I am really not sure what to expect because as I posted the other day, on one hand you have the 'election year' cycle that gives you on average an 8% gain for the year in the DOW. But then again, look at that chart above of the weekly S&P and you can clearly see without any doubt that 50 week is about to cross through the 80 which signals long term trends. In this case it's down which could portend S&P 1000 or less again.
Now what's very interesting is the larger elliotwave predictions in terms of grand supercycles that have been predicting DOW 5000 or less on this bear run. I don't know how to agree with that, but what is a fact is that the market as represented by the S&P specifically has been 'juiced' by the overweighting of energy stocks. If you took half of them out, the S&P would have never hit new highs from the 2000 March high.
So, we could be in for this "C" wave down to finally put to bed the bear market that many say we were still in from 2000.
When you look forward into the next few years, it does seem that geopolitically and fundamentally there is every reason to expect a major market selloff of major degree. Unless someone pulls something out their rear end to give a huge boost to the economy as a whole, I think we could be screwed.
But then again, remember the 1990s. The same doom and gloom talk was abound in 1992 all through 1995. What happened then? Remember? I remember this little company AOL started to get people's attention by allowing them to finally use their computer to actually do something more than write letters and do spreadsheets. They now could dial up to a network and actually talk to each other via the 'internet' which was this brand new thing.
Three little years later Long Term Capital cratered in 1998 and it was the same as the subprime crap we have now. But it was short lived because all the money was piling into venture capital and internet start ups.
The point is that you never know where or when these new things are going to come from. But I can assure you that someone out there is right now working on it - whatever 'it' is and probably there exists a company trading publically right now that is probably a tiny penny stock that is going to be the 'it' thing.
Short of that scenario, keep all positions protected with puts. I'm just doing monthly covered calls with puts in place just in case as a rolling collar. It's safe and it's a sure thing. I prefer to be more of a risk taker without the puts in place, but it is what it is.
I got sandbagged on SIGM which is a perfect example of what can happen in this crazy type of market. Not again.
If the FED tomorrow cuts and then says something to the effect they are done, because we're at a major resistance level in the S&P, I tend to think the market falls. Even if it gets a quick boost, it should be a short opportunity. But a week out I think that could be the thing that jams the market up 1000 points. But that should be a major short opportunity because remember 'sell in May and go away'. It works and it works for a reason. Don't fight it. Any big rallies here should be selling opportunities with a long side bias not until Sep through Jan.
But believe me, I'm going to be trading tomorrow's e-minis. Fed day can be very profitable.
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