With 15 minutes left in today’s trading, let’s take a quick technical look at the past month’s market action:
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SPX 30 Days

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My perspective: This 2 day pullback after the sharp 20% rally from the October 10th lows in the SPX is about a ~50% retracement of the inital rally, as well as the Election Day revisit to those highs. Bloomberg noted that this was the worst two-day slump since 1987.

It appears that forays above the level 1,000 have twice brought out the sellers.

I wonder if SPX 1,000 will become the modern equivalent of the 1970s Dow 1,000  . . .

Category: Markets, Technical Analysis, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

37 Responses to “Does the 1970′s Dow 1000 = 2000′s SPX 1000 ?”

  1. albnyc says:

    Just another whiny and petulant day in the markets.

  2. DL says:

    “I wonder if SPX 1,000 will become the modern equivalent of the 1970s Dow 1,000”

    No, but SPX 1,500 might.

  3. Mannwich says:

    This is actually a fantastic trading market if you can get on/stay on the right side of the wave. There’s no point of considering any move “long term” (or even mid-term) anymore, although I do far less trading in my retirement accounts.

    Anything that has a big move up/down gets sold or shorted at this point. Rinse, lather, repeat. Think I finally caught the wave here. Need to just stay on it somehow.

  4. phb says:

    Good call…do we see a 750 spx or a 1200 spx first?

  5. mlomker says:

    If you go from low to high this is the 61.8% Fib, which is why there is so much resistance at 900 today. I reversed long at the close; we’ll see how that goes.

  6. DL says:

    Mannwich @ 4:07

    “This is actually a fantastic trading market if you can get on/stay on the right side of the wave. There’s no point of considering any move “long term” (or even mid-term) anymore…”

    I agree and would add the following:

    This is actually a fantastic trading market if you don’t have a full time job.

    I have one of those (full time jobs), and so I’m only catching some of the opportunities.

  7. krbecarson says:

    SPX 1,000 will be more like the modern equivalent of the 1930′s DJI 250.

    >>>>I wonder if SPX 1,000 will become the modern equivalent of the 1970s Dow 1,000 . .

  8. leftback says:

    Jeff, that’s exactly right. Sorry, I mean “Mannwich”, great handle, there. Catching the wave for me has been a function of not trading too big. If I miss, I wait, instead of trying to force the trade or missing it by a day or so. I have also been in sync with the market after a chilly spell.

    So here we are again at USO 50, gold 725 and SPX 900. One school of thought says this is the bottom again, another says if oil breaks below $60, then Katie bar the door. Actually, Katie was here this morning, and I think she is a gold bug.

    I did some GDX into the close to balance my SKF overnight, and I was highly tempted by some oil stocks but didn’t pull the trigger, not quite believing this is the bottom for oil after all the volatility this week.

    Barry, I dont think SPX 1000 is the upper limit for the decade but I do think that it will be quite sticky and we might be range bound for a decent amount of time, which would obviously be a joy for the technical traders amongst us. :-)

  9. Myr says:

    Is the Fed going to bailout ABK, MBI, etc.? They ‘re going bust otherwise and then that will lead to more writedowns at the banks. F/GM/Chrysler are already effectively bankrupt. And all the while, housing continues it’s inexorable crash across the entire planet. Hedge Funds are imploding. Deflation’s grip is getting tighter. All the old bears are bullish. The folks at CNBC seem quite bullish. I wish you guys good luck with your bullish call, but I’m not joining you.

  10. Mannwich says:

    @DL: Agreed. I have a “full-time job” but business is VERY (I mean VERY) slow right now, so I can spend more time on this……

    I guess that’s one silver lining in business being slow. I’ve learned A LOT this year, much of it from Barry and the fanastic commeters on this blog.

  11. Bruce N Tennessee says:

    There are old traders
    There are bold traders
    There are no old, bold traders…..

    ..careful with those toes…

  12. krbecarson says:

    …and I guess if Henry Blodget can lead us into the tech stratosphere, he can also lead us into the basement of the broader market. LOL Unreal.

    Merrill’s Bernstein: Stay Out of Stock Market
    Nov 06, 2008 12:30pm EST
    Henry Blodget

    Merrill’s excellent strategist, Richard Bernstein, has news for those who think the market has bottomed: It hasn’t. You’re all waaaaaay too eager to buy the dip, Rich says, and your bullishness is a decidedly bearish indicator. Contrary to popular wisdown, it’s also better to be late than early: Our indicators are improving as a result of the equity market’s downdraft, but they are not yet giving an “all clear” signal.

    We have previously said that we would follow four main indicators to gauge our re-entry point back into the equity markets. They are sentiment, valuation, estimate revisions, and jobless claims. Let’s review where these indicators now stand.

    Much to our shock, sentiment actually deteriorated slightly rather than improved last month [translation: investors got more optimistic]. Our model is picking up that investors are willing to “buy on the dip”. Historically, significant market bottoms have not been associated with such bullishness.

    Valuation has demonstrably improved, but valuation was so extreme that it is now only beginning to approach fair value. At the end of August, our models were suggesting that the equity market’s valuation was extreme, and similar to the valuations seen at such notorious market tops as August of 1987 and March of 2000. The equity market is nowhere close to such extremes any longer, but it is not yet undervalued. There are certain sectors within the equity market that do appear undervalued to us and Consumer Staples and Health Care continue to head the list. We will be updating our estimate revision work within the next week, and it will be interesting to see if downward revisions start to overshoot.

    snip

    http://finance.yahoo.com/tech-ticker/article/123267/Merrills-Bernstein:-Stay-Out-of-Stock-Market

  13. Mannwich says:

    @lefty: Agreed. My trades/positions have gotten much smaller as well and that has helped avoid any big mistakes lately, although I did have a recent cold stretch that was a very good lesson for me to remain agnostic/flexible/patient and avoid the temptation to over-trade on either side.

    @Mark E Hoffer: LOL.

    @Bruce N Tenn: Yes, need to be very careful with these toes. Like I said, that’s one function of business being slow. I can really pay close attention to this stuff right now.

  14. Simon says:

    The parallels between investing and surfing are uncanny.

  15. Simon says:

    There’s potential for a lot of humor in the surfing metaphor.

  16. leftback says:

    @ Myr said: Is the Fed going to bailout ABK, MBI, etc.? They ‘re going bust otherwise and then that will lead to more writedowns at the banks

    I agree that the Return of the Bond Insurer Boogeyman has been a big factor in this week’s action. Personally I think that it is a dead business and we should tell these Ambac/MBIA guys to f*ck off and die, then deal with the resulting problems in the MBS, corporate/muni bond and swap markets so that we can move on. Let’s face it, we were living in a world of make-believe with low rates and it is OVER.

  17. albnyc says:

    Simon says: trading and surfing yes; investing, not so much.

  18. Bruce N Tennessee says:

    A little off the subject, but we blogged last night about transfer of wealth from the individual to the government will be unavoidable now that the government has transferred debt onto its books.

    Arnold will cause the sales tax rate in Los Angeles to be 10.25%….

    http://www.latimes.com/news/local/la-me-arnold7-2008nov07,0,4137915.story

    Schwarzenegger calls for sales tax hike, cuts in services……

    …I’m just saying….taxes, default, whatever it takes…this government bailout will hurt the taxpayers ability to hold on to what he or she earns for a generation…it will be transferred to the government. Put it in your book…..

  19. Winston Munn says:

    Speaking of trading this market….

    A young pastor new to California told his wife that he planned a sermon on the sins of surfing. She told him she could not attend services if he was to make a fool of himself.

    Later, the young pastor decided that he didn’t know enough about surfing, that his wife had been right, and so at the last moment he changed the topic of his sermon to the sins of sex.

    The next day at the grocery store his wife met a church member who raved about the pastor’s sermon.

    The wife replied, “I don’t know how that can be because he’s only tried it twice and fell off both times.”

  20. I-Man says:

    I-Man is hanging ten.

    If NFP doesnt smoke me like a spliff of Lamb’s Bread tomorrow then I will be a solid believer in the Inverse Head and Shoulders reversal pattern and be looking for an upside breakout around the neckline: SPX 1000… But we need to see improved volume on the buying.

    So to be on topic for once… No. I dont believe that SPX 1000 will be Dow 1000 in the 70s.

  21. Winston Munn says:

    I wonder why the Fed bothers with the charade of a target rate. For the past two weeks FF have been ranging from 0.25-0.50% and the Fed has done nothing with OMO to protect the 1% target. They should be draining aggressively now to protect the rate. But no, nothing.

    To justify this another emergency rate cut in the not-t00-distant future may be in store.

    Lee Adler also brought up two excellent questions: With all the credit outstanding destroyed, how can money supply be flat? And why is the Fed subsidizing the CP market when the lower quality CP market seems to be functioning fine at the 4-6% range?

  22. AJ Trader says:

    Nice chart.

    I love the new digs !

  23. jmborchers says:

    We are in a bit of trouble here and my bottom in call maybe wrong. A lot of stocks I have have fallen from the recent peak by more than 10% and have not been bought at this point. They have now mostly fallen 20% back to near the old lows.

    I sold just barely into the money calls to short today at near 6% premiums. If I’m right these calls expire worthless.

    I still think Xmas will be better than expected but Nov not looking to be a good market month.

    Expect Spy 50% drop here to continue down.

  24. Simon says:

    I think I can see a big swell on the horizon. There’s a nice light off-shore breeze but I’m worried this one will close out. At any rate I’m paddling further out to wait. I want to live to surf another day

  25. AGG says:

    The Scholes Platinum Grove fund has halted remissions because of heavy losses. I gues LTCM wasn’t enough for the Mr Noble Prize in economics. Of course representatives of the fund will probably say something like: Due to current market conditions we are experiencing a shift in our positions so that going forwrd we can avoid going backward. However, we are now positioned to position our forward going progress more profitably in the current market conditions. Oh, and by the way, we’re going forward. However, if you want to take your money out, you’re shit out of luck, pal.

  26. DEFT says:

    Like I said in another post, it is not inconceivable that the S&P earnings will drop to the 2002 recession level of $60 per in ’09.

    At 12x that would bring the S&P to 720 in ’09. That’s more than 20% down from here.

    At 10x that would be 600.

  27. Mike in Nola says:

    Barry, why didn’t you tell me this two days ago? :)

  28. Everything is going down, especially the people that don’t have jobs.

  29. krbecarson says:

    Scholes’s Platinum Grove Fund Halts Withdrawals After Losses

    LOL
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aWQVwbD5Hfxw&refer=home#

  30. ohemingway says:

    Birinyi Associates via Minyanville

    “We believe the markets are in uncharted territory with developments and characteristics that are unique in our experience and we can only guess at what might transpire over the next several months. Frankly we don’t know. History provides no clues and anyone who claims to have some insight or strategy cannot do so on the basis of fact and historical evidence.”

  31. Steve Barry says:

    I see NO reason to be long here…many reasons to stay out or stay short.

    1) Short interest is non-existent

    2) Bloggers at historic level of bullishness
    http://tickersense.typepad.com/ticker_sense/

    3) Put/call 10 day MA very tame
    http://stockcharts.com/h-sc/ui?s=$CPC&p=D&yr=1&mn=0&dy=0&id=p11854858723

    4)AAII back to being bullish
    http://online.barrons.com/public/page/9_0210-investorsentimentreadings.html

    5) II survey has had sharp rebound in bullishness

    http://www.investorsintelligence.com/x/free_chart.html?r=101#

    6) Economy has hit a brick wall…dollar rallying, killing the outlook of companies such as Cisco, Costco, Qualcomm, etc.

    7) PPT out of play until Obama takes office and turns it back on.

  32. mitchn says:

    About time to send a little “huzzah” to Steve Barry, don’t you think?

  33. Myr says:

    Good post ohemingway. The market has behaved in ways that have to leave you disturbed because it looks much more like the Great Depression than any other moment in our history. Current notions of “oversold,” “overly negative sentiment,” and “cheap” need to be radically altered.

  34. DL says:

    I’m hoping for a bounce tomorrow. It’ll be an opportunity to short something.

  35. DP says:

    At what point is everyone so contrarian that being contrarian actually becomes a meaningless double negative? Just asking…

  36. Eclectic says:

    “I wonder if SPX 1,000 will become the modern equivalent of the 1970s Dow 1,000 . . .”

    If so, dividends will provide the major component of investment return for some extended period.