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Hi Bob,
Saturday, November 15, 2003, 3:10:32 AM, you wrote:
BJ> FYI Any comment, Yuki?
Sure.
I put on shorts serious shorts 6 days ago, the first real serious
shorts I've done probably in 3 months. I saw this (H&S) forming
immediately, and I've played the right shoulder both up and down with
great success. Monday shorts covered on the open Tuesday made the
entire month in one night last week. These were my first serious
shorts in months -- I'd almost abandoned shorting since May, with a
brief exception or two, none of much consequence.
The neck line will be violated *hard* on Monday's open. Chicago took
our futures 150 or more below the neckline last night (Tokyo time),
and that's about where we will open. The measuring aspect of the H&S
might work out just about right, too. That is to say 1,000 off the
10,200 level is surely doable. I doubt if it gets completely down to
that level, but it might; and anyone who thinks there is no chance of
it is way too sanguine. I want to buy around 9,600, and I surely
expect to see that level. Between 9,400 and 9,600 might qualify as a
"grail" buy, *if* the recovery story in the US holds, and *if* the US
dollar doesn't fall off a cliff, neither of which are givens in my
book.
I might buy tentatively at 9,800, too. I ain't buying anything right
here; this is the "that's where it held before; that's where it will
hold again" level for the suckers. Ninety-two hundred would begin to
scare the hell out of everyone, so that indeed might be the target.
^_- I would buy there to hold a while, if we see it; a bad holiday
spending season in the US (worse than expected, even if anticipations
turn down) could get us there.
The pullback in late July and August was almost satisfying in terms
of level, but not at all satisfying to me in terms of time. They
they did exactly the same stunt in late September, with an even less
satisfying dip and immediate rebound, as this thing got frothy beyond
the pale. (Hey, that's what markets do; and if you think the prices
that Japanese banks are selling for compared to what they were
selling for 6 months ago isn't froth, I have many bridges for sale.)
So, a lot of the retail people who have been sucked in now are
probably looking for a bounce here. They are the ones likely to get
bounced, right along with the other less nimble who entered on the
right shoulder, and those still holding from the head.
Already, there is the beginning of massive pain on the retail/small,
margined investor side. Have a look at long/short balances on margin
in Tokyo, realize that these latest stats are about a week old or
more, and then realize that margin traders, by and large, are
suddenly about 75 meters down with about 10 seconds of oxygen left.
There is going to be some long margin liquidation next week on pain
of collateral call, and it may get out of hand a bit. The "generals"
are not usually in the business of bailing out weak, margined longs.
^^_^^
Needless to say, the US market is blowing its own bubbles again right
now, IMHO. It's hard to say which is going to lead the other lower,
but it's a very interesting question. In fact, oddly, I was thinking
of asking this very question in an original thread. ^_^ This week,
the Japanese "generals" seem to know which way the US is heading one
day early. That's not always the case of course, but it has been as
of late. Or are the US "generals" just following? ^^_^^
As we all know though, markets overshoot in both directions.
Expecting a round number like 10,000 to hold, especially when it's
been crisscrossed so many times in the recent past, is likely to be a
sucker's bet. I'd pick a number below that which I might expect to
hold (my pick would be ~9600 give or take), and then add the
overshoot factor to it (which would make me think I can buy 200 to
400 points lower, just as the last margined longs are asphyxiating.
^^_^^
Remember, we have 3-1 leverage on equities here. A lot of folks
underestimate the downside risk. They may be about ready to get
educated.
All of this only means (to me) that we are entering or are in a
correction phase right now. I suspect long will be the place to be
when it ends, but I think it may be longer and deeper than some may
be ready for. There simply hasn't been one in the US, really, since
this rally got underway. You can't just "walk off" overbought time
after time after time. Eventually you get a good scare, and we all
are due for one I think.
Best,
Yuki
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