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Jeff Diercks on Nasdaq Volatility Index Could Be Signaling Trouble Ahead By the way, check out a video update on the mar...
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Jeff Diercks on Dow 10,000: Time For Euphoria Or To Run For Cover Please excuse the error...the retracement range...
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Correction Begins....How Deep Will It Go?
A stock market correction appears to have begun this week. The primary driver of this correction in my opinion is the tightening of monetary stimulus and rates in China and the overarching reach of our government in trying to control and tax our banking and investment industry.
Today's selloff has pushed stock prices below short-term support and set up a downward price channels as reflected below. Already a number of our stop losses have been hit and our exposure reduced. We will likely wait for a bounce to the top of the trading channel, see below, to further reduce or cover exposure.
Where is the correction likely to lead? Here is our best guess. We will again use the Nasdaq Index.
So this would target 2200-2205 on the Nasdaq from its current 2262 (last trade)...so we are looking at possibly another 2.8%-3.0% downside. Short-term the market is pretty oversold and I would not be surprised to see a bounce on Friday that would provide a possible point to reduce short-term exposure further.
Medium-term and Longer-term up trends still remain in place.
Disclosure: Hold QQQQ
Chanos vs. Rogers - Is China A Bubble Waiting to Burst?
Chanos vs. Rogers.....the heavyweight fight of the century. Jim Rogers came out swinging this past week as he called Jim Chanos (the famed short seller) a China neophyte in so many terms. He further alluded to the fact that Chanos and others "couldn't spell China 10 years ago are now experts on China."
But who is right? Chanos claims that he sees a major credit bubble coming driven by the countries massive stimulus.
Could they be following in the steps of the U.S.?
We do know that the China Securities Regulatory Commission on Friday approved the launch of stock futures and a trial run of margin trading. This certainly would appear to help build Mr. Chanos case.
A chart of the Shanghi Stock Exchange week price activity shows the index consolidating in a triangle pattern. At this point it could break up or down, although continuation of the short-term trend would be up.
So far the verdict is still out, only time will tell.
Dow 10,000: Time For Euphoria Or To Run For Cover
Last week the Dow Jones Industrial Average passed the 10,000 mark for the second time on the way up. The first time the market closed above 10,000 was in October 2008. Wall Street celebrated with traders tossing commemorative caps and uncorking champagne. This time around the feeling was much more like that of relief.
According to Arthur Hogan, chief market analyst with Jeffries & Co. in Boston, "It's almost like an announcement that the bear market is over." But is the bear market really over?
Obviously it's hard to argue with the type of run up the markets have seen since the March lows. Is this the beginnings of a new bull market phase or purely a bear market bounce? Truth be told, no one knows for sure, except God, and he's not talking. So as investors, how should we be positioned?
The simple answer to this is to be skeptical, guarded, but realize that the market is a wild, untamed beast and if it wants to go up.....we must learn to accept it and participate. As trend followers, we have learned to sit back and let the trend be our friend. The current trend is up as one can plainly see.
However a closer look also reveals some cracks in the market's armor that should cause investors to be guarded. First, we really haven't had a sizeable correction in this market move. A sizeable, normal correction is a 33-62% retracement of the move. This speaks to the strength of this move.
Second, technically price action is rising within what is called a "rising wedge." This pattern is typically bearish and a break of this pattern should lead to a more sizeable retracement (33-62%) or possibly the end of this move. See Dow graph below.
Finally, most bear markets start with a strong inpulsive move down. This is followed by a strong, upward retracement move and then finally a longer, recessionary move lower. If this market holds true to historical form, we still have this latter down move to come. Will it? No one knows for sure, but if history tells us anything it's to have our guard up while still partying with the Dow 10,000 crowd.