I will update the site Sunday night, late, and post it here and send out a newsletter.
I am close to launching my "look over my shoulder" live trading room. This week yielded 202 SP500 points, and 62 points on Friday alone. It will give you an opportunity to watch in real-time when I am buying, and when I am selling, and most importantly, how I manage the position. Of course the way things are going right now, by extrapolation, we will not have a market to trade by the end of October. To lighten your mood and mine, I have sourced a few cartoons...
Tom
So if Time Mag is a good contrarian indicator, then what should we make of this????
FANTASTIC. A NEW ALL-TIME high for Vix index (fear/greed index) marks the end of another record... : the biggest lost ever in 7 consequtive sessions. I hope the 377 cal days turn marks the end of the downturn for a week or two.... stay put...
Update 12:32pm
I fed you wrong information regarding Bank Holiday in the US. Columbus day is NOT a bank holiday (I dont think the US even uses this expression), and the exchanges are open for trading as usual. Sorry!
update 09:42am
I hold my hands up and say I am thoroughly tempted to buy something here. The reason I am not buying anything is because it is not even 10am, and I want to see how the US reacts to the Globex SP500 futures being down 20 points. This is a classic panic, and there will be capitulation coming. Please dont be a hero here. The trend is down, and there are a lot of distressed sellers still waiting to catch a bid. You know that timewise the turn is due, but you cant trade it using options. The Vol is through the roof and you would be paying a hefty premium for the priviledge of owing a call. The 10th has been mentioned several times over this page, so read through below and draw up a plan. Monday is a bank holiday in the US, and it is very possible that central agencies all over the world will nationalise Morgan Stanley and Goldman Sachs. Given it is a bank holiday on Monday, I suspect the SP500 pivot is 916. Anything above it I will buy. Otherwise I will stay short. Watch for short covering into the close in the US. And if we get a lower open in the US, watch for a reversal at 16:30 UK time. I am not predicting there will be one, but if there is one, if could spurt a huge amount of short covering into the close....
Tom
update 06: 56am
DAX being called down 300 points... I am not even interested in buying now...
update 1:56am
HMMMM.... I got some bad news. And it isnt that I sold my unit bought at 952 out at 920 and lost all the days day trading profits. Nope... money means nothing compared to life, and the bad news is that we have lost a really fine man this week.
Dominic Mazza, who ran Trading the charts site, has passed away at too young an age. Dom came up to me in NY once and spoke. He was just a really pleasent gent, a solid technician, and a giver. You will be missed amigo.
I sold out. I dont mind a bit of heat when building a stake, but I was out of pocket by 30 SP points in 10 minutes, and I am not putting up with that. And here is the worst thing: we havent even begun to panic yet. There is no fear but I think tomorrow is about to change that. So I am sat on the frontline, ready for tomorrow morning. It will be a day for quick fingers and decisive mouse action... good luck... TA wont matter here.... I will buy dips on huge volume for small scalps, and I will sell every rally..... bedtime....
PS: I cant find any retracements that are worth considering here...... so the bottom is the old lows from 2002!!!!
NEWSFLASH
DOW DOWN BELOW 9000. I AM BEGINNING TO BUY A LITTLE. SO IF I HAVE 10 UNITS TO BUY, I AM BUYING ONE UNIT. I AM BUYING THE DEC SP500 AT 952. THE SP500 HAS JUST LOST 40% (GANN LEVEL) AND TOMORROW IS A BIG DAY, PLEASE READ BELOW FOR INFORMATION
9th October 2008 - 15:26pm
I think a while back you heard me say that the 6th through the 10th was an important time period. In particular the 10th is important, as we have declined for 144 calendar days. BUT you gotta ask yourself if the low is not already in? I have been trying to buy dips, and I am repeatedly getting stopped out for scratches, so either I accept that the market is whippy or I stay out. You heard the good ones on CNBC say that traders keep shorting the rallies. Now that you can short the financials again in the US, this process may be flowing through the system again. Either way, I am trading cautiously now. I have had a great month so far, but yesterday result shows me about the changing markets. After 2 days of + 40 SP points, I managed 1/4 yesterday after comms... yep...1/4 point for a full days work..... :)))
From a position trading point of view I favour the long side, but I am flat right now.... These are the two dates I am keying in on: 10/10.... (it is actually also a bear market low anniversary from 2002, but that is not why it is important). The 10th is 144 cal, and the 22nd is 377 calendar days.... ... I think it will be an exceptionally whippy month.. brace yourself....
More coming tomorrow morning with charts..
Happy Trading
Tom Hougaard
8th October 2008 - 12:41pm
Quick mouse action is required today!!!
Here is a look at where we stopped..... we have not taken out yesterday's high, despite all the fuzz... Sure a low is due... we know that but if we get a big gap, I suspect we will have to fill it at some point..... so nothing has really changed..... I will trade what I see.
Tom
7th October 2008 - 11pm
Urgent: I make no guarantees this opportunity will be around when you read it, but I have bought the FTSE tomorrow at minus 160. I have just learned that the BOE will supply the market with a 50bn rescue package... I have no idea how the market will react, but I suspect that it will benefit the market..... YOUR RESPONSIBILITY....You can trade the it in the overnight market, but I don't know at what price. And even then, dont be complacent if we rally. We can STILL turn down and close lower!!!! AND if the FED cuts rates, do not be fooled by the rally... I will sell into it.....
It was a difficult day to trade because of the divergence between the FTSE and the Dow. The FTSE was on fire (well, at least in the morning), and the DAX was weak. I spoke to Larry Pesavento, who has been a real inspiration during the last couple of weeks with his insight to the market. He told me that the real deathblow to the market was the Fed's announcement today before the open. It was meant to be good news, but it really hammered home the notion that the US is headed into a depression. It was his words, not mine. I admire his analysis, and I have to remind myself that he is the one living in the midst of it.
It is in mind impossible to do any kind of proper intra-day TA on these markets. I gained 41 SP500 points today but it was done trading intraday without real TA, in the live trading room. This was after 3 losing trades on the trot after the open.
Another veteran I heard on CNBC surprised me by saying, and I paraphrase here: I wish they hadn't rallied towards the end of the close(this was monday night), because otherwise we would have had a chance of making a final low. Apparently in his universe you need to close hard down before you can find a low. His name is Art Cashin and he is exceptionally articulate and knowledgable on the markets.
Anyway, I doubt I will update tomorrow morning. I am long the FTSE and I hope Alistair Darling is going to give the markets what they want. We will see.
Good luck
Tom Hougaard
7th October 2008 - continued
The Dow hit a huge number last night. I have no doubts though that the volatility will continue around this number. My feeling is that with so many cycles coming in between now and the end of October, we will see some wild rallies, and shocking declines. Even this morning has been wild with the FTSE and DAX opening up +100 points and now trading down 50 points.
The 6th - 10th October is the key period together with the 22nd october. I can begin to speculate how those two dates will pan out, but I think it is more important to get the gist of the the sell-off: sell rallies.... It has paid off hugely so far. At some point it will stop of course, but I dont need to tell you that this is the nature of trading. Good luck today. This is an investors nightmare and a traders paradise..
Tom
7th October 2008 - 06:16am
good morning,
I had a question on the live trading room. It is close to completion. We have been running it in live demo mode, trading it myself, and posting the entries, stops and exits in real-time for a 2 months period. So far the results have been good, but obviously need to be seen with the volatility in mind. Nevertheless the room produced 304 SP500 points (about 3000 Dow points) in September. So far October has been manic with yesterday producing 52 points (about 500 Dow points), and since the week starting on the 29th September up until last night has produced 101 SP500 points (about 1000 Dow points). I trade the SP500 because it is the most liquid but the signals can be used at the same time for Dax, the FTSE and the Dow.
This morning we are looking at a substantial rally. The 6th October was a key date, but it actually extends up until the 10th, and another key date at the 22nd October. So hang on for a wild ride. We hit a real key point yesterday:
So I will remove myself from the bearish camp for a little while, well at least for this mornign.
Kind regards and happy trading
Tom Hougaard
5th oct 08
SUNDAY NIGHT 11:16PM - dOW CALLED DOWN 70 POINTS... FTSE DOWN 180, DAX DOWN 190.... NO REASON TO COVER SHORTS...
PATTERN TARGETS 1044 IN SP500.... A MOVE ABOVE 1112 WILL HAVE ME PLAYING SHORT SQUEEZE...
Larry Pesavento sent me this....priceless...thank you Larry
" many of you have emailed me with questions about what is happening in the world today-all i know is that money is very scarce as witnessed by the LIBOR RATE -this is the rate set by the London banks to lend to each other--it is 8 standard deviations from normal--even worse than 1987--
why are they so reluctant to lend even at high rates???
--also GE capital had to go to warren buffet and issue more stock to raise capital--GE is AAA rated and should have been able to raise this amount easily-I sent an article about the panic of 1837 which was based on the same thing that is going on now-A WORLD WIDE SQUEEZE ON CREDIT-what is also interesting is that the astro aspects from 1837 are present now in the same positions--this is why i am so cautious--
if there is going to be a meltdown it will start late Sunday in the usa as Europe is in as bad as shape as we are (MY notes: the German rescue package for Hypo has falled through and I expect that will not be well received by the market Sunday night) --dropping interest rates will just cause further problems --the bill that passed Friday that brought on all of this hoopla was a bad bill--it was originally 2 pages and failed --it was over 400 pages Friday so every member got his pound of flesh in order to pass the bill--the 700 billion could be gone in a few hours Monday-the market has told them it was a bad bill --wall street is now run by Washington--the power that Paulson and bernake have was not meant to be by our founding fathers--the good news is that we will still be just fine but we are in for at least 5 years of contraction and great trading markets--my opinion of course and i hope i am wrong all the best Larry """
Weekend Reading. Download PDF from Milken Institue on WHY we are melting down. It is called a PDF which explains the mortgage meltdown.... really interesting in place... click on image
the next two weeks will in mind offer the low, but more likely towards the end of NEXT week. Please also bear in mind that 61.8 retracement for Dow 9900.....
Have a nice weekend
3rd October 2008 -
Good morning,
I am surprised why Europe is being called up today. Asian indices are all in red, with Nikkei and Hang Seng down between 1.5 and 2.5%. The trend is so firmly trenched lower, and I have no idea why anyone would buy ahead of the Non-Farm Payroll numbers released today. And to add to the argument, the vote in the Senate will take place today. If this was such a done deal, I very much doubt that the Dow would decline 3% yesterday. The real issue is not the vote. Investors are looking at for example the LIBOR rates and note it is 8 standard deviations from the mean. What does this mean? No one is lending money to each other. Do you want to have an idea of what does to society. Take a look at this link:
Ask yourself this: if this was a crisis of normal magnitude, would you not expect Gold rally? It always rallies in time of uncertainty. Yet, it has declined $80 in the last 2-3 sessions. Why? Because investors are going into cash. Hedge funds are seeing redemptions at an unprecedented level, as cash is being hoarded. So I am not seeing this is an opportunity to buy gold. At least not yet.
Finally, the VIX indicator suggest the market is oversold, and I agree. BUT when I look back over the last 10 years of VIX signals, I have been able to time lows in the market using tools such as the Matrix Timing indicator. If we are making a low today or this week, it will be with a time cycle that I dont know anything about. I dont have a low on the cards for another week at the earliest. I could be wrong, and I will follow the market closely. I do however remember the old saying when trading cycles: 90% of the damage is done in the last 10% of the cycle. I do have many links for a low in 2 weeks time.
Some thoughts to ponder upon. I think today will be crucial. If we close near the lows again today, I will stay short over the weekend.
Safe trading today...
Tom
2nd October 2008 -
Good morning,
there is a lot to read below, so I will keep this short, and short is what I want to be.
I got an important time date at the 6-10th October. I can't rule out there is more downside to come.
DAX CHART
The chart is telling me to be short the DAX below 5900 in the futures. Anything above should lead to a move of 5950 and higher. The gap has been filled from this morning, so if my assertion is wrong, we will take out 5900, and thunder up to the 6000 area. I am betting against it for the time being. Price is current 5998 on the chart.
This 5-min DAX chart shows better the situation than the 30 min chart. Gap has been filled and we are back in the range. I expect selling here..
FTSE is up at the top of the range. I am short against 5050 if we get there.
If there is anyone reading this who has expert knowledge in astrology, please contact me directly on admin @ tradertom.com
Kind regards and happy trading..
Tom Hougaard
1st October 2008 - 19:18pm
A trip down memory lane. I found this from 30th September 1999. It is a story which now 9 years later has come back to haunt us:
September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
'
From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
1st October 2008
Good morning,
Volatility indicators suggest a low is being made. The question is if you trust them or not. There is always a tendency to say that this time it is different, but fear is fear. It was interesting to note that see the Dax performance yesterday, which was poorly. I am inclinded to buy the DAx, which is just being called up 20 points. The FTSE was called above 5000, but is now up being called up 70 to 4975. The newsflow out of Australia favours miners like Rio and BHP, which have been cleared to negotiate a merger. Both stocks are higher in Aus trading....
This chart shows the $VIX index and its correlation with the SP500. The chart is saying that a low is being formed and that buying now would be rewarded in the months to come. Don't shoot the messenger. Look at the chart and judge for yourself.
Happy Trading
Tom Hougaard
30th September 2008
There were some who emailed me saying they had not received the recent newsletter, so I will put it up here. Much of what I wrote about actually happened yesterday. Newsletter
I am quite keen on buying this morning. You can currently buy the FTSE here at 7am to be down 200. I dont think we will be down 200 at the end of the day..... dont forget your stop-loss.....
FEAR is high. VIX spiked to 48 yesterday. This is a classic sign of a low.
good luck today
29th September 2008
I have just sent out my weekly newsletter. In it I talk about a Time expose which Larry Pesavento sent me. It contains all the major Time Magazine front pages which spell doom and gloom. In particular it focuses on what happened afterwards. Thank you to Larry for sharing this....PDF TIME MAG Covers
Tom
29th September 2008
The markets are awaiting the Senate vote. I am watching the lows from the 19th September. They will make or break the bull case. Today will be a lottery to trade. You might get lucky if you are on the right side after the Senate vote. I am short FTSE intra-day. I dont think anyone will do much before the uncertainty is out of the way, and therefore volumes will die down.
Tom
23rd September 2008
Good morning,
The gap has been filled, and the trend is still down, despite the massive short squeeze. I think the 1200 area is important pivot, and I will have to be bearish and anticipate new lows if we close below 1200. This pattern reminds me of the bear market low, which is shown on the second chart. A huge short squeeze, followed by a retest, and then the rally (which eventually failed and turned into the final October 2002 low.
This morning the FTSE and the DAX are holding up very well. The Nikkei is in positive too, so I am inclined to be a buyer this morning. Either way, it is volatile times. I traded 25 times yesterday in the SP500 with 15 trades stopped out for nothing....
Good luck today and in the weeks ahead.
Tom Hougaard
www.tradertom.com
22nd September 2008
There is a stark contrast between TA folks on the bulletin boards and websites around this globe. Over the weekend I read various opinions on the state of the market. The camp is split in two, with one camp saying this is the end of the bear market, while the other camp is saying, this is the end of the current swing down, but it will get worse eventually.
It seems there is some consensus that the worst is over for now. Technically we hit 34 weeks down, and a double drive down, but it was the sheer scale of the reversal, that makes me want to be a buyer of the dips.
I spoke to my friend Steve Copan. The Matrix Newsletter was updated over the weekend (www.thematrixnewsletter.com), and I wanted to show you two charts from it. The first one is an Elliott Wave look at last week. As I spoke to Steve, he felt that this combination of ABC could simply just be the A-leg down, with a B leg retracement for some time, and then another leg down. Either way we could be looking at 2011 before we are done with this bear markets.
The other chart lends more weight to this being a bottom of some description. Just remember that when we got out of the bear markets in 2002/2003, we saw a huge impulse wave up and a near 50% retracement of the gains, before we began a more solid momentum move. So my feeling is this will be whipsaw. On Friday I had to trade 15 times to get 42 SP500 points. There were a lot of breakeven trades, and small losses. I think this will be the theme for the days ahead to come.
On the chart below you can also see there are bigger time targets coming later in the year. They are probably more important than the one hit on my birthday :).
Finally here is a view from the www.themarketmap.com of what will happen today in the FTSE 100:
Good luck today and in the weeks ahead.
Tom Hougaard
www.tradertom.com
19th September 2008
What a difference a day makes. This morning I witnessed Barclays opening up 65%. Earlier at our morning meeting we discussed how much Barclays would open up. Some suggested 10-15% at the time. It seemed a lot, but could be conservative in one persons view. At 08am Barclays and many other banks opened up 50-65%!!!!!
There is no significant price or time hit. Therefore this market bounce is dubious in character. However, the fundamental landscape has changed, and it would be unwise to totally dismiss the last 12 hours as a dead cat bounce.
Yesterday we hit a perfect low from an Andrew's Pitchfork point of view. I spoke to the Matrix architect, who made a compelling argument for the possibility of the A wave down having completed and the B wave up beginning for the next 6 months potentially. On top of that Chris Locke, a long-time favourite of mine, called this the end of the bear market. The chart below is the one shown in the last newsletter, pointing to 1135 as a target. It looks like we hit it pretty well.....
Next update Monday 22nd September
Happy Trading
Tom Hougaard
16th September 2008
I would like to see this market move down 55 weeks. The top of 2000 into 9/11 low in 2001 was 55 weeks. Either way, in the big scheme of things, this bear trend has not run its course, as compared to previous bear trends. The last bear market retraced 44% in time of the bull run. So far we have retraced 49 weeks or 20%. From a Fib point of view we look for 23% at a minimum.
12th September 2008
Small and big alike, they fall
8th September 2008
Do you think any of the key players knew the announcement to take over Freddie Mac and Fannie May would come this weekend. Of course this is a borderline conspiracy theory of mine :))), but volume (circled) patterns seems somewhat out of the ordinary on Friday near the close:
POUND EURO sliding towards a 1 to 1 ratio. It's time to buy Butlins stocks and Camper Van shares, as no one can afford to buy €3 beer on Costa del So , and while we are at it, short the airlines flying millions of Brits to the Spanish shores. OLe!!!
ANALYSIS
