There's just no way around it, stocks remain in freefall. Hopes for an intermediate term bottom failed miserably last week when the major indices broke down out of their famed symmetric triangles. While the dow jones and S&P 500 have not made new lows, this appears a technicality with the leading indices (nasdaq 100 and Russell 2000(above)) getting crushed to new five year lows on Friday. This scenario has set up a test of the 2002 bear market lows and brings new measured rule targets into play, all of which are significantly lower. Here's the dow's traingle:
The best thing for the stock market now would be a quick panic of "extreme capitulation" down to the lower 7,000's on the dow or lower 700's on the S&P. With the failure of the early October bottom the market needs some sort of extreme event to entice investors to come back to the market and shorts to cover. Right now we are back into a steady free fall so it is more important than ever to honor stops. The obvious example here is JASO. When JASO broke that 5.3 area (IPO support) the stock was crushed beyond belief, falling almost 40% in two days. The problem is that 100% of investors in JASO are now at a loss and most of them probably would be happy just to get out break even. There will be enormous resistance for JASO to rally now. That's why I suggested a stop at $5.2 when I mentioned it last week. From a technical standpoint it is impossible for me to like JASO while it remains below that IPO price.
I guess the next step here is to exploit (profit from) the weakness yourself. If stocks are gonna get crushed after breaking support then we might as well short that break and go on the offense. Take a look at ICE:
Now I realize ICE has fallen a large amount, my target was met a while ago and the PE and PEG look very attractive especially with all this volatility and volume to boost earnings. But none of that matters if the stock is going to keep making new lows. In fact the irony and absurdity of a stock falling so rapidly in the face of booming business might even accelerate the downside as panic ensues. If stocks are going to be massively devalued here I want at least some exposure to that downfall. I'm trying to keep my eyes and mind open to anything in this crazy market. Right now things look and feel pretty damn foreboding.
There's just no way around it, stocks remain in freefall. Hopes for an intermediate term bottom failed miserably last week when the major indices broke down out of their famed symmetric triangles. While the dow jones and S&P 500 have not made new lows, this appears a technicality with the leading indices (nasdaq 100 and Russell 2000(above)) getting crushed to new five year lows on Friday. This scenario has set up a test of the 2002 bear market lows and brings new measured rule targets into play, all of which are significantly lower. Here's the dow's traingle:
The best thing for the stock market now would be a quick panic of "extreme capitulation" down to the lower 7,000's on the dow or lower 700's on the S&P. With the failure of the early October bottom the market needs some sort of extreme event to entice investors to come back to the market and shorts to cover. Right now we are back into a steady free fall so it is more important than ever to honor stops. The obvious example here is JASO. When JASO broke that 5.3 area (IPO support) the stock was crushed beyond belief, falling almost 40% in two days. The problem is that 100% of investors in JASO are now at a loss and most of them probably would be happy just to get out break even. There will be enormous resistance for JASO to rally now. That's why I suggested a stop at $5.2 when I mentioned it last week. From a technical standpoint it is impossible for me to like JASO while it remains below that IPO price.
I guess the next step here is to exploit (profit from) the weakness yourself. If stocks are gonna get crushed after breaking support then we might as well short that break and go on the offense. Take a look at ICE:
Now I realize ICE has fallen a large amount, my target was met a while ago and the PE and PEG look very attractive especially with all this volatility and volume to boost earnings. But none of that matters if the stock is going to keep making new lows. In fact the irony and absurdity of a stock falling so rapidly in the face of booming business might even accelerate the downside as panic ensues. If stocks are going to be massively devalued here I want at least some exposure to that downfall. I'm trying to keep my eyes and mind open to anything in this crazy market. Right now things look and feel pretty damn foreboding.
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