10-19-2013 Comments

[MTman]

Mike - It seems that parabolic moves end with stocks having climax top type action as defined by O'Neil in HTMMIS. The only stocks that seem to be hinting at this might be some of the oil and gas plays. Until we get 1-3 weeks of huge moves in the leading stocks (which would indicate climax tops), it seems these quick pullbacks are simply shakeouts. The Put/Call ratio seems to indicate we are due for another shakeout. Your thoughts?

Mark

[Mike]

Mike - It seems that parabolic moves end with stocks having climax top type action as defined by O'Neil in HTMMIS. The only stocks that seem to be hinting at this might be some of the oil and gas plays. Until we get 1-3 weeks of huge moves in the leading stocks (which would indicate climax tops), it seems these quick pullbacks are simply shakeouts. The Put/Call ratio seems to indicate we are due for another shakeout. Your thoughts?

Mark

You could be correct however almost every stock that I would like to own is quite extended. The last two times the Log Periodic Power Law suggested a regime change led to short term pull backs which indeed was a regime change. There just seems to be too much federal reserve pumping up the markets to get too excited about a long term decline at the moment. So we might pause here and go on to new highs, or perhaps real weakness will develop. As to the shorting comment, most good short positions develop 5 to 7 months after a stock tops. If we are topping out here there will be time.

[Chern]

Mike thank you for your comments. I am still somewhat confused. I thought Sornettes work was designed to detect a "crash", hence my question, why not short the index here with fairly tight stop, take a small risk on the market going higher(granted likely with this FED liquidity) but actually bet on the crash which would be huge though low probability upside given how the curve looks. Thank you again for sharing your work.

[Mike]

Mike thank you for your comments. I am still somewhat confused. I thought Sornettes work was designed to detect a "crash", hence my question, why not short the index here with fairly tight stop, take a small risk on the market going higher(granted likely with this FED liquidity) but actually bet on the crash which would be huge though low probability upside given how the curve looks. Thank you again for sharing your work.

Sornette originally used the word crash but has since moved onto another description of a regime change. The two past times I detected super exponential growth led to short pull backs. Perhaps that is just the nature of what is going on with the FED buying programs. I noticed that quite a few stocks made new highs today, not much of a regime change so far. TSLA however is below its ten-week moving average. Sornette did indeed short an index on the 1987 crash when he predicted it. I am just more of a stock picker and QE is still here. RAX is more of the kind of set up for a short that I prefer.