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Big Risk of a Collapse

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Posted by The Trader

on Friday, 07 October 2011 01:18

Downside potential is easily to the 950-1000 range in the S&P 500, but we don't have to see it all right away if we're truly in a bear market. Traditionally, we often see a September/October low followed by a healthy rally into the end of the year. I suspect when a low forms here in October a sizeable rally could very well unfold, but it could be a bull trap. - Mark Leibovit's comments to Michael Campbell September 28th/2011

Big Risk of a Collapse Happening

With Manic Markets, it is crucial to evalue both long and short term charts and levles often. We wrote of the Squeeze set up three days ago. Once again, the markets bounced off the support levels, and fooled too many of the new “smart” shorts. Our long term scenario is intact, and we still believe the big dynamics on the downside will evolve later this autumn. There is a big risk of a Collapse happening, just when everybody is sucked into the long trade, and shorts have given up. For now, let’s review the short term charts, all hitting resistance levels. - The Trader www.thetrader.se

(Ed Note: Latest comment Oct 7th at the bottom of this post)

 

S&P 500 Index

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Euro Stoxx 50 Index

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Frankfurt DAX

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Market Collapse around the corner? Remember 2008?

10/05/11 - If History is to repeat, we got the perfect short term bottom placed yesterday. In this move up, shorts will be losing faith in their positions, and cover furiously. The last leg up should take place over the coming days/ weeks, before we get the total breakdown of the “system”. Probable scenario or not, you decide, but the charts sure resemble 2008. For the full Chartology, check here.

SPX Weekly 10/05/11

(Click on chart for Larger Image)

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SPX Daily. 10/05/11

(Click on chart for Larger Image)

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Make or Break-Chartology 10/03/11

(Charts of US, European, Germany, Spain, Italy, Hong Kong,

With Markets falling hard in today’s session, let’s review some important Index Charts. We wrote of the big sell formation last week. We are now trading on those support levels. Will the market fool everybody again, bounce up, and confuse both bulls and bears?

As HFT are dominating all trading, we might just get that flash crash again. Market is sitting on critical levels, especially the SPX. Below charts with important levels to watch. Make or Break, yet again.

SPX sitting on the Edge….

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NDX on some critical support levels.

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Stoxx 50. Off the lows and trapped in a short term trading range.

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DAX. Also off the lows, finding a trading range.

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Spain Ibex Index also off the lows.

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Italy is in deep crap, but the Index is actually showing some signs of life. Let’s see if the support levels hold.

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The biggest Dog of all, Hang Seng, has put in a formidable sell off lately, not receiving the attention we expected. Remember, this is the growth market….

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Continue holding that Cash

With the Markets confusing many, both bulls and bears, below is a good piece of what to expect. We are in bear territory, but the bounces will be brutal, and people will trade based on greed and fear. These last day’s “bull”, has probably a little more to go, before we once again reverse down. Another Greek weekend coming up…

From DShort;

In November of 2007 as our risk ratio indicator was plunging into what should have been a “buying zone” of extreme bearishness, the buy/sell timing indicator was just beginning to initiate a “sell” signal, warning that prices were moving lower. As a result, each successive turn UP of the risk ratio indicator remained short lived as investors were sucked into short-term rallies that ultimately failed. It wasn’t until May of 2009 that both the risk ratio indicator and the buy/sell timing indicator gave“longer term” investors an all clear signal to move cash back into risk based assets.

Today, we are witnessing exactly the same set up. The risk ratio indicator is at levels that are bearish enough to warrant a rally. However, with the timing indicator on a clear “sell” signal, that rally should be sold into. ….

(Click on Chart for a Larger Chart)

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