Back to BOT Long Signal at 1303 and Cramer is Right

The sp500 did not waste any time getting up and through 1303 today so far.  How we close today is still an open question but the strength is undeniable.  This market continues to trade with unstoppable confidence.  It is tempting to short these types of markets but it is not advised.

BestOnlineTrades since September 2010 has been writing about the inherent strength in this market and the strong tape action as well.  We talked about the fact that the market only managed to do a 38.2% retracement of the March 2009 to April 2010 advance.  And that this was an inherent major sign of strength of the market and its underpinnings.  We also talked about how the market’s inability to create a bottoming tail for the yearly 2011 candlestick was also an extreme sign of strength.

Granted we have issued a number of BOT short and Neutral Signals since that time, but our major theme has been one of relentless bullishness.

As Jesse Livermoore used to say if it is wrong to go short then the long side must be the right side.  This continues to be the case in the present time frame in our opinion.

I very rarely tune into CNBC but I happened to be watching briefly in late January and Cramer expressed something which I really think holds true in the current time frame.  He expressed the fact that we are in an amazing bull market and that it resembles to a degree the bull markets of the early 80’s or 90’s.  He also said that a lot of people are afraid to simply acknowledge this fact and instead are constantly finding reasons to be afraid or look at the market with a glass is half empty approach.  Watch his CNBC clip and see for yourself.

This is a very good point he makes.  I have heard very few willing to acknowledge the supreme power of this current bull trend, recognize it, respect it and let it be.  Instead there seems still be a constant sentiment of fighting the trend or the inability to shake off the mega bear trend from 2007 to 2009.

On the other hand it is understandable because of the seemingly near vertical price trend that has such a hard time getting a 5% correction going.  This is unnatural and somewhat unbelievable.

But here at BestOnlineTrades we theorized that the market and sp500 may be trading into the parabolic which helps explain this type of action.  It will be especially interesting to see if it can do so right into mid June 2011.

Posted in BOT Long Signal, Index Trading, SP500
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19 comments on “Back to BOT Long Signal at 1303 and Cramer is Right
  1. JR says:

    Closed my shorts and went long today! Resistance is futile!

  2. RiceToaster says:

    short, long, short, long. I think it’s best to stay sideline. This market has a mind of its own and the mind is controlled by the FED. You don’t know when they would pull the rug and I certainly don’t want to get caught when they do. Good luck to all.

  3. Tom says:

    Nice job JR, seems the trend is up again… amazingly… wow.

    Yes on sidelines is good too with a slow tape like this… or maybe just focusing on strongest sectors.

  4. Austin says:

    My 2 cents is the NAS and the VIX is still showing resistance and support, so im going to hold them shorts another day :/

  5. ed says:

    Agreed Rice Toaster. I hate this market and I hate the FED for what they are doing. This is a counterfeit Bull market that cannot be traded. It’s all about making people feel good and go out and spend money to boost the economy. The price to pay will be high inflation and in the end many people will be left holding the bag

  6. Larry says:

    Make no mistake we will fall and 2100 seems to be the majic support line..just timing. nice head and shoulders pattern forming on NAZ for the year. Could be a big fall here , or maybe we top out at 2860 again. In either case, the fed can only prop the market up so long and they can only put the fluff and spin on bad news just so much.

  7. Tom Tom says:

    Thanks for your comments Larry. I am not sure where you see a head and shoulders pattern forming on the NAZ. perhaps you mean starting in October 2010 and now forming the head pattern. 2860 sure does seem to be the ultimate price test level as it relates to the previous peak in 2007. To me that is the ultimate and maybe last battle line. If we fail there, it is trouble, but if we blast through, then off to the races for a while..

  8. Tom Tom says:

    Yes from the economic perspective this is all manipulation and pumping. Bernanke wants to pump the stock market and it seems to be working. So people check their mutual fund statments and it puts them in a good mood and then the consumer confidence numbers start to increase and it creates a re enforcing cycle. I suppose markets have been pumped for centuries, so it is nothing new and we are in the pump of the century right now. But better to ride along with the pump then fight it with picks and shovels in my opinion. I admit though that it is disgusting that the end result will be inflation gone out of control which ultimately will hurt everyone. So the strategy of the short term pump leading into long term inflationary pain for everyone else does not seem wise.

  9. Tom Tom says:

    seems like a decent strategy Austin. That VIX sure did have a huge one day move the other day. Looks like it could have a follow on move up eventually which should means stocks get hit down again… hmmm

  10. ed says:

    This vacillation in the market today is characteristic of a market getting ready to reverse.

  11. Larry says:

    I was referring to the head and shoulders pattern of the april high last yr on the naz yearly chart. This would be the head if we topped here and headed to 2100 again and the 2nd shoulder would begin perhaps in Sept. Also, it looks like Rare earth stocks got a 2nd wind today watch for follow on moves. I think if we see more bad jobs tomorrow and Friday this could be it. Their thought process is they know how to battle inflation but not his monster as they said on bloom.

  12. JR says:

    Ed you might be right.
    But more than likely it is like the old steam locomotive. After it chugged along for a while it would stop, add some more water to the boiler and then steam along again!
    Today was probably just a pause as the locomotive gets ready to steam further ahead!
    The red hot engine is the Fed. and that smart old engineer Bernanke just keeps on adding coal to that hot old engine!
    Yes sir, it just keeps chugging along!

  13. Geoff says:

    I typed a lengthy comment but it did not “take” for some reason. So here is abbreviated version. IMO – obviously – market going DOWN sharply. Now. reasons (1) divergences noted week ago and yesterday close – – Dow Industrials new recovery high while Dow transorts wacked badly yesterday (2) All Investor Sentiment Index soared to 51% bullish from 42% as of 2/2/2011. For conspiracy theorists, FED will not stand in way of sharp decline to bring fear back to table and foreign buyers of US public debt – – so FED can more rationally promote QE3 when the current POMO expires in June. IMO – – market down at least 10% NOW.

  14. Tom says:

    Ok I see the possible head and shoulders on the Nasdaq Composite Index now… It certainly looks like a very large pattern. But the head of the pattern is so large that it may take quite a while to keep forming before it curls over which would seem to be consistent with market tops taking much longer to form than market bottoms.

    Thanks for pointing out that possible pattern.

    But Does the Nasdaq first go to 2862?

    That remains the lingering issue for me still. 2862 would make for a clean retest of the 2007 all time high and seem to give an extra strength reason for it being a top and start of selling.

    nas

    The current view of the nasdaq above is looking like it wants to print a reversal hammer right after revisit to recent highs. I have seen this pattern before, namely on the SLV ETF and it led to a huge gap up and run the next day. I wrote about this a little bit previously when I talked about long bottoming tail hammer candlesticks.

    Geoff not sure why comment did not go through the first time, perhaps it was due to slow internet signal. For the market to go down now I think we need to see the nasdaq close red today, that is my take anyway.

  15. Larry says:

    Well, i think with TZA added to the R/S list for february it will be less likely we have a sustained reversal.

  16. Tom Tom says:

    if they keep reverse splitting the TZA in the years ahead then the previous price highs are going to be in the millions of dollars, the chart is going to look absurd.

  17. Larry says:

    Could this be the setup for a true shooting star pattern? Triple tap the top here 3 days in a row for a friday reversal? Sure do see a shooting star pattern on the naz weekly where it is testing the parabolic. This reversal would have to be over in a matter of 2 weeks though for anyone to want TZA. If naz goes parabolic next week then I think we goto 2800 but not nearly reaching it’s all time high of 5132 set in March of 2000.
    BTW thanks Tom for letting me sound on your board. Looking for other input as this market been drving me crazy since I thought the pullback in Nov.

  18. Tom Tom says:

    Well my current take is that the Nasdaq will make a run for 2820. It has come this far this fast it might as well go for that level as the ultimate retest.

    On the weekly chart of Nasdaq so far it looks like this weeks price action is completely evading the bearish potential of the last weekly shooting star candlestick. The fact that Nasdaq did not ‘obey’ the last weekly shooting star reversal I think has to be interpreted that the market is still strong enough to trend higher IMO.

    Only a total break down tomorrow 2/3/2011 would maybe the picture a little bit. But on today’s daily so far there is a reversal hammer which seems to bode well for upside follow through tomorrow.

    If the Nasdaq does not get a real correction going after moving into the 2800 range I will be extremely surprised.

    On the other hand I think we have to be careful about the assumptions we make. I did a post before showing the Jakarta Composite Index long term chart and one can see that even as this index moved into the previous all time record high, it actually exceeded it *first* and then had a violent pullback down into the range.

    So for me to say that if and when the Nasdaq gets into 2800 that it will automatically just fall apart is probably the wrong thing for me to say. Will need to give it some ‘free play’ time up in that range as there could be more short squeezing that pushes it slightly above the 2007 high before a real drop occurs… from past experience a market can seemingly hover up in a previous resistance zone for ever until it is finally ‘ready’ to correct down.

    Your are welcome to sound on the board any time and as much as you will. Thank you 🙂

  19. Larry says:

    WEll seems NAZ is on the move once again. She went parabolic on the weekly today. Next stop 2800 i guess

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