Bounce, Test, Bounce, Crash

May 18, 2006 7:32am by

The technical damage done this week was substantial, but as I mentioned last night on Kudlow, we are near support.

I’ll expand upon this later, but I can envision a bounce off of these
lows, a reflex rally that runs on decreasing breadth and volume for a
few days to a week or so, then a retest — and failure — to new lows
in June.

That gets us oversold enough for a stronger bounce for a month or so (July? August?) and then the denouement into September and October.

This is just a guess, and I’ll try to get more details and intelligent projections later this week, but that’s my expectations.

Your mileage may vary  . . .

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Discussions found on the web:
  1. Larry Nusbaum, Scottsdale commented on May 18

    I suspect that the NASDAQ (and NDX) will rally up to resistance and fail badly. I will remain short the QQQQs and SPY. Yesterday, I sold most of my OEX June puts near the close and will look to buy September SPX and NDX puts into any rally.

  2. CrispE commented on May 18

    Barry:

    Look for May retail sales figures to drive the market one way or another as my “mall” index (people carrying bags at the local mall per 30 minutes) is now dropping. Starting to see stores with staff just standing around as their are no major gift holidays or reasons to buy now currently.

    It’s anecdotal evidence but has been fairly reliable in the past.

  3. scorpio commented on May 18

    denoument? always thot u looked French. must explain why Kudlow finds it so difficult to understand u

  4. Ned commented on May 18

    agree with Barry’s roadmap completely and that makes me nervous. market usually enjoys making a fool of me. to paraphrase the Yiddish: Traders plan and the market laughs.

  5. Mark commented on May 18

    Hmmm. This market looks like it doesn’t know WHAT to do. If someone yelled “Boo!” I think it would run screaming. I just get that feeling.

  6. KirkH commented on May 18

    My infinitesimal vocabulary forced me to look that one up. Good word…
    1. The final resolution or clarification of a dramatic or narrative plot.
    2. The events following the climax of a drama or novel in which such a resolution or clarification takes place.

  7. calmo commented on May 18

    A variation on the ‘dead cat bounce’ theme: the nearly dead cat bounce (for the somewhat bearish) or maybe the drugged cat bounce (for the somewhat bullish).
    ‘Agree that the inflation numbers should not have had the impact on the market that was ascribed to them. The daily volatility seems to be increasing. Is there a record of this that can be compared to the gradual creep up/down over the last decade? Can this be correlated to the size and number of trades? With carry trades getting problematic everywhere, are larger players moving back to the market causing some of these whipsaws? Maybe smaller players have good reasons to be nervous.

  8. B commented on May 18

    BOO!

    There is ZERO force behind this open. And thanks to the blockheads who gapped the market so hard this morning. There is still too much greed out there and Mr. Market may just not oblige a rally…..

    This is a very dangerous market right now. The bulls better get their act together and quickly. This past two weeks looks like 1987 in more ways than one. And it’s almost eerily quiet and has been for three weeks on up or consolidation days.

    Of course, that’s what happens when these greedy retards jam commodity and industrial equities up 150% in four months. If we don’t get some kind of push here, I’d look for the options players to start hedging their positions going into Friday. And, that **could** mean a week ending route just like we saw in January OE Friday.

  9. Mark commented on May 18

    I think the night crew returned the 11am Buy Program to the closet backwards. Someone isn’t noticing that the switch needs to go left instead of the right now.

  11. Larry Nusbaum, Scottsdale commented on May 18

    I was unable to move quick enough to do anything. Oh yeah, almost forgot, I remain short T, which is no great accomplishment since I shorted it here a while back.
    When a sector is in distribution mode, you always wished you had sold (more)….LOL

  12. Fred commented on May 18

    All those poor cats.

    I am partial to the Schroedinger’s Cat market. Everything is OK as long as you don’t look.

  14. The Nattering Naybob commented on May 19

    Barry,

    Your dead spot on. There will be a bounce, then a 5 week flag waving downtrend, then hasta la vista baby….Click on the link for more details.

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