Luna $ Ticks

October 25, 2008

Ready for the Crash?

Filed under: Trading SPX SPY — moontrader @ 4:30 pm

At this point a crash seems just a natural consequence and the culmination of more than a year of a huge correction movement. Let’s go to two simple charts:

In this first one you can see that there’s been a consolidation from the bottom of the 10th through last Friday, in the form of a triangle. You can also see that Friday we opened with a huge gap down but the market recovered through the day. But notice that it was the first close below the support line of the triangle. Now let’s zoom in on Friday to see the intraday action in this annotated chart:

The message is pretty clear. We are going down, down, down. I don’t know how much, I had SPX 750 but it can go as well to 620 or further. And I guess it’s going to happen between Monday and Thursday, most probably between Monday and Tuesday. If you’re short, my advice is to cover your position at will, but don’t try to nab the bottom. Just relax and digest the idea that you made a lot of money. I mean, in case my forecast happens. Don’t forget everything is possible.

One last thing: CNBC published the rules for the circuit-breaker. CNBC publishing that? Things are getting pretty nasty. Here the rules, just in case you decide to cover your position a little before the halts:

  • The Dow Jones industrial average would have to fall 1,100 points in a day to trigger the first halt.
  • If that decline is reached before 2 p.m., the market will shut down for an hour. If the threshold is breached between 2 p.m. and 2:30 p.m., the halt will last 30 minutes. No trading stops would take place if the plunge occurs after 2:30 p.m.
  • If the index were to fall 2,200 points before 1 p.m., the market would close for two hours. If such a decline took place between 1 p.m. and 2 p.m., there would be a one-hour pause. The market would close for the day if stocks sank to that level after 2 p.m.
  • In the event of a 3,350-point decline, the market would close for the day, regardless of the time.
  • The thresholds are computed at the beginning of each quarter to establish a specific point value for the quarter. The 1,100-point drop represented a 10 percent decline at that time; the 2,200 level, a 20 percent drop and the 3,350 level is a 30 percent drop.
  • The rules would halt trading on the major securities and futures exchanges in a coordinated cross-market halt if the circuit breaker is enacted.

The last time the markets were shot down was during the 9/11 period.

Click here for the full article.

See you all on Monday – btw, New Moon!

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9 Comments »

  1. Keep waiting! The train has left the station and we are on for a multi month rally soon! The 620 that you are talking about will happen but next year. Till then, keep dreaming!

    Comment by bullnbear87 — October 25, 2008 @ 6:41 pm | Reply

  2. I think I miscalculated 7-28 Lunar Day

    I used Universal Lunar calendar set for Los Angeles and added 3 hours
    http://lunarium.co.uk/calendar.php

    I should’ve used New York instead :)

    Comment by Fork_Master_Serg — October 25, 2008 @ 8:31 pm | Reply

  3. Everyone and their mother are talking about impending downfall this week with lunar calendar. Market sure has surprised everyone expects same thing to happen. Needless to say, we live in historic times.

    Comment by Rainman — October 25, 2008 @ 9:17 pm | Reply

  4. I don’t often post a comment here but I visit this site regularly.

    The base line on your second chart looks like it’s made of steel.

    Comment by Urszula — October 26, 2008 @ 1:14 am | Reply

  5. Are your charts out of their minds? MOON___
    there’s a 50/50 chance the market goes up 3 days in a row. Commercial Paper gets released on MON. No way are financials going down that day. and Rate cut on WED, no way are financials going down on WED. imo.

    Comment by zee http://z-stock.blogspot.com/ — October 26, 2008 @ 3:04 am | Reply

  6. zee, I’m just reading my charts. Everybody said the market would rally with the bailout passing the Congress, what happened was exactly the opposite: that triggered a humongous sell-off. Let me tell just one thing: the markets are stronger than the American government or the FED. The FED can change a couple of rules and create an illusion a one day or two, but the last couple of weeks proved that the market goes wherever it wants to, and neither the American and European government, neither the FED can change that.

    Comment by moontrader — October 26, 2008 @ 7:28 am | Reply

  7. […] Ready for the Crash? At this point a crash seems just a natural consequence and the culmination of more than a year of a huge correction […] […]

    Pingback by Top Posts « WordPress.com — October 26, 2008 @ 7:15 pm | Reply

  8. Carolan cancels the crash

    “Another Crash Caller: Chris Carolan.” Say what? I am not calling for a crash. The crash is over.
    http://carolan.org/

    Comment by Fork_Master_Serg — October 27, 2008 @ 9:19 am | Reply

  9. Serg, if we revisit the broken triangle support trendline again, that’s bad for the outlook. I mean, at this point I had already covered my position, with a profit (less than expected) and I’ll wait to see what happens today.

    Comment by moontrader — October 27, 2008 @ 9:28 am | Reply


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