Larry,

With sentiment high and the VIX low, it would seem that the downturn is around the corner.

I realize that:

- Anything can happen
- Every moment in the market is unique
- The market can stay irrational longer than I can stay solvent,

but how much longer could we have to wait? I'm not seeking a prediction, but just your opinion.

My entire life savings are staked on it (just kidding).

Again, the main question amidst my ramblings is, how much longer could we have to wait?

Thanks,
Steve

i'd say somewhere between 1 day and 20 years.
or maybe by the end of the 1st Qtr. 2005.
or sooner.
or later.
or... who knows?

hope this helps.


-ja

Steve,

I, of course, don’t have a clue about what’s going to happen in the future. But if you want a guess, I can do that as well as anyone.

You’re right about sentiment. It’s sky high. And that’s definitely an important bearish factor. It’s just that, by itself, sentiment is not a very good timing tool. I don’t know what to make of VIX. I’ve never been a big VIX follower. I know it’s been “low” forever. But I don’t think anybody knows what’s low for VIX anymore and what it means.

My best guess is that what we’re seeing right now is typical November-December end-of-the-year strength. This market hasn’t gone up much this year and I don’t think it will go much higher without at least an important correction. Of course what I consider much higher and what you consider much higher may be two different things.

If I’m right about the seasonal end-of-the-year buying and if I’m right that the bull market made a top in 2000 (big “ifs”), then my guess is the market will start to roll over not too long after the first of the year. I thought the same thing last year and it did, indeed, roll over at the end of January. It’s just that it started moving up again in August. But this market isn’t nearly as strong as it was during the last quarter of 2003. So the momentum isn’t as great.

I think you’re a prime candidate for stop loss orders, Steve. I don’t use them for the COT because I don’t spend time wondering about when the market’s going to top out. But if I did wonder about such things -- and I can understand why you would wonder -- I would put a stop in and forget about it.

Larry

<< I think you’re a prime candidate for stop loss orders >>

If this is true, then I should have stopped out at 1165.

I didn't, so I'm going to ride it out.

Here's what I really wonder:

When the maket turns back down, will it get back below 982 (where I went short)?

That would be nice. If not, then maybe when it crosses the 200day MA, the leveraged portion of the trade will make up for the losses.

We'll see,
Steve

Stephen,
You might consider using Jim's idea of exiting the COT trade anytime it closes above the entry price. You will probably have to endure some whipsaws (but then if your following strat 5 you are already used to that ) and you won't have as good of returns as just following the COT normally. But you won't have any large losses either. Bonus: you can pick whatever entry point you want and if your inclined to use margin you can stay leveraged anytime the trade is profitable or you can use Joe's idea of pyramiding in as the trade becomes more profitable. I try not to pick my entry around areas of obvious resistance or support to hopefully keep the whipsaws to a minimum.

Just one idea for staying the course during these difficult times. Good luck.

Gary

Steve,

No. No. No! 1165 has nothing to do with it (I don’t even know the significance of 1165). Getting even has nothing to do with it. You start where you are right now. The rest is history. So if losses are bothering you, you have two logical choices: 1. Get out now, or 2. Put a stop in and forget about it.

I began this as an education site. I still intend to keep it that way. So forgive me if I seem to lecture sometimes. But there are some absolutes. And waiting to get even or saying that since I didn’t get out at a certain point I might as well ride it out are sure losers.

Larry

Steven Espi...

the easiest way is to choose a strategy and follow it with no stops. if you're troubled by the draw-downs, just reduce your size (i.e. make a smaller bet).

do you have other strategies you follow or only COT for now?

-ja

Hello all,
Just to throw my two cents (post 1982 zinc pennies, I'm not giving up the copper ones) in, you know I have been following DJI/M3. I found information on the National Debt and Quarterly figures on GDP so I've been able to calculate a stimulus factor of s=(m3+Debt)/GDP which reflects monitary growth compared to actual growth. DJX/m3 has not made a new high recently with the DJX. It's only 2% away but still it's not a new high. If you take the entire stimulus number into account though, the DJX/s has reached a new high and actually hasn't been higher since march 02.
As m3 and the debt have both risen the lesser effect of s is becuase of a greater real growth in gdp. So this is only as valid as you think the govt's gdp numbers are (that's for you Gary).
So if you believe in the gdp, the market has made a new high and is only 14% short of it's all time high. If you don't believe the gdp numbers then the market has not made a "real" new high but is close.
Now, SOMEBODY TELL ME WHAT THIS MEANS!!!!!
Just kidding,
h

This kind of goes along with what Howard said. If you measure the Dow in Euros, Gold, silver, Copper, anything that has intrinsic value or at least is not losing value ie. most foreign currencies, then the US markets have basically gone nowhere since the begining of last year. It's a nice trick pumping the money supply it appears on the surface that your stocks or house has gone up in value. I'm sure the vast majority of the masses don't know the difference. Just don't go on a vacation out of the country. If you would have invested in the Dax, Cac or Ftse for the last year and a half you would be up almost 100%.

Gary