Comments on: Expect Pullback, but Don’t Count the Rally Out

By: Richard (permabear)

Richard (permabear) — Mon, 05 Jan 2009 06:21:25 +0000

so that last purchase of SRS i made at $51 is the last ill make? i wanted to load up more at $49 and $47 before it heads higher.

By: Richard (permabear)

Richard (permabear) — Mon, 05 Jan 2009 03:33:48 +0000

im simply going to load up on SRS. buying it at every $2 fall until all of my cash is positioned. started at $57 and bought last at $51. have 600 shares so far and i’ll max out at 2,000 if it keeps falling. ill stop buying when it stops falling. maybe thats tomorrow? im tired of trying to guess which way we are going this week or next week. im just looking to double my money over a six month period and im happy with that. amateur i am and this bear market has me tired out. once ive kicked some SRS tushy i’ll re-evaluate what to do. man… i need a rest.

By: vic

vic — Mon, 05 Jan 2009 00:57:04 +0000

Are there individual stocks that you’ll watch that give early signals that a new wave has started or is about to start.

By: pooch

pooch — Mon, 05 Jan 2009 00:05:44 +0000

My Guess ,the way i read McHugh is 950S&P target into Jan 17-20, a .pullback and then a move up to 1050 S&P .He has a turndate around Feb 21 indicating a ugly move down at that point

By: Tom (formally known as tom)

Tom (formally known as tom) — Sun, 04 Jan 2009 22:21:45 +0000

oh, and BAC reports on 1/20!! Unbelieveable timing.

By: Tom (formally known as tom)

Tom (formally known as tom) — Sun, 04 Jan 2009 22:04:56 +0000

If we are in Wave 4 (getting more convinced of that), then I bet it ends on 1/21. Consider the slide that took place from Nov 4 (after Obama’s acceptance speech) to Nov 20.

Look for all “The Good” to be priced in by Obama’s inauguration date of 1/20. The carnival is being set up to be the biggest in history. As Craig wrote above, “As Mish pointed out in a recent article, Wave 4s usually end with good news. Something to watch for.”

I’m going to ride wave 4 and get out of the water when the swell gets to big.

By: mav

mav — Sun, 04 Jan 2009 21:42:58 +0000

Wave 3 is over (with very high probability). Look at the russells or the qqqq which present the clearest pictures. Triangle in Oct is 4 of 3. Wave 3 ended on nov 21. This scenario is perfect.

The more important question is what form will wave 4 (which we are in) take,
A double zig zag? or a flat? or a triangle? Some stocks like the homebuilders have already fulfilled their potential 200d targets.

By: Craig

Craig — Sun, 04 Jan 2009 18:48:36 +0000

Thanks for the post. The only caveat I would add is that I don’t think “we can all agree we are in Wave 4 up”. Wave 3 looks complete to me, but I’ve underestimated the length and persistence of wave 3 for some time, and I think the possibility exists that its not over. Check out some of Uner’s posts for more on this possibility.

Just good to keep an open mind and set stops accordingly.

By: say

say — Sun, 04 Jan 2009 18:00:56 +0000

I think we can all agree we are in Wave 4 up and we are eventually due for the development of Wave 5 down. Until we see the final 5th Wave down I believe that the “A” Wave down of a longer term “ABC” correction hasn’t finished. Once the final 5th Wave down does occur then this should be followed by the “B” Wave up. This is where I believe McHugh’s analysis could be wrong because he has the “B” Wave starting with the bottom of Wave 3 which was the 11/20 closing low. It would seem based on EW Analysis that the “A” Wave down should complete with the 5th Wave down and not the 3rd Wave down unless I’m totally missing something. It’s possible the final 5th Wave down will not drop too much below the 11/21 intra day lows which could potentially end up looking like a Double Bottom pattern. The time frame on all of this is hard to say. Like Craig said I could see the market zig zagging higher through the end of the month possibly into early February which would then be followed by the final 5th Wave down.

I could see the final 5th Wave down ending sometime in the late Spring with the “B” Wave up leading to a Summer Rally followed by some weakness in the Fall and then more strength into the end of the year. Once the “B” Wave up ends this would then be followed by the “C” Wave down beginning at some point in 2010 possibly. That’s my two cents.

By: Craig

Craig — Sun, 04 Jan 2009 07:00:27 +0000

It’s difficult to measure sentiment. Most of the traders I talk to are very bearish and anxious to ride the next wave down. The average Joe probably assumes the market has to go back up, but how much money does the average Joe have invested?

A lot of money that was in the market has been destroyed by the decline, and a lot of money is badly burnt and too scared to get back in.

I try to figure out what the “amateur” trader is doing and take the other side. I don’t mean “amateur” as a slight to those traders, because I’ve been on the “amateur” side many times. But where is the fast, inexperienced, thrill-seeking money going right now, and I would venture to guess on a very short time frame, amateurs are loading up the boat short. And the smart money is being patient and waiting to get short. This rally might continue to creep higher until the amateurs have taken too much pain and cover for a loss. Then, wave 5 down begins.

As Mish pointed out in a recent article, Wave 4s usually end with good news. Something to watch for.

If you’re short, I’m not calling you an amateur, and you may be on the right side of the trade. I am just trying to explain how I try to think about market psychology There is never a shortage of opinions on the market, and trying to figure out sentiment is more art than science, although plenty of people try to quantify it.