Dow Jones 7350: Armageddon’s Gate?
Ten Year Weekly Chart of the Dow Jones Industrial Average. Note the trendline break (light blue).
I will be extremely worried if 7350 is blown through. The next area to watch will be 6500 (questionable), which will intersect with the trendline drawn from the 1987 crash and up through subsequent lows in 1990-1991. Should those areas fail, there is nothing but air, with support at 4,000.
I will be home and able to trade intraday on Monday. Should the market capitulate and then firm up around the areas mentioned above, I may consider the potential for trading a bounce. It seems Monday is likely to be a pivotal day.
Should the market not firm up, and move decisively below 7,350, I am seriously concerned that America will be facing the nationalization of our banking system. Monetization will be worst nightmare our country will have ever faced.
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Wood:
Did the system produce a signal for Tomorrow? Just asking…
October 9th, 2008 at 10:18 pmSusan, thanks for keeping me focused. No, it did not. It will not produce a signal as long we go down everyday.
If I end up trying to buy on capitulation, it will be a completely discretionary trade.
As for the signals, I’m not sure exactly whether they are still relevant. If we continue to witness this massive dislocation, the markets are likely to undergo a complete shift in psychology and structure which will likely be permanent, until the next time this happens.
The good news is that there will be many completely new edges to exploit.
October 9th, 2008 at 10:31 pmFunny how nobody listened to me….I wrote over a year ago and many times thereafter if we fall below 9500 we could see 7500…and I knew we were going to 9500…
October 9th, 2008 at 10:31 pmFutures now down 4%. Fuck, maybe we can take care of all of this tonight.
October 9th, 2008 at 10:37 pmyour system has been great, but I traded out of SDS when you called it out and left 30% upside on the table….and just sitting out of this collapse. Cant even short a bounce, because its panic time. now what to do? get some popcorn and watch the greatest financial collapse in modern times?
October 9th, 2008 at 10:50 pmHowdy, its a very short term system. I stated from the beginning the average trade was less than 5 days. Sorry you left so much on the table.
Watching will likely be better for your account value than trying to partcipate in the collapse.
October 9th, 2008 at 10:56 pmcash (and some popcorn) is king too, unless the banks burn it. But if/when the markets return to something similar to the last 100 years of trading, i look forward to following your alerts
October 9th, 2008 at 10:58 pmWood,
Thanks for the post. Going long a bottle of scotch tonight and longer a handful of Advil in the morning.
October 9th, 2008 at 11:00 pmAnton,
you’re the man. however, go long scotch and short advil.
chivas of course.
October 9th, 2008 at 11:04 pmChivas,
I’m anticipating inflationary pressures inside my head in the a.m. directly proportionate to the deflationary pressures in my accounts. Maybe go long scotch tonight, longer scotch in the a.m.?
Chivas, of course.
It’s so crazy, it just might work. But alas, I’m going to need all of my Mad Max faculties in order when this all flies apart tomorrow, so short Advil it is.
BTW, didn’t you hit a grandslam the other day with, I think, HXB or something?
Maybe you and Shed need to be a little more vociferous with your opinions around this joint.
Good luck tomorrow.
October 9th, 2008 at 11:32 pmWoodshedder:
The new Svengali.
I agree, if we break that 73XX area we are in DEEP YOGURT.
October 9th, 2008 at 11:42 pmI’m with you there. Looking for a 7,200 intraday bottom by Monday’s close.
Folks I talk with are starting to draw lines in the sand at 7200 - 7300 Dow as the place to step in and buy the blue chips at fire sale prices.
We shall see.
October 9th, 2008 at 11:44 pmWe will find out pretty quickly if the top a year ago on down is going to look like the 73 on down, and the charts look very familiar, or if it’s going to be more like the 29 drop… and the charts also look familiar…
I’m making a couple posts in the PG that I’ll put up one of them I’ll show the chart comparrisons.
If the top was like 73, we could be very very near a bottom like within a few days. Otherwise, we have a 29 staircase down, and we hit those dreadful 7500 and below and continue down the highway to hell.
I’m praying we bottom here, but compare the following 30-50 years following the tops…. 70s, we might have serious stagflation and rediculously high oil prices, and inflate the bubble once again like the dot com, and then we’ll be in the same spot and perhaps crash harder, further in debt, and continue, and eventually america loses it’s power. If it was a 29 top, we spiral down, soup lines form, holding gold and silver become illegal (actually, instead they just made it legal in the patriot act to take gold and silver without notifying us), and we go through hell… But at the end of it we become a prosperous nation instrializing ourselves to the wealthiest country… Then again, we’re not currently backed by gold like we were back then, so we don’t become the currency to turn to for strength, and instead the Swiss are the new americans…
this is incredible, really.
October 9th, 2008 at 11:44 pmAnton,
lol.
no , i did not hit a grandslam. i went long xhb. even though iam partly hedge right now, i am still down 12% on that position. i will double down when i think the time is right.
Shed is the only one that saw the potential for this decline.
October 9th, 2008 at 11:54 pmwoodshedder,
The “doomsday” predictions have…well…grown tiresome !
With all due respect, of course !
You’re bringin’ me down, dewd !!!
Whatta ya say ya give it a rest and look to “selectively” git LONG some names !!!
EVEN if it’s “INVERSE ETFs” !!!
Take a stand…post a trade…
Just sayin’ …
Regards,
alf44
October 9th, 2008 at 11:58 pmThe market is falling! Why isn’t the government doing something?
Haha…they already have, haven’t they?
Now that the stampede of 401k baby boomers are liquidating to save their retirement funds by going into case…we could see anything happen.
For example a tremendous down October, or not. Waiting and watching this historic deballing of the baby boomers. HAha, did they REALLY think they were going to be allowed to keep all that money, stop working, and retire in ease?
Actually a sad story if it plays out like this, and a whole generation gets their retirement funds wiped out.
Maybe the 401k idea really will be shown to be a very bad one after all.
.
October 10th, 2008 at 12:00 amFWIW…
Thread titles like “Russian Roulette” and “Armageddon”…
…just aren’t doin’ it for me !!!
October 10th, 2008 at 12:01 amAlf44, I took a stand a couple of weeks ago when I quit trading a market in which I have no edge.
Believe me, the strategies we’ve designed LOVE volatility. When the market gets back to going in 3 directions instead of 1, you will not believe how much money I’m going to make.
That is, assuming the strategies still work after the carnage.
My discretionary trades, should I decide to try and catch a move from bottom will be to buy the DDM, SSO, IWM, and QLD. It will be very simple. It will not need to be complicated.
October 10th, 2008 at 12:07 amAlpha, I sure hope so.
It MUST hold.
October 10th, 2008 at 12:13 amAnd I thought I was the only one thinking of a bottom in the 4000 range. But that is down the road.
I don’t see us below the 2002 lows in the next couple of days, however. But perhaps the bounce we get will be brief and then we test the 6500 level later this month or in November.
How many times over the past year has the PPT pulled something right before options expiration? If I have any shorts left on Monday with egregious profits, I will get out if I haven’t already. Emotions will be peaking early in the week. Maybe I’ll even speculate on a bounce into expiration.
Then perhaps another low around the 24th, but not a lower low. A chance to survey the damage and pick up a couple of value/dividend plays as well as buy some calls. Then we will have to see where we stand. I will still be expecting lower lows below 6500 but maybe not until next year. This extreme pessimism will have to be worked off first.
Having said that, look for most of the surprises to be to the downside. I will maintain a large cash position until I really think the bottom is in. That is going to be awhile.
At some point in the near future, the bubble in treasuries will have to pop. An incredibly bearish opportunity, especially if you missed the stock market decline.
Best of luck to all of you. If some of you are really thinking about the social ramifications, I think you have until the summer before we see any widespread craziness.
By the way, do not forget that Monday is a banking holiday. Seems like a helluva time for the PTB to pull some shit.
October 10th, 2008 at 12:22 amFuck it! Im buying EZPW.
October 10th, 2008 at 12:53 amEXCERPT of the YEAR:
Now, at this time when the market is behaving exactly the way it should be behaving, when all the patience and discipline and diligence is paying off, I see most are now looking for the market to do the opposite. However, months ago, when all of the events of the past weeks would have seemed possible, but unlikely, they were preparing for this very event. It is here, and everyone seems unprepared.
October 10th, 2008 at 2:33 amWood,
Great work.
Thanks for leading the way.
P.S Do you still play the violin?
October 10th, 2008 at 5:51 amThanks BOTD!
AssNapMike- I’ve never played the violin. That was the Fly messin’ around.
October 10th, 2008 at 6:58 amWoodshedder, My hat is off to you again. When I first read the excerpt of the year my trading guardian angel said, “you know he’s right.” Reversing the new longs would have saved a bunch of profits. I definitely need to adjust the trading plan… Anyway, thanks again.
October 10th, 2008 at 7:43 amHey Wood, how many systems do you normally trade at any given time? I don’t have any system yet, but what I’ve seen on the charts for the past month is that nothing that I watch has been able to actually close over the 5 day moving average. I figure if some of the stocks can actually close over the 5 day I’ll dabble in them a bit. Everything looks like damn death right now, and this has been an even screwier morning than most. Sheesh.
October 10th, 2008 at 11:49 amIchabod, right now I have 4 that are active. However, they may not be triggering any signals anytime soon, due to the recent freefall.
October 10th, 2008 at 1:15 pm