I love alliterative titles, don’t you?
Fun time is over, the Jet’s lost to the Colts (avenging their first loss of the season) and the Saints beat the Vikings in overtime actually putting the best two teams from each conference (by record) into the Superbowl for the first time in ages. Superbowl tickets are going for $2,800 (average according to Stub Hub), which is about the same as the last two years so not economic downturn is being felt there.
As I mentioned in the weekend wrap-up we were fortunate enough to have cashed out the bull side ahead of the holidays and we followed our two step program for bearish success on Friday by 1) taking the money and 2) running – as it’s been a very long time since holding a bearish position over the weekend hasn’t been punished by the market Gods (by that, of course, I mean Lloyd Blankfein).
We have plenty of bullish plays that we attempted to bottom fish last week and we still have our disaster hedges in case things get worse but, on the whole, we’re expecting a 1% bounce in the very least off our 5% lines (anything less will be a bad sign) and our chart is shaping up like this:
| Dow | S&P | Nasdaq | NYSE | Russell | Trans | HSI | Nikkei | FTSE | DAX | |
| Topped Out | 10,700 | 1,150 | 2,320 | 7,400 | 650 | 2,000 | 23,000 | 11,000 | 5,530 | 6,050 |
| Currently | 10,172 | 1,091 | 2,205 | 7,030 | 617 | 1,921 | 20,598 | 10,512 | 5,308 | 5,677 |
| Drop % | 4.9% | 5.1% | 5% | 5% | 5.1% | 4% | 10.4% | 4.4% | 4% | 6.2% |
| 2.5% Bnce | 10,433 | 1,121 | 2,262 | 7,215 | 634 | 1,950 | 22,425 | 10,725 | 5,392 | 5,899 |
| 10% Drop | 9,630 | 1,035 | 2,088 | 6,660 | 585 | 1,800 | 20,700 | 9,900 | 4,977 | 5,445 |
| Cur. % Up | 19% | 19% | 21% | 20% | 22% | 14% | 15% | 12% | 21% | 19% |
| July Base | 8,200 | 880 | 1,750 | 5,600 | 480 | 1,650 | 17,500 | 9,200 | 4,200 | 4,600 |
Clearly you can see why we have a 5% rule – that alignment on the US indexes on Friday is no coincidence. Our 5% rule tells us that we should EXPECT a 20% retrace of the drop at each 5% level so a 1% bounce here and a 2% bounce at 10% (if we fall that far) would still be considered signs of continuing weakness until they are broken over.
IN PROGRESS
