patterns for a Year end Snoozer... of course

you are mostly talking about a 2 swing pattern... so...


Tony said...

Pennant resolves.... up? Whaddya say, Mr. Right Brain?

Odds are that it resumes the previous direction, which is up. "They" will be watching closely to see which line it crosses first and we could have a big spike either way.

With so much case waiting for deployment, the spike could be impressive and the first move could be a fake-out.

I suppose my preference would be to wait for the first counter trend swing after the breakout or breakdown to make sure it's not a fake-out.

I closed my shorts Thursday, except for AMZN which continues the death spiral. (Forward PE still over 50).

Eric said...

Probably should resolve... NOW
is the issue.

It's Fairly Wonky, so I'd expect anything out of it.

That is how pennants resolve into tops, one must realize that before, in the range bound, we had another Pennant, and it resolved into this one.

I'm still very neutral, but sentiment is powerfully positive. So, for sure I'd still rain dance.

Tony said...

"NOW is the issue"... like how soon?

...or are you saying "HOW"?

It all goes back to how tops are made, via Mamis. No bell will go off, unless we have a parabolic melt-up ala March 2000, but it just doesn't seem to be acting that way now with this two swing flag.

At the risk of engaging in recency bias, we can look at Oct 2007 where we just had a series of lower highs and lower lows as the market petered out. So maybe this pennant is really the start of a series of lower highs.

The 1975 bottom saw a couple of nice pennants that all resolved up. We didn't get the Mamis Point E aversion until 1978.

In 1933 we had classic aversion about 10 weeks from the July 1933 low, and that was the last deflationary recession. The difference today is that we have added massive liquidity and are adding more, so perhaps we will avoid the double dip.

If you put a gun to my head, I'd say this breaks out to the upside and the next resistance is 119 on SPY or 11K on the DJIA. Aversion comes next Spring or Summer.

But then, my right-brain is deficient.

Eric said...

75 double bottomed(sort of), you can count that as aversion.

78 was Buy the dip. into the 80(ish) top.

My point about Now is that it's a 2 swing pattern, and we have had 2 swings. We could get one more.

I'm just talking out scenarios If we know the 4 ways it will probably trade. We can just play the bouncing ball to that music.

Sentiment is so Positive, it's ridiculous. Tons of "Upward predictions". Like I pointed out Cramer pulled the Classic mistake Taleb pointed out. pointing to charts with nice trends and Extrapolating them to infinity. Like Taleb says "They just add more cells to the Spreadsheet, and assume constant Growth."

I've been Hearing 1300spx and every trend following Trader thinks he is a Genius right now.

Even the Bearish forecasts right now are all "Well in 2003" we had a slight pullback at the 50% retrace.(Generals fighting the last war)

Sentiment seems extremely complacent/ and bullish... they are partying like it's 1999.

But there is a little bit of improvement in Breadth, which makes me cautious about being Bearish for a downswing.

It's not that I agree or disagree with your spring sell off.

Not that I have hours to argue macro, but though a deathspiral of deflation, may have been avoided. There is still 30 years of MBS to work through the credit system like a pig through a Python. Seems like enough to make us go sideways for a while.... But sideways from where? is the Question.

Tony said...

Ritholtz talks macro on yahoo:

One point he makes is that sentiment is middle of the road. He's usually pretty good with sentiment, but I admit I have a hard time with the metrics used in sentiment. Using Cramer is fraught with problems since he's always bullish.

Surmise: we go higher and have a 20 to 25% correction at some point and then churn until 2015 at which point the python has pooped out the last of the MBS' crap.

But if we do go to 1350, then a 20% correction only gets us back to where we are now.

I wonder what Steve Grasso and Joe Terranova think.

Eric said...

Barry is awful with sentiment.

Remember "Get Wicked Short" DAYS AFTER Bear Stearns blew up. Sounds like he was the sentiment.

I've also watched it, as he does a Huge Rationalization about why we could go higher, at a significant Swing Highs, him feeling like he needs to defend his position is good sentiment.

All the "Sentiment Metrics" are always about 7 to 10 days behind, and can move 40% between Measurements.

In a way he is right, we aren't to a Cyclical High But Aversion is not a Cyclical High.

at the polar edges... he is a Lemming with everyone else. Bearish at the bottom and Bullish at the top. He was OOZing Bearishness on nov 1

BUT AGAIN!!! I'm just talking about Scenarios. If we can see the different Scenarios, we can trade them to our advantage as they do or don't happen.

Like I said... EVERY DICKHEAD in the market is ready to jump based on this "Range", So it should skid fairly far out of the Range, before it bounces... what happens after the bounce is anyones guess and will depend on the direction.

But when in doubt I have to stick with a mix of technicals and sentiment. Sentiment is very positive, But technicals during holiday periods make me Crazy, so I just have to go at it day by day.

Tony said...

I dunno, I think Barry has been pretty close to spot on with sentiment. he called the top in Oct 07 and the bottom in March 2009. I remember those two points distinctly. he's been harping about easy money and mortgages for 5 years before the crash. Only Tom Iacono had been more vocal.

A lot of folks are waiting for a time when they can feel comfortable just dollar-cost-averaging into a balanced fund. Well, that time might be now. I'm sure quite a few signed up for their 401(k) plans this past month and I'm pretty sure they are more aggressive than they were 12 months ago at this time.

This should give a decent floor to the market with a more constant flow heading into the market on a weekly basis with every paycheck.

But I do notice that Barry is hedging more than usual... and that is a sign that he's readying his rhetoric for any scenario. if the market crashes Monday, he'll say "I told you we are in a secular bear." But in the past he has been a much more vocal bear.

I'll have to rifle thru my closet and find my moccasins.

Tony said...

And the most important question, no matter what the metrics show or the macro view: how do you play this range?

1>Wait for a break and play it either way?

2>Guess one way now and go in either long or short?

3>keep all cash until aversion Point E?

4>(My preference) Look for the break, either up or down, and then wait for the first counter-swing and then get in... which should be close to the trend line. I did this with the XLF breakdown, and so far, so good.

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