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Tuesday, October 14, 2008

Rip Your Face Off Rally, Major Accumulation Day

On Friday last week I said Relax, Still Building Longs. In the comments shortly after the open I posted:

“Added on the open. HOLY CRAP! I left a stain in my pants, but I hit the “BUYBUYBUY” button.

Closed my eyes, pulled all stops and waited.

The cheering in the pits is wild.”

Some of the fills in the panic dump were ridiculous. QLD @ $25.88, SSO @ $30.90.

I went into the weekend all out long and without hedges. Granted, I drank a helluva lot more than usual all Thanksgiving weekend and I was more than a little nervous. I had to ‘sneak away’ from family events on Monday quite a few times to check the markets, but I stayed long.

Monday was the FIRST major accumulation day in a long long time. This bounce is for real.

This should not come as a surprise after about SIX major distribution days almost back to back. The weak hands have been flushed out. The forced, panic liquidation has taken place. The way is clear for a 'rip your face off' rally'.

Prices could easily bounce to the 50% and even 61% Fibonacci retracement levels before backing off.

I expect volatility to fall from nosebleed levels 'back' to the low low level of 30. (Haha.)

All risky assets will rally wildly while this occurs.

I will be scaling out of one quarter of my long positions on the open today. I’m thinking about thirty minutes after the open as the retails guys come in on the back of yesterday’s rally.


Anonymous said...

Mr Ben,

The Fib levels in the chart are for the NYSE.

Could you share what is the 50% and 61% Fib targets in SPX?

Thank you.

Ben Bittrolff said...

Added the S&P 500 chart with the Fib levels.

Brant said...

Congrats to you nimble fellows. At least as of premarket, I'm still ~30% to the good from my last year move to IRA/401K cash (vs desperately getting out last week). My 401K has some 60 day rules on jumping in and out, so I have big delay requirements.

I mentioned at the end of Fridays comments about the 2002-03 "W" bounces mentioned on the Chartology part of Fast Money (I think the lesser of the three CBNC evils). Those bounces were the same time of year (and almost the same low levels) with the 2nd bounce to the full bull market at the start of 2003. I'm wondering if the underlying economy then was better than now esp. when it comes to holiday/retail spending with everyone getting more stingy with their personal finances now.

Of course I might be an idiot too, but I do still have $s/%s to play with. By the way the word verify on this one had three "z's" to start. I don't think we're sleeping now.

Brant, Atlanta, GA

dougiefreshh said...

Same here. can't move my 401K cash around need to choose wisely when to get back in.

Are the economics sound, or is just the ride up the wave before the bow of the ship goes under? Ben?

Sev said...

Careful Ben. Make sure you hedge that out and don't stand out there naked too long. It looks like a rally SHOULD occur all the way to election day but we still have earnings to go through and we still have lots of swaps to be settled. Those retracers are right on but the level of underlying fear is not to be thrown away lightly. This could be a powerful wave 4 or a slight blip on the way down to 5 bottom. I don't trust the gubbamint to fix this as they couldn't see it coming anyway. A lot of big fish still want out if they know where this is eventually headed. I would hedge a small trade or 2 on skf and have my stops at 15% in case a black swan swims accross.

Jonny said...

Thanks Ben, you continue to be one of my rocks of info and validation. I'm with Sev, things look very good medium-term from a technical standpoint but there are wrenches that could certainly gum up the works and override the momo. That being said, I'm also 100% long and strong but have my ear to the ground and finger on the trigger. S&P 1065-1070 seems like the showdown between retracing to 950 or up to 1150 in short order.

Anonymous said...

did we close above the 10/8 high on any index....? this rally already failing? we filled gaps also and then fell back so what does that mean....?....i think we need at least 2 bailouts a day going forward.

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