Portugal consome 5% de nuclear, mas centrais no país ainda são tabu

[Ulisses Pereira]

Sim, aí as coisas ficariam bem mais claras. Recordo que ontem foi o quinto dia de menor volume deste ano no NYSE. Um aumento do volume e aceleração das quedas, deverá fazer-nos abrir os olhos.

Um abraço,
Ulisses

[Eagle Eye]

Nao temos tido volumes pq ainda nao estamos numa fase de capitulacao. Ele coloca a hipotese de entrarmos numa. E ai veriamos com certeza o volume.
Um abraco, Eagle Eye

[Ulisses Pereira]

Sinceramente, acredito que para podermos falar numa capitulação teremos que ter volumes muito fortes e movimentos muito acentuados. Se repararmos, nos últimos dias, os movimentos no mercado americano têm sido muito comedidos, o que não é de modo algum característico de uma fase de capitulação.

Um abraço,
Ulisses

[Eagle Eye]

WEDNESDAY a.m.
March 5, 2003



The Stop-and-Reverse
by David Nichols

Yesterday was a very negative day. The 60 minute SPX chart that I showed yesterday has now seen a resolute breakdown.



So it looks like a capitulation phase could be underway. It's not happening yet, as we haven't even taken out the lows from a few weeks ago, but this could be the beginning of one of those rare moments when the market creates a super-majority in the bearish direction. It seems almost impossible that this same bear market script is going to play out again, but I guess that's why the phrase "people never learn" is a time-worn cliché.

In real-life, these capitulation phases are very hard to capture. They spring up suddenly due to a confluence of exogenous external events -- usually not during market hours -- and carry a market that's already gripped by fear to inconceivable depths. These moves also invariably have an ending worthy of a Hollywood thriller: just as you get up your nerve to capitalize on the negative side, the market double-crosses you and starts a massive snap-back rally.

But there is a very simple trading strategy that we can employ, if such a market wipeout is really going to happen. We can pick an important price level, and when the market is below it, we'll want to be short. If the market is above our line, we'll want to be long.

At least it sounds simple, anyway.

First off, we need to be careful where we put our line. If the goal is to be short for a free-fall decline, then the obvious line is the recent closing low on Feb 13th. If the markets are heading down dramatically, they are going to have to decisively take out this level at SPX 817. So that's our "go short" point.

But markets are not perfect systems, so we have to allow a little leeway to not get faked out. I like to allow a 3 point cushion to a widely-recognized support/resistance line, as often the market (and market makers) overshoot price to one side to trigger all the stops placed at these obviously important levels, before reversing quickly.



We're also going to make 817 our "go long" point, should the market elect us short by falling under this level. When the SPX rises back over this level, we'll want to exit any remaining shorts at SPX 817 (hopefully we'll have taken profits at lower levels) and go long on a move that has the strength to go back over SPX 820. This is basic "stop and reverse" trading.

Such a strategy has many benefits at a time like this. Outside events will not influence our decision-making process. (Personally, I've made a decision that I don't even want to bring up Iraq or that word I'm really tired of -- "geopolitical" -- unless I have information that I don't think the rest of the market has assimilated.) The market will elect us short, if it's really going to fall off a cliff. And since we'll then have a stop point near where we've entered, our risk will be kept to a minimum, as much as possible.

Of course plans are always subject to contingencies, and this morning I'm just offering a broad-stroke plan to capture a potential capitulation wipe-out low without an undue amount of stress. Any number of contingencies, such as a market that gaps way down below our level, or a market that triggers us short and then quickly reverses, could leave you confused and uncomfortable.

In the case of a big gap -- just skip the trade. There are too many wild cards at that point. We can adjust on the fly, or we can just look to go long the Rydex funds when the bearishness reaches a fever pitch.

If the market elects you short, and then just rallies right back, then use SPX 817 to 820 in the same way, as your stop-and-reverse point.

You'll notice that I haven't mentioned using the Rydex funds for this trading plan. These end-of-day funds don't provide the needed ability to get in and out intraday in such a quick market. You'll have to use the exchange-traded fund for the S&P 500 -- the SPY -- to capture these moves, if you even want to. Or you can use any other proxy you're comfortable with on the S&P 500. But you'll need to be able to get in and out intraday.

Of course, now that I've outlined this whole plan, it's likely that the market won't even enter such a capitulation phase. I actually don't think it's going to happen. But I could certainly be wrong about that. If it is going to happen, we won't be caught flat-footed and without a plan.

Sentiment Dashboard
by Adam Oliensis



SENTIMENT TANK: The tank filled up by 6% to "75% full" of negative sentiment. That's a large rush of bearish feeling. The indices are testing down toward their February lows and the tank is filling up toward its line of declining tops that launched at that point. A break of that line of declining tops on the tank and the February lows on the indices puts us at risk of a "big whoosh" down toward the October market lows. And that could take the tank up over 85% and toward a maximal reading near 100%.

SHORT-TERM: The hourly gauge is in a strong decline phase.

MID-TERM: The mid-term gauge advanced by 2 to 19% in its advance phase. However our Confidence Diffusion Index (CDI), which measures 7 different factors on the charts, regressed to a BEARISH -1. Unless that recovers quickly back into positive territory this gauge will flip over into a decline phase. The CDI functions as a kind of early warning system, measuring the "heartbeat and blood pressure" of the gauge. The mid-term advance phase needs some CPR or it's going to die.

LONG-TERM: The weekly gauge, after flipping into neutral last week has moved back into a decline mode, advancing 4 points to 53%. The weekly CDI progressed to a bearish 4. The weekly downtrend is reasserting itself.

The mid-term advance is measuring sentiment momentum off the February 13 market low (green arrow on the tank). The long-term decline is measuring momentum of sentiment off the mid January high (black arrow on the tank).



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