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Tim Ayles
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We strive to build highly disciplined, sensible client portfolios. Portfolios that are focused on investing in businesses with solid free cash flows and solid dividend payouts. We buy businesses, not stocks. Tim is a Registered Investment Advisor.
My company:
Napa Wealth Management, Incorporated
  • Be Careful Next Week 0 comments
    Nov 12, 2010 8:46 AM
    As I mentioned last week in my instablog seekingalpha.com/instablog/475264-tim-ayles/107599-the-dow-is-repeating-the-pre-flash-crash-pattern , next week could be interesting for the market.

    In that blog post I mentioned "If the pattern continues this way, we should expect a strong end to this week, followed by new highs next week and a reversal. This reversal will be a few % points and will have the perma bulls telling everyone it is a dip to be bought. "

    As you are aware, last week did in fact end with a mighty surge in prices to close the week out after the QEII and NFP announcements. Although we did not make new highs this week, we got close, and some indexes did in fact make them before reversing a few % points.

    The pre-Flash Crash pattern remains eerily intact.

    Some other similarities are rearting their ugly head as well as just reported at ZeroHedge.com:

    It has been a few month since everyone was throwing the word "contagion" around just to sound smart. Prepare to get a whole lot more of that. PIIGS CDS are now at a fresh all time record, way wider than during the May days, that lead to the flash crash and Greece's bankruptcy. All this means that the fair value of the market is now even lower than where it was on May 6, but the tail risk has been internalized by not only US but European taxpayers. That rubber band will snap again. Just a matter of time.



    As stated last week, if your cash is burning a hole in your pocket and you are dying to by this recent dip to get on the Fed Induced Sugar High Rally ( seekingalpha.com/article/235315-market-s-sugar-high-won-t-end-well ) it might be very wise to let next week play out to prove that this pattern, which is similar in both time and price, is more a figment of my imagination.


    Disclosure: Long SDS, PSQ, SPXU, against long positions in individual stocks
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