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Market in free fall – are we back in recession?

If you are thinking to be bullish these days (start buying stocks) I would postpone it a bit. We may see more on the downturn in this market. Tomorrow we will see some labor data published and they may stop this fall, but do not expect it much. I would say that data will be worse and we will drop further down.

A few days ago I was expecting the market to drop to 126 level (looking at SPY ETF, which tracks S&P 500. S&P 500 will be at 1260 level then). Well, we broke down fast and furious. Yesterday I was expecting a bounce for today’s trading back up to 130-ish level and then continuing down to 123-ish level. Not even close. We erased the hammer candle signal without even blinking an eye. The new support at 123 didn’t hold for long. As far as now (11:48 ET) we can see another very long bearish candle and sloping down.

News and media are now talking about recession. Panic is rising. When taking look at VIX you can once again see a long spike up created by a long bullish candle (currently at 28.13), which is similar to the spike which happened in March 16, 2011. Does that mean that we are doomed? No, not at all. This actually mean that we may be bottoming.

So how does that work with my previous posture stating that we are heading even lower (by breaking $123 level I am expecting to go to $118 level)?

Well, if you take a look at the market, we dropped huge within 7 trading days. The largest drop since October 2008 which erased all year-to-day gains of the market ($1.1 trillion of value in just 7 days!!!). Taking the speed and depth of the drop, this market has to correct and bounce back. When everyone is panicking and speaking about recession, we are close to the bottom of this 7-day slide. I cannot say when that happens. Taking into account tomorrows labor data (I am expecting them to be bad), we may bounce on Monday. If so, it will go up to $126 level or near it. However, we broke down on high volume and I in my opinion we are officially in bear market. So overall, we will go down, but we will see bounces (the same way as in uptrending market we see dips). So the expectation is that we will go back up to 126 level, where we bounce down and continue to 118 level and so forth.

So how to trade in this market?

It is tough question. For swing trading and short term trading this doesn’t matter. Swing or day traders can trade the market both ways. But what about 401k or IRA accounts? I do not know yet, but I am thinking to move some of my allocated money into cash equivalents and stay aside. This ride donw the hill may be long.





4 responses to “Market in free fall – are we back in recession?”

  1. Richard says:

    Pretty section about stock market. I just stumbled upon your site and in accession capital to assert that I acquire in fact enjoyed account your blog posts. Any way I’ll be subscribing to your augment and even I achievement you access consistently quickly.

  2. Ale says:

    I don’t think we are back in recession

  3. Anthony says:

    Hey there, You’ve done an excellent job sharing your investment ideas. I will definitely digg it and in my opinion suggest to my friends. I’m sure they’ll be benefited from this site.

  4. Amarilis says:

    Recession? No way! I hope we are getting out of the forest! I lost quite a bit money in my 401k so I need to recover!

  5. jackie says:

    Investing…

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  6. GerGer says:

    In a normal market, the wide disparity between the Dow Jones Industrial Average and technicals would be screaming an ugly message, but these are not normal times. waiting for next quarter earnings more stock buybacks and warnings christmas will always be a key economically sign.

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