. . . . . What a Difference A Day Makes . . . . .
Friday, the 13th was atypical in many ways. And that could be shrugged off if it wasn't EXACTLY the thing we've been waiting on.
OK. You know how we all waited for the big money players to come back from France or the Hamptons or wherever they all go during the summer? And you know how the media played up that they were all coming back just after Labor Day. But I predicted that we would instead get slammed after Labor Day? That was because I knew that the big money doesn't really come back in September, but rather October.
So around September 29th [30 days has September], I started getting into the markets more heavily. . . In anticipation of the Oct. 3rd FED meeting, [where everyone was CERTAIN we would get a neutral stance and didn't]. . . But also in anticipation of the Big Boys coming back with their volume.
Well, they came back with their volume alright. They slammed the first two weeks of October harder than their underlings slammed September. Now who could have predicted a 6 consecutive week slam?
Anyway, the significant thing about all this is yesterday.
What was so unusual about yesterdays trading over every other trading day in the summer. The typical "Light Summer Bear Trading Range" day [as I named it back in April] had high volatility, low volume and a downward bias. That is due to the fact that it is far easier to manipulate a thinly traded stock or a thinly traded market. And bear markets, even Summer Bears drift lower.
But all that changed yesterday.
Interestingly, the change began as the VIX hit 30, so that theory held water quite well.
Yesterday, we investors feared. But what was it we feared? The Summer Bear? But he didn't bite. And in fact, the Summer Bear has gone back into HI-BEAR-nation until the Spring!! Which is probably why they call that elite group of big traders BEARS in the FIRST place!! It didn't matter WHAT we feared. It was only important that we feared SOMETHING!! Enough to keep us from jumping in with both feet! And we were played perfectly.
Why do I say this? Take a good long look at the tech trading yesterday. Look at the Nasdaq COMPX & NDX on a graph with candlesticks. . .make the candlesticks, nice and fat. Look at a 60 minute, and a 15 minute. Look at Fridays action. Compare it with any other day in the past 7 months.
Not only do we not see the wild swings in the markets up and down and up again, which is obvious to everyone. But we no longer see as many smaller swings in the intraday when you look closer. And that means there are fewer near-term battles being waged. Stocks which resisted any upward moves for the past 7 months. . .suddenly were "allowed" to run without restriction.
IMPORTANT NOTE: There is a danger here, since this type of restriction free trading is also how we are set up for 4 Day Margin Liquidation Squeezes.
So even within sectors and individual issues, we no longer see the "yank". . . where the price works its way gradually higher and higher then YANK!! The floor drops out, everyone runs for the door and the party is over. That play was virtually gone from trading yesterday.
Not only that. But take a good long look at volume. Not just on the indices, which were obvious. But look at the tech stocks. One after another after another had considerably greater volume yesterday than at most any point in the 7 preceding months [on no news].
Were these private investors? Individual investors shrugging off the war potential? Shrugging off the oil crises? Shrugging off the .09% PPI number 3 TIMES what was expected!!? Shrugging off the renewed interest rate fears?
No! This board is a good enough cross-section of individual investors. I didn't see everyone piling in on stocks in the morning. Nor did I see it anywhere else where the individual investors were. It wasn't us. Plain and simple.
The Enormous Rally of Friday the 13th which reached historic heights was made up almost entirely of what are referred to as "strong hands". . . primarily, the Hedge Funds, Fund Managers and Brokerage Houses. Remember the "weak hands" gave up their shares on Thursday.
So for the time being, it appears that not only have the Big Boys entered the market beginning in October. . .but over the last two weeks they increased the volume to the down side. Remember that Thursdays historic lows were on extremely heavy volume. That was no doubt made up of short-covering INTO the panic selling.
So Friday morning, October 13th was the perfect day NOT to take the markets higher in a major way. The one day where the individual investors would be too afraid to join in. The Perfect Day!
And it worked perfectly. Gotta hand them credit for such an excellent play. I wish I could have seen this for what it was as it was happening, but I am simply spread too thin during the trading day until I complete my work on the website. That is why I am still "officially on vacation". . . because my eyes are not as reliable as usual in seeing what is not supposed to be seen. Instead I wake up in the night with the answer to the prior days problems. . .which is too late to be of much good.
But at least we can now alter the way we think of this market. Generally, when the Big Boys turn long, they do so with a longer time frame than we are accustomed. They could conceivably take us higher straight through earnings week. . . straight through Asian woes. . . straight through the Election and all the way to December. . . . although they generally leave by the second week of December and do not return until January. . . which would set up another round of Holidility but based more on the Summer Bear model. . . however, this past December the Individual Investors stepped up to the plate and took the markets higher and higher without the Big Boys. . . .which is why they stepped in on January 3rd and slammed us silly.
I realize I am once again going out on a limb. . .and some will say I am taking too much risk in doing so. But unless I see this heavier volume removed from trading I am going to hold my long positions. I am not expecting a dump on Monday or Tuesday, but rather similar "non-volatile" trading like we saw on Friday. The kind that keep all the candlesticks white. The kind we saw last year on October 28th run straight through into December. [AGAIN it is important to note that I will turn on a dime, should I see further signs that another 4DML is about to be waged on us.]
Now one thing about all this is notable. The year 2000 has far more volatility than any year preceding it. . .probably going back to the 30's. So any calls made in the year 2000 are less reliable than those made in previous years. Thats just the way these current markets are. . . .whether using TA, Value, Subjective Indicators or tea leaves. . . predicting in the volatility of 2000 is an enormous challenge.
So while I am bullish, I am not foolish. I would not get fully invested and take near-term trading positions and then turn my back on this market. I believe that will always be dangerous. . . . even though not long ago it was not. But we have seen how useful a tool the 4MDLs are. So the enemy is never to be trusted.
However, I believe now we have a better understanding of their game plan and the effects of it on our trading.
As long as volume remains strong and volatility light. . .I will remain bullish tech stocks. . . and fully expect to remain long for about 7 weeks. Once we make it to the first week of December, it is time to re-evaluate. Or if volume drops back out of the markets or volatility increases dramatically, then we would also need to re-evaluate.
But for now I am playing on the side of the big money until I see reason enough why I shouldn't.
Rande Is |
