Dramatic Short Term Change in Market Opinion

The VIX is breaking down bad today.  The market has at least so far intra day rejected the bearish case.  I am seeing enough signs now that this decline has extinguished itself. 

The market should have been down 500 points by now and should be down 600 by the close today.  It is not looking like the day will end that way.  Because of this I have to assume the opposite will occur.

Again, the market had the opportunity to take the bearish option today but it is dramatically rejecting it.

There is another important point that I have failed to point out in the past and that has to do with the volume structure on the SPY on the recent retesting action of the market.

The MEGA volume was on August 9, 2011, then we had a retest in mid August on much less volume.  Then recently one day ago we had another down move on even lighter volume.  This is the same type of action that ENDED the bearish action in 2010 !!!!

I know I get a lot of criticism for changing my mind so much on this blog but I have to make the call as I see it and as the market changes.  The alternative is for me to ‘hang on’ and be slow to change opinion while the market goes up 1000 points.  No thank you.

I am not a bull at this point, but I want to state very clearly is that this market has initiated a bottoming process on lighter volume and it looks like it wants to attack the upside now.

The longer term picture is still bearish to me, but we will have to see if the market is able to get up to the 1250 range.  If so then need to watch and see if it is able to bust up into and above 1250.  If it does that then it could start to create significant problems for the longer term bearish case.

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7 comments on “Dramatic Short Term Change in Market Opinion
  1. vat says:

    don’t trust up fridays

  2. Tom Tom says:

    Well generally I agree with that statement. But problem is this market should be down on a Friday very badly going into a weekend hurricane and God knows what else. Fact that the market can print green on a Friday before the seemingly end of the world is quite the statement of confidence. Hate to say it but think we have to give credit to the bulls today assuming they can hold it up.

  3. KT says:

    Twitter guy still says crash is imminent. However, he uses nature as part of his forecasting. Hurricane bearing down on NYC could lower the markets Monday. Don’t know if it will crash them, though.

  4. JR says:

    I think the most likely scenario is a trading range channel for a while between $SPX 1045-1100 support and 1220-50 resistance. So the market will trade upward for a while to 1220-50 and then down to support again.
    If so, this is the kind of market where you can do quite well.
    Flat right now, but will go long Monday PM, if there are no surprises.

  5. Tom Tom says:

    GULP. I am starting to consider the possibility we can still have a longer term bullish trend. I say this because I have just reviewed some charts on several sectors on the longer term basis which I have not done in quite some time.

    The longer term charts could be telling us the decline is done and the final lows are in…

    I may have to initiate a BOT long signal Monday next week and then see if it sticks.

    The longer term charts are truly amazing and if I am correct it could be saying that we are about to start a new bull phase while the whole world and the moon is currently bearish!!!

    I am almost shocked at this development. I Need to examine my charts more and see if I can justify the longer term indicators developing into bullish signals.

    Obviously the 50 DMA has crossed the 200DMA but the moving averages are lagging indicators.

  6. Abhinav says:

    Gold also went up today 3%+and the upside today was limited unlike what most technicians were predicting a 3-4% move either ways. Does that mean we may still see a real DOWN day next week.

  7. Neal says:

    Tom:
    Why are you shocked by the bullish development? Since 1995 the VIX has closed above 40 just 6 times. In all but one of those cases the market was on average 6% higher within 90 days. How about this statistic: Since 1960 just as in August 2011 the S & P has fallen 11% or more just 5 times. IN EACH OF THESE INSTANCES the S & P gained an average of 9% in the following 30 days!!!

    Moreover since 1987 we have a new “bullish” force, the Plunge Protection Team. Haven’t you been noticing how they’ve jackassed up the markets by the end of the day, even after substantial intra-day swoons. They use heavy future buying for fuel and the corpses of short sellers for kindling. While I realize it might feel like “beating the system” to win on the short side against the banksters, the truth is in the long run it is truly financial suicide.

    And by the way I can direct you to a book proving that systems, ANY financial program system, will eventually blow up. I’m talking primarily about the under $20,000 systems, a few of which are gathering dust on my shelf. It also applies to the very sophisticated Nobel prize winner type Long Term Capital Management systems, only they take longer to fail, and they’re bailed out by taxpayers. The universal rule is that a system many work for a while work but then it becomes a crowded trade, the black swam flies in and the trader in a heartbeat the little trader runs out of chips. My free advice: the casino wins and you guys are trying to win with the odds against you, a sucker’s game!

    Some people on this website have a problem with this Brave New World of ever more powerfully manipulated markets. Many of them think they on in the long run win by trading against the big boys. These are the outfits that don’t really need a system because they in effect own the casino. They have their computers on the floor of the exchange so they can see your orders in advance and front run any traders. And if that weren’t bad enough we have ETF’s and hedge funds with virtually unlimited amounts of other people’s money distorting the markets.

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