This is a 10:45 a.m. intraday update of Turov on Timing for Thursday, November 20, 2008.
Yesterday’s decline was historic: On the NYSE, the ratio of declining volume to advancing volume was 57:1. In the
past, 9:1 was sufficient to usually generate a rally. On the NASDAQ, the ratio of declining volume to advancing
volume was 67:1. Furthermore, of the 100 stocks in the NASDAQ 100, none advanced on the session.
I think it’s important to keep several things in mind. First is that unless you think the market is going to zero,
there will be an end to the bear market. Second, bear market bottoms have generally been marked by sharp “V” shaped
rebounds. Third, emotionally, ALL bear markets look the worst on the day they bottom (just as emotionally, all bull
market tops look the best on the day they top). Fourth, when virtually everyone agrees on market direction, most of
them are proven wrong. And fifth, historically, the biggest rallies have occurred in bear markets.
The bottom of this bear market (just like the bottom of every other bear market and the top of every bull market)
will be known for certainty to have occurred only after it is long finished. By then, a substantial part of the
rebound will have happened already.
Three additional comments regarding today’s market (and unrelated to what I’m going to say in a moment about my
daily models): (1) As I write this, Citigroup is down an additional 20+% or so to about $5 a share. And while its
stock may decline further, in my opinion, there is NO WAY Paulson is going to let Citibank, The Bank, fail – and
since it appears that urgent action is necessary to halt the decline, I would not be surprised to see such action
sooner rather than later. (2) The 2002 bear market low was SPX 776. The market bounced off that level about ½ hour
ago and then, not uncharacteristically, rallied 20 SPX points before retreating again. It’s currently rallying
again. From my experience as a trader, I deem it unlikely that the market will slice through that level and keep on
slicing, if it retests again today. Much more likely is that it will either continue its bounce off it (or from a
level just above it) OR rebound quickly from a violation below it, if it retests that level today. Either way, I
think most of TODAY’S market damage has already been done. (3) While Citigroup and GM and Ford are getting mashed
today, the Dow Industrials and the NASDAQ 100 are both down by less than a percent. That’s an important positive
I’m glad I’m not a long term trader as pinpointing the bottom of a market decline as rapid as this one is difficult,
to be sure. But I’m a short term trader and, in my opinion, the daily model and my NASDAQ models, combined AND
adjusted for the extreme volatility, will generate profits for readers – recent tough moments like late last week
I have no clue at the present instant what tomorrow or next week will be, but my NASDAQ model right now calculates
that the probability of the market ending TODAY’S session higher than it currently is, is 73% (i.e., 73:27 odds) and
the expected value of that return, unleveraged, is 2.12%. I think those are good odds and worthy of a trade.
Additional comments: While the model is based on the NASDAQ 100 index, recently the SPX has been outperforming the
NASDAQ, and so trading the SPX based on the NASDAQ signal seems reasonable. Second, the risk of whipsaws between
now and the close is high. So instead of recommending a 400% position with a stop, I’m going to recommend a 200%
position with no stop. Obviously, readers can use a stop, if they emotionally need to do so, but I’d rather “play”
it this way. Therefore: TOT daily traders are advised to go 200% long at the market. For our track record, as
soon as AOL tells me this email has been sent, I’ll check the TradeStation SPX chart and I’ll notate the next tick
as our “official” entry level.
Thanks for the opportunity to be of service, and I’ll update again between 3:45 and 3:55 p.m.
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