Looks like we were right about that inverse head and shoulders pattern meaning little to nothing to the technical developments of the indices (just had to bring it up). The markets sold off hard today and they look poised to test if not shatter the lows set back in October. If those lows are broken, I expect to see a lot of stop-losses triggered all at once, which will simply drive prices even lower. In fact, there is so much attention being paid to those lows, as many thought those would be the bottom, and if they are broken, expect to see panic spread across the market.
As for us, we managed to do quite well, holding gains of over 20% in QID, 16% in CRY, and some gains in a few others like CVX and BRKL. If you shorted the charts of the stocks that we put out this morning, you would have also done quite well. We’ll be updating our stop-losses in the morning, once we have a chance to see how the overseas markets performed and the US Futures Markets.
Tomorrow undoubtedly serves as an opportunity for the markets to rally and if the PPT jump in again that may very well happen and could be in a very big way. We don’t put a whole of faith in this critical support level to hold if the selling continues to increase as it has in recent days.
It’s important to remember in this market that you can never underestimate how much fear can drive prices downward. Take the Nasdaq from 2000-2003 it went from 5000 to the low teens and we are in what I consider to be a far worse crisis then what happened in 2000-2003. Don’t try and time bottoms in the market, fortunes have been lost doing that; instead let the market gain some ground, before jumping in.
Look for the downward trendline to break (which it hasn’t done yet) look for a higher-low on the charts followed by a higher-high, with the volume to support it. And don’t just go in all at once, instead gradually commit your capital. If you do, you will save your portfolio from capitulation and you will set yourself up for a much better chance at succeeding in the most difficult of markets.
Here’s the Nasdaq and S&P charts…