What Happens Next? Doom? Gloom? Boom?

[MadMarketScientist 11]

I know there are a lot of really smart traders on TL. Whenever I read the forums posts and replies I'm usually pretty amazed. Really with few exceptions.

 

I'm not sure about you but seems like the marketing angle this fall to sell products/services is to take the "end is near" approach. My inbox is filled with services saying we are going to crash.

 

I realize this type of stuff is what sells -- nothing like some good 'ol fashioned fear. We see it everyday in the news.

 

However, I'm curious what the consensus is here on TL. Are you expecting the markets to go up or down between now and 12/31/10?

 

If up or down -- any thought on what type of move we are looking at? Is it the beginning of the end or will the market defy the skeptics and improve?

 

And, what are your reasons either technical or fundamental?

 

I'm going to formulate my thoughts shortly and post. I'm still debating between my desire for it to be positive and optimistic with the reality of the real world out there....and not trying to be jaded by the doom and gloom marketing I'm seeing either.......

[bathrobe 10]

I remain mostly bearish on global stock markets, my reasons are: US job situation still terrible and I dont really hear any good news (people have been out of work for much longer and are unwilling to take minimum wage jobs which are available because of ego), Commercial real estate looks iffy, trillions of dollars in US credit card debt which cant be paid (credit card debt will only get worse and massive write downs will come at some point). Govt programs (stimulus doesnt really seem to do anything)

 

The Chinese banking system shows the same problems as the US banking system, european debt problems are not fixed just covered up.

 

My trading is mostly intraday and I dont use indicators but looking at a historical chart I would expect a double bottom.

 

I thought I heard on the news than Bernanke would do "anything" to avoid another crash which would lead to a propped up market which would lead to a possibly stronger crash.

[thalestrader 14]

Well, this is a bull market, you know!

 

If you really want my thoughts, I'll give them for free, which is still a price much higher than they're worth: Technically, if the SP-500 closes above 1220 on a weekly basis, then I will be expecting 1500+. When? Who knows? Three quarters? Five? A couple of years? It doesn't matter, the trend is up from the March 2009 low, and it will have been reconfirmed as up.

 

If, on the other hand, SP-500 breaks and holds below 1010, then I would be looking for a low around 950 +/- ten or twelve points.

 

Fundamentally, the history of the world is a history of growth. So long as there are people, businesses will innovate and economies will expand.

 

One last thought, when so many are predicting a coming apocalypse, and when such opinions are, remarkably, considered sane and acceptable rather than crazy, then I have to take the other side of that trade. If I may defer to a religious analogy: Even the Son does not know when the Father plans to bring about the end of days. And if the Son doesn't know, then neither does Prechter nor Faber nor any other newsletter writer or market prognosticator.

 

I assume the sun will rise today, tomorrow, and the next day, and that it will continue to do so aslong as I live. Until it doesn't, I'm bullish on humanity in general, and America in particular.

 

Best Wishes,

 

Thales

Ignorant of the coming apocalypse, and happily so

[Kiwi 16]

I'm currently yearly/monthly bearish. Why:

- fundamentally the debt/bubble issues haven't played out in the rest of the world even if they have in the US so I don't think "it" has finished.

- we have a nice retrace on the bear market which would be about right if we had a 1929+ sized event but doesn't necessarily make it a bull just yet

 

What would change me:

- I think the highs of the first week of August are important so to break them and hold above them for two weeks would suggest the bear was seriously hurt

 

But:

- day by day and hour by hour I will just trade what I see in front of me.

[BlowFish 10]

Well, this is a bull market, you know!

 

 

Ahh the wisdom of old Mr. Partridge. (Reminiscences of a Stock Operator)

[thalestrader 14]

Ahh the wisdom of old Mr. Partridge. (Reminiscences of a Stock Operator)

 

I knew you'd appreciate that quote, Blowfish, and I was thinking of you when I posted it. Many have read Reminiscences, but few have come to own it as you have.

 

"Old Turkey's" wisdom is the one "secret" that truly can make you rich.

 

Best Wishes,

 

Thales

 

Most let us call'em customers -- are alike. You find very few who can truthfully say that Wall Street doesn't owe them money. In Fullerton's there were the usual crowd. All grades! Well, there was one old chap who was not like the others. To begin with, he was a much older man. Another thing was that he never volunteered advice and never bragged of his winnings. He was a great hand for listening very attentively to the others. He did not seem very keen to get tips -- that is, he never asked the talkers what they'd heard or what they knew. But when somebody gave him one he always thanked the tipster very politely. Sometimes he thanked the tipster again -- when the tip turned out O.K. But if it went wrong he never whined, so that nobody could tell whether he followed it or let it slide by. It was a legend of the office that the old jigger was rich and could swing quite a line. But he wasn't donating much to the firm in the way of commissions; at least not that anyone could see.

 

His name was Partridge, but they nicknamed him Turkey behind his back, because he was so thick-chested and had a habit of strutting about the various rooms, with the point of his chin resting on his breast.

 

The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock. They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap's answer was always the same. The customer would finish the tale of his perplexity and then ask: "What do you think I ought to do?"

 

Old Turkey would cock his head to one side, contemplate his fellow customer with a fatherly smile, and finally he would say very impressively, "You know, it's a bull market!" Time and again I heard him say, "Well, this is a bull market, you know!" as though he were giving to you a priceless talisman wrapped up in a million-dollar accident-insurance policy. And of course I did not get his meaning.

 

One day a fellow named Elmer Harwood rushed into the office, wrote out an order and gave it to the clerk. Then he rushed over to where Mr. Partridge was listening politely to John Fanning's story of the time he overheard Keene give an order to one of his brokers and all that John made was a measly three points on a hundred shares and of course the stock had to go up twenty-four points in three days right after John sold out. It was at least the fourth time that John had told him that tale of woe, but old Turkey was smiling as sympathetically as if it was the first time he heard it.

 

Well, Elmer made for the old man and, without a word of apology to John Fanning, told Turkey, "Mr. Partridge, I have just sold my Climax Motors. My people say the market is entitled to a reaction and that I'll be able to buy it back cheaper. So you'd better do likewise. That is, if you've still got yours." Elmer looked suspiciously at the man to whom he had given the original tip to buy. The amateur, or gratuitous, tipster always thinks he owns the receiver of his tip body and soul, even before he knows how the tip is going to turn out.

 

"Yes, Mr. Harwood, I still have it. Of course!" said Turkey gratefully. It was nice of Elmer to think of the old chap.

 

"Well, now is the time to take your profit and get in again on the next dip," said Elmer, as if he had just made out the deposit slip for the old man. Failing to perceive enthusiastic gratitude in the beneficiary's face Elmer went on: "I have just sold every share I owned!" From his voice and manner you would have conservatively estimated it at ten thousand shares.

 

But Mr. Partridge shook his head regretfully and whined, "No! No! I can't do that!"

 

"What?" yelled Elmer.

 

"I simply can't!" said Mr. Partridge. He was in great trouble.

 

"Didn't I give you the tip to buy it?"

 

"You did, Mr. Harwood, and I am very grateful to you. Indeed, I am, sir. But --"

 

"Hold on! Let me talk! And didn't that stock go up seven points in ten days? Didn't it?"

 

"It did, and I am much obliged to you, my dear boy. But I couldn't think of selling that stock."

 

"You couldn't?" asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers.

 

"No, I couldn't."

 

"Why not?" And Elmer drew nearer.

 

"Why, this is a bull market!" The old fellow said it as though he had given a long and detailed explanation.

 

"That's all right," said Elmer, looking angry because of his disappointment. "I know this is a bull market as well as you do. But you'd better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself."

 

"My dear boy," said old Partridge, in great distress "my dear boy, if I sold that stock now I'd lose my position; and then where would I be?"

 

Elmer Harwood threw up his hands, shook his head and walked over to me to get sympathy: "Can you beat it?" he asked me in a stage whisper. "I ask you!" I didn't say anything. So he went on: "I give him a tip on Climax Motors. He buys five hundred shares. He's got seven points' profit and I advise him to get out and buy 'em back on the reaction that's overdue even now. And what does he say when I tell him? He says that if he sells he'll lose his job. What do you know about that?"

 

"I beg your pardon, Mr. Harwood; I didn't say I'd lose my job," cut in old Turkey. "I said I'd lose my position. And when you are as old as I am and you've been through as many booms and panics as I have, you'll know that to lose your position is something nobody can afford; not even John D. Rockefeller. I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir. But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don't feel like throwing away a second tuition fee. But I am as much obliged to you as if I had the money in the bank. It's a bull market, you know." And he strutted away, leaving Elmer dazed.

 

What old Mr. Partridge said did not mean much to me until I began to think about my own numerous failures to make as much money as I ought to when I was so right on the general market. The more I studied the more I realized how wise that old chap was. He had evidently suffered from the same defect in his young days and knew his own human weaknesses. He would not lay himself open to a temptation that experience had taught him was hard to resist and had always proved expensive to him, as it was to me.

 

I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend.

 

And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and

early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level, which should show the greatest profit. And their experience invariably matched mine -- that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.

 

excerpted From Edwin Lefevre's Reminiscences of a Stock Operator

[Kiwi 16]

Thats the thing though, Thales. He said:

 

"I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend."

 

In Mr Partridge's terms we may be at the end of a reactionary swing in a Bear market. So maybe he'd be holding short still - I guess it just depends on his time frame.

 

One of the strong arguments for this being the beginning of the 2nd leg of the bear is that no one over at ET thinks it is; actually my brother's Chicago stockbroker doesn't either

 

 

Attached a chart of the current "bear," with a beautiful rise into 62% and then an immense amount of uncertainty over the last few months. Looking at that and thinking about intial bear targets you'd have to like the 50% of the current rise given how nicely it coincides with earlier S&R.

 

.

Edited September 7, 2010 by Kiwi

[thalestrader 14]

Thats the thing though, Thales. He said:

 

"I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend."

 

In Mr Partridge's terms we may be at the end of a reactionary swing in a Bear market. So maybe he'd be holding short still - I guess it just depends on his time frame..

 

You and I both know that he would not have held short through a nearly 100%, 14 month long bull swing. Remember that his tipster was covering after a seven point rise in hope of buying again at a lower price following, presumably, a 3 to 3.5 point reaction

 

Attached a chart of the current "bear," with a beautiful rise into 62% and then an immense amount of uncertainty over the last few months. Looking at that and thinking about initial bear targets you'd have to like the 50% of the current rise given how nicely it coincides with earlier S&R.

 

You say "current" bear, but I see a bull market that started in March of 2009. I do not see a new bear. I do see that the new bull is currently in its first reaction of like degree to its bull move from the '09 low. That reaction may have bottomed at 9614, or it may have yet to bottom. Your "initial bear target" is also a possible target for this reaction to bottom. But the bear, such as it was, is dead.

 

To put things in perspective, here is the Yearly chart of the industrials back to 1916 ...

 

 

Best Wishes,

 

Thales

[Kiwi 16]

But the bear, such as it was, is dead.

 

 

LOL. And that is the $60,000,000 question my friend. Do we have a 2B down with more to go or do we have a test and resume on a big old bull. I think its a 2B down for the grumpy bear. But it will take more than a couple of days to get confirmation either way.

 

[daedalus 10]

Short term bull... then expecting them to get spanked into the end of the year.

[Attila 10]

Short term bull... then expecting them to get spanked into the end of the year.

 

Agree.. Long-Term TL on SPX likely to get touched again.. question is when?

[MadMarketScientist 11]

Great comments so far. Very interesting and thoughtful. Beats the crap that stuffs my inbox

 

My thinking is this -- and it's probably as valuable as a spin on the roulette wheel in Vegas and as likely to hit.

 

I think we're going to have the self-fulfilling prophecy of a big swoon sometime in September/October and definitely something leading up to the mid-term elections. Put the fear of god into the markets especially since seems like everyone will have itchy trigger finger to sell should something trip up the market. However, I do feel that the market will respond strongly to that reaction and we will be higher by the end of the year, especially once the uncertainties of the elections are out of the way.

 

I'm thankful though everyday that when I trade the most I'm trying to figure out is the next 5 minutes to one hour because I really don't know how anyone can be really accurate trying to play out a market over weeks, months, years.

 

Every year I threaten myself to remove all of my funds that are being held long-term in mutual funds and trade the entire 100% short-term. Still haven't pulled the trigger but I feel so much more control trading the short-term than the long-term.

 

You guys are smarter than me so I tend not to trust my "big picture" analysis.

 

MMS

[daedalus 10]

You guys are smarter than me so I tend not to trust my "big picture" analysis.

 

MMS

 

lol... says the man making consistent profits trading crude...

[TheDude 10]

Old Partridge....

 

Elsewhere in the book (or it could have bee Wyckoffs books) is the answer from none other than J.P. Morgan himself. On asked what the market will do....

 

"I think it will go up a bit, down a bit, and then fluctuate from there"

 

Sounds like an options trader to me!

[TheDude 10]

As for a more personal, but not so insightful analysis, here's my 2 pence worth:

 

Long term MP (yearly/monthly) suggests up to me. There seems strong support.

 

On a daily time frame, it just seems too odd that back in March-April time, the market (ES) was still creeping up on unhealthy volume. It did a similar thing before the last sizeable drop pre Lehman down trend. The sort of conditions that make everyone think a big break is coming. Apart from the flash crash, were still holding. It aint natural for the market to behave this way, especially when the USA IS bankrupt and China holds it by the short n curlies.(hey lets base this decision on funny-mentals as well as technical stuff as on the long term, the dog does wag the tail still!

 

Talk abounds regarding the PPT coming back into the market.

 

Make no mistake. Once the yellow peril has finished selling it's green backed assets, this baby's gunna puke big! There simply is NO other way. They're just holding it up in the interests of self preservation. Similar to the way Livermore manipulated Wheat to ditch his corn position. Same game, same tricks, global scale.

 

Everyone knows big long term money is going into Gold in a big way. Thats one economic whether forecast you dont want to see if you're bullish equities.

 

SHUCKS! You know what? I'm so bearish long term, I'm gunna buy me some long dated calls cos I'm usually badly wrong and only just scrapped a pass at Economics at school!!!.

Edited September 7, 2010 by TheDude

[MadMarketScientist 11]

Well, you got me there -- though for me that means trying to be right on a technical basis 65% of the time for the next 5 to 30 minutes. Ask me what Crude is going to be in a week, 30 days or a year and I'll take out my Ouija Board or the reliable Magic 8 Ball......

 

MMS

 

lol... says the man making consistent profits trading crude...

[SIUYA 11]

I know that I cant predict the future. So I am going to move all my trailing stops up in a normal manner for both the longs and the shorts and then let the market tell me.

In the meantime if pushed for an opinion....bullish, looking to short. Lucky for me, I usually dont act on these decisions.

[pablosanchez 10]

At some point the bubble always bursts, and life moves on, in somewhat of a different form and different shape, but always driven by simple human emotion. The heart of all this emotion is, as always, fear, and the need of some to control others through it's use....

 

In the case of the markets, fear of losing money, or fear of missing out on making money.

 

And perhaps, sometime in the near future, people will begin to wake up and see that this whole system that we "trade" is nothing but belief. Belief that we can clutch money out of thin air and an electronic box, belief that we need to "work" to make money, to provide us with things we don't always need...

 

One look at fractional reserve banking, and the way this system is set up on foundations of quicksand, is enough to show one that the numbers we watch can never truly get better, and debt can never truly be paid off, only increased in perpetuity.

 

"Fundamentally, the history of the world is a history of growth. So long as there are people, businesses will innovate and economies will expand"

 

Perhaps the one part missing from this is that all empires fall, and new ones rise to take their place. America is unlikely to break that "trend", and, indeed, mighty rome fell once it's financial system melted away. As the zero hedge people state, on a long enough timeline, the survival rate for everyone (and everything) drops to zero.

 

Until this certainty happens in our lifetimes, I'll trade what is in front of me on the screen, whether long or short, and use my stops to limit short-term risk. And when the big fall happens, i suspect that stops, and money, won't truly matter...and maybe i'll grab a bag of popcorn, sit back, and watch it fall, kinda like the final scene in fightclub...:cinema:

 

But by then, my trading will have more than paid for my vegie patch and self-sustaining farm, and hopefully my kids will grow up with a much simpler and more pure way of life...

 

FWIW - I'm bullish :shrug::ciao:

[jkent77 10]

I don't know how long you have been trading, but I find it useful to have a bullish or bearish view and slant my trades in that direction. But when I trade, I trade what I see, and I admit I was wrong easily and stop out if the market goes against me. We are definitely in a bear market (medium to long term) now, which to me means, it's a traders market (not for investors). I trade bear markets and ride bull markets. I follow only a few market services, 99% are worthless and will lose you money, particularly the widely marketed ones. I have subscribed to over 100 different market services to try to learn. One large heavily marketed service was bearish during the whole recent bull run (his followers lost their shirts).

In this bear market, I am short term bullish until about the 23rd or so of Sept., then short term bearish into early November and expect a short term "Christmas" rally after the elections (if conservatives go back in). If liberals stay in spending money we don't have, then all bets are off - down she goes and God help us.

[daedalus 10]

I guess the thing i'm always interested in is the possibility that the "status quo" has changed in our markets.

 

I mean, you look back historically and as thales pointed out with his charts, these DB's on the yearly charts lead to big rallies and the markets continue to rise rise rise...

 

But as TheDude, I feel, rightly pointed out... the US is effectively bankrupt. And at no point during our history have we been in as much debt and had our country effectivly owned by other nations... So all those charts, based on all those fundamentals... are they even valid with the completly different situation we're facing now?

 

Economically we are screwed and as of yet it hasn't really even been touched on by the mass media. When you look at what our country has done with its debt levels (and what it continues to do) I have to ask myself... are we in a completely different game these days?

 

One thing is as sure as the sun rising tomorrow is this - sooner or later we will have to endure that pain and its gonna be the end all be all of pain. And I can't imagine ANY positive earning report, stimulus, or bernake B.S. can save us from the cold hard facts that the good times have possibly come and gone and the status quo has done a 180.

 

Any thoughts?

[thalestrader 14]

... So all those charts... are they even valid with the completely different situation we're facing now? ...Any thoughts?

 

You believe that "its different this time."

 

It's not.

 

Trade on.

 

Best Wishes,

 

Thales

[SIUYA 11]

For me a couple of interesting things/questions have popped up in this thread, that always remind me of certain traits common to traders and habits.....

1) for a day trading site, where most traders don't hold positions over night, why even have an opinion for the long term.....seems to go against everything people talk often about.

2) even many who are bullish seem pretty pessimistic about the long term, and the reasons given seem locally and not globally focused. For centuries humans have been prophesizing doom and gloom, and yet here we are living in a time where globally people have never been better off.

3) are people trading the price action or the fundamentals?

4) with MMS compliments about people being smarter than him.... brains in this business dont mean success.

5) we cant predict the future even if we can imagine it, and even then this is more than likely to be flawed even with a 50-50 chance of being right or wrong.

6) the most expensive words in the English language - "this time its different"

7) its what we dont know that will hurt us.....the black swan event......so given the bearishness we are probably going up.

8) regardless of what our own personal political or historical views are, the market does not care.

[Kiwi 16]

Thales is right about different.

 

Its always different and yet, when you look back at history, its always the same.

 

I recall skimming a book about the lack of good journalism today and one of the points made was that if you compare stories written for dailies with weeklies with monthlies with historical context ... with time truth emerges. But it isn't in the dailies or the blogs because events and emotions swamp the underlying truth.

 

So, the truth: When something "big" happens it is rarely what you expect by reading the concerns of the day. The markets will go up and down. We'll have periods of high and low volatility in different timeframes. And I won't be able to predict when changes will come - I'll just have to go with the flow and manage my risk.

[Attila 10]

For me a couple of interesting things/questions have popped up in this thread, that always remind me of certain traits common to traders and habits.....

1) for a day trading site, where most traders don't hold positions over night, why even have an opinion for the long term.....seems to go against everything people talk often about.

2) even many who are bullish seem pretty pessimistic about the long term, and the reasons given seem locally and not globally focused. For centuries humans have been prophesizing doom and gloom, and yet here we are living in a time where globally people have never been better off.

3) are people trading the price action or the fundamentals?

4) with MMS compliments about people being smarter than him.... brains in this business don't mean success.

5) we cant predict the future even if we can imagine it, and even then this is more than likely to be flawed even with a 50-50 chance of being right or wrong.

6) the most expensive words in the English language - "this time its different"

7) its what we don't know that will hurt us.....the black swan event......so given the bearishness we are probably going up.

8) regardless of what our own personal political or historical views are, the market does not care.

 

Yup.. It is one reason from time to time I have sworn off Forums.. You end up thinking like the herd if you are easily influenced.. the need to predict the future so strong yet futile. Remember Darvas did best when he was away from the all the noise of Wall Street. For a Daytrader even a daily chart can be a bad influence, encouraging predicting....

[Phil-n-Texas 10]

I know there are a lot of really smart traders on TL. Whenever I read the forums posts and replies I'm usually pretty amazed. Really with few exceptions.

 

I'm not sure about you but seems like the marketing angle this fall to sell products/services is to take the "end is near" approach. My inbox is filled with services saying we are going to crash.

 

I realize this type of stuff is what sells -- nothing like some good 'ol fashioned fear. We see it everyday in the news.

 

However, I'm curious what the consensus is here on TL. Are you expecting the markets to go up or down between now and 12/31/10?

 

If up or down -- any thought on what type of move we are looking at? Is it the beginning of the end or will the market defy the skeptics and improve?

 

And, what are your reasons either technical or fundamental?

 

I'm going to formulate my thoughts shortly and post. I'm still debating between my desire for it to be positive and optimistic with the reality of the real world out there....and not trying to be jaded by the doom and gloom marketing I'm seeing either.......

 

MMS,

 

first time poster here so here it goes...

 

my analysis is pretty simple and is based on market flow analysis of swing highs and lows. looking at the $SPX, i view that we're still in a down trend when we broke support from 2/5/10 on 5/25/10 as we haven't made a new high since then. we came close in early August but fell short of breaking the 6/21/10 active high. yes it's more of a sideways range, but based on swing highs and lows my call is we're still in a down trend.

 

we currently have a the higher low of late August and closed above the central monthly pivot and R1 is sitting right at 1134 which is just above 6/21 and August highs.

 

if we maintain the August higher low and have a close above 6/21 high then the trend is up.

 

i tried to attach a basic chart... i extended the resistance line from 6/21 to the right to better illustrate that the August highs didn't take out the active high.

 

also, here's a link to another post i did on the subject that points out some potential areas of resistance and or targets should we continue the move up.

 

DJIA - Dow Jones Industrial Average BIG BOARD! (DOWI:DJI): $SPX charts...

 

specifically i'm keeping an eye on the two upper longer term TL's... i.e. the one that extends from April '10 high to August '10 high which we're testing now and then there's one that extends from 2007 high to the same April '10 high.

 

-phil