End of the Dow Bull Run

[lurkerlurker]

:!: 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. :cheesy:

 

[Hook Shot]

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. :cheesy:

 

[fibonelli]

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

 

[Atilla]

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.

 

[lurkerlurker]

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?

 

[Mayfly]

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

 

[firewalker99]

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?! :-0
Be interesting to hear what theory you are following, not the Dow theory anyway

 

[firewalker99]

:!: 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. :cheesy:

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.

 

[firewalker99]

:!: 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 :cheesy:

 

[Dinos]

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"

 

[2468steve]

Just turn the Dow chart upside down.If any of your stock holdings had a similar chart would you be selling.....Logic may say we're too high,the Dow chart,upside down or otherwise,says different...

cheers

 

[Mayfly]

Quote:

The beginning?!
Be interesting to hear what theory you are following, not the Dow theory anyway!

I wasn't following Dow theory as it happens, but I wouldn't be changing my statement even if I was, if you see what I mean?

Cheers

Mayfly

 

[fibonelli]

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.

Hi LL,
No evidence of unloading at the mo 'cos small traders are more bearish than the large traders.
Waiting for S&P500 to test year 2k ath circa 1556 and we'll see what happens. :cheesy:

 

[firewalker99]

Quote:



I wasn't following Dow theory as it happens, but I wouldn't be changing my statement even if I was, if you see what I mean?

Cheers

Mayfly

If you look at it on a very high time frame (like 10 years) I agree it shows you quite a different picture. The next bear phase might only be short-lived who knows. But on a more short-term basis we had a second corrective phase by the end of February, by definition a short-lived and sharp move counter the "obvious" uptrend.

The final phase of the bull market is often characterized by an even steeper run up (parabolic rise) that leads up to the buying climax. That's imho what is happening now. Let's just say if I wanted to buy anything right now, I wouldn't sleep well holding it overnight! So anybody who's watching stocks will notice that some have already started to top and even are in the distributing phase right now.

Anyway all that affects me little really, because I only trade intraday and never hold overnight... but it makes up for a fun discussion

 

[firewalker99]

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

Also there's a general consensus about the current bull market that's about 4 and a half year's old... so if you say it's about to begin, how would you describe the past 5 years then?

 

[Grey1]

I feel market needs a correction early next week and as a result I am reducing all my swing positions by 75%.

Dow is OS in Daily and weekly but it does not mean it has ran out of momentum ,, We can only judge the exhaustion by few days of weakness in dow which should affect the higher time frame of exhaustion( weekly ) , Any way 75% in cash and watching


grey1

 

[daytradingUK]

Thanks for the updates Grey1

My thoughts are the big institutions want to push a record here and that will be the completed by Tuesday / Wednesday, after that I am hoping rather than expecting people to start bailing out.

 

[firewalker99]

Rolling over

Say bye bye to the highs...
this is a chart of Russell... it's the furthest ahead in the process

DOW is in a league of it's now, NASDAQ has been distributing for over a month...
we are very close now

 

[firewalker99]

I feel market needs a correction early next week and as a result I am reducing all my swing positions by 75%.

Dow is OS in Daily and weekly but it does not mean it has ran out of momentum ,, We can only judge the exhaustion by few days of weakness in dow which should affect the higher time frame of exhaustion( weekly ) , Any way 75% in cash and watching


grey1

We are about 2 weeks ahead now... be interesting to hear your views as we get ever closer to the mountain top!

 

[zigglewigler]

Some big funds including Soros have been buying heavy in prime stock, Buffet looking to capitalize on oil prices knocking road freight so he's moving into rails. They are targeting specific long term goals.

But as regards the Dow, it's always been a polished turd for the masses.

Some believe markets boom, consolidate then boom again.

This bull run took off when everyone had convinced themselves that Iraq was the only hurdle to prosperity, the market ran away with itself as it saw the match between superpower and p*ss pot state was going only one way. An Arab farting in the direction of the USA, had the market go into apperplexy, such was the sentiment. Post March 03 terrorism had little effect by comparison.

The market only goes up because of bullish sentiment, the fundamentals will be interpreted to support the consensus, a from of sexing up. When figures come in that are less terrible than expected, that's apparently reason to charge in, regardless of just how bad those numbers still are.

It usually takes a shock event to scare a new sentiment bias into the market. Then the very same fundamentals will be embraced in a whole new light.

When? I've given up having an opinion on that one. I day trade and to hell with everything else.:cheesy: