Look for big selloff again tomorrow

I punted my AEM put today at a small loss. $Gold failed to rally and confirm this trade. In after hours trading stocks are sharply lower. Probability of NDX bearish tomorrow is 71%.

I AM TRADING THIS WITH A UBB PUT OPTION.

Please send this site on to your friends if the correct timing and market direction are helpful to you. Using optionone service and my own timing signals I have made a lot of money trading these very volatile markets.

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LONG AEM DEC CALLS

Palisades Research give 53% probability for S&P UP DAY tomorrow. Tim Knight remains bullish. AEM and FCX P&F turn Bullish.

Forecast for a big plunge in $Indu was wrong--only got 750 points down and then todays huge reversal

The low pole reversal is seen when a chart falls below a previous low by at least 3 boxes but then reverses to rise by at least 50 percent of the fall. The reversal implies that the supply that was making the prices fall has been absorbed and demand is taking over. The pattern is an alert that higher prices could be seen in the future. The ideal buy point would be on another reversal back down to be closer to the stop loss point. This would also set up a double top breakout if the prices reverse up and break over the current column's high.

Tim Knight has a very near term accurate record in calling this market---bullish, Palisades Research gives only 47% probability for rising S&P tomorrow.

Was this the reversal day? Looking for bottom for gold stocks

"In the latest commentary regarding the situation on the market, I suggested that we might get a very rapid pull-back in the precious metals stocks, ALONG WITH THE TURNAROUND IN THE GENERAL STOCK MARKET. So far this turnaround did not materialize, but instead we’re experiencing a monster rally in the USD, which naturally puts the pressure on the prices of precious metals and corresponding shares. As a result we have plunging prices of even the best precious metals stocks.
The big money is made by being brave while others are fearful and nobody should argue with the fact that most investors are currently terrified. Since that is the case, the question that we need to ask ourselves is ‘how will I take advantage of this opportunity’. Vast majority of investors will not take it at all, as people tend to act on emotions, not on the common sense - buying here is ‘way too scary’ for most investors. The easy way to play it is to wait until shares are back up and then buy. The problem is that at that moment this extraordinary buying opportunity will be over. You want to buy low, right? Aren’t the prices low already? Aren’t everyone and their brother bearish on stocks of any kind, including PM stocks? Then it seems that this is the time to take action. I am going to use most of my cash reserves to purchase precious metals stocks and especially call options on them.
As you know (updates and alerts were sent), during this decline I engaged in a few speculative transactions. Because of the volatility and the declining trend, these were risky transactions and most of them did not play out as expected. Yet, the overall rate of return is impressive, as one transaction with extraordinary profit is more than enough to compensate the losses. Therefore, the speculative part of my portfolio compensated to a certain extent the losses on my long-term holdings. The word ‘losses’ is purely theoretical, as they are all paper losses. I don’t intend to sell at these prices, although I will switch the juniors that are acting weak to those, who held up relatively well during this plunge.
Did we bottom yet? I don’t think so, but we are very close. As mentioned earlier, we now have the best companies in the sector (in my view that is), including AEM and KGC underperforming other companies from the sector. This usually takes place near or at the end of the fall. We have the general stock market (SPX) reaching a long-term support level – the low of 770. I therefore expect to see at least a temporary bottom in the SPX somewhere in the 770-810 range. According to my calculations this should correspond to the 125-135 level in the HUI and this is where I plan to buy aggressively. As far as gold is concerned, it should not go lower than $630.
The stocks that I plan to purchase are GDX, AEM, GOLD and optionally KGC, FCX, BVN - depends on the market situation. I currently favor gold stocks over silver stocks, as gold tends to perform better in the first stages of a rally, whereas silver usually catches up later. The bottom should materialize on a very high volume – if it is not, I will not proceed with purchasing options (only stocks), as the probability of that day being in fact a bottom will be too low." source recent gold price newsletter

MARKETS TREND LOWER

There are still more bulls than bears this week. Palisades Research give 65% probability for S&P to close up tomorrow. Tim Sykes is bullish. Carl Futia is bearish: Spiders - December S&P E-mini Futures: The market will probably drop into the 800-10 zone before staging a 300 point rally. I will remain bearish until Dow Theory and IBD give me the signal for a counter trend rally.

Inflation Bailout

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Lord John Maynard Keynes (1883-1946), renowned British economist.

DEFINITION OF INFLATION:
Inflation is the loss of constant purchasing value of the dollar,
caused by an increase out of 'thin air' of the supply of money and debt creation by the financial system

http://www.investmentu.com/IUEL/2005/20051212.html
See this site for linkage of gold and inflation

After the current washout by hedge funds and forced liquidation by margin clerks I think there will be a huge rise in the price of gold. I will wait for confirmation by my usual signals.

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Down Down Down Volatility Surges

Tim Knight says this was second day we should have crashed but didn't--things are looking up for the bull's.








Probability for next day: Palisades Research


S&P down 73% -1.39%
NDX down 80% -2.94%

With the volatility index at all time highs I wouldn't try to pick the bottom of this market panic.

Bank Failures

U.S. bank regulators Friday closed tiny Alpha Bank & Trust in Georgia, the 16th U.S. bank to fail this year as the weakening economy and falling home prices take their toll on financial institutions.

Certainly the FDIC’s and the banking industry’s challenges so far haven’t come close to the challenges of the 1930s and 1980s. Some 9,000 banks failed in the four years before Congress created the FDIC in 1933. Thousands of institutions also failed during the S&L crisis.

THE EAR NOSE AND STOCKS PC INDICATOR update

Google Results 1 - 10 of about 349,000 for stock market panic with Safesearch on. (0.24 seconds)
Google Results 1 - 10 of about 230,000 for stock market capitulation with Safesearch on. (0.21 seconds)

BIGGEST ASSET AND CREDIT BUBBLE IN HISTORY COLLAPSES

Emmanuel Roman, of GLG Partners, said 25pc-30pc of the world's 8,000 hedge funds would disappear "in a Darwinian process", either going bust or deciding meagre profits are not worth their efforts.

"This will go down in the history books as one of the greatest fiascos of banking in 100 years," said Mr Roman, who co-runs London and New York-based GLG, a former division of Lehman Brothers Holdings with assets of $24bn (£14.8bn). "There need to be some scapegoats, and the regulators are going to go hunt people. That will be good in the long run."

His views were echoed by Professor Nouriel Roubini, a former US Treasury and presidential adviser known for his accurate prediction of financial crises, who estimated that up to 500 hedge funds would fail within months.

Both men were speaking at the same hedge fund conference in London on Thursday, and Prof Roubini said he would not be surprised if the US and other countries soon had to close their stock markets for more than a week to halt descent into "sheer panic".

The economist warned that the world is heading for a protracted recession that will end the US's financial dominance.

"It's the beginning of the decline of the US financial empire. The Great Depression ended in a massive war. I hope that's not going to happen but it's pretty ugly now," Prof Roubini said.

He added that turmoil over world trade, currency markets and debt is likely to cause geopolitical tensions between the Western world and emerging superpowers such as Russia, China and "a bunch of unstable oil states".

The conference saw analysts, economists and hedge fund managers discussing the possibility that global recession could now last two years on fears that government bail-outs and nationalisations have failed to stop the markets slumping.

"We're now paying the price for the biggest asset and credit bubble in history," Prof Roubini said, advising investors to stay clear of risky assets and keep their money in cash. "The bail-outs have not worked because the markets are no longer rallying, and the policy-makers have run out of options."

FINANCIAL FUTURES LIMIT DOWN CRASH CAPITULATION SOON

MARKETS LOOKING FOR VALUE---GIANT MARGIN CALL AROUND THE WORLD

















See nysebullish chart. Bear confirmed on Oct 23, 2008!!!



Palisades Research predicts 60% down probability for NDX Friday. I Think this is close to 100% for Friday unless we have a Paulsen-Bernacke Miracle today. This is the forecast come true time--"a big move is coming--my work says it will break down very hard." That's my opinion and I am sticking with it.

DID YOU PAY ATTENTION TO THESE MAJOR WARNING SIGNS?

Did you ignore this June 19 report?

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century

RBS issues global stock and credit crash alert 19 Jun 2008

Or missed this June 7 warning?

Morgan Stanley issues triple sell warning on equities

By Ambrose Evans-Pritchard
Last Updated: 12:16AM BST 07 Jun 2007

Morgan Stanley warns the 'mid-cycle rally is over'
Morgan Stanley has advised clients to slash exposure to the stock market after its three key warning indicators began flashing a "Full House" sell signal for the first time since the dotcom bust.

Teun Draaisma, chief of European equities strategist for the US investment bank, said the triple warning was a "very powerful" signal that had been triggered just five times since 1980.

"Interest rates are rising and reaching critical levels. This matters more than growth for equities, so we think the mid-cycle rally is over. Our model is forecasting a 14pc correction over the next six months, but it could be more serious," he said. Mr Draaisma said the MSCI index of 600 European and British equities had dropped by an average of 15.2pc over six months after each "Full House" signal, with falls of 25.2pc after September 1987 and 26.2pc after April 2002. "We prefer to be on the right side of these odds," he said.

The first of the three signals Morgan Stanley monitors is a "composite valuation indicator" that divides the price/earnings ratio on stocks by bond yields. It measures "median" share prices that capture the froth of the merger boom, rather than relying on a handful of big companies on the major indexes.

"If you look at all shares, the p/e ratio is at an all-time high of 20," he said.

The other two gauges measure fundamentals such as growth and inflation, as well as risk appetite. "Investors are taking far too much comfort from global liquidity. Markets always return to fundamental value, so people could be in for a rude awakening. This is the greater fool theory," he said. "The trigger may be rate rises by the Bank of Japan, or a widening of credit spreads. There are lots of little triggers."

Morgan Stanley predicted a "catastrophic event" in world currency markets during the coming months as occurred in 1992 due to opposing views between the Fed and the ECB about what to do about monetary policy and inflation and due to imbalances in the ECB itself.

Both RBS and MS are elitist insiders high in the food chain of Illuminist companies. They knew what was coming.

$indu slammed for 500 points--on our way for predicted 2000 point decline before next big rally

Palisades Research gives a 61% probability for up day tomorrow for $SPX but Asian markets are down sharply tonight.

Then crash into next week???

Tim Knight give "Crash Set-Up Signal"

IBD reversed market direction this evening--"Now market in correction." This is why I use Dow Theory to confirm IBD signals. I remain 95% in T-Bills.

75% probalility that triangle will resolve in direction of current trend--DOWN, DOWN, DOWN

Trend Nasdaq S&P 500 Russell 2000
Long-Term Down Down Down
Intermediate Down Down Down
Short-term Down Down Down

***Trends as per Trader Mike

"THE EAR NOSE AND STOCKS PC INDICATOR"

http://pr.statestreet.com/us/en/20081021_1.html
Investor confidence is at all time low--So you think you can pick the bottom for this catastrophic market decline?

http://www.marketwatch.com/news/story/difference-between-panic-capitulation/story.aspx?guid=%7BB036DF1F%2D7F54%2D42BF%2DAE82%2D370A2D0827F1%7D&dist=msr_1

Google search for "stock market panic (P)" returned 327000 hits today while a search for "stock market capitulation(C)" returned only 217,000 hits. Have we found a new indicator? Henceforth this is to be called the "THE EAR NOSE AND STOCKS PC INDICATOR"
I am sure that a bright graduate student can turn and twist this idea into a goverment grant and a PhD dissertation. Otherwise I will run a school contest for 6th gradeschool students. These students can do the reasearch and I will publish the results on this blogsite. I can make it a contest for MBA students if we use the VIX index as another factor in this trillion dollar equation.





Blogger sentiment is way too bullish--everyone thinks they have called the bottom in this market.
53% down probability for S&P tomorrow.

The credit default swaps that will move the market massively lower have not yet been reported, I think someone is scared, frightened and terrified (Hyperbole X 3) to release this news.

http://www.marketwatch.com/news/story/lehman-credit-default-swaps-settle/story.aspx?guid=%7B5DD31540%2DDAD8%2D46D2%2DADA0%2D5E062F7007B5%7D&siteid=rss

Look for 2000 point plunge very soon

67% NDX probability of market decline tomorrow.

So which chart looks bullish long term to you?

Look for market meltdown from derivatives in next two weeks

Traders return to work Monday with a bit of history lingering over the session. Sunday marked the anniversary of the 1987 stock market crash known as "Black Monday." The Dow plunged 22.6 percent that day to mark the largest one-session percentage decline ever.




If the current market trends continue, the only forecast I am sure of is as folows:
Playmate of the year will be a nubile lass being impaled by a train.

The Psyche of the American Consumer
The Consumer Weakens
The Paradox of Thrift
An Economic Blue Screen Of Death
Those Wild And Crazy Analysts
London, Stockholm, Malta, and Becoming a Grandfather
By John Mauldin

http://www.frontlinethoughts.com/pdf/mwo101708.pdf

http://www.investigatethesec.com/drupal-5.5/files/Banking%20Committee%20%202%2013%2008%201_0.pdf
This chilling memo of Feb '08 reveals that senator Dodd knew the financial meltdown was coming. Why did the SEC stop previous investigations?

IBD signals Market in Confirmed Rally

"...if one tortures a dataset long enough, it will confess to anything!"

- Andrew Lo


The week's wild ride has concluded, but you might not know it by the relatively mild close had on Friday. The S&P 500 surged almost 12% Monday, suffered its biggest drop since the 1987 crash on Wednesday, and rallied more than 4% Thursday. IBD signals Market in a confirmed Rally after Thursday followthru rally.

However, Palisades Research gives a very negative reading for Monday's market and a 68% probability for a down S&P and NDX. Tim Knight has turned bullish. Dow Theory letters is Bearish. I have faded the pros and went into the weekend with several short option plays (MY favorite is an UBB option)--I lost money on my last gold option positions Rgld and AEM.

Oil down 52% from peak--Will Gold follow?

We could see gold at $600 and the possibility of deflation creeps closer and closer. Bernacke studied the Great Depression so much--he seems hell bent on leading us into another one. Paulson and Bernacke should resign now--it would restore confidence.

BEAR'S MAUL BULL'S ARSE

I look for more downside action and test of market lows--Gold stocks hit with broad market selloff. We may have another volatile day with midday reversal. NDX forecast for up day at 81%. Panic prevails and before this current bear run is over I look for $INDU below 7500.

Big Bounce Happened--Now What's Next?

So we got the big bounce in $indu but on suspect volume. Blogger sentiment way too bullish. Palisades Research gives 87% probability for a down NDX day tomorrow. So is this the shorting opportunity of a lifetime???
Why has gold not broken out???

Look for Big Up Day for Broad Financial Markets

If the $indu retraces this past weeks loss I look for 1000+ point rally tomorrow. I will await confirmation of gold stocks P&F charts before adding to this trade. Follow blog of Tim Knight he is very bullish at this time.

I am not the only one upset at the performance of the Fed.

In a Barron's interview of highly-respected money manager Jeremy Grantham:
"This is much worse than I thought. All the fundamentals are turning out worse than I thought they would. All the competencies of the senior people at the Fed, Treasury and [top-tier firms] have turned out to be much less than I had expected; that's very disappointing. And, therefore, how could one's confidence that the senior people would get us through the storm be very high?"

Bush sounds Hooverish

Watch the money supply. I remain 95% in T-Bills and 5% in gold and silver mining stocks.

If any of my readers are surprised by this homungus BEAR market I invite you to read a book published last year:
A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation (Hardcover)
by Richard Bookstaber (Author)

I have been asked what financial analyst do I follow? I use Stockcharts.com extensively. I determine market direction based on Dow Theory. I follow Richard Russell Dow theory Letters, Robert McHugh, Ph.D. Technical Indicators and Dennis Gartman. I use Zacks and Investor's Businsess Daily to confirm buy or sell decisions. I use point and figure charting to confirm market direction. I use oneoption service for specfic option trades. I only trade in my pension profit sharing account 3 or 4 times a year. I have a smaller trading accunt with optionsxpress.com that I use for market speculation. When I am not making money in my trading account why would I want to trade in my retirement account?

My number one financial rule is "No one cares about your money unless you do." I think the greatest financial lie ever given to the general public is the belief that you can't time the markets.

I look for a huge tradeable rally in the broad financial markets to begin in the next several days.












“The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis.” Herbert Hoover, statement to the press, Oct. 25, 1929

Bush said today that the U.S. "will continue to act to resolve this crisis and restore stability to our markets." Oct, 2008

With the credit problems still plaguing the markets it is not unreasonable to compare our crash to 1929. That crash started out much more quickly and the DOW lost about 46% in only two and a half months. Then there was a partial recovery. We are now into the problem for a year, at that point stocks were still down about about -36%, roughly the same as our -39%. The market bottom arrived in 1932, almost two and three quarter years after the start of the decline, and by that time the markets had lost over 89% of their original value. On the plus side if this is just a run of the mill crash we can expect it to be over with a 40% to 45% total decline.

Huge drop in spot gold. $XAU and Royal Gold P&F charts remain bullish. If the Fed doesn't start to inflate right now we are headed for severe deflation Japanese style. Bernake and Paulson should both resign immediately. Review previous post re money supply--the Fed kept moeny supply far too tight and far too long--now look at the mess we are in!!!

Fed Cuts Rates VIX at all time high

This is a weekly bar chart of the VIX options volatility index. It is higher now than at any time in the past 10 years, including the Long Term Capital Management panic in 1998 and the 2002 bear market low. I am still looking for a tradeable bounce in major market averages. Gold mining stocks breakout today. I am trading options on AEM and Royal Gold. This the greatest Financial Panic of my lifetime but with the increased volatility has come great volatility which is ideal for swing trading.

Tomorrow I travel to Horseshoe Bay Texas and play in the member guest golf tournament with my older son Alan.

A truism about trading and life itself: "All lies and jest, still a man hears what he wants to hear and disregards the rest. The Boxer - Paul Simon"

http://www.practicerange.com/

http://www.mentalgear.com/

Fed Rate Cut Soon

Look for fed rate cut tomorrow. High probalility for market rebound--Palisades gives this at 71% for the S&P tomorrow. I look for $indu to drop to 7100 or below over the next several months. I am buying AEM options in AM.

How Did we Get in the Mess we are in??

http://www.time.com/time/business/article/0,8599,1723152,00.html

Was it credit default swaps? CDO'S or the subprime mortgage problem? Are you making money during this highly volatile trading period? I closed a very profitable trade today--the idea for the trade came from this subscription service.

http://www.oneoption.com/default.aspx

Global Panic $Tran signal Bear confirmed

I look for a near term bounce for $INDU and then a crash very soon in the next 2 weeks. The $TRAN confirmed the BEAR continues. I will wait for P&F confirmation for $GOLD and $SILVER STOCK PURCHASE. CASH IS KING!!!
I miss my canary in the coal mine MER as a leading indicator. Does any one have another stock as a suggestion?

The Libor / Overnight Indexed Swap (OIS) rate

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1PWw0Omowag&refer=home

The TED spread may not be the cleanest measure of interbank worries.

OIS SpreadMore prominent of late has been the spread between Libor and the Overnight Indexed Swap (OIS) rate. An overnight indexed swap exchanges a fixed level of interest, the OIS rate, for the amount earned by fed funds over the term of the swap. The counterparties to such a swap bear minimal credit risk, as they simply make payment based on the difference between a fixed rate and a stream of variable rates. With a conventional Libor loan, by contrast, the lender bears the credit risk of the borrower for the entire principal plus the Libor interest.
As a result, the Libor/OIS spread is perhaps the clearest indication of pure counterparty risk. Like the TED spread, the Libor/OIS spread surged in August 2007. Formerly ensconced comfortably in the neighborhood of 10 basis points, the three-month Libor/OIS spread has fluctuated wildly in the past year, even exceeding 100 basis points for several days in December 2007. But the spread remains elevated in 2008, with recent readings holding well above 80 basis points.1
Despite the liquidity facilities arranged by central banks and the massive influx of capital into troubled financial institutions, the Libor/OIS spread reflects persistent nervousness in the global banking system. The multiyear issuance period for complex assets that have since become impaired suggests that confidence in bank balance sheets will only return gradually, as the slow but steady lessons of cash flow experience help frame balance sheet valuations.