Twenty-nine months into the Mother of All Bear Rallies, it was unlikely that mere mortals would predict the precise start of the stock market’s collapse, inevitable and long overdue though it may have seemed. However, no one should be surprised by the selloff’s ferocity, nor by the prospect that the first wave down may have run its course in mere days. Traders who have been waiting for the Big One for years undoubtedly are re-discovering how hard it can be to reap a windfall even when you are right about the trend. We think shares still have a long, long way to fall, although we harbor no illusions that the Mother of All Bear Markets will be easy pickings. That much should have been obvious yesterday, for not even bears with brass cahones could have withstood a spectacular short-squeeze rally that saw the Dow trampoline from lows around mid-morning to a final-bell peak 600 points higher. Five hundred of those points came in the final hour alone. The proximal cause of this wilding spree was a Fed announcement that short-term rates would be held near zero through mid-2013. Although no one, not even Paul Krugman, could believe at this point that more easy credit will have a positive effect on the economy, traders bought the news anyway. As we have explained here many times before, they did so not because the news was bullish, but because they expected others traders to react as though it were.
Bears would have found it no easier to catch a ride south a week ago, when the onslaught of selling began. Three days earlier, on Friday, a strong rally trapped bulls and wrung out bears. But the hook was set Sunday night when news of a debt-limit deal sent index futures into a second short-covering spasm equivalent to 200 Dow points. Could any bear have stayed short? We’d guess not. Would any bull have had the good sense to take profits Sunday night? Possibly, although most probably would have held out for a jackpot on Monday. Needless to say, the jackpot never came. Instead, stocks began to plummet in the middle of New York’s night, screwing bulls and bears alike out of an opportunity to make easy money on a decline that had burned out its brakes.
A Simple Trick
Fortunately, whatever happens from this point forward, we needn’t get shoved around. Using Hidden Pivot Analysis, predicting the markets will require little more from us than reading bullish and bearish impulse legs on charts of various time frames. (Click here if you’re skeptical that it could be so easy. ) Moreover, the techniques we used to trade the market during the Mother of All Bear Rallies will continue to apply. Did we mention that nailing the market’s highs and lows was never easier than during the dot-com boom? The more violent the stock market’s price action, it seemed, the more predictable things tended to be. Even so, it will take nimble reflexes and iron guts to trade the swings and swoons. We’re looking forward to it — to helping subscribers stay a step ahead of the mob. That said, we remain seriously concerned about what the stock market’s collapse may portend for the economy. We see very hard times ahead, and with them, quite possibly, radical political change. Interesting times, for sure.
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rs,
I suppose they would, them being the dishonest sobs that they are (thinking back to H.Bros. betrayal). However this time, it will bite them a lot (:happy face).
You kno they have set up the funds to deflect the gold demand into paper, and filled those funds with tungsten bars. So that is where they want the gold demand to go.
If the change the margins, wouldn’t that prompt more physical accumulation, rather than the flow into their tungsten ETFs?