Subject: Market Update: My triangle update after today's big move down
There are a few more people I have added to this email chain. Bear with me and connect with me individually and I will get you up to speed. It is best to look at the chart I have attached while reading...now onto the analysis!
Looks like I was faked out with that crazy move on Thursday along with alot of other people. It is a good thing I knew it would be short lived with little upside at the top of triangle and didn't close out all my shorts. Today as you can imagine moved well beyond the lower triangle trendline and in fact took out the $800 (S&P500) point which is our next confirmation. Currently market's at $796. I will be very happy if the market closes and stays below $800 today. I am adding a few more shorts today, but the real time for that will be once we get the next big suckers bounce which I suspect will correspond within a double bottom area around $760. At this point we should hear all the cheerleaders on tv talking about the double bottom. This will spook the weak shorts and give one last false hope for a rally. This will also be a great time to short. The triangle will help us there too, as once again we should not move into the red area or anywhere north of the upper trendline. I don't suspect that bottom will be the ultimate bottom because I don't think enough people would have sold yet, frankly. THERE NEEDS TO BE PANIC...similar to the October sell off. People need to hate stocks when this is all said and done.
In times like these you have to trust the charts. They are the only things reliable right now. The put/call, volume, Committment of Traders, and wave counts will let me know when the liklihood of a bottom occurs. Right now it is far away, there are just too many bulls out there. The financials are also once again the leaders of the market and are about to break to new lows below $8 on the XLF. This is not good for the market. Since they are the leaders, when they make new lows, the market as a whole will follow. By the way, the Transports have just made new lows. Just need the Dow to follow and we will get our Dow Theory Confirmation. It is currently only a few percentage points away.
By the way, for the first time in its history, the S&P is about to have a negative earnings quarter. FIRST TIME IN HISTORY. Granted there are some new rules and derivatives and such over the past 15 years, but no one was complaining about these things on the way up. As a result, the 2009 forward P/E ratio is like over 40x or something crazy. Historically bottoms occur in the single digit area. From this standpoint that would mean either the market goes nowhere for years until earnings catch back up, or the S&P would have to fall to sub 400 (50% below where it is now)....I suspect a combination of both, but I don't expect earnings to get any better this year. There has to be positive new hires, that will be the leading indicator. That way people will start net spending again.
Remember, this is all just my opinion and I am not "qualified" to give investment advice. You all have different goals, risk tolerances, etc and need to make your own decisions. I am just telling you what I am doing because you all at some point have expressed interest. All I can suggest is do something to protect yourself in this tough environment. Don't be a victim. We all have insurance for death, health, and other accident prone events, we should also have insurance for our retirement accounts and money.
Good Luck and I will keep you posted. By the way, I expect to have a website or a blog going by summertime so I won't have to keep clogging up everyone's inbox. I am also looking at what the best areas to put my money will be once this bottom occurs (looking like late March/April time frame now). Hint: it has to do with one of the most beat up and risky sectors as well as Canada!
Thanks,
Chad
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