Longer Term Reversal Trigger

No more short selling?  Cox is an idiot.

 

Before I make general comments, the market reversed above our longer term reversal trigger, it confirmed a longer-term downtrend and establish support, the Market has started to move hgigher from support, and additional upside now looks probable until such time as longer-term resistance levels are tested again.  Thursday was very bullish.  Use 2425 as a general upside target for the NASDAQ.

 

The Stock of the week, CAT = Cha Ching!!!

 

With that understood, here are some general comments:

 

I live in beautiful La Jolla.  Almost every day I find myself working in a café from my laptop enjoying the beauty that surrounds me, but for the past week I have not left the house.  I have never seen the market act like it has over the past week.  This was unprecedented, and I_m not using that word lightly.  Everyone knows that inherent weakness exists and everyone understands that financials pushed the envelope whenever they could so weakness was expected, but this time there was an added factor which perpetuated the weakness.  The naked short selling was an atrocity.  From what I recall, the SEC imposed mandates against shorting financials when Bear Stearns experienced its run on the bank.  Clearly that didn_t matter this time around.  Clearly, Christopher Cox should be fired.  His neglect caused this to happen much faster than it should have, and that destroyed some historic companies on Wall Street.

 

These general comments do nothing to satisfy the related stress that mounted from this recent debacle.  I hope some solid exercise will.  I_m sure there are many people out there that have similar concerns.  Please, go for a run and clear your head.  Opportunities are presenting themselves and you should have your eyes open.

 

We already know what lies ahead.  The Investment Rate tells us that the weakness will resume, eventually.  But the next leg is up according to the longer term analysis we offer.

 

This market is likely to surge relatively immediately as short sellers are forced to cover their naked short positions.  This will take place over the course of the next few days.  With that, other short sellers will probably exit the market and a strong short covering rally will almost surely ensue.  The upside target that I have set above could be tested in a blink of an eye.

 

You should be prepared for extremely aggressive upside market moves if initial support levels remain intact.  Many stocks are oversold as they have been beaten down with the rest of the market, unnecessarily so.

 

Once this short covering rally has exhausted, there may be some lingering up days, but eventually the market is likely to stall and from there another down move should take place.  Without the naked shorts, it is not likely to be as aggressive though, and channels will be much easier to define. 

 

For now 2425 is my upside target for the NASDAQ. 

 

Continue to use the Beta Site Exclusively.

 

http://www.ultimatetraderchallenge.com/

Comments

[nScout:]

Good article!

2008 Sep 19 11:23 AM

[adan:]

definitely interesting info

especially liked that you acknowledged a resumption, eventually, of the down trend (and not that we're hoping for one, but that it's the primary direction)

thanks!

2008 Sep 20 01:51 PM

[irondoor91:]

Bailouts in Bull market = Bull trend resuming. Bailouts in Bear Markets = Bear trend resuming. Agree with your analysis of Possible short-term pop for a few days or weeks. If you're a Bear, you've got to cover above 2473 on Nasdaq or 1973 on NDX. If this is a continuation of the uptrend from July 15th, then it should reach at least above the August 11 high of 1313.15 on the S&P. If Monday and Tuesday turn out to be larger declines in the face of the breadth and volume on Friday, a selling panic could ensue. Remember that there are a lot of stocks not on the banned shorts list and people will seek protection. Market makers can also short any stock now to hedge their put options exposure.

2008 Sep 20 03:19 PM