Friday, Aug 21, 2009
Getting out of that Hole
Telegraph: Markets rally on Ben Bernanke's optimism over global economy
Markets in London and New York rallied on Friday after Ben Bernanke, chairman of the US Federal Reserve, declared the global economy is "beginning to emerge" from recession. "His remarks – at the annual economic symposium in Jackson Hole, Wyoming – coupled with fresh data showing the rate of existing US home sales rose at their fastest pace in almost two years in July, added to a growing sense that the global recession is drawing to a close".
Posted by alan @ 11:29 PM (602 views) Add Comment
5 Comments
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1. quiet guy said...
http://www.youtube.com/watch?v=_qQX-jayixQ
2. techieman said...
There are a number of indicators that indicate a turn in the market. Interestingly here (this web site) you will see less people commentating on an HP crash. The reason for this is that we have a lot of herding. When prices were falling everyone turns bearish. Now alot of the bears are "giving up hope" and even turning bullish. "I've waited so long for this crash and i cant wait any longer"
Or they cant comment any more because they feel stupid when they have said that prices will fall .... but they then rise. So my point is that when you see an extreme in sentiment that makes no commonsense thats the time to be wary! On that basis the rise in HP might rise a bit further, although im beginning to think enough is enough. (we are seeing less bearish comments in the papers - more "prices should go down" from "prices will [carry on] go[ing] down").
The markets are the same, its just the timeframes are different and more responsive. The bears started to think the top of this retracement from the March lows, was in last week. For example the footsie fell from 4791 to 4608. The question was - was that 4791 the top if so how much would we retrace from that "top", before a down move started in earnest?
I think the break of that high (and the 1020 on cash S&P) was significant. Alot of bears have now turned flat or even bullish.
As for me? Well i thought that 4800 FTSE was a good level to short the first time and that i was looking for around the 4530 level as a target (just above support). Then 50/50 whether there would be a retracement back toward the 4790 high or whether there would be a new high since March. The retracement you expect to be sharp but you do expect it to slow down about around fib numbers not to carve straight through them!
After that retracement you expect the market to go back down, and at that point its probably a good idea to go short on a sell stop below a prior days low. - which you may have to do a couple of times. Risky business but that's the name of the game.
So what happens now - well it takes a move that baffles the bears to finally take the bears out of the equation. This is probably that move.
How long will it last and how high will it go? Well i hope it goes on a number of up days - when i find myself saying "well maybe i was wrong and it is a bull market after all" is when its probably the time to sell. 5000 looks good now but personally i like the look of 5120 - 5150.
If i doesnt get there will i still go short - yes on signals although i am prepared to take a hit and look for more confirmation than usual. In the meantime is it worth going long? Well perhaps....;-), but more honestly i would rather carry on playing in the softs and leave the financials to one side at the moment.
I was short the FTSE @ 4775 but took medicine @ 4755 (so yes made 20points but had left around 150 on the table, as i said i would have got out of half probably if it went to 4530 ish) as it was clear that we had gone a way through the 61.8% retracement AND closed above it. It was a small position so no harm done, but yes i suppose i should have reversed to the light! (hindsight is a wonderful thing isn't it!)
3. rotten tomato said...
Crystal ball anyone?
4. house said...
@2. techieman said...
I do not understand much about shoorts and sentiment of calling top or bottom of the market but what you have said makes a lot of sense. But as I have said in the past, if we had normal market conditions without state interference then past experience and charts may be of better value. Am I barking up the wrong tree ?
5. techieman said...
house - yes i think you are a bit. The fact is a few commentators and investors suggested we were near the bottom end of feb / begining of march. Financial planner for example said "now is the time to buy". Yours truly was a bit closer to calling the bottom though - take a look at the achieve around March 9th and just before.
The reasoning behind calling a bottom was pretty much based on there being (continued) intervention that would be perceieved to work. If there hadn't been (and whether you agree with it or not is a different issue). Then really it would have probably been a financial meltdown which the authorities couldn't let happen. Not only that but if there had been a meltdown then it wouldnt make much odds anyway. By that i mean take the example of the bay of pigs.
It was best to bet against nuclear war because if it happens who cares since we are all dead anyway? So you might as well back against it!!
But having said all that you are fully entitled to a view - and mine may be wrong, however its not really about being right or wrong - its how much you make when you are right and how much you lose when you are wrong!