HOLY SMOKES : Dow below 5,000 and S&P 500. Is this possible by Dec 31, 2009?

PANDA_IHB

PANDA_IHB

New member
I feel that we are coming close to the top of the roller coaster right before the second major drop in the DOW, S&P, and Nasdaq, however, I am the worst market timer. Any of you want to guess how high the DOW will rise until the floor suddenly drop to below 5,000?



I am planning to wait until the DOW reaches 9,800 - 10,500 before I short the DOW. Is it too soon?, too late?, or just the right time to short? Any opinions?
 
[quote author="PANDA" date=1242034956]I feel that we are coming close to the top of the roller coaster right before the second major drop in the DOW, S&P, and Nasdaq, however, I am the worst market timer. Any of you want to guess how high the DOW will rise until the floor suddenly drop to below 5,000?



I am planning to wait until the DOW reaches 9,800 - 10,500 before I short the DOW. Is it too soon?, too late?, or just the right time to short? Any opinions?</blockquote>


PANDA, if there's any one thing I learned about the market (and I have tons of bad trades to prove it), it's never to try timing the market. It's hard enough to say what the market will do the next trading day (or trading hour) but it's just impossible to say when the market will start heading down after an index reaches a certain point.



Instead, why not try to catch the middle part of the move? In a volatile market, it's much easier to catch the middle 10% move in a 20% up swing and vice versa.



If you are a trader, you should be okay as long as you miss the huge crashes that happens more frequent than we want them to and aren't on the wrong side when those incredible bull runs take off. I know it's more easier said than done but if you are nimble, disciplined and take decisive action, you should be able to get out before it's too late.



You don't need to time the market to make money.
 
[quote author="PANDA" date=1242034956]I feel that we are coming close to the top of the roller coaster right before the second major drop in the DOW, S&P, and Nasdaq, however, I am the worst market timer. Any of you want to guess how high the DOW will rise until the floor suddenly drop to below 5,000?



I am planning to wait until the DOW reaches 9,800 - 10,500 before I short the DOW. Is it too soon?, too late?, or just the right time to short? Any opinions?</blockquote>
The Dow will hit 5,000 before it hits 10,000...when? I dunno, in the next 6-18 months would be my best guess.
 
BV's quote in another topic seemed relevant



[quote author="BlackVault CM2" date=1241850233]One can't predict the timing...that is why positioning yourself in waves/phases is often the best solution. You can't be precise, just have to be in the vicinity.</blockquote>
 
[quote author="PANDA" date=1242034956]I feel that we are coming close to the top of the roller coaster right before the second major drop in the DOW, S&P, and Nasdaq, however, I am the worst market timer. Any of you want to guess how high the DOW will rise until the floor suddenly drop to below 5,000?



I am planning to wait until the DOW reaches 9,800 - 10,500 before I short the DOW. Is it too soon?, too late?, or just the right time to short? Any opinions?</blockquote>






I expect a 10-15% market pull back in May-June, then in July while Banks announced their numbers, they will try to rig it and start another sucker rally and you might see Dow 9500-1000, then we will bottom out in Q3-4, not sure how low, but I wont be surprised it Dow goes 5500-6000 and SPX hit below 600 by year end. I don't want to list all the reasons why we should revisit the lows, if you guys read some of my posts in the daily economy commentary, you will know where I'm coming from.
 
And one should time the market, learn TA and know with the highest probability which way the market might go in the next 2-3 months, the wall street, mutual fund managers and so called financial planners are all preaching buy and hold, JUST DOESN'T WORK. Once an asset class forms a bubble and bursts afterwards, it will never come back, in 2000 it's the tech, if you own Cisco at 80 and your planner tell you to buy and hold, you are still down more than 50% after almost a decade!!!
 
[quote author="BondTrader" date=1242277866]And one should time the market, learn TA and know with the highest probability which way the market might go in the next 2-3 months, the wall street, mutual fund managers and so called financial planners are all preaching buy and hold, JUST DOESN'T WORK. Once an asset class forms a bubble and bursts afterwards, it will never come back, in 2000 it's the tech, if you own Cisco at 80 and your planner tell you to buy and hold, you are still down more than 50% after almost a decade!!!</blockquote>


Buy and hold is for suckers....



As far as Cisco...yes you would be down over 50%...unless you knew how to sell calls each month...in that case you probably would be up several hundred %!
 
[quote author="BlackVault CM" date=1242282691][quote author="BondTrader" date=1242277866]And one should time the market, learn TA and know with the highest probability which way the market might go in the next 2-3 months, the wall street, mutual fund managers and so called financial planners are all preaching buy and hold, JUST DOESN'T WORK. Once an asset class forms a bubble and bursts afterwards, it will never come back, in 2000 it's the tech, if you own Cisco at 80 and your planner tell you to buy and hold, you are still down more than 50% after almost a decade!!!</blockquote>


Buy and hold is for suckers....



As far as Cisco...yes you would be down over 50%...unless you knew how to sell calls each month...in that case you probably would be up several hundred %!</blockquote>
That's exactly the strategy that I have initiated on my recent COF short sale position. I have sold May out-of-the-money puts against them and will be doing the same on Friday with June out-of-the money puts.
 
During the Great Depression the DOW peaked to 381.17 and dropped sharply to 198.69. The government printed money like nothing else and when the DOW reached 294.07 the Americans started to believe that the government's stimulus plan was a success.



On Oct 1st, 2007 the DOW reached 14,066 and by Mar 2nd 2009 the DOW dropped to 6,626. Today the DOW is at 8268. The Great Depression lasted 34 months. We are currently 19 months into this Great Depression II.



<img src="http://stockcharts.com/charts/historical/images/djia19201940s.png" alt="" />
 
[quote author="PANDA" date=1242453487]During the Great Depression the DOW peaked to 381.17 and dropped sharply to 198.69. <strong>The government printed money like nothing else and when the DOW reached 294.07 the Americans started to believe that the government's stimulus plan was a success</strong>.



On Oct 1st, 2007 the DOW reached 14,066 and by Mar 2nd 2009 the DOW dropped to 6,626. Today the DOW is at 8268. The Great Depression lasted 34 months. We are currently 19 months into this Great Depression II.</blockquote>


FAIL!



Between 1929-1933 there was a monetary contraction by about 1/3rd. In Monetarist theory, it was the lack of FED action that caused the depression to be great. Go back and read about the Great Depression before you post factually incorrect information.
 
[quote author="graphrix" date=1242465566][quote author="PANDA" date=1242453487]During the Great Depression the DOW peaked to 381.17 and dropped sharply to 198.69. <strong>The government printed money like nothing else and when the DOW reached 294.07 the Americans started to believe that the government's stimulus plan was a success</strong>.



On Oct 1st, 2007 the DOW reached 14,066 and by Mar 2nd 2009 the DOW dropped to 6,626. Today the DOW is at 8268. The Great Depression lasted 34 months. We are currently 19 months into this Great Depression II.</blockquote>


FAIL!



Between 1929-1933 there was a monetary contraction by about 1/3rd. In Monetarist theory, it was the lack of FED action that caused the depression to be great. Go back and read about the Great Depression before you post factually incorrect information.</blockquote>


I respectively disagree Graphrix, it was not the lack of FED action that caused the depression to be great.



Yes, there was monetary contraction, the FED pulled the money supply too quickly which caused the free fall from DOW 294, but what happened prior to that (DOW 381 to 198)? Are you telling me that FED did not print money like nothing else like they are doing today? I would take "lack of FED action" any day over "too much action" by the FED we are seeing today as it only drags out the inevitable pain.
 
[quote author="PANDA" date=1242467817]I respectively disagree Graphrix, it was not the lack of FED action that caused the depression to be great.



Yes, there was monetary contraction, the FED pulled the money supply too quickly which caused the free fall from DOW 294, but what happened prior to that (DOW 381 to 198)? Are you telling me that FED did not print money like nothing else like they are doing today? I would take "lack of FED action" any day over "too much action" by the FED we are seeing today as it only drags out the inevitable pain.</blockquote>


You are not disagreeing with me. You are agreeing with me that the FED created too much a monetary expansion prior to 1929, and that includes excess credit, much in the same that we are seeing now.



The difference between then and now, is then they were on the gold standard and the FED did not print money to replace the money that was quickly disappearing after 1929. They remained on the gold standard, and refused to expand monetary policy, therefore the depression was prolonged much longer than those nations that were no longer on the gold standard, namely your favorite country, China.



Now, when trillions of MBS backed pools are worth just a few billions, and commercial paper backed assets have contracted from over $1200 billion to under $600 billion, and other various assets have contracted by the trillions, then please explain to me how the FED is applying inflationary procedures when what they have printed to this day still does not equal what has contracted? If they were to take the same monetary contraction stance as they did in the depression, then we would be seeing an unemployment rate of over 50%, and barely any business would be able to survive. The world would be chaos, and those with gold would be the only ones able to buy anything, and there wouldn't be a single country to buy the supply they need with the amount of gold they even if it went up five times it's value. China would be broke in a matter of hours with all of their dollar and treasury holdings.



Are we going to suffer more pain later with another recession? Yes, but the pain of that recession plus this recession would not be nearly as painful as the greatest worldwide depression that would be suffered if a "lack of FED action" approach were taken. I'm open minded to economic theory, but you, and some others are blinded by the bias in the people you read, and don't see the bigger picture of it all. In fact, it seems like you don't really understand some of the things that are going on, and are blinded by bias, when if you stop listening to what people tell you or what you read and start thinking for yourself, then you would see a lot more than you do with having the blinders on.



BTW, best post in weeks. At least I have been encouraged to respond in hopes of more intelligent discussion. Thanks panda, and I sincerely mean that. This place has been boring as hell lately.
 
[quote author="graphrix" date=1242465566][quote author="PANDA" date=1242453487]During the Great Depression the DOW peaked to 381.17 and dropped sharply to 198.69. <strong>The government printed money like nothing else and when the DOW reached 294.07 the Americans started to believe that the government's stimulus plan was a success</strong>.



On Oct 1st, 2007 the DOW reached 14,066 and by Mar 2nd 2009 the DOW dropped to 6,626. Today the DOW is at 8268. The Great Depression lasted 34 months. We are currently 19 months into this Great Depression II.</blockquote>


FAIL!



Between 1929-1933 there was a monetary contraction by about 1/3rd. In Monetarist theory, it was the lack of FED action that caused the depression to be great. Go back and read about the Great Depression before you post factually incorrect information.</blockquote> Panda is mostly correct, although it is not a black and white issue. The monetarist, (Bernanke), theory is false. There is not a clear cut cause and effect relationship to be read from the Depression. The Fed did print like crazy, but the timing and cause and effect is blury at best.
 
[quote author="graphrix" date=1242484820][quote author="PANDA" date=1242467817]I respectively disagree Graphrix, it was not the lack of FED action that caused the depression to be great.



Yes, there was monetary contraction, the FED pulled the money supply too quickly which caused the free fall from DOW 294, but what happened prior to that (DOW 381 to 198)? Are you telling me that FED did not print money like nothing else like they are doing today? I would take "lack of FED action" any day over "too much action" by the FED we are seeing today as it only drags out the inevitable pain.</blockquote>


You are not disagreeing with me. You are agreeing with me that the FED created too much a monetary expansion prior to 1929, and that includes excess credit, much in the same that we are seeing now.



The difference between then and now, is then they were on the gold standard and the FED did not print money to replace the money that was quickly disappearing after 1929. They remained on the gold standard, and refused to expand monetary policy, therefore the depression was prolonged much longer than those nations that were no longer on the gold standard, namely your favorite country, China.



Now, when trillions of MBS backed pools are worth just a few billions, and commercial paper backed assets have contracted from over $1200 billion to under $600 billion, and other various assets have contracted by the trillions, then please explain to me how the FED is applying inflationary procedures when what they have printed to this day still does not equal what has contracted? If they were to take the same monetary contraction stance as they did in the depression, then we would be seeing an unemployment rate of over 50%, and barely any business would be able to survive. The world would be chaos, and those with gold would be the only ones able to buy anything, and there wouldn't be a single country to buy the supply they need with the amount of gold they even if it went up five times it's value. China would be broke in a matter of hours with all of their dollar and treasury holdings.



Are we going to suffer more pain later with another recession? Yes, but the pain of that recession plus this recession would not be nearly as painful as the greatest worldwide depression that would be suffered if a "lack of FED action" approach were taken. I'm open minded to economic theory, but you, and some others are blinded by the bias in the people you read, and don't see the bigger picture of it all. In fact, it seems like you don't really understand some of the things that are going on, and are blinded by bias, when if you stop listening to what people tell you or what you read and start thinking for yourself, then you would see a lot more than you do with having the blinders on.



BTW, best post in weeks. At least I have been encouraged to respond in hopes of more intelligent discussion. Thanks panda, and I sincerely mean that. This place has been boring as hell lately.</blockquote>


Funny, from my chair it looks like Panda is the one who has been reading more historical fact and you have been reading the standard interpretation, (read propaganda), of those facts.
 
As long as you folks are thinking, I have a question I have been pondering and maybe ya'all can help me out. This is a real question, not a set up.







B-52 Ben has been claiming to be deflation concerned.

Ben has increased the Fed balance sheet immensely by buying assets, (ha-ha), from the largest banks.

98% of the funds supplied by those purchases, (loans), have become <em>excess</em> reserves.

The banks are holding 92% of their reserves as excess reserves when usually they hold about 4% of their reserves as excess reserves,

because ...

for the first time in Federal Reserve history ...

the Federal Reserve, by Ben Bernanke's decision, is paying interest on <em>excess</em> reserves.

You say the Fed is only paying 0.25% on those reserves. Yeah, well, when you get the money for nothing or close to, 0.25% is free money and risk free money, especially to a big bank.

Ben is paying the banks to keep the money in excess reserves instead of loaning it out.

He is doing exactly the opposite of what he said he is trying to do.







Why?
 
The Federal Reserve is NOT a government entity. Its as Federal as Federal Express is.

The member banks that make up the Federal Reserve will do what they want with our money.

After all the more we print the more money they make. The more debt. The more they make.

Keeping the likes of Goldman and the member banks solvent is its primary concern.

The moment you think they are in it for the public. Your deluding yourself.



Someday Americans will wake up and the Federal Reserve will be abolished.



Its one of the largest criminal enterprises ever established.
 
[quote author="bltserv" date=1242516992]The Federal Reserve is NOT a government entity. Its as Federal as Federal Express is.

The member banks that make up the Federal Reserve will do what they want with our money.

After all the more we print the more money they make. The more debt. The more they make.

Keeping the likes of Goldman and the member banks solvent is its primary concern.

The moment you think they are in it for the public. Your deluding yourself.



Someday Americans will wake up and the Federal Reserve will be abolished.



Its one of the largest criminal enterprises ever established.</blockquote>


Yeah, I have been saying as much for years.

And my question above stands, Why?







In the last hour or so, I came up with an explanation. I do not know if it is plausible.

I have to get ready to do kid stuff, but will offer my explanation tomorrow.
 
A quote from Alan Greenspan in the Objectivist about the Fed in the 1920's.



<blockquote>When business in the United States underwent a mild contraction, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. The Fed succeeded, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in breaking the boom. But it was too late ? the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching, and a consequent demoralizing of business confidence. As a result, the American economy collapsed.</blockquote>
 
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