ES 09-15-2008 II

Well, the market didn’t quite do what I envisaged. I was looking for a one-timeframe in either direction; instead we had a rotational day until 1:00 PM EST. From that time onwards, a directional move down ensued. The cash S&P closed 1192.70 on very strong bear volume on Market Delta’s footprint charts.

In this blog, I’d like to consider what last night’s action means for the US stock market.

  • The close alone is equivocal. It closed a mere 7.5 points below the swing low at 1200. A conviction bull bar close above 1215 would raise the probability of a low being in place till at least after Xmas.
  • The volume and bearish candlestick suggest that the above scenario is unlikely. Instead of a rally, we should see a continuation of the down move.
  • There is one more item muddying the waters. The FOMC decision is due at 2:15 EST. According to the Fed Fund Rate, there is an 80% probability of a rate cut of the Fed Fund Rate. I doubt that will happen but the FED may do something else ‘to try to save us from Armageddon’.
  • One thing is clear, each intervention needs greater and greater effort from the FED to generate a positive response. Will tonight be the night where FED intervention fails?

My best guess is that the FED action will generate a knee-jerk reaction that will cause a retest of 1200. This retest will succeed, and we’ll see the market start a full-fledge bear market. This assumes that 1215 will remain intact on a closing basis.

5 thoughts on “ES 09-15-2008 II”

  1. Hi Ray
    I am stuck in hotel in Anchorage……
    Bright light on the horizon of my day is…
    CNBC.
    I am amazed at the language commonly used to describe current market behaviour. It is not up/down/sideways etc, but instead good/bad/tragic/devastated/ etc.
    Its almost as if the commentators had a position on, and they were describing its progress. Not very zen, and definately not a detached observation.
    Speaking of zen, how is the zen masters mobility progressing?
    Ciao
    regards
    Stuart

  2. Hi Stuart

    What are you doing in Anchorage!?

    Agreed – very un-Zenlike.

    My mobility is fine. Almost back to normal. Just cannot bend all the way down but apart from that better than a 40 year old.

  3. Stuart, anchoring from the sky,you should be out there prospecting for Black Gold.
    Quote
    In 1968, oil was discovered in Prudhoe Bay, and the resulting oil boom spurred further growth in Anchorage. In 1975, Anchorage merged with Eagle River, Girdwood, Glen Alps, and several other communities. The merger expanded the city, known officially as the Municipality of Anchorage. The city continued to grow in the 1980s, and capital projects and an aggressive beautification campaign took place.Unquote

  4. Dear Ray,

    I am looking for some resources on position sizing ideas. Could you please suggest some reading material/websites etc on this subject.

    Regards,
    Manish
    PS: Your comments are really insightful and very informative.

Leave a Reply

Your email address will not be published. Required fields are marked *