Dipy,
I wouldn't be one bit surprised if you were eventually right, and in fact I anticipate that this will likely happen. I just think that day is some time off, and in between now and then we will have a rally off the long-term trendline support. In my view, there just is not sufficient selling pressure available anymore to convincingly drive stocks below that trendline. The overwhelming selling pressure which might have done so has already fired both barrels, much of it is likely in short positions, and there is money waiting to enter on the long side (and there is evidence that at least some stocks have been under quiet but determined accumulation for some time, even as analysts issue further downgrades and news stories bemoan AG, consumer confidence, and economic slowdown, et al.
Still, IMHO you are correct: capitulation is not present, as measured by either the put/call ratios, or any sentiment indicator. I don't at all mean to imply that capitulation is present, or even close. Nor do I mean to imply that the market has reached anything like a climactic bottom and reversal there.
But my scenario vis-a-vis analyst upgrades/downgrades and market manipulation and big money at the ready doesn't at all depend on capitulation. It only depends on driving prices to relative tops and bottoms---and then, effectively reversing direction. They don't have to be the top or bottom. So, while we await a probable true bottom, with its characteristic widespread investor despondency and indifference and excessively high put/call ratios and so forth, why have dead money sitting around? Why not run things up, and then down again, and let the market find The Bottom in its own time? This, I think, is precisely what the big boys have been doing, and will continue to do. You can see this being played out in many time frames.
For example, you can see it play out virtually every day, when some MM gaps a stock up (or down, for that matter) excessively, the retail orders (the impetus for the excessive gap) fill at the open at excessively high prices, the buying pressure evaporates because there's no real buying pressure into the open, and then there's a sudden, sharp selloff as the big boys, having taken short positions, now dump massive inventory into the market, driving the price down, much to the horror of the rank and file, who play right into the game by dumping shares and adding gasoline to the fire; the big boys cover their positions, and now rapidly take long positions, both of which halt the free-fall in its tracks, and create sudden and massive buying pressure; the stock moves sharply upwards, the momentum players join the fray, and as they do, the big boys sell into the strength and call it a day---all in the space of 30 minutes or less!
I don't think they particularly care where the true tops and true bottoms are; they are just intent on making money all along the way, any which way they can---long, short, or straddled.
JMVHO, of course......
WS |
