Saturday, February 28, 2009

Sleepless night...stock market crash..???

First off - what I am NOT.

I have NO ego, I am NOT rigid, I am NOT eternal Bull, I am NOT eternal Bear, I don't care if I am right or wrong - I trade to make money, if I did - that is good enough justification for me.

Trading is about ODDS and staying in the game (as risk management and preservation of capital).

That being said... I've been hinting on "THE bottom in progress" for the last few days. February monthly close brought good news and bad news.

The good news is - MONTHLY buy signal was generated on SPY and DIA (weekly buy signal is almost completed) - AND "risk zones", since monthly February close is the lowest, just became way narrower with the higher bottoms. (compared with risk zones that might have been generated based on huge monthly range of November 2008)

The bad news is - daily buy signal failed miserably (as well as prior common supports - which, I personally don't care about much), it was irresponsible of me to expect daily setup to have any effect whatsoever after decline of such magnitude.

I did not sleep all night - I was convinced we are at the close proximity to the bottom, suddenly I realized that I was biased - still over 50% long on IRAs since few weeks ago, tried to imagine myself 100% on cash - all of a sudden I see possibility of 593 on SPX and 57.29 on DIA in just a few days - that is crazy. Sliced and diced data and charts and all I get is 50/50 chance of crash or rally - drives me nuts.

I can tell you this - I was able, many times in the past (not just once) to pick major market turns. (It is all there - in the legacy Trading to Win blog's archive).  As of right now - I do believe this is the bottom in the making, BUT - the problem is - as with any long term bottom - "naming the price" is close to impossible. I do think that March will mark the bottom - the question is - "at what level?" [Do NOT ever believe to ANYONE who will tell you that STOCKS HAVE GOOD/BAD PRICE -PRICE IS A HIMERA, not matter how it has been "calculated", whether based on "fundamental make belief" analysis OR technical "Art Analysis" - PRICE has NO VALUE, only TIME MATTERS]

After Friday's close odds favor much lower levels than I was able to calculate prior to month of February close (see post as of February 23rd), they are much lower than any move I'd like to get involved into.

Based on what is possible now - this is what I will do Monday morning (IF it will not be too late) - I will close every single position in every single "not day trading" account - AT THE MARKET soon after the open. The huge move is coming and I don't want to get caught on the wrong side. I will then put on neutral deep out of money put/calls collars for about 3% of my portfolio value 2 months out.

Charts speak louder than words - here they are (I am NOT saying that market WILL plunge to the bottom of the risk zones - grey boxes, I just don't want to be the part of it now, not even on the short side - at this time there is a real possibility that clearing counter parties will not be able to honor obligations...  Somehow I sound just like James Rogers right before 1987 crash - and I just did what he did this Saturday morning - I went to the banks and took a lot of cash OUT, as well as some content of safe deposit boxes - it is on its way to my "Warrior nephew" in Montana now).





I will update "Trade Signals" tonight.

"Live to trade another day"


P.S. Promised analysis of Natural Gas will have to be postponed.

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