Friday, June 22, 2012

Potential Market Bottom

Ok!! So the market declined 256 points in DJIA. A bad day! A very bad day! But does this mean that the rally is over? Tonight, I am seeing a lot of people suggesting that the rally is over and the market will start declining sharply. However, the technical indicators along with the sentiment indicators are not suggesting this. Based on the following analytic reasons and the IPM turn date, which is end of June, market could have put in a bottom yesterday. For this forecast to hold, market should not decline below 1305 (Sp500).

1- 2nd wave personality and Current Sentiment: 2nd Wave should show optimism but right now we are not seeing optimism

2- Technical Indicators: Market has internal strength

3- EW structure and EWI contrarion signal: EW structure suggests a potential for rise

4- Crucial Levels 1305

Note: If you want detailed analysis on these topics please let me know and I will try to make a detailed document. 


  1. Thanks Naqvi! I tend to agree because 1)trading stocks is not an exact science and it could take a coupleof days for the market to get to wehre you're propriatary program is saying it will go, 2) it takes a couple of days before the market feeds/weeds out what the Fed has said, and 3) with the instantaneous media input, it can convulute fundamentals. I think we are within a trading range but looking for a direction out. It is still far enough away from being overbought to give it more upside. I agree that 1310, 1305 will be the trigger to more downside. REMEMBER ALL, I'm talking about the next week here, not the next 6 months. I think we have bottomed for the very near term and IF we get passed 1344-50 at the beginning of nest week, we could see 1380, then it gets a little wobbly. Will all that happen by the middle of next week when I would like to get out is safety? Probably not, but I'll take what I can get! If it looks strong Monday and Tuesday of next week, I may hang until Thursday or Friday. Anyway I look at it, I'm out by the 4th! These statements are all mine, they are a little contrary to others on the and gorilla trader, but thats just me. Be safe out there! Brad

  2. Sorry gang, I didn't have a chance to spell check my previous post.... Brad

  3. Hey Brad - what may trump everything is that the end of June is the end of the 2nd quarter - all the fund managers are likely to do a bit of "window dressing" to make sure any losses are limited, or they may shoot to create some short term gains. Having said that, volume was so low on Friday for the up day, there may be some follow through from Thursday yet to be played. It is hard to gauge. It makes sense to test 1370 at some point, and maybe even the 1400's again before the next leg lower, but ya never know. 1380 has been passed up and down during the day too many times the last few months (4/12, 4/13, 4/17, 4/25, 5/4) so I don't think that number means much. I've been jumping in and out just playing with the 20's and 50's (ema's, not ma's) and have been having some luck. I will say that shorting VXX is my favorite thing to do lately (when I feel markets are going to rise)...if you just look at the history of that ETN, there is so much more value going short than long. I was patting myself on the back yesterday getting 6%, not realizing I was leaving another 4% in the last hour or so...tremendous value there as it's filled with panic sellers on a daily basis. Anyway, maybe 1305 gives some support, but the line in the sand is around 1270.
    Anyway, all reports and fundamentals from every single country have been horrible - at some point the shoe has to drop, but no way to know when with this being an election year the meantime, bears/shorts have funded all of these rallies imo. Permabears always think they are smarter, and once in a while they are right...but usually they give it all back and more in a short amount of time. Remember, at least twice every month 401k's are going long...that is guaranteed money coming in no matter what is going on. 99% of the people that I know never look at the market...they just keep putting money into it and that helps keep things propped up as well - besides all the various banks/countries printing money or giving it away at 0% rates.
    I have been a little confused following Naqvi's time frames (from what I can tell they are fluid and change often), but I am happy to see more posts - once I can make some money from it, I will donate. Cheers. -Mike

  4. Naqvi, it seems the market does not rise until the end of June as you predicted. What would be the reason behind of the wrong signal from your system? Does it appear a turning point today? Rubbish!

  5. I see the writing on the wall. Too bearish and the next leg is down. Be careful out there. Brad

  6. Brad - no way to know...bearish sentiment is increasing which is good for equities. The funny part is - if you are a normal person with normal sensibilities, then as soon as you want to sell is the best time to buy. With so much going on tomorrow, I would have thought for sure there'd be a huge sell off at the end of today...hasn't happened. I am all 80% cash heading into tomorrow, but I'd have to imagine we go higher after the last few days...anyone's guess. Naqvi's going to say that 1305 held and that's all that matters...but tell that to whomever had to sit through that 40 point drop on the S&'s all designed to make you feel pain and want to sell. Leaving in May and coming back in September might be the best advice (emotionally for sure) when you look back on average year over year. -Mike


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