Replies to post #712 on The Options Box (OBOX)

[Poet]

Hi Koikaze:

Here is a market summary posted last night on Hahn's Corner, a for pay website to which I belong. I think Richard Hahn has been remarkably accurate in his analyses over the past seven months.

Bad news across the board. There are many ugly chart breakdowns. No sign of a capitulation washout event, yet. There are signs manipulation efforts are failing. There was no bounce to stability on the last day of options expiration. Yikes! You can just hear the derivative blowups exploding. Watch JPM for unusual signs of weakness, for they are the derivatives monster.

I was shocked the market was not muscled back up and away from the breakdown zone. Instead, we have a crash scenario in play. Many are looking for a crash to buy on Monday. The market never cooperates when people are ready for it. But then, I didn't think we'd break down so badly on Friday. Things might be worse than we can imagine.

Things are looking grim. As far as trying to buy in at the bottom, my only advice is to let someone else go first. Be sure you have the 1929 crash pattern in your mind before you commit capital to this freefall situation. In 1929, the first crash low was exceeded about a week later. There was a big sucker's rally for a few days. Because of our time wave projections on July 30, you can see why I have a great interest in this pattern.

Many investors are growing weary of the bear market that grinds slowly lower. We are near the point where many can't stand it any longer and will sell at any price to avoid the daily pain. That final wave of capitulation washout is ahead of us. Our time wave studies suggest the most likely time for a market crash low to be July 29 +/- one day.

[bbgold]

Morning Fred,
The Big Bear Growleth Eh? <GG> Yes, I know what you are going through with seeing some choice stocks being depleted by these slides. That is why this year my goal has been to be mostly cash whenever the market starts to turn down. So far this year it has been saving me a few headaches. It must be fun to go over different strategies and scenarios with your daughter. I hope that the 'lessons' have not been too severe.

It sounds as though your account is taking a bit of a beating. Have you been using fairly tight stop orders or buying Puts to hedge your downside? One strategy that I have seen, but not used, is to constantly purchase Puts on your stocks. I know that it can be expensive to do but if we do get big slides, like we have been having, the Puts can usually make up for some of the losses. The idea is to then sell the Puts when they are most profitable and roll over the Puts to the next level down. Again, I have never used this strategy but can see how it would work for a declining stock. The other part of the Theory is that you use some of the Put profits to average down on the stock so that you are constantly accumulating shares for when there is a recovery. Anyway, something to think about.

BTW, has the Mud stock been sliding for a while now or just recently? If you have been following the MKTSS board then a good thing to remember is that whenever the Dow or Nasdaq move Below their 320SMAs then the Plan is to be Bearish. You Might want to start to use that Bearish signal to enter a Put position or set a tight stop loss order, maybe.

So far it does not look like much of a selloff according to the Futures. We both know that can change pretty quickly though. IMO we are due for another Bounce from here. I don't think that it will be much of a reversal though, not yet. If we get a bounce back to the 320SMAs and cannot make it back above it then you might want to exit some more positions or make sure and get some hedge positions. Lately, buying Puts on the Dow would have been a pretty good hedge.

I sure hope that we do not get much more Panic. The more money that is Lost in this market is less money to eventually come back in. If the short sellers are making money shorting the market then will just continue to do so. That would be a Scary situation if most of the traders in the market are Sellers and Short Sellers and the Buyers are staying away or Broke.

I hope that things will turn around for you and your daughter Fred. I am sure that she is learning a Lot of lessons as these markets have been pretty unforgiving. It sounds as though she has a Great teacher though and will be able to pass this Test.
Take Care Fred and daughter! Sincerely, Bob :^)

Good Luck to All! :^)
PLAN the TRADE and TRADE the PLAN!