Is the market about to fall and will it do it in a big way?

March 2nd, 2012
in Gary's blogging, midday post

11:46    Good Morning.  The sky hasn't fallen just yet, but the dark clouds are forming. You would be a darn fool buying long right about now is the way I see it. The markets opened down along with gold, silver and oil. The USD is up. The DOW is at 12964 and the 500 is at 1371.

By now you have guessed, along with a other million traders, that this is just another day playing the same old song and low volume movements. Wednesday the market was down, yesterday the market was up and today the market is down - so far.  All within a tight narrow range just below each markets respective upper resistance. I suspect Monday will be up flirting with the upper resistance again and we do the sea-saw thing once more in the days that follow. You and I both know this uninterrupted rise won't last for much longer, but when will it stop is the question. And then, how much of a correction will it be?

The start of the correction in question will most likely be answered by a very large spike in volume - red volume. The DOW will do one of its famous 650 point drops and scare the crap out of the uniformed. Jim Cramer will be the first on the 'Main Stream Neurosis Broadcasting Company' (MSNBC) to have predicted the fall and what protective clothing yous should wear for the fallout.

Like all other intelligent inquiring minds, I am wondering where the market will finally move to? But I also know Mr. Market isn't going to go far, in either direction, on the persistent anemic low volume we have seen over the past 2 months either. Like everyone else I look at the news and charts trying to make sense of what is right in front of me. Hindsight will be one of those, "Yeah, I should have seen this coming".

In my daily proactive search of market moving news I viewed this chart of the Baltic Exchange (blue) and gold (orange) and saw that the gold made a similar "squiggly" in 2008 that it has done in recent sessions. Is this the precursor for something that might be a bit more than a simple correction? Even the Baltic Index "squiggles" suggests a similarity of 2008.

Nah, this time it is different our politician are telling us. The Fed and Dr. Ben say, this time is different because the US economy is improving albeit slowly and they have the charts to show it. (Well, my chart is bigger than your chart!)  There have been many articles explaining the low numbers of the Baltic Index is because of an glut of container and dry commodity ships hitting the seas.

Humm, but I still wonder! You look at the chart below and tell me what you see.

The "grand feeling" among those I respect is a "correction" is way overdue and could happen any day now; what is going to be the catalysis that triggers this turnaround I wonder? The longer this low volume market climbs the deeper the correction will be when it does arrive. My feeling is that it is going to be a whopper with every pundit claiming to be the first to predict the calamity in some obscure article they wrote a month ago. The point is that the signs of a needed correction are here and NOW and shouldn't be overlooked.  I'll try to cover that later today in another blurb.

In the meantime, I have threatened to go short more than once over the past month, but backed down as I have always been too early in my Ha-ha's (predictions). This feeling of impending "doom" persists and is burning a hole in my pocket of cash this morning. The short ETF's are at their lowest levels and in some cases never have been lower. Boy, what a temptation, but remember the trend is your friend until it isn't. The trend is currently up and until that changes, be cautious.

Well said at Leavitt. I would add that being ready for a change is always worth a bird in the hand. Don't be stupid, tread cautiously and have a plan.

@leavitt: "Being negative doesn’t work. Being cynical doesn’t work. Thinking the world is coming to an end has either caused you a lot of pain or kept you on the sidelines. The trend is up so that’s the direction we need to play it. This doesn’t mean you throw all caution to the wind and blindly go full margin long. It just means it’s wise not to make trading any harder than it already is."

Written by Gary

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