[timbo]

I have this vivid image of a trader at the New York Stock Exchange flinging at dead cat at the floor and screaming "Bounce you f**ker bounce".

If it wasn't so serious it really would be funny

[ohanian]

I have an image of a stock trader saying to a dead cat

"Goddamn it! I'll show you how to bounce!!!" by jumping out of a window on the thirty seventh floor.

[Iaato]

Who needs to pretend. Here's a really sad trader. Watch the video

the stock market ruined my life

[IanC]

Just read in the NY Times online that Asian stock markets have fallen more in the first few hours of trading Tuesday than they did all day on Monday. Things are gonna suck at the NYSE tomorrow.

[abelardlindsay]

Wow.. Waiting for the market to open this morning is like watching a long coil of rope attached to a speed boat and a dock rapidly uncoiling as the boat speeds away waiting for the boat to run out of rope and have the back half of the boat ripped off..

[MrBill]

I am actually loving it! ; - ) It is not 'schadenfreude', although there is that, but it is seeing the excesses of the past decade(s) come home to roost.

After 'greed is good' comes 'the fear factor'. Even on peak oil dot com there were a lot of swelled egos as a rising tide lifted all boats, and some posters were positively convinced they were smarter than the market.

Welcome to the ebbing tide! ; - )

RE High Probability Blog Spot: Classic! We are in a bear market and this guy turns a $7K loss into a $38K loss by doubling down. Buy on dips works.... until it doesn't! ; - )

[alokin]

Pretty sure there will be a big crash tomorrow. And all these guy who went rich only by moving money around will hopefully be ******.

[mkwin]

$this->bbcode_second_pass_quote('', 'G')ood Morning, Traders. As of this writing at 7pm EST on Monday night (1/21), S&P futures are down 53.75 points and Nasdaq futures are down 69.50. This means that without Fed intervention (or some other catalyst that would have the propensity to reverse these losses) between now and 9:30am tomorrow, the markets are going to open much, much lower. This will be the mother of all gap downs if the situation does not improve between now and then. The SPX should open somewhere well below 1300 in the 1260-1270 area. Given this situation, there is very little we can say here as to what will happen in the bigger picture.

If the aforementioned catalyst does not appear then we can be relatively sure of one of three scenarios playing out. One is that the market will open 50+ points lower and rally immediately. If that happens then we would see the market probably remain strong all day. The second option would be that the market opens much lower and sells off right from the open and continues to sell all day long, taking the spx down by at least 80 by the close. In this option, the market might not fall immediately at the open but would more than likely move below first 15 minute and first 30 minute lows which would set the tone for the rest of the day. The third option would be that the market would open much lower and use most of the morning and lunchtime to digest the gap down, going sideways for the morning session and then sell off harder in the afternoon. These are the three scenarios that we feel have the highest probability of happening tomorrow. Note that just chopping around, ie: going up a bit then down a bit are probably not happening. There is too much emotion out there. Therefore, people are either going to all panic en masse immediately (option 2), panic only a little then full on Armageddon later as they realize that sideways after a 50 point gap down is not bullish (option 3), or the whole world is going to see bargains in front of their eyes and there will be massive short covering on the open (option 1). Those of you who are reading this and are long stocks (or short vertical put spreads), please make a mental note of what you do tomorrow and then realize that probably all of the retail money in the world is going to do the exact same thing. This is because human nature is human nature and people are people. Everyone is going to pretty much act the same way.

So, what are some clues as to which scenario is going to play out? The market internals of course. There will be a breadth reading and an advance decline reading and a trin reading. The way these indicators react to the open and are trending both in the first 15, 30 and 60 minutes of trade will be key in figuring out sentiment and direction. If these numbers open up rather benign, then we could see rally. If these numbers are very bearish from the open and make no effort to improve, ie: breadth worse than 10:1 negative on open, A/D lines opening up -2000 or worse, trin over say 4.0, then the selling will probably continue. Remember that whatever you think is oversold or overdone can always become more overdone. The last panic situation that we had was almost a year ago on 2/27/07. Anyone remember that? Breadth (the relationship between up volume and down volume) was 100:1 negative on that day. Yes, 100 to 1. You read that correctly. On that day the SPX gapped down 20 points and then sold off about 30 more, ending the day down about 50. As of now we are going to just gap down that much at the open. Should be interesting.....

[bodigami]

$this->bbcode_second_pass_quote('MrBill', 'I') am actually loving it! ; - ) It is not 'schadenfreude', although there is that, but it is seeing the excesses of the past decade(s) come home to roost.
After 'greed is good' comes 'the fear factor'.(...)

[cube]

$this->bbcode_second_pass_quote('Iaato', 'W')ho needs to pretend. Here's a really sad trader. Watch the video the stock market ruined my life

[MrBill]

After some of my biggest losses it was always fun to go down to the pub and drown our sorrows and tell tales about how bad our day was. Misery loves company! ; - )

[steam_cannon]

$this->bbcode_second_pass_quote('timbo', 'I') have this vivid image of a trader at the New York Stock Exchange...

[roccman]

$this->bbcode_second_pass_quote('MrBill', 'C')lassic! We are in a bear market and this guy turns a $7K loss into a $38K loss by doubling down. Buy on dips works.... until it doesn't! ; - )

[mkwin]

$this->bbcode_second_pass_quote('roccman', '')$this->bbcode_second_pass_quote('MrBill', 'C')lassic! We are in a bear market and this guy turns a $7K loss into a $38K loss by doubling down. Buy on dips works.... until it doesn't! ; - )

[cube]

$this->bbcode_second_pass_quote('mkwin', '.').. Unless, like me, you went short.

[timbo]

And the cat has bounced.

It can now be stowed away for a little while as everybody, well not quite everybody, gets themselves even deeper into debt due to the lowering of interest rates.

[timbo]

One other thing I've noticed is that the swings keep getting bigger. For example, if I recall correctly, over the last ~6 months for the ASX200 we've seen 3%, 5% and now 7%. Seems to indicate a system that's badly out of balance. My analogy would be a tightrope walker who is losing his balance, each swing keeps getting wilder until he falls off.

If you are still watching this thread Mr Bill I'd be interested in your own observations and comments

[steam_cannon]

$this->bbcode_second_pass_quote('timbo', 'O')ne other thing I've noticed is that the swings keep getting bigger. For example, if I recall correctly, over the last ~6 months for the ASX200 we've seen 3%, 5% and now 7%. Seems to indicate a system that's badly out of balance. My analogy would be a tightrope walker who is losing his balance, each swing keeps getting wilder until he falls off.

[MrBill]

I am attaching two graphs of the S&P500, which for purposes simplicity I will use as a proxy for equity markets. I find it hard to watch too many different markets at the same time (and get any real work done!).

The monthly gives the long-term trend that I think we need to keep in perspective, and the second, the weekly shows the pattern I would like to highlight. I will not post them because it really distorts the screen due to their size. I hope you can read the detail in any case.

S& P 500 montly chart Bull Rally

I am referring to your question about volatile swings on top of high volume. Basically, what we have is a bull rally that started back in 2002 near 570 and topped-out at 1577. At the tail end of the rally starting in Q1'07 and then confirmed late last summer as we started to see the rally unwind at the seams in a perfectly detectable pattern that we have seen often enough including at the start of the great stock market crash in 1929.

S&P 500 chart Broadening Out Formation

That pattern is called A Broadening Out Formation. You can see it unfolding best on the weekly chart. Basically, if you look at the pattern unfolding it looks something like a reverse wedge /[sup]<[/sup]

A high after a long rally
A low from which it recovers as player's are still buying on dips
A new high that seems to prove their optimism correct
Another low that takes out the previous low
Another new high that we call The Bull Trap
And then finally the collapse or capitulation!

This pattern when accompanied by high volumes shows that traders do not know whether to buy or to sell. They think the market is over-valued, but they are equally afraid to miss the next big rally. So we see this whipsaw action unfolding as the bulls and bears fight it out.

Of course, this pattern does not unfold exactly the same each time. For instance, you had the Fed cutting rates in August and then again in November before proper lows could be put into place. So it would be foolish to say, ah, but the previous low was not taken out, so the 10% correction and subsequent high is not valid!

That's the difference between practitioners and academics. Whatever works to give an information advantage when trading, and not a fixed set of rules that can be programmed into a computer! Those do not exist because if they did then anyone could do it and then smart traders would start putting their orders in every time just slightly ahead of the important turning points and it would invalidate the model! ; - )

[steam_cannon]

Wow, that's a MrBill answer!