Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Bulls May Panic -- and Traders Could Get Trapped


It won't be 1987 all over again -- but the echoes are impossible to ignore.

It was very difficult to get short and stay short in 1987 as the market was oversold quickly beginning expiration week. It was very difficult for bears to think about getting short yesterday with the market flat-lining after the open so the market is vulnerable to unwinding further.

The great unwinding in 1987 began on a lunar eclipse on October 7. We just had a lunar eclipse on August 4th. The crash in 1987 occurred apx 6 months from a low preceding a persistently aggressive rally. We had a low in March followed by the most persistently aggressive rally in 70 years. September will be 6 months from low. It is interesting that the 27th trading day from the August 7th peak (so far) is September 15th, the anniversary of the day the market came unglued in 2008 when Lehman Brothers failed. The 27/28th day from late August high in 1987 was early the lunar eclipse when the crash commenced.

The August 7th turning point still stands as the high. Importantly, converting price to time, August 7th was 666 days from the October 11th 2007 top. The S&P March low was 666 of course.

Yesterday, the S&P hit 90 degrees down in a tick opening down 20 points to 980. The normal expectation would be for an attempt at support the first time tagging 90 degrees. But you never know how long it could last. 180 degrees down is 950-ish. At the same time the 50 dma is 945 while 50% of the range from the July low is 944.

Consequently, you can see the potential for a cascade if the confluence of support at 945 to 950 is snapped. 944 is also the January high. A break back below those double tops will trigger a lot of stops as prior resistance is supposed to act as new support. If it does not, there will be a lot of folks trying to get out of Dodge at the same time.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos