Ok, finally, the DJIA is down below 11200 as we though it would be. And SP 500 is also in the bear market. So, it is official that the bear is here. Other than vindicating some of our thoughts, what consequence it might have on the trading in the near future?
First of all, the market may overshot, meaning it may go even further down than it should be. And based on the history, it definitely will. How deep this bear market will be is anybody’s guess, if the average bear market is down 30% from the high, this bear market probably could be as bad as average. Not long ago, a technician featured in CNBC predicate DJIA down to 10000 based on a head-shoulder pattern, how accurate the predication remains to be seen, but I begin to suspect my 11200 goal may a little too conservative. 11000 is certainly in the bear’s cross hair.
Today’s action certainly has a sense of flight to safety, gold, health care and utility is up. Everything else is down in unison. So, there are some panic begin to show. VIX is spiked to 25, another one or two sessions like today, we may begin to see the capitulation we wanted to see for some time.
The wishful thinking is the biggest enemy for the trader. You cannot justify your position if you are against the market. Just because you went long today, do not persuade yourself that tomorrow the market will bounce back because it is down so much today. The Japanese market has a streak of 13 down days lately, it could happen to US market as well.
I am still again oil and steel. Look, today is a perfect day to make a cause for those oil related stock, but they went down at the end, basically, it meant the rally is becoming a selling opportunity for the smart money. So, one should side with those in the known. I believe there are still money to make by go short of those.
V is dancing around its support. Maybe there are so many support to be short. But if V and MA should be mirror each other, than, there is no reason for V to stay in current level. But be careful to trade V, seems like there are too many indecision here.
