Saturday, August 28, 2010

Runnoff and timelines

Many charts are conflicted, and that points to an unstable market, and a possible playing out of the so called Hindenburg Effect/Omen. When I say conflicted, what I mean is; IBM has topped, while AAPL has bounced off support. At the top of wave 2: The dow topped at a lower high, while the SPX hit a new high. The VIX is way over-sold, while Treasuries are near all time highs.

A crash is coming, and it's just a matter of time. Sometimes I use the word crash to describe a steep sell-off, but here I'm taking about a crash in which curbs are triggered (maybe over several days), and it's been a while since we've seen that kind of action. 3 1/2 years. I actually prefer not to see a crash, because 3X ETF's seldom see the gains they would in a more sustained sell-off, plus a 4000 point crash would likely result in several months consolidation (more sideways action), and we've seen enough of that!

Respect for your elders: I was fortunate enough to watch my father trade in the decade-long '70s bear, so at least I have some second-hand experience, while most fast money traders have known nothing but upside, and quick recovery, their entire adult lives, I'd like to think I'm more of a realist.

It may take many years to reach absolute bottom, and this is evidenced by history. Even the puny debt bubble of the 1920's took nearly 3 years to unwind, and the market didn't recover for more that 20 years, and we are following the same plan (higher taxes and more government spending)! How much longer is this one going to take?

Commercial building momentum is just now beginning to slow. To top this off we have an entire generation of investors (the baby boomers) who are all about to run for the exits at once. Nothing the corporate government media complex says is going to convince these old timers to gamble what little they have left in their retirement savings, on the roulette wheel that is the casino stock market.

I only hope that the house of cards stays glued together long enough, to provide us with a volatile trading environment, for the next few years, because if the derivatives market crashes, so goes the swaps market, along with the whole kit 'n kaboodle.

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