American Ninja Stock Market Warrior

Look at the picture below, this is what this market feels like right now to me (photo from the American Ninja Stock Market Warrior Series).  I feel like we are hanging right on the edge of a very steep cliff right now.  There is  a Pesavento index day on Monday which can lead to accelerated moves in the market.  I believe that day could lead to a break of August 9, 2011 swing low support.

The tricky part of the current decline is that we are likely going to set up some type of divergence eventually.  I will be quite disappointed if that bullish divergence starts to form on Monday of next week, but I can only let the market tell me what is wants to do next.  As of now, it still seems to be saying it wants to plummet next week below the August 9, 2011 low.

It would seem to have multiple possible targets.  1040, 1010, 920.  The market likes round numbers very much and so somewhere slightly above 1000 seems to make a lot of sense.  But 920 seems possible on an intra day spike.

I continue to be extremely bearish on the stock market but am keenly aware that at some point when appropriate the market will build a divergence and we can get the next extended bounce.  I do not see it happening yet.

I will become ULTRA bearish if I see 14 day RSI break below the 30 percentile level next week.  My bear fur will become very thick at that juncture as I believe that it could coincide with max selling levels and possible huge 20/20 candlestick bars that are devastating (in terms of downward price action).

Can you tell I am bearish ? 🙂

I am just about as bearish now as I was right before October 2008.  As I have said on many previous occasions, extreme bearishness can turn into immediate bullishness sometimes, especially with me.  So do not be surprised if I turn tail on the statements in this posting depending on what we see develop next week.

The picture above pretty much describes how I feel about this market today.  Today was an inside day and probably mostly short covering.  There was no massive bullish reaction, no test of yesterday’s swing low.  We continue to hug the range near 1100 and I expect a drop like a rock type action next week.

I see no reason to be bullish between now and the transition from September to October 2011 (only 5 trading days away).

And again, if RSI under 30 level then I expect a HUGE HUGE downside move to commence (that should correlate with a VIX reading above 48).

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5 comments on “American Ninja Stock Market Warrior
  1. RMT says:

    A while ago we were talking about the bear flag on the daily charts…Guess what that same bear flag is now on the weekly chart with a downside target near last years July lows. I took some profits from my SDS trade, which was an excellent trade , and I will look to add more shorts next week on any kind of a dead cat bounce like the one we had today. The perfect set up would be a light volume bounce on monday/tuesday near the gapfill level of around 116.5 to 117, which also happens to be the breakdown of a key upward sloping trendline. THe dollar is a bit extended so if the dollar pulls back a little, then we could get a small bounce in the markets. Ultimately, the dollar will go much higher and that will put further pressure on the markets. Today’s price action was pretty weak and confirms my views that we are headed lower. Look at the action in copper; copper is generally a leading indicator and it got hammered today. The spy broke the neckline of the daily head and shoulders patter from the 8/9 lows. Even if the HS plays out, we should see a downside target of 105-106 on SPY. The vix just broke out of a bullish consolidation and has a target well above 50. And obviously the weekly bearsih set up is there as well. And one more thing that reaffirms my views is that the clowns on cnbc are calling for a rally and talking about how we’ve made lows for a while, etc. On a technical level, I just see a lot more reasons to be bearish than bullish right now. Tom, just wondering if you could give us a link to the P-index that you have been referring to. BTW , your last few posts have been quite impressive, keep it up.

  2. Tom says:

    Good comments RMT and congrats on your SDS trades. I believe as you do that there will be another SDS setup with a nice further chunk of upside in that ETF.

    Big question is does it come after a super spike rally (in the sp500), a sideways multi day consolidation (in the sp500) or no rally at all (in the sp500).

    Someone made a comparison to September 5, 2008 and the most recent three days of price action we saw last week. Basically they are saying we will bounce and whipsaw a bit more just like we did after September 5, 2008.

    Possible. But the only problem with that theory in my mind is that volatility was just starting to increment up on September 5, 2008. But now we are almost in the max volatility zone.

    Interesting that the market did drop laboriously after 9/5/2008 to some new marginal lows but then there was a super spike one or two day rally that was quite shocking.

    It has me thinking at least as a possibility that we may get some type of move to 1050 or or maybe even 1010, but then from that level get a huge huge one to several day bounce that brings us right back up to where we are trading now or slightly higher to fill the gap.

    This scenario would be interesting because it would blow out the longs who are looking for an immediate gap fill of a few days ago and then blow out the shorts who are looking for worse than 1000 sp500 (or who are not quick enough to close shorts out after sp500 1000 to 1050).

    It would also make it difficult for new shorts to get their ideal entry if we drop fast to 1000 from Monday onward.

    I don’t have a direct link for the P-Index Date info. But here is some info that references one that occurred on Oct 18-19, 2009:

    “We have a HUGE cycle on Sunday evening through Monday morning. This is an extreme cycle….We’re going to have a good trading market next week. Next week is critical next week due to these planetary aspects affecting all markets, including commodities, currencies, stocks. We could have a crazy announcement Sunday night, bad news, war. The 18th is the last of a big cycle… it’s called a Pesavento Index day…. if there are 14 separate planetary events at one time, this is extremely accurate…. when they work, they act like magnets. We have a very high probability of a down week next week.”

    As it turns out in 2009, Oct 19, that did mark an important turning point for the market.

    The problem with these astro type dates is that it is basically impossible to determine if they will serve as acceleration dates, or reversal dates. Oct 19, 2009 it served as a reversal date.

    Since we have come down so hard the last few days I am afraid this one could serve as a big reversal date.

    The monthly chart seems to be suggesting that we should be able to get to 1050 within the next 2 weeks ? We have end of quarter coming up into Oct 2011. Perhaps window dressing will work in reverse this time.

    Friday 9/23 was basically an inside day. There is always the risk of a huge short covering rally in the early going here.. guess we will just have to wait and see, but even if we drift the next 5 days, soon thereafter looks like more down to me still.

  3. Geoff says:

    Tom’s comment above “waffles” to an extreme degree and seems very at odds with the post he is commenting on.

    On Tuesday, Sept 13th, this blog posted “BOT Long at 1172”. That posting brought a torrid of comments (13 in total), and most were not complimentary, including mine. Amongst the comments, was #9 – – a comment of ed, who said that the week of the 13th would be up but that the following week or last week would be the worst week of 2011. Congratulations to ed! Good call

  4. RMT says:

    Yes, Ed’s call on that post was quite accurate, but its not a surprise as he has made several good calls in the past. Out of the handful of commentators on this blog, Ed is by far my favorite. Anyways, I do think markets will test last years lows, but it won’t go straight down. We will have bounces along the way and I’ll look to play that. If next week the markets test the 8/9 lows, I’ll look to play the long side for a 1 or 2 day bounce. If the spy rallies to the 116.5 to 117 level, I will look to add shorts. At this point, we need to pause and consolidate before we break the lows from 8/9. stocks like fcx, mt, cat, oil etf uso, are just some of the plays that are starting to look a little attractive on the long side as they will be (or already at) coming into support levels if we have a gap down or sharp fall on Monday/Tuesday. Friday’s close was kind of in no man’s land really. Its a bit late to add new short positions, and no technical reasons to add longs yet. But Fridays action was quite weak, but I totally forget about the end of quarter coming up; end of quarter window dressing might make things a little harder than it needs to be. For me the picture is pretty clear though at this point. A flush to the 8/9 lows, and I’ll look to go long for 1 or 2 day swing trade. A dead cat bounce towards the 117 level, and I’ll add more short positions.

  5. ed says:

    Thanks for the kudos guys.

    When I’m right I’m really right but when I’m wrong I’m even more wrong

    Tom, in answer to your question, I would just have to go with my gut or intuition on this. To me being intuitive is not just looking at the facts but being able to read between the lines I think all the great traders have this “right brain” ability. However staying in this frame of mind is difficult to maintain.

    Even though the dollar looks like we have more upside and we have instability in Europe and almost everyone thinks we will crash I would have to say we will surprise to the upside and continue toward previous highs

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