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Friday, July 17, 2009

Another 2009 Prediction came true

I covered half way through the year results of 2009 predictions. There was a few with "Jury still out", I quote:
  • In Q2, the market will pull back, sucking the bears in for the short of a lifetime. They will be disappointed as the market rallies back in Q2/Q3 and hurts the bears.
    Oh god, I hope I was wrong! Because I am the sucker I predicted!
  • After the rally of Q2/Q3, the market will finally collapse to new lows in Q3/Q4.
    This one I still agree, Q4 lower than now. Time will tell
Well, unfortunately I was right, there was a major bear trap, the head and shoulders I was talking about is a MAJOR bear market pattern. This pattern typically precedes a market fall. I repeatedly pointed out unless the SPX closes below 870, the pattern wasn't confirmed in my book. Well, it closed around 880 for 3 days then took off starting Monday. I took my positions when SPX first hit around 930 back months ago. Today SPX closed at 940.

I got severely hurt this week, as I am sure anyone who is trying to short. The SPX ran up about 7% in FOUR DAYS! A normal bull market rises slowly, as it did in 2005, 7% in about 1 year!

Below is 2005, and last four days. Below that, chart showing the BEAR market trap. In my opinion, I will call this past week satisfying my prediction back on 1/1/2009 there would be a bear market trap, "short of a lifetime". What is now still pending is my prediction of a market DUMP now, in Q3 into Q4.

Sometimes it is very painful to be right, I'll comment on my poor trading on this event below these 3 graphs.
From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog
So, if I am so frigging smart, why didn't I cover all my shorts a week ago? Worst case Monday on the open when I realized the trap was set? (click)

Well there are a few reasons. First, and foremost, Greed. I "believe" we are headed down, in the near term, and much much lower % wise than % higher. So risk to reward is down. And due to all the volatility, I am afraid over-night the market will fall hard. I would then be in a position trying to chase/establish positions. Since it is quite obvious I can't predict exact dates (no one can, except Goldman Sachs), I must place my bets on the next major move.

I did realize that this market is violent, and as I stated many times, 2009 is going to SUCK for trading. The cat is out of the bag, and we all know the economy is sick. Volatility is the price to avoid a market cascade straight down, everyone has to be kept second guessing the next move.

And finally, NOTHING that pays well is EASY. My saying on this blog is "There is no such thing as a free bailout". Also, there is no such thing as FREE MONEY. The angst of the market is the PRICE for the reward that must be paid. Trading is work, not just in reading, and understanding, but in execution. The pain is 3x now because politics is now manipulating the markets. If you want to short in a less painful way, wait until the DOW is at 4,000 flat lined, you may short wait 3 months and gain 2% profit.

In this environment, (assuming I am right), when this bear turns, expect 2x + profit.

In any event, my timing could be waaaay off still. One of the services I pay for is calling for SPX 1050 "This waved C-up move should be very strong, taking the Industrials up to the 9,700ish area and the S&P 500 to the 1,050ish area. " Pay for the service at: https://www.technicalindicatorindex.com

If Tuesday by noon we haven't turned, you are probably best off not reading my blog again and protecting your remaining cash. If the market does turn, it just means reality is starting to come back to the markets, it isn't a miracle.

Thanks to John Chinnock for being my emotional counselor through this. :)

4 comments:

  1. Sometimes selling and sitting on the side lines helps clear your mind. Last week was a rough week for me so I just sold Monday and sat this week out.

    Gonna try to short some today though. Not much but a taste.

    ReplyDelete
  2. I do not understand that so many traders need to be rather right than make money.
    This week was not harder than any other week.
    H&S pattern failed, so what follow your set ups and trade them. The worst mistake one can make is to be stubborn . I was short ... got stopped out and reversed .... be flexible and not emotional attached to a particular market direction.
    regards
    Max

    ReplyDelete
  3. MAx factor, agree 100%, but I have a day job, and I can't watch the markets. I can go into a meeting, and come out with a major move leaving me behind.

    I find in this market putting stops and buy orders at levels just gets you into a ping-pong situation, so I for one play for the longer term move, rather than the game playing.

    If I could do this full time, I 100% agree with you, trade the market, but I am trading for the trend over the longer term.

    ReplyDelete
  4. Ragnorox,
    what inicator made u close your positions?

    ReplyDelete