There seems to be some nervousness each time the market comes off a low. I must stress to everyone that you should do all the research you can to solidify your standing and reasoning for a position.
That being said, the following is my opinion. I don't want anyone to trade off this opinion alone, but do your research, because I could be wrong just as anyone else.
Now, I have only sold a handful of S&P Puts which I bought near the 1180 mark and that was just to take a few profits. I still hold a large number (almost 300) of them as a primary trade. They are deep out of the money Puts and I plan on holding the bulk of them still. It is of my opinion that this market is in deep trouble. The Nasdaq decline over the last year was a premonition for what will happen to the DOW and S&P and we have already started to see this. I am nearly 100% confident in my positions based on my research as I see the DOW likely trading below 8000 and the S&P below 1000 sometime within the next 3-4- weeks. On an economic basis, we are heading into a recession as earnings are declining and production slows. This is only the beginning in my opinion, as we are now starting to see stories of the spread going global. Major companies are still laying off by the thousands and the effect has yet to trickle down to the retail, service, fast food, etc., level. Think bigger picture and not the day to day blurbs you see on CNBC or wherever. On a charting level, we have come off a stock market mania that has far exceeded the levels of 1929. I don't care what anyone says, this is not sustainable and like any rubber band, the further you pull on it, the further it will snap back. We have broken several key support levels on the way down suggesting that there is now great weakness in the markets and rapidly decling earnings or simple rate cuts are not going to help so soon. Chart patterns in a larger picture are bearish. I do not see any bullish patterns. What we saw over the last few days was a classic bear market rally where we see powerful surges in very little time. They are episodes of panic buying and short covering in one and are liekly to fool both bulls and bears into thinking a new run has started. A new bull run will never start with one of these surges, especially after a mania we just finished. The likely scenario will be a dragging market that gradually comes off its lows over a period of weeks, not hours. From an elliot wave standpoint, I cannot see any bullish counts whatsoever, and the only ones I can possibly come up with all suggest more downside is to come. The best fitting counts in fact, are now suggesting that we have only completed wave 1 of 3 down. This first wave took us down about 1700 points on the DOW so imagine where wave 3 down will take us. Yes, we will have some strong tradable rallies, but new lows will eventually be found.
I stand by my opinion. |
