Terrifying Tuesday: Market Signals Don't Add Up

This is what I wrote Monday:

Earlier I had indicated that the bounce level is 1430.(/ES) Cycle says that it should happen in a day or two.

The 15 min charts in most indices is looking like a bear flag or at least a continuation or consolidation pattern which indicates more selling ahead.

In fact after the post was published, I was thinking that I might lose face today. But God saved his idiot savant. (sorry BDI!)

This time the cycles have been spot on, which is not always the case. So now we have most of the down calls fulfilled. Earlier oil sold off, yesterday gold and silver corrected and is just about the lower part of the range. Now we have the remaining part of the call, which is to shoot up till election. Even Apple (AAPL), o mighty Apple, also corrected below $ 640. Now we are coming into the final part of the bull market rally which hopefully will culminate around 2nd week of November.

In the pre-market, when I scanned the futures, the emini was up around 6 handles. I sent out this tweet:

‘GMA. Day starts where we left it yesterday. Not much change but somehow I don't like it, don't know why. Feels like a trap. May be I am paranoid”

That was much before the selling started. Well, sometimes it pays to listen to the intuition.

Now the intuition is saying that we will see some more selling before the bounce. I think we still have little more selling to come today but will ultimately close above /ES 1430.

In the afternoon I started scaling in long positions in PM sector and the long Treasury ETF (TBT). Over the weekend I will write about the importance of scaling in any position. It is one of the trading disciplines I have learned very late in life. I am not touching other stocks yet but depending on how today turns out, I would be interested in Seattle Genetics (SGEN) and Panera Bread (PNRA). But as of now, they are not a priority.

One notable exception to selling was oil, which was actually up throughout the day. I think the Boyz were rotating money. If the sell-off was due to concerns about the global recession, why did oil not sell? Moreover TBT was up. Even Nat.Gas was up. You see, things don’t add up.

Many have been conditioned that there is inverse relationship between Equities and Bond. To a certain extent they are right. The investor psychology has been so scarred by the 2008-9 financial crisis and mom and pop investors lost so much money in stocks that they did not participate in the entire rally from SPX 666. Scaremongering blogs have not helped either. Now investors are fully loaded with fixed income funds and bonds. Next comes the scariest part. In the forthcoming melt down, both the stocks and bonds will go down together. And retail will again lose money.

I want to avoid rants of all kind in this blog and keep it focused on the market action, devoid of macroeconomic analysis.