Wednesday, September 9, 2009

Irregular Top

This could be what we are looking at an irregular top. Or it could blast past and keep going up. But double tops have proceeded every major down of the last few years. Watch for the double top.

Max Pain looks at call and put options and calculates the point of lowest gains to option owners (minimum pain to option sellers). for QQQQ 38 or 39 are about the same low point, so 39 would be "good enough"

Keep in mind all the big moves of option expiry week happen on Monday and Tuesday and maybe a little Wednesday but for the most part the smart money has already rolled forward to a later month, or closed their positions. The other money is sitting on a bunch of out of the money options that they hope will pop into the money with a big end of week move, which frankly just never happens.

Finally, a reply to a poster who was sure helicopter Ben can save the US by printing forever.

Available "money" lets call it, is what allows people to spend. Whether that be credit or real money. Credit itself has never stopped growing through the "Great Recession" (which is now over if you ask the Fed). Understand? Credit is at an all time record and is finally curling over heading towards negative.

Pumping 7% GDP into the economy has resulted in a 3% drop, whereas a 3% gain is normal. In my book, that is a "loss of 13%". 70% of the economy is the consumer, and yet the consumer is saving more than they have in decades, paying down debt, not using credit.

Cash for clunkers was a dismal failure. It was a late night crack hit, that has already resulted in empty dealer lots --like we hadn't learn't enough about bubbles. Sure some vehicle were sold, but the net effect will be negative and not positive, and sure they will probably try something more...until some point nobody will want to loan any money to them, then they will take your IRA and hand you T-bills instead. OK, get it now?

Good solid infrastructure investment well planned that results in future business efficiency and yes even enjoyment for the people (park system) does result in future dividends. Cash for Clunkers was a poorly conceived, too rapidly deployed, and has no future benefit.

Believe what you wish, and please get an avatar, that Hillary is damn annoying.


  1. Hi steveo,

    Great post mate. What's the book the page is from?

    I'm still expecting to see a double-top or a top by 1070 as I think the SPX bear wedge will play out. That is a high probability & volume confirmed pattern building for the whole rally & we are very well overdue for a correction here.

    That correction will probably get us back to 870 - 880 yet again and then we will see whether we can break through it. That area seems to be the key area for the bear market & should form key support.

    At that point I think we either break through & complete the bear market or continue the rally into 2010.

  2. What do you make of the max pain on SPY at 91?

  3. Ah, got it. EWP Pages 58 & 59.

    Silly early morning question.

  4. Hook-Max pain (min Pain) for SPY was like that last month, around 91 and I though for sure it would at least take a dip towards that, but it didn't, it just kept running up.


Insightful and Useful Comment!