Market Deception

The sp500 today is playing a game I am quite familiar with.  It gaps down and then appears to start a northward rally.  Then all those who were talking about the flag pattern failing and saying the decline is over.

The market is being DECEPTIVE.  It is trying to suck in some more fish and then take them out to the woodshed later this week.

If we are going to get a stock market crash, it does not have to occur today.  A stock market crash can be a series of 10 1% down days in a row and THEN on the 11th day a 18% down day.  That is the most deceptive type of crash because the market declines in very small increments on a moderate slope and then finally gives up at the very END.

Unfortunately that type of price action is tough to understand.  It is similar to the old ‘frog in warm to boiling water’ syndrome.  The frog does not jump out until the last minute and then it is usually too late.

In early August 2011 we saw the market go repeatedly down day after day and the persistent number of declining days was starting to break records.

So do not be deceived when this market trickles down for 5 days in a row with each day only 1.5% down.

Posted in SP500
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4 comments on “Market Deception
  1. Geoff says:

    i hope this comment is not a jinx, but i think your post here is a smart one. that comment definitely coincides with my recollection of 1987.

  2. RMT says:

    Tom,
    I think you are right my friend. Today’s action looks like a breakdown of an important trend-line I have. Unless we miraculously recover by days close, I think I will pick up a position in the SDS prior to the close. This is one hell of a bear flag and if we close below 1148 (Fridays low) then markets will be in breakdown mode. I also have a couple of other factors at play and its amazing how all these factors lining up at the same time. Also my prediction about a dollar rally is coming to fruition. We may say a slight pull back in the coming days, but the dollar will race up again, which will put a lot of pressure on the markets. My downside target is last years pivot lows, then a revaluation from there. A huge down move would also give the Fed more leverage in dishing up another round of QE. The one caveat here is that this is options ex week, and a lot of shenanigans goes on during this week. Europe is collapsing in front of our eyes, and US markets have every reason to follow suit.

  3. RMT says:

    WOW looks like the PPT team does it again. Looks like I’ll have to wait a couple more days to pick up the SDS. SPY held key support level and had huge reversal; possibly a little more upside left…

  4. ed says:

    Maybe happen this week. But the week after option expiration tends to be a down week. Will close out most longs and go short Friday’s close unless indicated otherwise

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