Thursday, May 14, 2009


Sucker's rally for the Bears? After three days of falling, many of the major stocks/indices bounced off support and confirmed a slim trading range. I've got lines all over my charts from all kinds of time frames: 20 day, 6 month, 2 year, etc... This is getting messy.

I think it's going to be a Trader's Market for the time being, something I won't have much time for. I dropped all my stocks except GM (from 1.13), and I'm giving FAZ the benefit of the doubt one more time. Again, TIGHT STOPS on FAZ, because that freakshow can turn on you at any time.

Here's XLF, my basis for FAZ. It spent the past two days bouncing around a narrow channel established back in December. I'm betting that it could be a bearish flag, consolidating a few days before going back down. It's not looking too good, though. As I said, a LOT of stock/indices are riding some pretty good support lines now, and even Ritholtz is feeling a little [cyclically] bullish.

And I would like to take this moment to point out that I had mentioned this time period on Ritholtz's blog months ago. Referring to the S&P's price movement from 1966-1976 and comparing to today.

The current rally in 2009 reminds me a bit of the rally in 1970. From 1965-1980, the S&P 500 had a mean price from 90 to 95...15 years of a secular bear market (SBM). Good for traders, I suppose, bad for retirees cashing in their 401k's. The current SBM started in 2000, and has a mean price around 1170. But what I'm really wondering is if we'll see a third phase of this SBM over the next 3 years as we race back to 1600 S&P. And then see another crash down to...say, 650 in 2015 before the real recovery? Maybe I should dedicate a post to this. I keep bringing it up to the real traders out there, but I've got nothing to show them.

The S&P bounced off support and kept nicely within its tight little channel. This is still anybody's game so it's probably better to just wait and see.

Besides, it's Options Expiration Week, so expect chop and turbulence until Monday. I'm about 83% in cash, and don't see any real reason to get long or short yet.

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