Thursday, September 18, 2008

The trend is still downward

Don't get too excited just yet folks. Sure, there have been some wild swings in the market this week, and today's biggest-gain-in-6-years is all the buzz. The big picture, however, is that the trading range of the S&P 500 index fell progressively lower in each of the last 5 trading days.

To top it all off, today's end-of-session rally was preceded by an all-time bear market low of 1133 on the S&P, so I'm not ready just yet to declare that the next rally has arrived.

5 comments:

Anonymous said...

Jody,

I agree that the trend is still downward.

I don't have a sense of whether the main reasons for today's rise are:
Market sentiment turning Bullish? Short covering/trimming institutional positions?
HOPE?

Note that that even though the price action today looked a lot like a "hammer" (candlestick formation that hints at a reversal), the price action stopped at the same resistance line as yesterday. That resistance probably won't hold as the volume today was strong and the Dow Futures point to a higher opening.

Is is possible for you to share the indicator that triggered your trimming back on SDS?
Your indicator could help me decide whether to start trimming my (SPY) Put positions (thinking strongly about it).

Thank you again for sharing you insight.

Ken

Jody said...

Ken,

I make a point of not trying to figure out price movements on individual days, mostly because I need all the brainpower I can spare to keep track my medium-term methods. I will eventually have automatically generated indicators here which will both free up some of my mental energy and make it simpler for readers to understand what I'm doing.

Dan said...

Jody,

Seems to me that our government is doing everything they can to shore up the stock market and keep it propped up at the expense of the tax payer. The goverment is systematically taking over the private financial sectors. Was this a planned event? One has to wonder.

Jody said...

Dan,

Let's be honest. There is one side of the isle that likes the idea of having the government fund the mortgage industry for the sake of low income people, just like it funds retirement insurance (Soc. Sec.), health insurance for the elderly and poor (Medicare/ Medicaid), etc. If they had proposed all-out socialism for home buyers a couple of decades ago, the other side would have rejected it immediately. The half-way step of creating Freddie Mac and Fannie Mae turned out to be the perfect vehicle for sneaking another socialist program in under the radar.

The real question is: what will be the next Freddie Mac that gets socialized in 2020? Maybe they will completely take over *all* retirement accounts, so that our 401ks and Roth IRAs will be managed by the government instead of E-Trade or Vanguard? Maybe they will simply take over Bank of America after it buys up all of the other banks? This could be fun!

Dan said...

Jody,
With all this market manipulation taking place without congressional approval (unconstitutional), its difficult to predict where the market is headed, but one things for sure, Paulson et. al. are doing there best to keep this market from crashing. I expect at some point in time for the market to reflect reality, unless its really possible to fool enough people enough of the time......