Stock Market Choke Points

part 9A

by Brian Stoll, TimingStrategies.com | September 8, 2008

From our last update part 7B, (we pretty much skipped thru any further part 8 series from August 1st , right into part 9) the estimation was a range bound market between 1280-1290 with a re-test of 1220-1200 July 15th low. Well to re-state the obvious in hindsight, we got just that, albeit a slightly higher local high of 1313 than the expected 1290. Today, Friday September 5th, provided the re-test of the 1220-1200 low we were looking for right at 1217 and recovery back above the 1235 price tag.

This type of price action is good and under “normal” market conditions “would” give us the set-up that if the S&P can make a daily price close above 1265 -1270 “should” get us a move up to at least 1330 as much as 1390. The parenthetical use of the words… normal, would and should implies the fact that we are not in free markets due to the massive credit debauchery of Treasury/Fed endorsed Wall Street malignancies. The possibility… yet lower probability, for a further wash low of the July 15th 1200 price tag to as deep as 1175-1165, is still in the cards, although not necessary for our previously estimated, potential buy signal, entered today at the close of 20080905 in our Rydex EOD system.

A net long of 35% exposure to the S&P/ DOW & NDX and 5% Basic Materials w/ still a 10% short hedge in the R2K and 5% short in the Inverse Gov. Bond was made for the long /short accounts.

A 35% straight long exposure in the S&P / DOW & NDX for our long only Rydex EOD accounts, with a 5% exposure to the Basic Materials Sectors was entered today Friday 20080905 as well. Both accounts also maintain a total exposure to the Rydex Energy and Precious Metal sectors of 15% each as well, which was entered previously on 20080811.

Should the S&P close back below ~ 1230-1220 down to as deep as the 1175-1165 price level before at least an intra-day print back above the 1270-1275 level, then the current estimation calls for a hold of the existing position with a potential scale in add on long exposure of as much as 60% net long to the indices. This estimation is subject to change based on price action and other indicators but stands for now.

I try to restrain as best I can as much of my personal cynicism and criticisms of the Wall Street / Washington menace in these client communications but a touch of seasoning somehow seems to sneak its way into the stew from time to time.

My personal thoughts on the influence of their cabal on free markets does not however disengage or impair the methods and disciplines learned and required to manage client accounts successfully from either the long or short sides of markets. The only goal is to make money. My personal opinions are wrong not quite as much as they are right but the systematic / rule based discipline of managing accounts is right much more often than wrong.

My personal opinion going into the end of the 3rd quarter 2008 and election, to the end of the year is that there is a bear market political rally being forced on its way. Price and time estimations are as previously mentioned, anywhere between 1330 -1390 on the upside with the time element influenced more by the election window than a pure cyclical / geometric time component, although the “normal” election and end of year seasonal influences are handicapped greatly by the credit market corruptions. (There’s that word “normal” again)

It was also my opinion that there was going to be a 4th July rally of minor magnitude which never occurred (that actually turned into a minor sell-off instead) and that there was to be a minor magnitude Labor Day bounce which did occur but was sold immediately there after. My point is that opinions expressed here are only that and not recommendations to buy or sell any investment whatsoever and should be taken with a grain of salt as most other opinions.

Contact Information

Brian Stoll | TimingStrategies.com | Registered Investment Advisor
Newport, California | Email | Website