I'm betting on a general decline over the next 8 months, with 'up' periods...(lower highs) We won't see 14,000 agin until the last quarter of 08 if we're lucky, but more likely the first half of 09. Basically i'm going for a 'mild' recession, but one that will still cause serious pain. But anway, who knows? Certainly not me, i'm an amature.

Great topic...

January 4th, 2008

We were looking to the increased post holiday volume and the start of 2008 trading to give us some direction, and we received an answer. Today's 2%-4% declines only reinforce the trends that we have previouly indicated as the market works lower.


The SP, Nasdaq and Dow continued their downtrends with all indicators (EMA crosses, MACD negative cross and stochastic crosses) confirmed negative as of yesterday. Although we might see a bounce, it is very possible that the market trends to lower lows before it runs to new highs.

I was stopped out of ARGN and AMZN today for small losses before the market took a deeper tumble. The stops did save over $4 and 12% cumulative between the two positions by days end. Short positions had gains of 4% to 8% on their stock prices as the financial and housing sectors should continue to be hard hit. I did purchase some ISRG as it bounced off the 50 day MA, but a tight stop is required on this position. I would also stay away from positions breaking their uptrends and moving below their 50 day MA's (notice that HDB, and APPL were removed from the watch list). Prices look cheaper today, but they might get a lot lower. Be patient with purchases until we have a confirmed uptrend.

Potential Long Picks: (consider, but add cautiously with stops)
BIDU @$350-$360 (near 50 day MA)
SPWR @$122-$127

Potential Short Picks:
FRE
LDK
FNM
CFC
PMI

Current Portfolio:
DAR (long @ $11.27) - stop loss at $10.55 (8%)
ISRG (long @ $313) - stop loss at $292.25 (previous near term low)
FRE (short @ $34) - used Feb. puts with a debit spread
LDK (short @ $48) - used Jan. calls with a credit spread

Until Monday...

Personally, I don't believe in market timing and am a long term investor. I'm also an optimist, and I look at this correction as a buying opportunity. No idea where the bottom is, but based on historical ratios, the market doesn't appear to be overvalued. So I'm going to snap up a few stocks, probably in the financial sector.

Have been looking at Morgan, Goldman, Bank of America.

---

Gabriel

Just submitted orders for MS, GS and BAC which should be executed Monday morning.

---

Gabriel

Gabriel, like you I don't know where a bottom is. You might be more optimistic than me, but looking at the near term trend I think it is wiser to lighten up the portfolio and wait for going long and strong until we see a positive trend. Careful trying to pick the bottom with the financials. Why not just wait until they are moving in the right direction and join the trend. The benefit of being a small individual investor is that we can get in and out so easily. We will continue to keep an eye on the trend as we wait for some positive market action.

Market update for January 7th, 2008:

The post below was the first item posted on this link:

12/17/07 - US Equities fell hard again today and most of the key indicators that I follow have turned negative or are about to turn. I follow the 7, 21, and 50 day exponential moving averages as well as stochastics and the MACD both on individual stocks and on major market averages. These are lagging indicators, but confirm trends and direction of the market movement. Today the 7 day EMA crossed below the 21 day EMA on the Nasdaq and the SP 500. It is about to make a negative cross on the Dow. Stochastics have gone negative on all three and the MACD has turned negative on the Nasdaq and the SP 500. As a result of the trend, I see the market testing December and August lows and potentially falling past them in another wave of a correction. These trend changes usually indicate trends of 2-6 weeks but can go turn quickly in markets with neutral action.



Today's Analysis for 1/7/2008:

The market analysis has not changed since Friday. All indicators are pointing downward and the trend is negative. We are currently testing recent lows from November in the SP and the Dow while the Nasdaq clearly fallen below these levels. While a bounce is possible after a lot of recent selling, it should not be used to go long until there is a clearly established uptrend. As a result, suggestions for long positions will not be made until we have a positive trend.

While I currently own ISRG (at a loss) and DAR (with a profit), long positions are very risky and both have a stop loss in place. LDK took a tremendous hit today and I closed the credit spread that I had previously listed with an 19% profit. FRE has also moved nicely and has nearly maxed out the potential profits for the position.

Finally, our young forum had over 90 views since the last trading day and seems to be building interst.



Potential Long Picks:

N/A

Potential Short Picks: (consider waiting for a bounce)
FRE
LDK
FNM
CFC
PMI

Current Portfolio:
DAR (long @ $11.27) - stop loss at $10.55 (8%)
ISRG (long @ $313) - stop loss at $292.25 (previous near term low)
FRE (short @ $34) - used Feb. puts with a debit spread

Market update for January 8th, 2008:

Regarding Market Predictions: The purpose of our analysis is not to predict the markets. Instead of attempting to determine what the markets will do we are following what they are currently doing. When trends are in place certain indicators follow them. The 7 day Exponential Moving Average Crosses the 21 day Exponential Moving Average, stochastics make upward or downward crosses and and MACD turns positive or negative. Currently all indicators are negative and indicate our current downtrend. After a brief bounce today we saw a dramatic turn lower in the general markets. The test of the November lows in the SP and Dow have failed and both indices have broken below their previous support from November and are very close to August lows. The Nasdaq would have to fall an additional 4% to 5% to reach it's August lows. The market has turned very negative and could see an explosive bounce, but it is wise to wait for a positive trend to develop before risking any capital.

Short Summary: Market in established downtrend. Wait to add positions.

Analysis of Recommendations: Based on the recommendations in this forum, any long positions would have been stopped out with a loss of 5% to 8%. The performance of our short positions from their time of recommendation is documented below. Not bad for one week of trading.

FRE - 21%
LDK - 12%
FNM - 20%
CFC - 35%
PMI - 29%

Potential Long Picks:

N/A

Potential Short Picks: (consider waiting for a bounce) (use a stop loss if you own any of these profitable positions)
FRE
LDK
FNM
CFC
PMI

Current Portfolio:

ISRG (stopped out today for 8% loss)
DAR (long @ $11.27) - stop loss at $10.55 (8%)
FRE (short @ $34) - closed position for 50% profi

Ha! Looks like you were right!

Still, I'm in it for the long term and am going to hold on to these stocks.

---

Gabriel

Gabriel,

I'm not right, the market is right. All we are doing is follow it's signals and at some point it will give us a signal that it will make more than just a short term bounce.

bbakes24

Market Commentary: January 9th, 2008

It looks like we have a recent trend. The market hems and haws for much of the day and then after 2 PM it starts take direction and moves impulsively. Today's bounce was one that we have been waiting for, but the problem is that it is very difficult to predict when the bounces will occur and how big they will be. As we watch the overall trend, a bounce would currently be a good time to sell positions or possibily position ourselves for more downward action. If you followed our suggested short sales (most of which I have not been able to sell short in my account) you could have made and additional 3%-5% by midday on most positions and PMI dropped another 18% making for some large weekly profits. As we could be seeing some follow-through to the upside after a big downward move we will be looking at all of our indicators, but the 7 day EMA cross with the 21 day EMA will truly show market trend while stochastic crosses will probaably occur earliest and do not necessarily confirm a change of trend.

Analysis:

All three indicators (7 day EMA and 21 day EMA crosses, MACD crosses and stochastic crosses) in the SP, Dow, and Nasdaq still indicate a downward trend. Bounces in a correction (as well as Bear markets) are often explosive and can be dangerous to be on the wrong side of. Use Stops to protect capital in both directions. However, until a trend change is established it is only a bounce and cannot be assumed as a new trend. Safe trading!

Market Commentary for January 10th, 2008:

So far we are seeing a continuation of the bounce that began yesterday. Our overall trend is still pointing downward, but the positive action could take us a few notches higher. The Dow and the SP saw the stochastics turn higher togday, but all other indicators still are pointing at a downward trend. After the large price drops that we have seen we will need some sustained positive action to indicate a buy signal. Unless you are trading for the very short term, be patient. It also might be a good time to get out of short positions that have been extremely profitable. The next trading update will be on Monday morning 1/14 before the market opens.

As the market approaches 1435, I expect semi strong resistance. As the market move towards the bottom (1385) scale in positions.

Good Luck,
Scott
http://www.advancedtrendanalysis.com

Scott, thanks for your post. It would be great to see others throw in their perspectives.

Market Commentary for January 11th, 2008:

After another sell-off following a short lived two day bounce all of our indicators are negative again. However, we all know that the markets direction is never that easy. I would suspect to see another bounce to slightly higher short term highs than we made last Thursday followed by another leg lower. I would say that this scenario is in place as long as stocks stay above their recent lows of last week. A break lower and we are probably in for another dip. Regardless, the trend remains down. Be careful with long positions, but a short is risky business at this point with another bounce being highly likely.

Market Commentary for January 12th, 2008:

With a strong bounce yesterday (as we thought and suggested in our post), it is likely that the market will hit a short term high before a strong downtrend could resume. The key position is the recent January lows that we saw in the past week. A break below these levels indicates a likely fall. Remember that while the markets are bouncing off recent lows, they are still entrenched in a strong downtrend. All three indicators (7 21 day EMA crosses, MACD and Stochastics are still negative. Once again the stochastics may be the first to turn upward, but based on our current trend, I think we have one more leg lower over the next 1-3 weeks.

Safe Trading.

Disclosure: I am currently 100% cash. I tried to play the bounce yesterday, but felt like I missed it with the large gap opening and did not pull the trigger at the right time when it pulled back. I don't want to chase this market.

Market Commentary for January 15th, 2008:

As it turns out, I am glad that I didn't pull the trigger on a long position yesterday by chasing the market higher. Today seems to have decreased the possibility of an additional bounce before we head to lower levels. The major markets (SP, Nasdaq and Dow) are just at the point of slipping significantly below the previous low made in the past week. It could be another slippery slope if we clearly break down from here. All of our indicators continue to point towards a lower trending market. It still seems as if the market is routinely selling at this point and I plan on purchasing QID (Ultra Short QQQ) to build some profits as my previous put positions were closed out last week with nice gains. I will use a tight stop on QID to limit losses to 1-3% and hopefully can get a nice short term gain. SDS and DXD that can be researched at: http://www.proshares.com/

Safe Trading.