Today's G7 news announcement - MORE HOPE!!
“Hope” is a Sell Signal
Both President Bush and Ben Bernanke spoke on Tuesday, and there were points when both seemed to be on the verge of tears. They know that the situation is hopeless.
During the week before the House first voted down the TARP, CNBC constantly ran a message on the screen: “Hope on the Horizon”. That was a sell signal. On the weekend before the House voted down the TARP, news stories were filled with the words “hope” and “hopeful” when describing the prospects for the House passing the TARP. That was a sell signal.
Numerous times we have seen various things announced and implemented. They have all been sell signals. Just today, the market rallied up a bit before Bernanke’s speech. The market was “hoping” that Bernanke would announce a rate cut, which never happens during such a speech. That was a sell signal. I shorted right into that foolish hope.
I’m thinking that I can short hope all the way down to the bottom. Once there is no hope, I will know to stop shorting. How does the hope end? The market beats it out of traders by slamming their heads into the concrete over and over. Which brings us to the next topic:
Should We Forget About Rallies?
We have all been trying to spot the beginning of the next rally. Perhaps instead we should be looking at the October 2002 low and trying to estimate when we will arrive there, and subsequently plunge through. This economy seems to be in far worse shape than the 2002 economy, so why not? The market seems intent on proceeding down in a straight line. Why argue?
How to Short Rallies When there are No Rallies
Suppose the S&P 500 drops 80 points in the morning, and then makes an intra-day bounce of 40 points? Guess what? You have a nice 40-point rally to short.
Maybe my pessimism here will be a contrary indicator. We will see. I dare this market to rally. I double-dog dare it!