And so October has come and gone. We got what we expected, which was a mother of an S&P 500 bounce, now probing the high extremes of the upside range. Why is it extreme? Because if it goes past certain levels it morphs from ‘bounce’ to ‘bears hand it over on downs’, and another opportunity lost to croak this market.
October was so very positive and now the bulls have some good tech earnings and a period that everybody knows is favorable. I mean, they sold in May right? Right?? Sure they did; a lot of them sold in August (and some bought back in October). So it’s the bullish November-April cycle beginning on Monday.
All I can say is don’t swallow the bromides, promos and infomercials coming from people who manage other peoples’ money for a living (i.e. the mainstream financial services industry and its associated media).
While I am not net short yet, I sold a little Apple (O:AAPL) here, added an EM short there and am skulking my way to the door. I have had some great trades and some real goofs on this bounce but it is time to realize that play time is ending and now only the true believers are going to take this market higher or going the other way, lower.
There is a very real possibility that the wonder bounce has been a last chance to sell. I am not saying that because I want the market to drop, which I do (because I find it easier to manage when people are spooked), but because the balance of the indicators (technical and macro) still say that the intermediate trend is changing to down.
Over in precious metals, the spooks came on cue, 10 HUI points below our ‘bounce’ target zone. This was completely view-able in advance through the CoT structure. It’s confirmation was in the reversal in silver vs. gold, post FOMC. While for the moment I am net short the PMs, I have a few quality miners tucked away in my pocket. This is not because of some idealistic viewpoint but rather, because my view of a coming macro change has not been eliminated by the market bounce.
Speaking of FOMC, it was really interesting that they decided to put a little pin prick in the fabric of things with that ‘at its next meeting’ wording. Meanwhile, another sign of manufacturing degradation has burped up in the economy. You won’t find it on financial TV where some guy jumps around like a gorilla on crack to entertain the investing masses. But you will find it faithfully chronicled each month by a guy formerly in the medical device manufacturing industry.
The market road map has been loss of momentum → downside resolution → bounce attempt → downside retest → mother of a bounce… all very manageable and logical. Now it gets interesting again because irrationally bearish sentiment is fixed, technical limits are upcoming and market/economic indicators are questionable at best.