How many legs the market has?

I just came back from vacation in Seattle and Vancouver last week and it was really great to see quite a few friends in person over there. My sincerely thanks to all those I met for their warm hospitality!! While I was busy on the road constantly and could not really watch the market closely most of the time, I was paid off well still by betting for some significant downdraft of the market. It is a great day today with good profits by doing so although I was a bit earlier as usual. Here is why.

“....the market god is playing with us again by fooling as many people as possible into thinking that the mini correction has been done... Then it will suddenly strike again............So folks, don’t just discount the strong possibility of another leg down in the next week or two.”  This was my warning 10 days ago and I was expecting a sudden mini crash down towards the 50 DMA around 2677 or even the 200 DMA around 2630. I immediately got a laughing question from a friend kidding me how many legs the market would have. Apparently he and probably most people simply didn’t believe my warning for another somewhat severe decline ahead of us a week ago when the market was seemingly doing quite well. What was the reason to worry about the downside risk, many folks were asking? Well, we got the taste for the downdraft today. S&P touched exactly its 50 DMA around 2677.  So how many legs we will see from the market, either up or down? The simple answer is I don’t know. One thing I do know for sure is that the market is definitely not a two legs animal but a multi-legs creature. And its leg up or down is very much associated with the herd mood in an opposite direction: when the herd becomes happy and euphoric, the market wants to punish them by legging down. Vice versa when the herd becomes depressed and outcrying, the market will surprise them by legging up. Since the herd mood keeps changing, so is the Market. Therefore there is no set number regarding how many times the market can go up or down in any time window. This current second rare sell signal has caused over 50 points down from its recent high. It is not as severe as last one with a 100 points crash just a few weeks ago but  is still severe enough to punish those overly euphoric just a week ago I think.

Similarly I made another bold prediction about crude oil when it was red hot in the past few weeks. It reached to $73ish at its highs recently and all the dumb money was betting long for it.  As I said, I also think oil will go up a lot as its long term trend in the next year or two but its next major direction in the near term should be down, not up and I expected for a 10-15% correction. Well, oil is again moving in my direction now, down to around $66ish as of today. If you haven’t read my blog on this call, check it out here. I got a question whether this oil correction is done already.  The decline in the past few days has been quite fast and severe, at least being felt so. I won’t be surprised to see some attempts of bottom fishing to come in to try to push up oil a bit. But I don’t believe the oil correction is done by now. Low 60s is a very reasonable target for this correction. I’d like to see a technical setup suggesting a bottoming and more ideally associated with a depressed mood from the dumb money running away from the oil sector. It usually takes time, maybe a few weeks before the picture is finally clear.

By the way, I get questions from time to time whether it is fine to share my blogs with friends. Well, if you like what I’m posting here, feel very free to share with your friends at your wish. No need to get my permission upfront. Actually I’d like to thank for your interest and spreading out and promoting my blog to a wider audience!!