Stock Market Choke Points
part 11A
by Brian Stoll, TimingStrategies.com | November 3, 2008
Greetings, it’s been a bit longer than normal since our last client update due to family, travel and business demands. The “Mr. Toad’s Wild Ride” in various markets over the last 3-4 weeks feels almost like 3-4 years and literally are times that will reshape not only the various stock, bond and other markets but all of our lives going forward. I want to make a point to all that may happen to read this client report, the current “crisis” or recent events have been a long day coming. They are the result of allowing Wall Street to control DC so that both may profit by the, stealing the from the people doctrine. The sad part of this crisis is the fact that that it was created by Wall Street which handcuffed itself to the public much like a terrorist hiding behind its hostage in attempts to achieve its demands and still get away. The problems the people of this country face were created by those still currently in charge of “fixing the problem” and as Albert Einstein said, “The problems we face will not be solved by the same minds of those who have created these problems in the first place”!!!
The first question as always is how to manage investments in such an environment. These are only my estimations and will certainly change as the markets evolve or devolve as the case may be. Presently I feel that in the long term, we are currently in the greatest bear market as never before seen, and interpret that it will continue to the point where the S&P reaches 450 and the Dow 3500, give or take few percent. The time span and manner in which something like this may unfold is indiscernible at this juncture. I am not an idiot wave disciple or gloom and doomer. I love my country and am saddened to see the political depravity offered as choices this coming election and that is only a small portion of what constructs my reasoning for such the dismal current bear market estimation. Believe me when I say I joyfully hope that I am wrong for many reasons, one of which being that I have two small children and have come to look at the world and all parents of humankind completely different since becoming one myself, so with that said, What’s the trade?!
My best near term estimation is actually reasonably bullish and can see the S&P trading to ~1020-1120. I know that is a rather large window for price to do its thing but if we look at the date of Sept 19th 2008, the day where Paulson did his thing, price has done nothing but vomit lower ever since. Up to the recent low of 20081010 of 840 for the S&P cash, and 20081027 of 825 for the S&P futures, each index reached very significant time dates for both markets whereas only 1 reaching a significant price level for a potential temporary low.
A move in the S&P that rings a price tag of ~1020 will set the condition for the first potential range top and I do not have any conviction if it will even get there or what I will do on any absolute basis if it does, the current mischief being forced upon the various markets by the “Cabal” can and have moved this market by 10% or more from high/low/high in a single day. For the stock market to make it to 1020 on the S&P from its October lows would be a move of over 20%, something it already has done with even greater amplitude in just 3 days and a move to ~1120 would bring a bear market bounce of over 35%, so there can be several cyclical bull and bear markets within the context of the current secular bear market. That brings it back to what’s the trade again and therein remains the answer which is kind of like the old what is pornography response, that being, I’ll know it when I see it and it’s somewhere between 1020-1120 on the S&P for a sell to go flat and or short of 60-90%. My estimation is the market “should” range for a while somewhere below what I call the “The Peak of Paulson’s Puke” on 20080919 or 1291 on the S&P futures and the low on 20081027 of 825. This range “should” remain for a while providing several bull and bear markets before finally breaking lower to my dismal target as prior mentioned. What would cause me to manage more aggressively from the long side again is a 2-4 day close above ~1140-1200 on the S&P
My current estimation is also reaching into the bond, energy and precious metals markets. I will not go into much detail about any of them but will make the statement that in regards to bonds; I will be shorting them via several different vehicles using the Rydex Inverse Gov. Bond Fund, the TBT for an ETF, futures and options on the TLT for our managed accounts. My estimation is that there is currently about a (-10%) downside for the 30 year bond and with any luck provided by DC negligent mischief a (-20%) downside.
© 2008 TimingStrategies.com / Brian Stoll
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Disclaimer: This is not a recommendation to buy, sell or take any investment position whatsoever. These are only current estimations and subject to change without notice and are intended for client communication purposes. Please take this or any other financial information with a grain of salt, as we do not predict markets or become dogmatic in any estimation. We manage risk, and volatility is an opportunity to profit for flexible investing and proper risk management.
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Brian Stoll | TimingStrategies.com | Registered Investment Advisor
Newport,
California | Email |
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