Thursday, May 17, 2012
Market Musing & Targets
Since the 2011 October bottom, the false leading indicator I subscribed to for the exact 6 deadly month had been advising short-selling the market. Along the grueling 6 month journey, there were a few double tops which re-kindled the hope that the market was finally heading back down. See the circled areas. You can see how already-up-to-my-chin I was near the "top" at the end of February (see Market Has Made Up Its Mind). In retrospect, the market was only 2/3 done! But look at the weak volume at the beginning of March -- surely felt like the market top!!! The market being at its best, finally flash out the final double top a month later (the first rectangle on the chart). But by then, I've been bruised all over and lost the will to fight the market. I held only laughable number of shares of bear ETF's (VXX, SPXU, SDS, TZA, SH), and by the time the market retraced 23.60% of the bull run (shown as 76.40 Fib on chart), I've sold out of my last bear shares and actually started accumulating some longs. Now the market is indeed in the "never look back" mode that I was looking for 2 months earlier and void of any bounces on its way down.
Today's 1.4% selloff reached 76.40% Fib of the rectangle target. From experience, it should bounce before proceeding to the target of 129.31 area, which happens to coincide with the 129.42 horizontal support. It would make sense to back-test the 200 day EMA (magenta line), especially with tomorrow being the historical FB IPO.
Speaking of the FB IPO, it's only intuitive to think that it would "hype" up the market, based on the past experience: the more IPO's the higher the market goes, and the high the market goes, the more IPO's, etc. They feed off each other. However, the shear size of the FB IPO, which will be the largest ever (surpassing V - Visa), introduced a new concept -- that funds would sell other stocks to raise cash in order to jump onto the FB bandwagon. So the market sold off. Market just never ceases to amaze me -- and has never been willing to drop its snobbery and accept me as friend.
UPDATE: With all that blood on the Street today, my IRA was down a mere .09%. Thanks to holdings such as TLT, PEP, HNZ, JNJ, and for today only, CEF, to help offset losses in other issues.