Thanks, too bad that post was followed up this morning with one to shamsaee stating I thought the fed rumors were just rumors. Doh!
Tonight's thoughts from our thread.....
By L3_Aka_L3 on Thursday, January 04, 2001 - 12:14 am: Edit
Dave - Excellent points. I was just telling Don, I am not sure how to write tonight's post. I don't want to sound too bullish but I don't want to come off as bearish either.
I think we are seeing a mid term trend reversal so in that regard I am bullish. On the other hand, I am not saying all stocks will rocket upwards now even the majority of what most active traders focus on. I see a lot of great short targets right now. Most of the defensive stocks that were run up to tech like valuations have already started thier descent today. Stocks like JNJ, PG, MRK, MO and other flight to safety stocks could drop significantly here. This is a market of rotation and you have to follow the bouncing ball.
I also think today was at least half short panic covering. I have already read numerous reports about big institutions fighting to get executions done and 30 minute backlogs due to order imbalances. Basically today was a panic situation for shorts just like an all out market crash would be for longs. Because of this, many of the things that shot up like rockets will drop again given time. This is where we have to sort out the wheat from the chaff and see what stays up and has strength.
We must also keep in mind that FA wise, not much has changed. Everyone knew that sooner or later the Fed would have to cut rates. We also know that we will get a whole mess of bad news over the next 6-9 months before the cuts start to be felt in the economy. That means at least 2 quarters of bad earnings misses, warnings, potential bankruptcies and business build out slowdowns. There will be many more declines to come and bargains to be had. I would be surprised if many institutions don't sell or at least bide thier time waiting to see who will be hurt and who will survive or climb to the top as the next few quarters unfold. I repeat once again, new leadership will likely emerge from this.
There are however some very bullish signs. The weekly charts are showing numerous buy signals already as they bounced off of trendlines, fork tines and fib retrace levels. As Don pointed out, there have been some nice bullish divergences in the new highs/lows and knowing that there were 90,000 commercial shorts out there that need to cover means that there will likely be some buying over the next couple weeks.
I missed my entries today due to work so I managed to only get long some QQQ. My first target for the NDX is around the 2800 level with the 3000 level being the next target based on fib targets of 38% and 50%. If we surpass those without a consolidation pullback of some sort, I will likely go short at the 62% level of 3300 based on FA and fib retracement rules. Of course this assumes we go up for a few days. We could just as easily consolidate here a while until the economic reports come out Friday. After all something scared the Fed into drastic action today. One of these upcoming reports could be really really bad and spook the market once again.
Some things to keep in mind. We still have a bunch of earnings warnings left to go. History also shows that in a recession, the market still tended to make the lowest low 3 months AFTER the first rate cut. Don and I agree we have pretty much seen the low in the NASDAQ and we expect the next wave of selling to probably be focused on DOW stocks.
Basically, I am long, have an upward bias but don't want to see too much irrational exuberance for we still have some tough times ahead. I want to be flat before the Fed meets 31 Jan or at least hedged or straddled. I think we have likely seen the lows for a while but still have loose stops in place and will start peeling off profits around 2800 NDX and keep selling into 3000 with the goal of being short by 3300.
EDIT - Tomorrow's expectations for the economic reports.....
Initial Claims - 350K
Factory Orders - up 1.4%
NAPM Services - 57.0%
Good Luck,
Lee |
