Comments on: Sentiment Overview: Week Of September 12th, 2008 http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html Freshly squeezed market commentary & analysis Sun, 21 Mar 2010 13:20:05 +0000 http://wordpress.org/?v=2.0.2 by: Bill K http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34793 Tue, 16 Sep 2008 21:48:14 +0000 http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34793 We actually missed the Dow 52 week low by 10 points. That's close enough for a retest. We actually missed the Dow 52 week low by 10 points. That’s close enough for a retest.

]]> by: Bill K http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34792 Tue, 16 Sep 2008 21:35:23 +0000 http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34792 Well the data has finally made a verdict. This has been text book panic, blood in the streets selling the past 2 days. We broke a trading volume record yesterday and then again today. The Put/ Call ratio never got below 1.3 in the past 2 days, even on the positive close. The VIX has been from 30-34 for both days too. All of these stats are showing undeniable sheer panic in the markets on record volume. We got the close below 1200 on the S&P 500 yesterday but we also had the kind of panic (we have all been looking for) that a contrarian trader can only buy in, not sell. Today the Dow and NASDAQ temporarily violated their 52 week lows and pulled back strongly to close positive. There is always a different reason why the panic comes, but as always, the reason needs to be ignored. The market is preparing for a nice rally. In my opinion today was the final capitulation day of this double bottom retest. Bill K Well the data has finally made a verdict. This has been text book panic, blood in the streets selling the past 2 days. We broke a trading volume record yesterday and then again today. The Put/ Call ratio never got below 1.3 in the past 2 days, even on the positive close. The VIX has been from 30-34 for both days too. All of these stats are showing undeniable sheer panic in the markets on record volume. We got the close below 1200 on the S&P 500 yesterday but we also had the kind of panic (we have all been looking for) that a contrarian trader can only buy in, not sell. Today the Dow and NASDAQ temporarily violated their 52 week lows and pulled back strongly to close positive. There is always a different reason why the panic comes, but as always, the reason needs to be ignored. The market is preparing for a nice rally.

In my opinion today was the final capitulation day of this double bottom retest.

Bill K

]]> by: Ron http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34789 Tue, 16 Sep 2008 20:30:28 +0000 http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34789 I know you have said before that you are not much on using a gut feeling to make decisions like this, but in my opinion some times the data will not give you enough information to make a clear decision. I know you have said before that you are not much on using a gut feeling to make decisions like this, but in my opinion some times the data will not give you enough information to make a clear decision.

]]> by: Ron http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34778 Sun, 14 Sep 2008 08:49:48 +0000 http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34778 That is where the analysis of why we are where we are and the gut feel of this game comes in to play, in my opinion. I know you have said before that you are not much on using a gut feeling to make decisions like this, but in my opinion some times the data will not give you enough information to make a clear decision, hence the current market confusion by everyone. But even if we take out my opinion and just look at the double bottom strategy, the “bottom is in theory” is innocent until proven guilty. That is where the analysis of why we are where we are and the gut feel of this game comes in to play, in my opinion. I know you have said before that you are not much on using a gut feeling to make decisions like this, but in my opinion some times the data will not give you enough information to make a clear decision, hence the current market confusion by everyone. But even if we take out my opinion and just look at the double bottom strategy, the “bottom is in theory” is innocent until proven guilty.

]]> by: Bill K http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34776 Sun, 14 Sep 2008 02:13:40 +0000 http://www.tradersnarrative.com/sentiment-overview-week-of-september-12th-2008-1846.html#comment-34776 Babak, I have been using the VIX, VXN, and put/call ratios to time intermediate and long term market bottoms for over a decade. When used in conjunction with sentiment/panic observed in the market they are great contrary indicators to time new bottoms on fresh lows. From 97-03 it seemed like the NASDAQ was the only market for traders and I watched the VXN more closely as it tracks volatility for the NASDAQ, as you know. I actually used to post on Raging bull in the early 2000's during the bear market about detailed historical market research that I was doing at the time. Back then I was looking for a VXN above 80 in conjunction with a 1.00+ on the regular put/call ratio as a sure sign of a near term bottom. I point this out to make the point that I am not new to interim bottom spotting. But the main problem we have right now is that those indicators are all best at spotting bottoms while carving out new lows. When you have a double bottom/retest, as is the case right now these indicators are far less effective at helping you verify that it is a bottom. The reason is simple, you have many TA chartists that are buying near that low to see if the bottom holds. If it doesn’t they sell and lose 2-5% at the most. So you will not see that group panic until it breaks below that July bottom of 1200 on the S&P 500. So overall the panic indicators will show less fear, which is exactly the situation we are in right now. That is where the analysis of why we are where we are and the gut feel of this game comes in to play, in my opinion. I know you have said before that you are not much on using a gut feeling to make decisions like this, but in my opinion some times the data will not give you enough information to make a clear decision, hence the current market confusion by everyone. But even if we take out my opinion and just look at the double bottom strategy, the “bottom is in theory” is innocent until proven guilty. So your downside is limited at this point and if proven wrong you bail out. Just my thoughts on the matter. P.S. Short ETFs are great for IRA and 401k accounts that you are not able to margin or short in. I have an IRA roll over account from a 401k and a regular IRA that I have built up over 20 years and I have used those ETFs in these accounts. They are a much better choice then buying puts, which you can do in those accounts. I find that when I want to short or go long the market lately I prefer to use double short or double long market ETFs even in marginable accounts. This allows me to use half the capital for the same result without paying margin costs. I did day trading from 98-01but these days I tend to be more of a swing trader, although I do some same day in and out trades I am more likely to hold for a few days to a few weeks/months. I have a decent position in QLD right now which is double long the QQQQs. Babak, I have been using the VIX, VXN, and put/call ratios to time intermediate and long term market bottoms for over a decade. When used in conjunction with sentiment/panic observed in the market they are great contrary indicators to time new bottoms on fresh lows. From 97-03 it seemed like the NASDAQ was the only market for traders and I watched the VXN more closely as it tracks volatility for the NASDAQ, as you know.

I actually used to post on Raging bull in the early 2000’s during the bear market about detailed historical market research that I was doing at the time. Back then I was looking for a VXN above 80 in conjunction with a 1.00+ on the regular put/call ratio as a sure sign of a near term bottom.

I point this out to make the point that I am not new to interim bottom spotting. But the main problem we have right now is that those indicators are all best at spotting bottoms while carving out new lows. When you have a double bottom/retest, as is the case right now these indicators are far less effective at helping you verify that it is a bottom. The reason is simple, you have many TA chartists that are buying near that low to see if the bottom holds. If it doesn’t they sell and lose 2-5% at the most. So you will not see that group panic until it breaks below that July bottom of 1200 on the S&P 500. So overall the panic indicators will show less fear, which is exactly the situation we are in right now.

That is where the analysis of why we are where we are and the gut feel of this game comes in to play, in my opinion. I know you have said before that you are not much on using a gut feeling to make decisions like this, but in my opinion some times the data will not give you enough information to make a clear decision, hence the current market confusion by everyone. But even if we take out my opinion and just look at the double bottom strategy, the “bottom is in theory” is innocent until proven guilty. So your downside is limited at this point and if proven wrong you bail out.

Just my thoughts on the matter.

P.S. Short ETFs are great for IRA and 401k accounts that you are not able to margin or short in. I have an IRA roll over account from a 401k and a regular IRA that I have built up over 20 years and I have used those ETFs in these accounts. They are a much better choice then buying puts, which you can do in those accounts. I find that when I want to short or go long the market lately I prefer to use double short or double long market ETFs even in marginable accounts. This allows me to use half the capital for the same result without paying margin costs. I did day trading from 98-01but these days I tend to be more of a swing trader, although I do some same day in and out trades I am more likely to hold for a few days to a few weeks/months. I have a decent position in QLD right now which is double long the QQQQs.

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