Markets Continue to Sell the Rallies

Yesterday’s action reminded me of the old saying that “Close only counts in horseshoe’s and hand grenades.” It was a day of lost opportunity for myself personally and for the markets in general.

The markets had a chance to make a stand in spite of all the negativity that was going on in the foreign markets around the world. You know you're in a bear market when double digit losses on indexes are becoming commonplace among the top stories in the news. The US markets had every excuse to throw in the towel and they didn’t, but they lost their grip on the gains in the last minutes of the day. I was almost hoping for a 10-12% decline to get it out of the way so we could move on with our lives.

In the end I closed my individual stock issues for no losses and decided to hold onto my ETF’s (DIA, IWN, QQQQ) since my positions are so tiny. What is frustrating is that I would have had a nice gain if I would have sold intraday, but I was holding on for the bigger trade that never materialized.

It’s to hard to try and time every move perfectly and I was fairly certain that we were due for a bounce, I guess I didn’t anticipate it failing again. Below are some charts (click one each to enlarge) explaining why I think we may head lower given the market action at the close as investors played hot potato with equities.

It’s possible that the bottom is in, but the VIX doesn’t have that clear capitulatory top that so many momentum charts have in common. The more I look at this chart, the more I feel like 100 is acting like a magnet. That could be the magic number for investors to feel that the markets have topped out. I’d like to see it rise up huge intraday, and then fall right back down to close in the red.

12 Day - 15 Min

The Russel 2000 has been very weak as of late and today it dropped another 5%. What is particularly scary is how it just gave out at the close. The moving averages are signaling that more downside is coming as it’s broken down from a small consolidation period.

12 Day - 15 Min

Once the indexes went in the red for the last time today I decided to bail out of my individual stock issue as I felt theit presented to much risk as a big move down (10-15%) may be coming very soon for a number of reasons. I really wanted to hold on to my long positions, but a trader has to trust his instincts and mine were telling me to get out.

I rationalized that I’ll be able to pick these same stocks up cheaper in a few days as all rallies are being sold off right now. It’s now beginning to look like we're just going to head down to make the ultimate bottom with no trader’s rally.

1. Asian markets are likely to continue selling off on the heels of US weakness.
2. Unpredictable nature of Fed meeting. Could be a catalyst for a big move.
3. Anniversary of Great Crash in 1929 will have investors nervous.
4. General high levels of fear in the markets, as the media pounds the negativity.
5. Even the uncertainty of the election outcome can weigh investors down, although I’m inclined to think that this isn’t much of an issue at this point.

Best case scenario is we get a 15% drop today or Wednesday and we can pick up some issues at great prices while sticking a fork in this bear.

Comments

[phdinsuntan...:]

Jeff, maybe the desperate mobile phone seller was not the
worst, your call was delayed just one day, I trust you sold today

2008 Oct 28 04:22 PM