End of the Dow Bull Run

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Old May 3, 2007, 10:52pm   #1
 
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Exclamation End of the Dow Bull Run

Caution - Bears Ahead

I'm new to these forums, used to lurk around as the nick would suggest.

I am a beginning trader who day trades equities and indices through SB firms. I am trading a small account, and have had mixed results so far.

I have been reading these forums, and note that many prominent members (and most likely experienced and sober traders) are carrying large shorts on the DJIA.

I think we can all agree that the fundamentals of the American economy aren't too good right now. I am struggling to find justification for these new highs, and have only come up with the "greater fool" theory. I'm not an investor, and I don't spend a lot of time considering intrinsic value, but I do believe that this has moved too far too fast.

My question to you all: is the bull run at an end, and if so, what indicators are going to give us an early warning to go short with acceptable risk reward? If the bull run is to continue, what scale of pullback to we want before going long?

For the really smart traders here- care to share with us if there are any other instruments which would indicate underlying weakness in the Dow, and what is the best way to take advantage of it? How will the prices of Crude, the values of GBPUSD. and other world indices lead or lag a sharp correction in the Dow.

Furthermore- where are the bears? The bulls are buying from somewhere, and not just profit taking longs. Higher highs totally unchallenged? Surely greed alone and the possibility of another February 29 2007 must surely have brought out the bears?

What broad economic indicators would forewarn of a correction? I see jobless claims are still down and manufacturing is up. There is a lot of liquidity here, and they no longer publish M3.

I know that the market can stay irrational longer than anyone (including folk like LTCM) can stay solvent, however we can all agree that this uptrend will stop. The question is when, and how are we all going to make a killing from it?

I've just opened a CMC account , and have gone as far as to install Windows 2000 under VMWare on my Linux box to use the fabulous MarketMaker. Since I've been playing with it, I've was going to attach daily candles of the Dow, with a 100 period EMA, a 150 period CCI (with OB/OS at +/- 200), and a 14 period RSI (with OB/OS at 80/20). I think this shows something interesting, but the board won't let me post it...

This is my first thread, so let the posts roll!

Finally, thanks to everyone here who have written articles and made insightful posts on the boards. Great community here.
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Old May 3, 2007, 11:57pm   #2
Joined Jul 2005
Celebrate a trending market

We search forever to find a trend then jump on it at relatively low risk ... and here we have a rampant bull trend - enjoy !

Might wobble tomorrow might not - but would need a massive day (200+) down to get me thinking about a possible turn.... In the meantime I'm long european indices going into the jobs figs... with one eye on the exit short term.
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Old May 4, 2007, 12:51am   #3
 
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There does seem to be a real dichotomy between the large traders and small traders at the mo on the US stock exchs, if you know where to look
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Old May 4, 2007, 1:52am   #4
 
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Originally Posted by fibonelli View Post
There does seem to be a real dichotomy between the large traders and small traders at the mo on the US stock exchs, if you know where to look
Excess liquidity in the markets. That is EXCESS liquidity in the markets with a huge 'E'.

After $500+ billion expenditure by the US, BoP defecit and LOW interest rates, as well as super low Bush tax cuts what can anyone do with all their dollars? Did somebody say elections round the corner?

Reminds me of the joke about a big BIG balloon and one prick. Not very funny.

I have the SPX = 1600 soon and I'm a big greasly bear.
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Old May 4, 2007, 2:09am   #5
 
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lurkerlurker started this thread I would guess that the larger traders are quietly unloading their longs to greedy small players. Do you concur, fibonelli? And I don't know where to look just yet.

Hook Shot - yes, smart money would have been long for a wee while now. The problem is, nobody wants to buy a top. If there is a sharp correction, we may not see these heights for a long time yet. I think most people are worried enough that they will place no new longs - maybe not confident enough to bet on a reversal, but I think most people are short or on the sidelines now (in terms of retail traders).

Atilla - good point - elections are always preceded by bullish trends.

Maybe I should stay out of the US markets...but since the FTSE is pulled by the Dow in the afternoon and the Dax in the morning, if I don't know where America is going I may as well give it up.

Looks like I should sit tight and wait.

In the meanwhile, I will look into option pricing. Not to buy of course, but I would consider that puts on the DJIA will become more expensive if the smart money expects a sharp downside correction. Am I right?
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Old May 4, 2007, 9:12am   #6
Joined Nov 2001
Hi LL,

Not sure that I'd agree with you about the Dow, looks more like the beginning of the bull run if you ask me? But, hey, what do I know?

Cheers

Mayfly
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Last edited by Mayfly; May 4, 2007 at 9:15am. Reason: Upload of charts seems to have failed for some reason!
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Old May 4, 2007, 9:17am   #7
 
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Originally Posted by Mayfly View Post
Hi LL,

Not sure that I'd agree with you about the Dow, looks more like the beginning of the bull run if you ask me? But, hey, what do I know?

Cheers

Mayfly
The beginning?!
Be interesting to hear what theory you are following, not the Dow theory anyway
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Old May 4, 2007, 9:26am   #8
 
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Originally Posted by lurkerlurker View Post
Caution - Bears Ahead

I'm new to these forums, used to lurk around as the nick would suggest.

I am a beginning trader who day trades equities and indices through SB firms. I am trading a small account, and have had mixed results so far.

I have been reading these forums, and note that many prominent members (and most likely experienced and sober traders) are carrying large shorts on the DJIA.

I think we can all agree that the fundamentals of the American economy aren't too good right now. I am struggling to find justification for these new highs, and have only come up with the "greater fool" theory. I'm not an investor, and I don't spend a lot of time considering intrinsic value, but I do believe that this has moved too far too fast.

My question to you all: is the bull run at an end, and if so, what indicators are going to give us an early warning to go short with acceptable risk reward? If the bull run is to continue, what scale of pullback to we want before going long?

For the really smart traders here- care to share with us if there are any other instruments which would indicate underlying weakness in the Dow, and what is the best way to take advantage of it? How will the prices of Crude, the values of GBPUSD. and other world indices lead or lag a sharp correction in the Dow.

Furthermore- where are the bears? The bulls are buying from somewhere, and not just profit taking longs. Higher highs totally unchallenged? Surely greed alone and the possibility of another February 29 2007 must surely have brought out the bears?

What broad economic indicators would forewarn of a correction? I see jobless claims are still down and manufacturing is up. There is a lot of liquidity here, and they no longer publish M3.

I know that the market can stay irrational longer than anyone (including folk like LTCM) can stay solvent, however we can all agree that this uptrend will stop. The question is when, and how are we all going to make a killing from it?

I've just opened a CMC account , and have gone as far as to install Windows 2000 under VMWare on my Linux box to use the fabulous MarketMaker. Since I've been playing with it, I've was going to attach daily candles of the Dow, with a 100 period EMA, a 150 period CCI (with OB/OS at +/- 200), and a 14 period RSI (with OB/OS at 80/20). I think this shows something interesting, but the board won't let me post it...

This is my first thread, so let the posts roll!

Finally, thanks to everyone here who have written articles and made insightful posts on the boards. Great community here.
Hi lurker,

If you look at the DOW 2007 thread, you can see a lot of people wanting to short.
But shorting this is by no means justified. If you want confirmation for a bear trend to initiate, you need to make a lower high first and by no means we are close to that. That could take two months or more (or two weeks lol but I don't make timed predictions and just act on what I see).

Anyway, if you want clues check out Russell 2000. No new highs since February, a nice distribution phase of two weeks, a break of the trendline and on it's way to make a lower high or exhaust into a blow-off. Looking at the DOW alone you would say things couldn't be looking better, that's why it's important to find divergences between markets.
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Old May 4, 2007, 9:35am   #9
 
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Originally Posted by lurkerlurker View Post
Caution - Bears Ahead

Furthermore- where are the bears? The bulls are buying from somewhere, and not just profit taking longs. Higher highs totally unchallenged? Surely greed alone and the possibility of another February 29 2007 must surely have brought out the bears?

What broad economic indicators would forewarn of a correction? I see jobless claims are still down and manufacturing is up. There is a lot of liquidity here, and they no longer publish M3.
After the correction end February, many surveys reported the public very eager to buy. The public doesn't act straight away but as the rise has been more steeper March and April have confirmed that there's a growning interest in owning shares because thinks look excellent. There have been a lot of good economic numbers out too recently.

But jobless claims down will lead to more inflation on the short-term. And let's not forget the housing problems that bubble underneath.

When all those who are looking to short already, finally give up on shorting... that's when the plunge will happen
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Old May 4, 2007, 11:02am   #10
 
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Bear or Bull, in general, there are long and short opportunities I would almost every day, just be aware of the long trend, it not difficult to work work, if in doubt, stay out "cash is king"
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