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Today was the bottom. Yes, THE bottom...

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May 26, 2010 – Comments (44) | RELATED TICKERS: GAME , O , VR

I honestly think today we saw the bottom of this correction.

And when I say the bottom I mean the range that we saw today: Somewhere between 1040 on S&P (which was the low for the day) and 1074 (the high of the day, which was also S&P's closing value).

And yes, I did change my mind. I did say recently I expect DOW to go all the way down to 9,000, but today, I just don't think anymore that's really going to happen.

Why?

First of all, everybody is expecting a bounce. Yes, just a bounce. Nothing more. Nobody believes market can start ralliying again and get to a new 52W high. Nobody. Neither Bulls nor Bears. However, I think the market is going to surprise everyone by doing just that. Hitting a new high without hitting a new low (new low being below 1040 on S&P, which I called the bottom above).

Secondly, last time this same thing had happened (S&P being very low in the morning just to finish at the day's high in slightly positive territory) was on 2/5/10, which marked the end of the previous correction (the one that started on 1/20/10).

Here are a couple of dates from that time, just to refresh your memory:

First the chart from 11/12/2009 to 2/5/10 so you can see the correction 

 

And now the chart that will show you what happened after 2/5/10 (once again, the day that looked just like what we saw today)

I hope you get the picture (literally).

And the third reason I think we saw the bottom today is that the volume of shares traded during this correction vas very low. Nonsignificant. I know some of you might disagree with this statement, but if you do, I'm sure you are looking at the wrong volume. Don't look at the volume on DOW or S&Pchart, but look at the volume of stocks that are tenfold (or more) up from their March 2009 lows. When you do that, you will see what I mean (I plan on posting a little something on the volume over the weekend).

So that would be my case for the bottom of this correction. Nothing scientific. Just my opinion. I'm sure you have yours too (and probably much different than mine).

Good luck to all of you whether you agree or disagree with me!

 

Disclaimer: I had a few beers before I started working on this post. Had a couple more while working on it.

44 Comments – Post Your Own

#1) On May 26, 2010 at 6:35 AM, ayekappy (< 20) wrote:

I think it was the ultimate gap fill, but it took it all day.  So today might see some green, then it's hammer time.

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#2) On May 26, 2010 at 6:55 AM, sentinelbrit (86.14) wrote:

I have resisted the temptation to sell and bought a few stocks on the way down. Of course, one can't rule out a decline back to 9000 or lower (anything can happen), but on balance I think we go higher. Throughout this market rally I have been of the opinion that until Mr & Mrs Smith start buying in a big way the market won't top. We started to see more retail buying in April but nothing spectacular. Some believe that the last bear market has had such a profound effect on retail investors that they will not return. Hmmm...human nature tells me they will. In any case, I don't think stocks are overvalued and my guess is that global growth will pick up. The latter is the factor that will surprise all the bears and even bulls and will drive the market higher.

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#3) On May 26, 2010 at 9:00 AM, Gemini846 (49.62) wrote:

I read a bunch of bearish news yesterday and was thinking.. this media is to bearish. Usually crashes come when the talking heads are all saying.. Hey we thought we were bearish, but Mea Culpa we were wrong, this rally has legs... oops.. WTF down 1k today?

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#4) On May 26, 2010 at 9:14 AM, portefeuille (99.60) wrote:

Nobody believes market can start ralliying again and get to a new 52W high.

I think that the probability for the event S&P 500 index makes a new 52w high before August 2010 is around 0.7 ("70%"). So does my usual chart I guess (see here). If it does not it will probably make one later in 2010. I give "no new 52w high in 2010" a probability of around 0.15.

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#5) On May 26, 2010 at 9:23 AM, portefeuille (99.60) wrote:

I made my first "major 2010 stock purchases" (ATPG and AIXG shares) in the last 2 weeks.

My largest positions ("top 10") are currently

EMC - EMC shares and call options,
ATPG - ATP Oil & Gas,
DBK:GR (DB) - Deutsche Bank,
DAI:GR (DAI) - Daimler,
Indian equities fund,
Mining fund,
EURO STOXX 50 ETF,
BAS:GR - BASF,
Emerging Markets fund,
HEN3:GR - Henkel,

not exactly a "defensive" portfolio.

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#6) On May 26, 2010 at 9:24 AM, portefeuille (99.60) wrote:

around 0.15

around 0.10

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#7) On May 26, 2010 at 9:41 AM, portefeuille (99.60) wrote:

my usual chart

my usual chart.



enlarge

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#8) On May 26, 2010 at 9:50 AM, portefeuille (99.60) wrote:

And don't forget indices like good old DAX that will make new 52w highs soon as well. I think ...

DAX.



enlarge

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#9) On May 26, 2010 at 11:18 AM, EnigmaDude (88.53) wrote:

I was worried yesterday when GMX blogged that all bearish bets should be closed.  Usually when the bears think the tide has turned its just the market doing a head fake.  But it is starting to look like good news is driving the market higher. 

I'm still cautious but things are looking up.  You might be onto something!

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#10) On May 26, 2010 at 12:07 PM, biotechmgr (34.99) wrote:

This is great, I could not wait to hear the bottom calls and here is the beginning along with another poster. The more of you that start believing that, the more I believe that the market will resume decline after a nice rebound. There are many ups and down in bear markets too.

Honestly, did all the bad news disappear? I shall not recount it all here. No, just like in 2007-2009, there were waves of optimism and pessimism, reaching an inflection point where the trend turned downward.

By my reckoning stocks are winding up for the big turn, and the current wave is a retracement upward to be followed by a confirmation of the downturn and the inflection point of recognition.

www.elliottwave.com

PS I covered my ST bearish bets at SP1050 and will reshort this rebound up.

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#11) On May 26, 2010 at 12:20 PM, dragonLZ (99.33) wrote:

Eye, I guess will see soon...

Sentinel, you said it. I share your opinion 99.9% (not quite sure about Mr & Mrs Smith)... :)

Gemini, not just media, I think everybody's too bearish these days.

Porte, when I said "nobody believes this market can hit a new 52W high", I knew you won't agree with that statement. I know you are a believer (from your chart5 post)... :)

Enigmadude, don't believe everything you read (especially don't believe in what Bears are saying during a bull market. Also don't believe in what Bulls are saying during a bear market. I guess the only problem is in knowing when are we in a bull and when are we in a bear market)... :)

Good Luck All!

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#12) On May 26, 2010 at 12:20 PM, portefeuille (99.60) wrote:

I shall not recount it all here.

Why not? What is new about the "debt situation in Europe" for example?

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#13) On May 26, 2010 at 12:24 PM, Superdrol (97.38) wrote:

I am going to have to disagree.  We may get a brief rally, but the technical charts are still pointing downward.

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#14) On May 26, 2010 at 12:32 PM, dragonLZ (99.33) wrote:

biotechmgr, weren't you the one who called the Market Top 2009 in September of 2009?

I guess you also thought market topped back in July of 2009 as you still have quite a few green-thumbs on Ultra Bear ETF's from that time (down 60-80 points on every single one).

I'm not trying to be rude (I know we all make wrong calls), but you sound like you are reading this market like an open book.

What do you think has changed so significantly in your interpretation of the Elliot wave from July/Sept. of 2009 to today to make you so sure about the market today?

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#15) On May 26, 2010 at 12:35 PM, dragonLZ (99.33) wrote:

I am going to have to disagree.  We may get a brief rally, but the technical charts are still pointing downward.

Superdrol, what technicals (I'm sure it's not Porte's chart :)? Care to elaborate?

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#16) On May 26, 2010 at 12:59 PM, Superdrol (97.38) wrote:

Sure no problem.  I also am a technician.  80% technicals 20% fundamentals.  I created this post over the weekend.

 

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=395669&t=01001545002054304245

 

Also today there were strong put option buyers for the September 870 in the S&P-500.

 

Unfortunately, I think we have further to go down.  Not end of the world collapse, but at least 900-1000 in the S&P-500 before I'd call a bottom.

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#17) On May 26, 2010 at 1:10 PM, TSIF (99.96) wrote:

We're clearly at a crossroads here.  This will be a point in time that bears/bulls will look back on. One will have missed opportunity.  

I'd have to say that while I'm a serious believer in Technical Analysis, the hard core Elliot fans who called the top and bottom in the wrong places just won't give up. (A few exceptions here on CAPS, gotta love Binve when he's right or wrong, at least he's willing to mingle with anyone and trade ideas).   Take the same set of charts, start your 1,2,3 and abc's in a different place and you get a different answer. I like technicals in absence of hard core fundamentals, but unfortunately sentiment and fundamentals change all the time.  Technicals/Elliot are one tool in your arsenal. 

What has changed that should keep us from being bearish?  The economy still stinks, unemployment is high, mortgage forclosures continue, governments are bloated above their ability to bring in income worldwide..etc...etc..etc.

I'd  have to agree, these aren't the best of times, but there are still TRILLIONS pouring into the financial markets. It has to go somewhere.  WE had our worse March 9, 2009.  Why can't we be off the lows and on the recovery. Are we worse off than that fearful undershoot that was so ludicrious it didn't last a day.

We're still worse off compared to what?? Yesterday???

Any of these scenerios are possible.  This could be the end of the correction, this could be a faint bull run, this could be a bull run in a bear market, the correction could have been a bear run in a bull market.  

Stay nimble, find your bargains, make your plan, but one thing I've proven to myself enough times.  If I don't play then I can't win.  What's my risk/reward??   If I over react to short term market moves then I usually do myself in.   A bear in a cave will miss the crop of berries growing outside until they are gone.  A bull who tears the fence down too many times will become dinner for the farmer.

Have fun, learn something. If you're not doing the former, then you might try a new hobby, if you're not doing the later, then you won't last very long.

TSIF 

 

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#18) On May 26, 2010 at 1:43 PM, TSIF (99.96) wrote:

I like your stuff Superdrol.  I think sometimes when we debate we have different interpretations of short term, long term, etc.and debate ourselves into a circle.   I agree with your blog, for what my $0.02 is worth.  The resistance at 1200 is strong, we could drop hard, or break through it. Your 80% technicals and 20% fundamentals sounds like a good mix.  You're open to other possiblilities, and while you give your odds for one direction or the other, you know that even a low odds play is possible.   Keep up the good work!!

 

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#19) On May 26, 2010 at 2:08 PM, dragonLZ (99.33) wrote:

Superdrol, on your blog you said: "Friday (5/21/10) was a sign to go long."

I agree.

That's why I created this player May2110.

I created this portfolio at the end of the day last Friday, and I based my picks on the the returns of individual stocks for that day (check the profile of this player).

I think the stocks that had nice (or huge) jumps last Friday will be leading this rally back out of the hole.

I know it's too early to tell, but today this portfolio is up 340 points.

I guess will know more soon...

Good Luck to All!

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#20) On May 26, 2010 at 2:15 PM, Mstinterestinman (20.76) wrote:

Well reach new highs then the Retail investors will pile in because dow 20k is coming then the bubble pops. I cant tell you the day or the year but the cycle is same regardless.

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#21) On May 26, 2010 at 2:18 PM, Superdrol (97.38) wrote:

Thanks guys.  Short-term volatility is pretty difficult to trade around.  Long-term really is what direction the market begins to take, so you can be appropriately on the right side of it.

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#22) On May 26, 2010 at 2:21 PM, dragonLZ (99.33) wrote:

A bull who tears the fence down too many times will become dinner for the farmer.

TSIF, I'm sure you've heard of invisible fences for dogs?

I wonder if they also make them for bulls. I think I need one of those collars.

Last time I tore a fence down, my farmer gave me the last warning. I guess it's better to be zapped by electricity from time to time than to get on the dinner table... :)

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#23) On May 26, 2010 at 2:26 PM, IIcx (< 20) wrote:

dragonLZ,

rec for the post but the headline made me chuckle when I saw it.

The post was created today. How is it possible for today to be a "was"? Maybe I'm missing the point?

Bottom was SPX 1040?

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#24) On May 26, 2010 at 2:29 PM, Mstinterestinman (20.76) wrote:

I know I will sound crazy but I believe our longterm bearmarket was 2000-2009. I am quite optimisitc about this next decade. Again I cant say where we will head tomorrow but I am fairly confident based on the historical patterns that we will see a five to ten year boom from here and new highs.

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#25) On May 26, 2010 at 2:30 PM, Mstinterestinman (20.76) wrote:

P.S. I am confident in the fundamental of my portfolio will admit most of my holdings pay a dividend which definately helps your patience.

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#26) On May 26, 2010 at 2:41 PM, TSIF (99.96) wrote:

#22  Bulls are too obstinant for that trick.  Also their neural network is too slow.  Hence the term bullheaded.    That's why most bulls don't heed the warning signals that the bears are going for a short romp.  The bears genenerally are lazy, however, and you can let them romp around from time to time. Not worth a fight as they'll go back into their cave when they get tired.    Be careful messing with the farmer. There are worse things than being put on the dinner table.......

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#27) On May 26, 2010 at 3:28 PM, dragonLZ (99.33) wrote:

rec for the post but the headline made me chuckle when I saw it.

The post was created today. How is it possible for today to be a "was"? Maybe I'm missing the point?

IIcx, I started this post last night (before midnight), and I was talking about the action on Tuesday, not Wednesday. That's why there is today and was in the same sentence (market was closed at that time, but it was still Tuesday).

However, because I was watching Suns-Lakers game (and working on my beers), I finished and submitted the post after midnight.

Does this explain it?

If not, keep in mind english is my second language and maybe I really didn't word it correctly.

Thaks for the rec, btw., and Good Luck!

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#28) On May 26, 2010 at 3:33 PM, russiangambit (29.42) wrote:

Bulls/ bears, who cares? In the end, it is all about liquidity and credit. The credit is getting tight due to european crisis, this is why stocks are all over the place.

I don't have an insight into the credit situation, though, beyond what is on Bloomberg. So it is hard to tell what is going on behind the curtain and whether the things are getting better.

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#29) On May 26, 2010 at 3:36 PM, brickcityman (< 20) wrote:

nuh uhh

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#30) On May 26, 2010 at 3:43 PM, outoffocus (23.22) wrote:

nuh uhh

Very cogent and well reasoned argument

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#31) On May 26, 2010 at 3:47 PM, dragonLZ (99.33) wrote:

In the end, it is all about liquidity and credit.

So it is hard to tell what is going on behind the curtain and whether the things are getting better.

russiangambit, I don't think it's about liquidity and credit, and I don't think it's about the thigs getting better (or worse). I really don't.

Think about it. If it really was that "easy" (just figuring out is it getting better or worse) wouldn't more people be making gazzillions in the stock market? JMO.

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#32) On May 26, 2010 at 4:13 PM, topsecret10 (< 20) wrote:

 We will test 9750.....    Any CLOSE below that number on the dow and we are heading for 9000 or lower....      TS

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#33) On May 26, 2010 at 4:21 PM, IIcx (< 20) wrote:

Good Luck to you to but I think you actually got it right -- we needed a higher low.

Best, IIcx 

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#34) On May 26, 2010 at 5:08 PM, rexlove (99.46) wrote:

Another interesting sign that I see that market is changing is that the small cap companies started going up ahead of the large cap. The small caps tend to lead the large caps all the time both on the way up and the way down.

Very interesting market action yesterday. The turn around in the market in the middle of the day is very telling and I think a strong sign the market is moving up. While I was expecting only about a 10% correction from market highs as opposed to the 12% that we saw - you can never account for market news and sentiment that can drive the markets wild.  

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#35) On May 27, 2010 at 1:09 AM, ralphmachio (25.75) wrote:

I think the market is heading skyward! ain't no stoppin' it now! so much good news! 

What? My bull suit not convincing enough? I have sold my long term FAZ position, my DRV position, my shorts in ZION, ROV, BEXP,XIDE and actually ended the day with some positive shares of BEXP. Feels weird. Like my fly is open. Luckily, that leaves me with more than enough day trading power to correct any lapse in judgement, short of a war or serious Euro problems- other than the ones we already got.

Two things that concern me: Lack of selling conviction before we bounced from low, and selloff late in the day today on strong volume. The market is skittish.  

It is amazing though, how used to ignoring the facts so many have become. There will be a day where reality bites the bulls in the ass with housing, debt, and  the insustainable nature of our economy in general. Till that day, I'm no longer a bull or a bear, I'm just trying to be on the right side of the trade.  

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#36) On May 27, 2010 at 8:59 AM, russiangambit (29.42) wrote:

> Think about it. If it really was that "easy" (just figuring out is it getting better or worse) wouldn't more people be making gazzillions in the stock market?

It is not easy to figure out the amount of liquidity, the rate of its flow, the credit avialble. You need to have access to all the FED and central banks info as well as the private banks info. FED has it, but they can't figure it out , or they itnentionally ignore the information.

Either way, it is not easy at all. It is like trying to predict a hurracaine several months in advance.

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#37) On May 28, 2010 at 12:26 AM, dragonLZ (99.33) wrote:

russiangambit, you might be right.

rexlove, I agree with you about small caps.

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#38) On May 28, 2010 at 12:36 AM, dragonLZ (99.33) wrote:

Did anyone notice that player May2110, a 4 day old player who's mentioned above in comment# 19, is already a 95 rating player with 74.5% accuracy.

Out of 200 stocks from this portfolio, 199 were up today (only stock being down MCO, down 0.05%).

185 stocks from this portfolio were up more than 3% today.

I know it's too eary to draw any conclusions (and today was a crazy day), but I think it's interesting what happened with this portfolio so far.

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#39) On May 30, 2010 at 5:29 PM, topsecret09 (37.04) wrote:

Next test 9750 on the dow....   :)    TS

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#40) On May 30, 2010 at 5:32 PM, topsecret09 (37.04) wrote:

  Oh, I almost forgot....  + 1 Rec for all the encouragement on some of my prior blogs...   :)     Lets see how all this plays out over the summer shall we.....    TS

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#41) On May 30, 2010 at 11:28 PM, dragonLZ (99.33) wrote:

TS, just so you know, # 10 rec on your latest post came from me... :)

And thank you for being so nice and polite both here and in your answer to my comment on your blog. Honestly.

And yes, I can't wait for this summer to be over to show you I was right and you were wrong... :)

p.s. If we don't fall below "my bottom" of 1040 before the beginning of September, would you agree that would mean I was right and you were wrong?  

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#42) On June 01, 2010 at 2:09 AM, HarryCarysGhost (99.69) wrote:

However, because I was watching Suns-Lakers game (and working on my beers)

Lol, I hope it was a Bud.

Current situation- more downward action let's say 9500

See ya on the way to 12000

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#43) On June 01, 2010 at 3:57 PM, StatsGeek (29.39) wrote:

Dow 2,000 within 3 years

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#44) On June 01, 2010 at 3:58 PM, StatsGeek (29.39) wrote:

And no, that's not a typo.  I didn't forget a zero.

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