Is the correction about to start?

[realcoolhead]

I think the biggest question is whether this is yet another bull market correction, or the beginning of a new bear market? Of course no one can be 100% sure, it seems David begins to think the later and mentioned a viable bear market strategy is demanding much cheaper valuation. Among stocks in the main portfolio, ASPV, WCG, OFI, MSI might qualify? Technology stocks are hard to evaluate since they are too cyclical, so I don't want to include AMKR, SYX, ARRS, SILC etc...

I think even if it turns out to be another bull market correction, there is more on the downside as S&P only went down 4.3% from its top reached a few days ago. Tonight a lot of people go home and realize we just had a huge down market and many people will naturally pick up phones to their brokers ... it is just people's nature.

[Terliso]

I think the biggest question is whether this is yet another bull market correction, or the beginning of a new bear market? Of course no one can be 100% sure,

That was a good question.
I think the answer is -- We are currently in another bull market pullback.

see the chart:

[tokyopua]

I think even if it turns out to be another bull market correction, there is more on the downside as S&P only went down 4.3% from its top reached a few days ago. Tonight a lot of people go home and realize we just had a huge down market and many people will naturally pick up phones to their brokers ... it is just people's nature.

On CNBC at they reported that futures orders were already 250% greater volume than normal volume for tomorrow (again, supposedly there were orders backed up).  Add to that what you mentioned and whatever may happen in China, and tomorrow is indeed set to open lower.  Since China had their trading stopped apparently, it also means that they are likely to drop tomorrow as well.  Vicious circle  

On thing this has taught me was that the supposed "curbs" arent as strong as I thought.  What I naively thought was that the curbs would stop trading sooner, but apparently a 500 point drop intraday is still possible and maybe more.  

[lancefur]

Ok, with all that is said thus far and knowing the current stocks on the MAIN, would it be wise to wait until after the open and sell all or wait for an hour and then sell? Maybe the market will recover from the overselling from the day before? That is if I were to sell all and go to cash...I don't want to do that for fear of an uptick tomorrow but then again, I really can't afford another drop like this in one day again for sometime.

I was also noticing some discussions on another index indicatior which hit 58%/53% and normally 18%...it was like VXX or something...memory foggy from losing so much money today.

[tokyopua]

Hi all,


Here is the article I promised from my IBD account, (it is called The Big Picture).  They dont question at all that today broke the rally, despite the fact that the distribution days dont add up yet (see my other posts in this thread about those if you dont know what they are, I think its a must know for all investors). 

They suggest being off margin and raising cash levels. 

-------------------
China Triggers Global Sell-Off
BY JUAN CARLOS ARANCIBIA

INVESTOR'S BUSINESS DAILY

Posted 2/27/2007

A plunge in Chinese stocks and a troubling U.S. factory report slammed Wall Street on Tuesday, its worst day of losses since the bull market began in 2003.

The Nasdaq gapped down at the open and kept deteriorating, closing with a 3.9% loss. The S&P 500 dived 3.5% and the Dow 3.3% amid broad weakness in the world's bourses.

Volume exploded on U.S. exchanges, leaving no question that powerful institutional investors sold major holdings.


In less than four minutes, around 3 p.m. EST, the Dow plummeted 254 points as a backlog of sell orders made their way through the ticker.

Tuesday's fissure ended the rally that began with the market follow-through on Aug. 15. The sell-off also erased all the main indexes' gains for 2007.

There was no refuge for investors, and many ghastly statistics.

Only two stocks in the S&P 500 closed higher. All 30 Dow industrials fell. All 197 IBD industry groups closed lower.

The selling started overnight in China, where the benchmark index plunged 8.8% — its worst loss in 10 years. Some blamed the Shanghai selling on talk of new government steps to curb the country's surging economy.

Then, before the opening bell on Wall Street, U.S. durable goods orders were reported down 7.8% in January. That was far worse than expected and fanned fears the U.S. economy is slowing.

Bond yields tumbled as the 10-year Treasury slumped 12 basis points to 4.51%. Expectations of a Fed rate cut surged. In the fed funds futures market, the chance of a rate cut by the end of June swelled to 72%. It was at 21% Monday and at 2% two weeks ago.

The headlines out of Asia landed a direct hit on Wall Street's leadership. Chinese and other foreign stocks, which had been outperforming in the U.S., took some of the heaviest blows.

The finance sector, another area of leadership, was among the day's worst performers too.

Tuesday's meltdown came after the market had given some encouraging signs, even though its progress was often frustrating.

Through Monday, the Nasdaq and S&P 500 had just one distribution day of higher-volume selling over the past four weeks. The indexes were near 52-week highs. Most leading stocks had avoided big sell-offs.

Yet there's no question Tuesday's massive selling marked a turn in the market. Conditions are no longer right for buying stocks.

The charts of many leaders were left scarred and giving sell signals.

Foreign leaders such as Mindray Medical, (MR) Home Inns & Hotels (HMIN) and Homex Development (HXM) gapped down on heavy volume.

Some top-rated stocks such as Copa Holdings (CPA) found support at their 50-day averages. But the Panamanian airline's Accumulation/ Distribution Rating dived to a weak D from an A three days ago. Stocks of leading airlines started having some troubles last week.

Big drops below support levels are sell signals that take on even greater alarm given the market's new bearish tone. Prudent investors should be off margin and raising cash levels.

The IBD 100 slid 5.8% Tuesday, as just one component, Dawson Geophysical, closed higher.

It may take some time before top-rated stocks set up new buying opportunities. In 1997, the Asian currency crisis triggered a three-month correction in U.S. indexes. One difference this time is that China's economy is sizzling.
----------------------------------

[tokyopua]

Just answered my own question (I was typing below). It would have been instructive to be checking the $VIX today.

So this is one lesson I think I have learned today:L 

The next time I see a big down day seeming to form like today, I wil be monitoring what the $VIX is doing intraday.  If I start seeing a spike like this one, I will sell. As it happens I had already sold everything on gut feeling, but this looks like it was a damn good indicator considering that the spike happenend at 2 PM and the fast drop happened at 3 PM.

-------------------------------------

Does anybody know how you can track the Volatility Index realtime, say for example on a platform like Etrade Pro?  Apparently the .VIX spiked today at 2 PM, so that must have been a bit of a clue of what was about to happen at 3 PM.

[jorgegr]

If you are subscribed to yahoo, can have streaming real time
quotes of this index under the ticker:
CBOE VOLATILITY INDEX (^VIX)

[tokyopua]

If you are subscribed to yahoo, can have streaming real time
quotes of this index under the ticker:
CBOE VOLATILITY INDEX (^VIX)

Thanks, I also realized I could pull it up in Etrade, I guess I just didnt know the symbol until today for that, i.e. $VIX. 

Apparently you can trade the VIX somehow?  If so I guess today they made a killing on it, wow, up 64%.  Just heard on Bloomberg TV just now that this was the largest jump ever on the VIX.

[realcoolhead]

Nice.

But it seems there were lots of false 50SMA breakdowns. Does it also require, say, 50SMA sloping down?

That was a good question.
I think the answer is -- We are currently in another bull market pullback.

see the chart:

[jorgegr]

No Tokyopua, as far as I know this is just an index
can't trade it.  Never seen "VOLUME" on any statistic.

[jorgegr]

Suggest you compare $VIX to QQQQ and QID.

You will see when to invest in QID,

But also take a look at SDS and  DXD

[tokyopua]

No Tokyopua, as far as I know this is just an index
can't trade it.  Never seen "VOLUME" on any statistic.

I see, what had me confused was the times I have heard the term "trading the VIX", but what that means is using it as an indicator to trade:

"If you prefer futures trading, buy S&P 500 index futures when the VIX approaches 50 and sell S&P 500 index futures when the VIX approaches 20.  If leveraged options speculation is your game, buy index calls when the VIX spikes to 50 and sell them and then buy puts when the VIX slumps to 20.  If stocks are where your heart lies, go long index tracking stocks (like S&P 500 Spiders (SPY), NASDAQ 100 Cubes (QQQ), or Dow 30 Diamonds (DIA)) when the VIX stalks 50 and sell when the VIX crashes back down to 20.

Regardless of how you play the speculation game, it is easy to use the VIX to ensure that you are almost certainly on the right side of the short-term market trend, whether it portends farther bear market plunges or exciting bear market rallies."

I am learning a lot of new things today, but it was an expensive tuition  

[jorgegr]

yep that's how I play it

[chinaguru]

A bloody day. I'm in China and has been watching the financial channel til now, 13:15 here. Right now, shanghai composite is 1.48% up with more ups than downs. Government has just cleared a few rumors which will make stocks down. So market is up again. The hot sectors today is 3G, energy.

The analysts predicted that the down is a correction of bull market, many stocks are still undervalued (I don't agree with this, though). The future market will be a heavy ups and downs between 2500-3500 (shanghai composite index).

Anyway, I don't think this is justified. Shanghai composite index tripled in one year,  a 10% correction is all it deserves. But did the major indices in the USA  triple in the same period? US markets over reacted.

I added more positions yesterday...it's a hard, but I did

[chinaguru]

nearly 2 percent up now, people begin bargain shopping