Market Direction for Tue, 31-JUL-2007

This thread is for discussing general and index-specific market direction for the stated period. While intra-day discussion is favored, accompanying this with longer term (inter-day) data is fine. Please stay on-topic.

OK. I think the market in general as measured by the S+P 500 will go up tomorrow. Can’t say if it will be big or not but up.

My take is that today was an ever-so-modest repreive, before more…not-so-modest carnage.

If one chooses to daytrade the daily moves on the way lower - best of luck!


Previous resistance (was 1493 (ESU), bumped to 1495.75 by 7.27.07

highs) is holding. “Retest” of 1455 is under way but shallow so far in

the ES (deeper on the retest in the NQ). Likely at least another swing lower (maybe 1470-1475 zone), but I expect it will hold and the ES will rally to or through 1496 as long as breadth stays strong on the

decline. A break of 1470 points back to 1455 or lower.

Re. 200 MA. I think moving averages can be useful in system

design and as benchmarks, but why the blind faith of TV’s

talking heads in the 200 day MA? Why not 250 days (one year)?

Should we use simple, weighted, exponential? The ES/SPX are

already through the WMA and not even to the SMA or XMA.

Anyway, I prefer actual market symmetry and price. Moreover,

anything anyone says on TV is suspect in my book. So when

you hear “I think the market will find support at the 200 MA” in

a pompous Louis Rukeyser tone, look out.

I maintain my prior divination regarding the short-term market:

A. The index sputters sideways until Wed. It then wastes its time in a volatile upward consolidation, gaining some ground here and there.

Now that the opening gap was filled at roughly 10:45 AM, this scenario has almost finished playing itself out.

B. It finally has a spiked upward rally, followed by another tug-of-war which wastes more time and loses some ground.

SPX high will be in the 1535 range (prox) before the upward swing begins running out of steam and drifts into consolidation. It still looks like this particular rally may begin Wed or be delayed a day.

C. Existing lows are re-tested, weeks from now. If broken, the RUT index hits near 712.50 as a low but survives intact.

I am expecting a HUGE nose-dive for the indices… but I do not yet have enough real-time information to determine if it will take place as part of stage "C" (in which case this stage will draw out for a few weeks before giving way), or after another recovery attempt from stage "C".

This information is subject to change with market conditions, and it often does. Anyone else care to predict the indices, with target prices?

By the way, any time I smell consolidation I also brace myself for a move contrary to that which I’ve predicted. Right now, I’m smelling more and more consolidation. There is the possibility of a slight downward swing (touching or just under our open) prior to the “real” rally up. This would be in keeping with my expectation of a rally commencing on Wed (or Thu, at this point).

speaking of “consolidation” (i know it’s off-topic, sortof):

American Home misses margin calls; shares plunge

Mortgage lender hires advisers for 'orderly liquidation of assets’

By Alistair Barr, MarketWatch

Last Update: 2:25 PM ET Jul 31, 2007

SAN FRANCISCO (MarketWatch) – American Home Mortgage Investment Corp. said Tuesday it has missed margin calls from its lenders and has hired advisers to consider strategic options including the liquidation of its assets.

Shares of the company plunged 87% to $1.35 during afternoon trading on Tuesday. Other mortgage lenders also fell. Impac Mortgage Holdings (IMH).

AHM(1.35, -9.12, -87.1%) said its lenders have initiated margin calls because the loans and securities the company was holding as collateral to back its borrowing have dropped in value.

The company said it has paid “very significant” margin calls during the past three weeks, but has “substantial” unpaid margin calls still pending. It was unable to fund lending obligations of roughly $300 million on Monday and said it will likely not be able to meet another $450 million to $500 million of obligations on Tuesday.

American Home said it has hired Milestone Advisors and Lazard Ltd. (LAZ)

LAZ(38.00, +1.85, +5.1%) as advisers to help it consider strategic options such as “the orderly liquidation of its assets.”

“American Home Mortgage emphasized that it is seeking the course of resolution, in this environment, that is least disruptive to its business and to the many thousands of home buyers to whom it has committed to provide mortgages,” the company said in a statement.

…is becoming more and more commonplace.


The above phase (slight downward swing) is completing. The dip, which touched below our open, may force a bit more consolidation to take place before the rally up. This may delay Wednesday’s move until Thursday (which I previously mentioned). The rally up will likely be staircase in pattern, with small dips in between fragments (for several weeks). Once that is under way, it will turn parabolic and be unsustainable.

Late-breaking news… the dip is retesting yesterday’s low, and has set off sell triggers (look at trade size). If yesterday’s low (1454) doesn’t hold, beware of the gap from April 3rd and 13th [?] of 1420 and 1438. It may act to pull in the index (or partially retrace), for closure. We are approaching extremely oversold throughout various timeframes, thus adding kinetic energy to the oncoming bounce.

Sellers Take Control, Sending Indexes South

By the time the closing bell sounded the S&P 500 had seen its 1% gain turn into a 1.3% loss. And the Nasdaq’s 0.9% morning lead had morphed into a 1.4% loss.

Compared to Monday’s level, volume was heavier throughout the day on both exchanges, according to preliminary numbers.

I will continue to let the market tell me where it is headed - since it has A LOT of work ahead to once again regain its footing (imho).


> Likely at least another swing lower (maybe 1470-1475 zone), but I expect it will hold and the ES will rally to or through 1496 as long as breadth stays strong on the decline. A break of 1470 points back to 1455 or lower.

I was wrong. The ES hit 1470, bounced in a corrective rally to 1479,

and then failed to hold 1470 the second time down. Taking out 1455

is still OK if it’s just clearing stops out there and 1450 or so holds.

Breadth is actually pretty good on the close setting up a potential bullish

divergence for the open tomorrow. If 1450 fails I’ll look for the next weekly trendline under 1410. Next support under there is the weekly swings near 1390-93.

Market Direction?

I just thought I’d bring you up-to-date. hasn’t had to do very much, but with this WOTM Index Spread Strategy we’ve gained 6%-plus off the lows…in just days.

Seems to work well for making money off “tops” and during the prolonged correction, where you know this manager will not be making much with investments into covered calls.

The only regret is that I could have stayed in cash until the bottom of the correction and avoided the 21% drawdown (since I did see all the signs). Then I’d be that much (10%+?) ahead of the indexes with the usual next 6 month move with our Funds.

But…perhaps this divergence can be closed further if anyone thinks (like me) - that at some point we’ll get a WILD jump by the DJX with which to enter the next spread trade.

It’s a good thing (I guess) since when (if) I make up the DD and profit further…it will lend credence to IRA account holders, etc. that I know what I am doing with this high-yielding Covered Call Strategy.

Any takes on the bottom of this correction?


"Any takes on the bottom of this correction?"

Sure… today is Wednesday… and per previous narratives, the bottom of this correction has been skewed by a day (to Thu). We’ll drop down just a bit further, then waddle (perhaps near the end of today and/or early tomorrow)… at which point the upstream rally begins.

With regard to the upstream rally - since the dip went lower than expected and consolidation shifted the timeline, I don’t have a new target high for it yet (the prior high I cited is no longer valid). Look for the stair-step and the eventual parabolic nonsense to signal an end to the rally, or an end to one phase of the rally (if consolidation sets in). It will be followed by what may be an even steeper decline that crushes the indices. That’s as far as my crystal ball goes, for now.

>speaking of “consolidation” (i know it’s off-topic, sortof):

> American Home misses margin calls; shares plunge

Mortgage lender hires advisers for 'orderly liquidation of assets’

By Alistair Barr, MarketWatch

Last Update: 2:25 PM ET Jul 31, 2007

The PTB knew this before the decline (back when Gilbert

gave us all the “green light” to be long on July 13th).

Understand the release timing of these “news” items is designed to

transfer money from the many to the few.

More confusion Sam…or (like Ross), “selective hearing”?

Please visit recent “Market Direction: Stop Losses” post at Kingdom Capital Covered Call Fund thread for near-exact clarification…since you seem to be stuck on st*pid with the misinformation you present.

My use of highly-accurate, widely-accepted market direction call methods have been a boon to my Funds for many years.

Simply by following price and volume surges from the major indexes for tells of institutional buying (accumulation) and selling (distribution) coupled with the action of market leading stocks (highest in rank of both technicals and fundamentals with institutional sponsorship) WILL get you safely in and out of market trends with VERY close accuracy.

Case in point: losses affecting most in 2001-2002, May-July 2006, Feb-Mar 2007 and now July-Aug 2007 were and are being averted by this manager’s funds. Just take a look at top stocks and you’ll see their stong growth during the optimal periods and the recent sharp losses since last Tuesday’s (Caution) call and Thursday’s (Stop Losses) call.

Hold and hope will never work for high growth funds in the long run!

Any “Green Light” that goes to “Caution” and perhaps temporarily back to Green Light (like the recent surge of institutional buying that confirmed the uptrend/breakout which did break down) has to be navigated GRADUALLY as many fail, but EVERY market bottom has been “confirmed” with the said price and volume action.

So when you next see Kingdom Capital give the “Green Light” call - indicating the end to this market correction, you will see a PHASE INTO POSITIONS to see if the “real” market bottom is showing up!

Most of course will still be shell-shocked having just (finally) exited their last positions with deep losses, that they won’t be ready to heed the call - until it again is to late.

Read the bold, italics and bold italics each week in my newsletter and you too will be able to sleep well at night;).

I know, Sam, it may be fun to write such misleading information…but please think about the damage slander can cause.


So when you say:

"this recent rally attempt has now been killed."

That’s bullish?

And you say "green light"

and that is bearish?

This is exactly what I’ve been saying…we agree 100%.


I may have come across a bit to harsh, Sam and I do apologize.

These are trying times for us all.

All I can say is that a strict stop-loss methodology must be in place for your trading to be successful. Minimizing losses is just as important as generating high-growth surges in your account!

Show me a C2 vendor that consistently does this and you have struck gold. Many are in la-la land (at the present), just wishing this thing will quickly resolve and move back on to new highs.

Real-life (successul) trading is just not the case. Manager’s should have already been off margin, locking in profits, cutting losers, etc.

In some - or even many of the top C2 funds…I am not seeing this.