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Tuesday, October 7, 2008

Oversold Bounce Time, Going Long

So, I started going net long yesterday. That’s right LONG.

You can find my conversation here on the Slope of Hope and here on the Evil Speculator in the comments section.

I’ve gone long the NASDAQ and the S&P500 through QLD and SSO. I’ve picked up some of names the hedgies have puked hard: AGU, MON, MOS, POT and AAPL, BIDU, GOOG, RIMM.

These are all oversold bounce trades. If the wheels start to come off, I’ll hedge by slamming the Nasdaq and S&P 500 futures short.

That is one hell of a spike in volatility. Mind you, the Volatility Index (VIX) may be compromised due to the short selling ban. Still, this parabolic move to 60 on the index leads me to believe that we are near some kind of intermediate bottom.

Toss in a few other indicators and I'd say its bounce time in equities.

For example, the NYSE Bullish Percent Index (BPNYA) has plunged to the lowest low in 10 years. I think the very last Bulltard is about to commit hari kari. I like it. I like it a lot.

Also, less than 6% of stocks are above their 50 day simple moving averages on the NYSE as measured by the S&P500 Percent of Stocks Above the 50 Day Moving Average Index (SPXA50R).That is amazing.

On the weekly chart, the SPX fell out of the down channel... and went into free fall. Prices are now so oversold as to be ridiculous.

Maybe the SPX will find support around the 1060 level from 2004. Yesterdays late day rally shows up as a nice ‘buying tail’ on the daily candle. Volume was a little anemic for capitulation, but I’ll take it for now.

If the last Bear market is any indication the SPX is about half way there now. Since I believe this one has to be worse, I will only go long for trading purposes. There will be plenty of time later to build those long run investments.


Anonymous said...

Mr Ben,

I see that Tim Knight expects this bear rally to last a week and go up to abt the 1130 level in SPX.

From your above charts, the resistance level looks to be 1150 in SPX.

At what SPX price level do you target to sell your long positions and re-start the shorts?

Anonymous said...

Have you considered that technical analysis may be of little value in a wildly irrational market?

Ben Bittrolff said...

spaceshuttle ben,

You bet. Hence the lack of charts of late.

Anonymous said...

so how'd that rally work out.

Anonymous said...

Perhaps the rally will be muted by deflation. No one
able to properly value stocks in relation to the value
any other asset especially cash.

Anonymous said...


Great stuff. What other charts do you look at, market wide, like the S&P500 Percent Stocks above the 50Day Moving Average and the NYSE Bullish Percent Index to help you keep track of the big picture?


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