Remember two days ago I mentioned that this is the level where the market could once again go into another dead cat bounce? Well, it seems like at least its happening right now exactly as expected. Even though the close was mixed, intraday trading action were largely positive. However, dead cat bounces like these are so so dangerous I almost never use them for any long calls. In fact, I used the opportunity to get out of two of my most profitable put options positions on NKE and MPEL, making 82.2% profit and 44.6% profit respectively (See how its done here!
), setting down our first profits of the year of the Monkey. Not bad at all.
Some of you emailed me and asked me what I meant when I said that this recession is going to be the perfect storm of recessions because factors that used to individually cause recessions are now all coming together. What exactly are these factors? Well, lets take a look...
1987 - Oil Glut crisis. Slump in oil prices following global oil inventory build up resulted in the market crashing 30%.
2001 - Dot com bubble, emergence of terrorism, accounting scandals hitting mega corporations.
2008 - Credit crisis. Bad credit rolling into a global economic slowdown snowball. Main cause of bad credit was the subprime mortgage crisis, home price bubble. European slowdown.
This time round, we have the oil glut, China slowdown, consumer debt bubble rolling up, another home price bubble, all of these will no doubt lead to more serious consequences that will truly spark the recession. And then of course, the Feds had to drop the rate hammer right now, which of course, in one of my posts a few weeks ago, I actually felt its the right thing to do as well even though in the short term, a market crash may be the price to pay for longer term stability.
Looking at the price action today, even though the market traded with higher highs and higher lows, which is a bullish indication that agreed with my expectation of another dead cat bounce around this area, I am seeing this dead cat bounce more like DEAD cat bounce rather than dead cat BOUNCE. Yes, it felt like a dangerous expectation because the market can easily slump down so fast from here that even if it does go up another day or two, its pretty insignificant. From how the internals are poised, the market doesn't seem like it has the strength to mount another assault at the 30MA line but actually looking to completing the bearish transformation (transforming the primary trend from neutral to bearish as well) by taking out the January low... soon. I would continue to use any positive days as opportunities to position me and my Master's Stock Options Picks
subscribers to downside.
So far, over the
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Market Crash Timer: RED
For now, the market remains in short term bear trend within an intermediate bear trend and primary neutral trend.