A suicide kiss?

When making a call against the crowd, it requires some braveness and courage. When everyone stepping on one side of a boat, it is always a bit challenging to stay on the other side lonely, even if the chance of survival for the lonely one is statistically higher. This is especially true when doing this in public as I have to grasp sufficient facial tissues with me, preparing for wiping off eggs on my face if I’m wrong.  

I was lucky I got one right a couple of weeks ago when I made a bold call to buy when everyone was panic selling. Then I’m making this one again calling for shorting when everyone is busy buying, a FOMO moment as I have called it. It seems like I’m just making a random call simply to go against the crowd but to tell you the truth, I’m not. Actually I’m based on some technical insight that I believe in. For one, whenever a big market decline happens, it is quite often to see a quick “dead cat bounce” to recoup about 30-50% of the initial loss, enough to make people feel safe to get in and lure naïve traders to chase high. That will create enough overbought condition for the market to launch another surprising attack. That’s one reason why I made a call to pinpoint the likely bouncing range up to 2730 last time. More importantly I think what we are seeing now for the market is likely a bearish phenomenon; I call it a “suicide kiss”.

For the past two years, we haven’t seen a 10% drop but only a straight line up for the stock market. Due to this enormous bullish trend, people have been so used to the uptrend that it is almost taken for granted to see market keeping going up without a stop. As such, S&P (same for other indexes) has gone way up from its long term trend line, the 50 DMA. But everything has it weight and sooner or later, it will be pulled back due to its gravity towards the 50 DMA, so-called return to mean. Two weeks ago, finally the moment came and the market crashed by 10% within 2 days, something rarely happened. It happened so fast and so surprisingly that had caused sufficient panic selling to push it down sharply below its 50 DMA. When this happens, it usually quickly changes the market condition to deeply oversold, allowing for a quick bounce back, but likely a dead cat bounce for the initial try. When I looked at the chart of S&P, it just happened to be that a 50% bounce back was also lined up nicely with its 50 DMA around 2730 (but changing of course). If S&P indeed bounces back towards its 50DMA, it is facing a quite strong resistance actually. Quite often, although not always, when it “kisses” its 50 DMA from below, it will turn back and initiate another more severe decline, hence the name of “suicide kiss”. The past two days of open high but close low seems quite bearish to me and you may have noticed that S&P has turned back from its resistance line of the 50 DMA and is trading now around 2700. It is too early to say I’m right but I think the chance is increasingly high that S&P may be on its way to retest its recent low around 2580 or even lower if severe enough. Stay tuned for the possible fire selling!


As always, try to stay away from chasing high or being part of FOMO. Most often, it will end up badly and painfully!! Kissing may make one feel great and sweat, but kissing at the wrong time and wrong place can be suicidal!!!