Tuesday, October 9, 2012

Terrifying Tuesday.

This is what I wrote yesterday:

Earlier I had indicated that the bounce level is 1430.(/ES) Cycle says that it should happen in a day or two.
The 15 min charts in most indices is looking like a bear flag  or at least a continuation or consolidation pattern which indicates more selling ahead.

In fact after the post was published, I was thinking that I might lose face tomorrow. But God saved his idiot savant. (sorry BDI!)

This time the cycles have been spot on, which is not always the case. So now we have most of the down calls fulfilled. Earlier Oil sold off, today gold and silver corrected and is just about the lower part of the range. Now we have the remaining part of the call, which is to shoot up till election. Even Apple, o mighty Apple, also corrected below $ 640. Now we are coming in the final part of the bull market rally which hopefully will culminate around 2nd week of November.

In the pre-market, when I scanned the futures, the emini was up around 6 handles.  I sent out this tweet: 

‘GMA. Day starts where we left it yesterday. Not much change but somehow I don't like it, don't know why. Feels like a trap. May be I am paranoid” That was much before the selling started. Well, sometimes it pays to listen to the intuition.

Now the intuition is saying that we will see some more selling before the bounce. I think we still have little more selling to come tomorrow but will ultimately close above /ES 1430.

In the afternoon I started scaling in long positions in PM sector and TBT. Over the weekend I will write about the importance of scaling in any position. It is one of the trading disciplines I have learned very late in life. I am not touching other stocks yet but depending on how tomorrow turns out, I would be interested in SGEN and PNRA. But as of now, they are not a priority.

One notable exception to selling was Oil, which was actually up throughout the day. I think the Boyz were rotating money. If the sell-off was due to concerns about the global recession, why oil did not sell? Moreover TBT was up. Even Nat.Gas was up. You see, things don’t add up.

Many have been conditioned that there is inverse relationship between Equities and Bond. To a certain extent they are right. The investor psychology has been so scarred by the 2008-9 financial crisis and mom and pop investors lost so much money in stocks that they did not participate in the entire rally from SPX 666. Scaremongering blogs have not helped either. Now investors are fully loaded with fixed income funds and bonds.  Next comes the scariest part. In the forth coming melt down, both the stocks and bonds will go down together. And retail will again lose money.

I want to avoid rants of all kind in this blog and keep it focused on the market action, devoid of macroeconomic analysis and other stupid things that our politicians and economorons do. May be a dedicated blog for the rants would be in order. But I would need contributors for that. Please raise your hand. In the other blog about better life, I got some very nice comments from some of you:

Bluesky wrote:
Hello BB,

I'm a huge fan of your finance blog. I consider it one of the best 5 on the Internet.

I just found this one and it's got off to a great start. I'm looking forward to reading this regularly too.


Thank you Bluesky.

Paul said:

Hi BB, I came across this blog through your financial blog. Between the 2 sites it can be synergistic (hate that word). Keep up the great work. I'll donate when I can.

Thanks Paul. Yes, they are synergistic. A better state of mind will result in better trade and investment decisions.

That’s all for tonight. Hopefully we will see the bounce tomorrow. If not and /ES closes well below 1430, then “O”  is going to lose the election. It seems unlikely at this point but who knows.

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