Tuesday, January 13, 2009

Market Talk

Unless there is some fantastic news that temporarily diverts the attention of traders from the world's ills, be it catching Osama (remember him?) or magical earnings from some important names, then it will be just a matter of time before we break SPY 85.5. Once that occurs then the bulls have to either make a stance at this important support zone or be prepared for a retest of December lows (82) and subsequent November lows (74).

Sunday, January 11, 2009

SPY talk

Market is at a critical juncture and bulls have to step up to the plate tomorrow morning to hold SPY support at 89 which is daily support, up-trend line and convergence of 20/50dma. If this level does not hold next stop will be 85. A strong bounce will be needed to get away from this support zone as soon as possible. If we do not pull away from SPY 89, and instead remain at this level, forming a horizontal base, then the market will likely just be delaying the inevitable and breaking down through this level later this week.

We're day-traders who trade around support/resistance but we always have an eye on the longer-term picture. We find the following chart terrifying. Unfortunately it is the chart of the S&P 500. How would we interpret this chart? We bounced on multi-year support, now we're basing above, and sometime this year will go back and break-down below last year's lows. However this time it will not be an electrifying vertical drop down like it was in 2008 but an exhausting day to day grind down on diminishing volume. And after months of months of slow losses, of investor hopelessness, of dwindling income and attrition from our ranks, including finally some of the best and brightest, then we will be close to finding the next multi-year bottom, possibly in late 2009 or 2010. And that is our optimistic view. Of course, we have our share of wrong calls and we hope this is one of them. However, note that our market prediction for 2008 made in Jan 2008 was a 20% hair-cut for the market, again, too optimistic.