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Sunday, August 9, 2009

Crossroads

On Jan 2nd 2009, I pontificated some market predictions that there would be a bear trap, a mega rally, and after most people bought into a rally, the market would crash. It seems I got my bear trap and mega rally, and I got caught.

But now, I am finding myself questioning the near-term crash part. I have NO DOUBT the markets will never see the late 2008 stock market highs, adjusted for inflation, for a decade. I have NO DOUBT that the us will not see market highs of 2000 for over a decade. This blog is dedicated for me to orate the multitude of reasons why the US and the world economy is facing trouble.

But I am starting to have doubts of crash-timing. I am in the market deep on the short side, mainly because I believe in the next week to 6 months or so the market will be significantly lower. However, it has become apparent that the US government no longer enforces laws regarding security fraud, and the government is in direct cohoots with the likes of Goldman Sachs. Playing in a crooked casino is probably not the brightest of ideas.

Further, I need to have cash on-hand to place bets appropriately when the market does turn. Catching the exact top is folly. I do fear the day the market turns with any sort of conviction, the market will open down by an obnoxious amount, making playing the bear side only good if already in the market.

But for now, I have to face the fact that, I may be off significantly on market turn around. Friday felt like to me to be an obnoxious over-the-top blowout to the upside. That usually is followed by a market decline, maybe not a crash, but a "Retracement".

I also have to face the fact that the lies, fraudulent manipulation, and one-sided news reporting may produce an SPX 1200 before 700. To prevent my account to becoming a disaster, I will set some lines in the sand to start dumping 25, up to 50% of my highest risk positions. The SPX I consider is up against a very long down trend level, and up against the "Rally highs" in October 2008.

I will set lines in the sand to start covering positions on any day where SPX is ending at or over 1020. Friday's high was 1018, I want to leave a little room for some games on Monday/Tuesday. I will keep my shorts (which are doing OK), but start to lighten on my lottery tickets and high risk shorts if SPX breaks 1020 on a closing basis.

This is EXACTLY the wrong thing to do after the market rallied 52.8% straight up in 4 months, the market is bound to turn hard core down. But I just can't take the pressure of the markets going to SPX 1150 then turning, if that is in the cards.

From WebSurfinMurf's Financial Blog

This ties back to a chart I made on April 20th, 2009, showing the target upside for the SPX back then. How many readers believed back then that it was possible for SPX to hit the long term bear trend line? All has come to pass as foreseen, just not exactly in the way as I expected on a week by week basis. My lack of discipline of getting ahead of the market is my main problem. Bbelow I took the 4/20/09 graph and over-layed current market valuations, notice the trend line now has been hit as pontificated, but much quicker than expected.

From WebSurfinMurf's Financial Blog

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