Thursday, May 20, 2010

Today Looks Like the Day

If you've been following along the past 5-6 market days, I have repeatedly said I don't believe this is the ultimate bottom (or don't believe the bounces) because there was no emotion. I've said we need to retest at minimum the May 7th "non flash crash" bottom. And that what we really need it the whoosh down bottom right from the open instead of the nonsense premarket games that have become the hallmark of U.S. "free" markets.

Today looks like that day. It appears we will have all of the above - the restest, the whoosh, and the emotion. In fact barring a miracle in the next 45 minutes we are going to gap down below Friday May 7th's intraday low (S&P 1094)

Now in all those entries I've written we need to see something like this, I've also said the traditional buying point (if for nothing else a counter trend move back up) will be a reversal after the carnage, and preferably a close at or near the high. This would mark some seller exhaustion.

The one caveat we have is May 6th - 2 weeks ago today. In the back of everyone's mind is what this market has turned into... a market where the "liquidity providers" (HAL9000) who have killed off traditional market makers for the most part, can press ctrl-alt-del, and walk away from the market leaving us with no bids. i.e. get your 1 cent bids in folks - there's some bargains to be had! It would be such a damning circus to have yet another flash crash - it seems almost too comical to happen twice in 2 weeks in the "sturdiest, and most liquid" market on Earth. Do I think we flash crash again today? Seems almost impossible as you'd think our PPT would be ready to flush us with buy orders to save the world from seeing behind the Matrix. But it things get furry, it will be interesting to see if the band of brothers named HAL start rushing to hit "HF STOP"!


For now:
May 7th's intraday low: 1094
May 6th's "flash crash: low: 1066

Below that there is a ton of intraday lows right at S&P 1060 from February lows, which was punctured in 1 session (Feb 5th) at 1044.50.

Of course if our "liquidity providers" (happy to provide liquidity except in times of trouble) disappear and we get another -10% intraday move, these figures will all be quaint.


Since the fund cash level is so extremely high (85%ish), I see myself making some purchases today - especially if the S&P gets down to the 1060s. Should be an exciting day.

p.s. the S&P 500 has not been below the 200 day moving average since July 2009.

p.s.s. here is an update to yesterday's chart of % of stocks in the S&P 500 below the 50 day moving average. We are now at Feb 2010 lows and I assume at the open today we'll plunge through Feb lows - another indicator that a bounce should be in the offing sooner rather than later.

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