Thoughts and Charts: Pavlov’s Dog is Catching On

Another relentless buying spree overnight saw stock futures rally some 1%.   It has since given up most of those gains.  Yesterdays rally looked to fizzle, but instead a late day explosion higher closed stocks at their highs.  The bullish euphoria of months past has enveloped the market.

Much of what I feel about the market and a host of individual names is in last nights market video.

The last few years I was bullish almost to a fault.  Now I feel I am skewed bearishly almost to a fault.  Just as I knew we were going to continue to surge to record highs, I now feel we are going to fall through the August lows.  It's only a matter of time.  I'd love to see stocks continue their rally.  A market pull back does not benefit the masses and it surely isn't good for continuing to skew the wealth distribution in this country.  We are all going to suffer as asset values decline.   But as I pointed out earlier this week, and in last nights video.  The writing is on the wall.

The Big old Wedge of Boom/Doom has broken lower.  While the action on Monday was swift to the downside, the market has bounced and has brought that loving feeling back to the market place.

It's another morning where the analysts are using the pullback as an excuse to buy.   Or if you had listened to those same analysts at 20% higher prices... Buy more.  I guess we know who is buying the dips these days.  And after 6+ years of unprecedented Central Bank action the Buy The Dip mentality has been ingrained in the minds of market participants like Pavlovs Dog.    A dip the last 6+ years is a akin to dangling a steak in front of a Bull Mastiff.   It gets quickly eaten, or in the case of the stock market... swiftly bought.

Ruff Ruff.....


In the midst of any  market correction lies massive short lived counter rallies, with time spans just long enough to shake the confidence of those trading for downside, and embolden the bulls to buy anything not nailed down.  I didn't think this pull back would be easy to trade, but I also didn't expect to witness the action we've seen the last two trading days.  Monday was just as expected.  Late Tuesday was just as expected.  And then the dogs came out just before the Tuesday close... lifting stocks with little effort off the lows.  No Kibbles and Bits were used in the ramp of stocks off the lows.

In the face of these massive overnight rallies and relief rallies, it is tough to stay the course.  To maintain your own perspective on the market.  I believe the patience will ultimately pay off.  I'm not someone who wants to see asset prices crash, another recession, people lose their houses.  But I also see a world where the rich continue to get richer on the backs of unprecedented financial asset augmentation carried out by the Central Banks around the world.

Almost seven yeas of zero percent interest rate policy is not healthy.  And I think the stock market is slowly coming to grips with that fact.  Perhaps another market collapse will be averted.  Maybe this time is different.  I sure hope so.  But the charts remain decidedly bearish.  The economic data continues to disappoint.  And the FED is never going to raise interest rates.  They can't.  They won't.  And if they were going to... they would have done it already.

More important than the FEDs dual mandate of inflation and jobs - is confidence.

By not raising rates last month, the FED is not exuding confidence.  Actions speak louder than words.  

And as such, I am not confident about this stock market right now.  These spikes to the upside remain  better prices to short/buy puts at.

See you in the optionmillionaires chat room and community!  Have a great Thursday.  There's a hurricane coming.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)

Leave a Reply