When This Bounce Comes, It Should Be a Doozy

We wrote in this weekend's summary that the peak (intraday) hit in November 2008 was a 37% divergence between the actual price on the S&P 500 and the 200 day moving average. Again 25% is considered extreme, and 37% was the largest divergence in history.

I still have my short hedges on, but if we have an ugly close and an ugly morning Tuesday, it would seem a good place to get long. The rubber band is stretched extremely so and now we are seeing the waterfall type of selling - the term I use for "8-12% type of losses" in many many names. Sloppy selling - get me out. Doesn't mean *this* is the bottom, but I'm getting more constructive for a trade on the long side soon.

When this bounce comes it should be a doozy.

Comments

[atlasman:]

A bounce like that will require an event to trigger it. Lets see, are there any companies reporting in the next week that might have a positive earnings surprise? No! Better than expected economic numbers? Doesn't appear so. How about a policy initiative from Washington that might actually help for a change? That is a real long shot.

Good luck with your bounce. I will keep my money under the matress for now.

Mar 03 06:32 AM

[Nikola:]

It's called a "dead cat bounce."

I think he's right: hourly traders, clean your mice!

Mar 03 06:35 AM

[boats:]

Bounce? perhaps. If there is one it may look something like +100 followed immediately by look out belowwwwwwwww!

Mar 03 07:09 AM

[Yer ol' Unc...:]

A bounce is coming. The spring is tightening. The Bulls - they will buy YOUR fear..and enjoy it all the way back up to the 200dma.

Mar 03 08:37 AM

[kelm:]

We certainly seem to be overdue for a bear market bounce and historically they can be considerable. Having said that, we have been overdue for one since November and all we have seen is weakness. There needs to be a catalyst and money sitting in the sidelines doesn't seem to be it. So I think I will not look for a bounce but rather look to short off it if we get a massive rise. Otherwise - sit US equities out.

Mar 03 09:22 AM

[YoYoMama:]

joshuaodonnell - I am wondering if you could be more civilized in future posts and not use offensive language. Thanks.

Mar 03 10:09 AM

[Fred Voetsch:]

On Mar 03 06:32 AM atlasman wrote:

> A bounce like that will require an event to trigger it. Lets see...

Such a market bounce comes from a tendency for the market to go overboard and revert back to the mean; that is the event.

Don't get me wrong, this market is going lower and I have consistently called for at least 3,000 before we hit bottom but there will be many bear market rallies along the way and we are setting up for one.

Mar 03 11:37 AM

[Fred Voetsch:]

On Mar 03 09:22 AM kelm wrote:

> We certainly seem to be overdue for a bear market bounce and historically
> they can be considerable. Having said that, we have been overdue
> for one since November and all we have seen is weakness. There needs
> to be a catalyst and money sitting in the sidelines doesn't seem
> to be it. So I think I will not look for a bounce but rather look
> to short off it if we get a massive rise. Otherwise - sit US equities
> out.

I agree with the "short off of it if we get a massive rise" but in fact the market did bounce 15% in a few days after the November lows and was up 20% off that low by January 2, 2009.

That's the problem with bear market rallies, they don't wait around for you and you had better be really good at knowing when the panic has reached its peak.

Mar 03 11:44 AM

[Richard Col...:]

Markets will rebound, INSPITE OF GOVERNMENT'S INVOLVMENT!
Asking the government to fix the economy is like asking the ARSONIST who burned down your house to REBUILD IT!

The TOILET THAT NEEDS TO BE FLUSHED is the nations CAPITOL! It has been backing-up for years.
Don't forget this in coming elections. You, the RESPONSILBE, must study your candidates carefully.

We have more people SPONGING OFF THE TAXPAYER today, than ever before __ and, the number of SPONGES will continue to grow if we don't nominate TRUELY consevative candidates who can actually win the general election.

We have NITWITS voting, electing NITWITS to office!

The best part of the current situation is that we have some HIGHLY URINATED people out there who are really fed-up.

Richard Collins
Claremont, CA

Mar 03 12:28 PM

[razorack:]

I agree we are set up for a rebound BUT dont forget the firepower of the hedge funds and investment banks have been severley curtailed so much so that there ability to drive the market up from obviious support levels just does not exist anymore. The real money is held in long only funds that will jump in on the fear of missing the big move. Unfortunately the fundamentals are getting worst and so these funds are not so trigger happy

Mar 03 01:54 PM

[plumstupid:]

er, whats a highly urinated person? If that's Cal Speak I'm gonna need an interpreter....


On Mar 03 12:28 PM Richard Collins; Claremont, CA wrote:

> Markets will rebound, INSPITE OF GOVERNMENT'S INVOLVMENT!
> Asking the government to fix the economy is like asking the ARSONIST
> who burned down your house to REBUILD IT!
>
> The TOILET THAT NEEDS TO BE FLUSHED is the nations CAPITOL! It has
> been backing-up for years.
> Don't forget this in coming elections. You, the RESPONSILBE, must
> study your candidates carefully.
>
> We have more people SPONGING OFF THE TAXPAYER today, than ever before
> __ and, the number of SPONGES will continue to grow if we don't nominate
> TRUELY consevative candidates who can actually win the general election.
>
>
> We have NITWITS voting, electing NITWITS to office!
>
> The best part of the current situation is that we have some HIGHLY
> URINATED people out there who are really fed-up.
>
> Richard Collins
> Claremont, CA
>

Mar 03 05:17 PM

[TraderMark:]

atlasman, it might not necessarily even need to be a good news event - a "bad" event once out in the open (rather than uncertainty) could be an alternative situation (i.e. a 750K jobless report Friday)

Nikola, agree it will be dead cat but we've had dead cats of 20% before.

kelm, we had a bounce at the very end of Nov 08 - huge one in 2 days - but that was most of it as we went sideways most of Dec. Had to be very quick to catch it which is why so many people are antsy to front run whenever this bounce happens.

razorack, agree on your points esp without leverage and continued redemptions at hedgies.

If I'm wrong, the plus side is only 695 points before we hit zero on S&P - I'll be 100% long down there ;)

Mar 03 06:03 PM

[Richard Col...:]

plumstupid wrote:

"er, whats a highly urinated person? If that's Cal Speak I'm gonna need an interpreter...."

Clue:
It has nothing to do with "geography". Surely you can understand a simple metaphor __ unless, your alias is as self-descriptive as it seems.

Richard Collins
Claremont, CA

Mar 03 07:08 PM

[T.Stamps:]

How can anybody want to stay long stocks when obama has said as
soon as the economy comes back I will raise taxes and take back
those profits.

Mar 03 11:48 PM