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Just What I Said

Published on July 6, 2010

Just What I Said

July 6, 2010

What a week that it was!! It’s very easy to say “just what I said” and pat your shoulder but the tough part is to say now what’s next? How do I benefit from what’s coming? I shall share what I mentioned to OPNewsletter members last week

So fireworks happened in the afternoon trading…
…today is a critical day. Usually after such a sell-off we should be expecting a rebound for 2-7 days but it doesn’t look like the case based on market futures. If Dow can’t hold on to the recent lows, I think 9,400 (+/- 50 or so) will reach quicker then many can imagine, S&P roughly to 1,000 to 975, NDX towards 1650..no one can forecast markets accurately…hence no predictions, a simple game of probability…..pls don’t share this outside this group.

Dow swiftly moved towards 9,600 before bouncing on last Friday. And what a market action it was on Friday afternoon.  Let me summarize in a simple way; hope zone (first 15mins), pain zone & sluggish zone (almost 3 hrs), then hope zone (2hrs and 45 mins) and finally, during last 12 mins, Dow dropped almost 70 points from the peak. Talk about Wall Street.

Market internals point to a bearish situation but in the short term markets are oversold.

  • Over 60% of stocks are in bearish zone
  • More than 65% NYSE stocks are trading below 200 day average
  • Almost 85% NYSE stocks are trading below 50days moving average
  • We had 3 90% down days and last week was full of down volume, everyday.

If there is a technical rebound, the levels that were earlier support will now turn into preliminary resistance areas. As I mentioned on my twitter streams sometimes back that even though VIX closed at 30.12, all the forward months are pricing VIX to be above 33 and that includes month’s as far as Feb’11 so traders are expecting volatility to stay here. Interesting times ahead.

China’s stock market is already in bear zone. Most eyes are watching now on China’s property market (other one being IPO of China Agriculture Bank, the largest in the world). Others Asian countries aren’t far behind either as prices are running high towards the peak levels. If US is potentially entering into double dip and Euro zone being in austerity zone, export driven Asia economies are going to find it hard to keep growing that doesn’t spell so well for the short term future. According to latest Bloomberg report, China’s property market is beginning a “collapse” that will hit the nation’s banking system, said Kenneth Rogoff, the Harvard University professor and former chief economist of the International Monetary Fund.

The world is choked with debt. Trillons of dollar has already been pumped to save economies. Just for perspective, 1 Dollar bill is 0.010922cm thick. So if you stack, a dollar bill on top of each other, $1Trillion is about 109, 220 Km in height, almost 1/4th distance to moon. Currently US has over $13trillion nation debt (almost $43,000/person or roughly about $2,000 per person on this planet) almost good enough stack two trips between moon and earth.  That’s only US, here is a list of countries with external debt. The figures are simply mind blowing. These are unprecedented times.

I am not sure where I read this first, but someone wise said this – “In Bear markets, winner is the one who loses the least”. Bear markets would like to engage as many traders as possible and when bear prowls it is ruthless. An important pattern has completed, there are lots of supports/resistances and we’ll handle it as it comes along. For the time being, I am watching the next level of supports as I mentioned above.

Our speculative trade on NDX is yielding over +400%, though I have already suggested OPN members, who took this trade, to book profits last week. We have replaced this trade with another high risk/high reward NDX trade.

Stay in touch, I will be sharing a powerful option trading strategy that can make money regardless the market direction but as long as it moves.

Profitable Trading, OP

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