The S&P mini futures contract is down over 14.75 this morning and is clawing, groping and straining to hold the 720 area. To characterize this as ugly is euphemistic at best. There is itsy-bitsy support at 720. If that does not hold tomorrow into the 11-1 PM EST period, we are most likely headed down to the next target in the 630 area. If it does hold the markets, could bounce nicely into the close. Fractals support this, but fractals, except for two days, did not work last week.
Some people are expecting a rally to occur “imminently”—whatever that means.
Others are talking about Black Monday, that infamous day in 1987 when the DOW fell 508 points, a drop of 26%. That was called a black swan. Indeed. Tell us about 2008 and the past two months when we have been under a black swan siege of Hitchcockian proportions. What happened to all the white swans, anyway? I mean how low does this have to go before it is just crispy critter to the max on the downside?
We are interested in these lower and lower projections, especially in light of numerous bullish divergences occurring on both daily and weekly charts. A possible roadmap is for the 720 to hold tomorrow and a rally into the 790 area before a retest of lows. We will know soon enough which jaws will win out. Global fear is palpable and the waters are uncharted, no matter how many trend lines ones draws--- even back to the early 1700's. If we can’t make it work with the South Sea Bubble, we can try tiptoeing through the tulips; even without Tiny Tim (may he rest in peace). There’s got to be a trendline somewhere, doesn’t there?
With each passing day, the bus has been careening down the mountain and getting emptier as more as more people are jumping off in sheer terror. Lightening of the load and thinning of the herd, perhaps? Buy and hope morphed into buy and cry and is now buy and bleed. I feel a pent-up pressure beginning to build but—bottoms and tops are seen only in hindsight. Speaking of buts ( pun intended) -- this has been a Jennifer Lopez market with various people seeing different bottoms for months now. This is not a bottom call. I repeat. This is an alert to have cash ready and don’t overstay your welcome or your size on the short side. There will be volatility, as the dying beast gasps for breath in its agonal throes, fighting with every fabric of its being to stay alive.
Perhaps it needs an injection of confidence and clarity from the new financial capital of the world about ----let’s say---no bank nationalization. Tell us the truth about TALF. Tell us the truth about something and stop the smoke, mirrors and disappears. Enough already. That might be a decent start. When a patient is dying, extraordinary measures are taken in the absence of a DNR (Do Not Resuscitate) order. Perhaps there can be life breathed into this dying beast that would be akin to a miracle at Lourdes. One wonders how many people actually believe that miracles happen. My hand is raised, and a single night bird just sang outside my window. A bird in the desert is singing right now. How bad can it really be?
Is it possible that a trap is about to be set for all those who now lie bleeding-- having jumped from the bus-- and come back in July, less traumatized and feeling pretty healthy again? Then, they just might feel well enough to jump back onto the bus just because they need to get somewhere, the bus is no longer hurtling into the abyss and it looks all safe and cozy again? But I am getting way way ahead of myself, and there is this one dying patient, initials ES, crying for attention at this time.
Thanks and Good Trading!
Janice Dorn, M.D., Ph.D., is a financial psychiatrist and chief global risk strategist for Ingenieux Wealth Management in Sydney, Australia. She also offer trading consulting and coaching services via her Web site, TheTradingDoctor.com.