Monday, September 28, 2015

Release the Wolves

It is a full moon.  Time to release the wolves.  With the wolves on the prowl, looking for blood, the sheep are beginning to panic.  You saw the signs on Friday when the big gap up was faded midday, led by tech stocks, in particular, biotech.  You can tell it is not hedging or derivatives selling driving stocks down Friday afternoon.  It was cash selling, as the small caps and the biotechs took most of the beating.

This is usually the final stage of the selloff when the wolves come out and the sheep dump their favorites.  We have a gap down as the fear is becoming more palpable.  It is morphing from a sleepy range bound chop fest to a last gasp panic.  The extent of the panic is hard to predict, but it usually doesn't last more than a couple of days.  So we should see the panic low this week.

The ultimate low all depends on how much it goes down today.  Today should be the day where the bulk of the point losses occur this week.  Below SPX 1900 and you have forced selling come out.  There will be value dip buyers waiting at 1867.  So if I were to guess, we should bottom around 1870-1880, which also happens to be where a lot of support rests from the trading in early 2014.


Anonymous said...

Great call here. Are you a buyer in your suggested range here 1870-1880 or would you prefer to wait til later in the week and see some buying (or decrease in selling)?

Market Owl said...

I will bringing out the shopping bag tomorrow looking to buy any undercut of today's lows. Depends on if we gap up or gap down.

If we gap up, I expect only a slight undercut of today's lows and we should stay above 1870, so will look to buy around 1875-1880.

If we open flat or gap down, I expect a marginal break of 1870 tomorrow, so would look to buy around 1860-1870.