when will this correction end?

So many of us old farts have witnessed so many of these pull backs that we wonder “What’s new?”  I’m not saying we know when each one will come to an end, only that we know each one will end.  It is only really relevant to be able to weather the storm and not make enough rash bets to be blown out of the game. It is certainly not the case that age inures you from the pain of a pull back, but when you learn not to bet the ranch on any one throw, you can survive from bubble to bubble, from correction to correction.

I see on the forum a fair amount of those who think they will be a hero. I’m not going to say you will never win swinging for the fences, only that most will strike out. It is infinitely easier to be a singles and occasional doubles hitter.  The homers will come by accident, and there are no five run homers.

Although there is no one way to successfully invest, this is not a Chinese meal; you will not do well picking a choice from each column. You must learn what each style of investing entails and find the one or two that work for you. And by a style, I don’t mean buying someone’s newsletter and slavishly following it. You have to understand why you are doing what you do.

So when will this correction end? Well, if ten people read this, nine will not be able to name the week ahead of time. Naming it afterwards is a good activity for academics, but not investors. There are some methods that do not require picking the end of corrections to be effective. It might be worth your time to investigate one or more of them. If it is of any interest, I’m back in town and able to watch the market more closely – you did a lousy job this time OF.

So, you think this is a market correction?  Come on ole timer... Maybe it's a bear consolidation...

Someone wrote today that I should consider going long....  that the stocks already have priced in Greece... 

Guess what... They didn't price in Spain... they didn't price in Italy.... They didn't price in the ole US of A....  They haven't priced in England, Germany.... etc... rates and rating going higher/lower....

I believe the small spikes have been shorts now beginning to cover.... but guess what... they'll short again... and again.... and again....

Up with no volume... Volume still leaving stocks.... and a Two Horse Race without Horses... Can't be a winning game changer...

I say the correction will come as soon as you respond to my entry.... But you know I still love ya and hope you made a killing off of my options and puts that I bought from you this year..... (HE..... HE....)

The bear consolidation continues this morning.... Again a head fake with futures as high as 1% coming back to the stark reality that there are no buyers for the hype of what a QE9,999,999 will do for the economy.

Hopeium is a new con word where a uptick on Class B data that will be revised next month lower.

Remember, volume leads price... Not the other way around....

spshapiro said:

  If it is of any interest, I’m back in town and able to watch the market more closely – you did a lousy job this time OF.

 guilty as charged

spshapiro said:

Nas, I don’t know you as well as some others, so don’t take this personally. The hardest thing for those who jump all in and all out, is calling the moment to do so. Often reluctance to make a mistake means missing the better part of a move. Enough studies have been done to show that it is a very small percentage of the days when the market is open that account for the largest percentage of market moves. Put that with the fact the market over the long term tends to move up, and I rather be (mostly) invested than out. This is not to say that there will not be moments when being out is the ‘hero’s’ play, but that only counts in the long run if you know when to get back in.

 SP your observation is well taken. But to start, I never been an investor - that is for rich people(which i am not, YET). I am a trader though, because i believe it is a good way for a smart kid to make a great deal of money than would have otherwise been possible. So for my account to be all cash for the moment is more a facet of short term trading behavior, account size, and also representative of walking a way for a moment after a period of success. But as to a larger percentage of an account being invested than not, i totally agree with you on a longer term perspective. But as for the moment the fact remains that market is in a down trend. What I am looking at right now is the down trend in place that can be seen from connecting the high on 5/1 to the high put in on 5/29. If it breaks that trend line to the upside convincingly - I BUY. If it gets to the line and bounces down - I SHORT. It should also be noted that the testing of the trend should happen any day now. If not today. On a personal note, I do think though that their should be a major correction just to get some junk out of the system. I think it is honestly the most bullish thing long term that can happen. That's for you investors out there, but as for me i'll trade anything that moves. 

The market is the market.  The true trader can find a way to make money no matter the condition (note that I do not consider myself to be of this cohort).  Even though I'm not so good at it, I think this year has been very tradable.  Even now.  Now sets up pretty easy.  You can understand the situation in Europe and what decisions are likely to be made.  You can understand the Fiscal Cliff and what politicians are likely to do.  

Probably hard to make a big return in this environment, but you should be able to stay positive.  

But I left OF in charge!!!!!!!!!!!!!

spshapiro said:

...So when will this correction end? Well, if ten people read this, nine will not be able to name the week ahead of time. Naming it afterwards is a good activity for academics, but not investors...

These two facts: 1) The market rallying in the face of extreme bearish sentiment; and 2) the lack of any real follow through to the downside of the extreme weakness that closed the prior trading week, leads me to believe that the correction following the 03/27/2012 high is over, and the market is commencing its next bull swing.

As such, starting on 06/05 and continuing today, I have begun to scale into a long QQQ trading position.  I have no specific profit target, and will let my profits run while watching price and volume for clues to whether the market is under accumulation or distribution.  I will exit if signs of distribution become manifest, and I will exit on a close below my mental stop, which is currently a close below the 200 day moving average.

So my answer to the question posed by the OP is that the correction ended around 10 AM EDT on Monday, 06/04/2012.  If I am right, I am 50% in to what will, over the next several weeks, become a 200% long QQQ position.  If I am wrong, I will likely stop yself out long before I accumulate a full trading position.  

Lacking a crystal ball, I have found that scaling into positions and adhering to my stop levels lets me rest easy, knowing that my winners will be larger than my losers, and I will not miss out on the important swings. 

OldFart said:

incubus said: 'scuses, 'scuses.

 yes, sp did his stuff. but what is the problem, when u r in charge u try to have some fun without hurting other people. down 30, up 30 this is how the ferris wheel goes

  Not to worry OF, I think it was two years ago that he pawned it on me.

optiontimer said:

As such, starting on 06/05 and continuing today, I have begun to scale into a long QQQ trading position.  I have no specific profit target, and will let my profits run while watching price and volume for clues to whether the market is under accumulation or distribution.  I will exit if signs of distribution become manifest, and I will exit on a close below my mental stop, which is currently a close below the 200 day moving average.

 Just to mess with your head, I'm short the Q's.

'Course, it's a counter to IWM that I'd added to in this correction, that spread has gotten insanely wide over the last year.

SP - you must have another trip planned in the not too distant future. Please leave OF in charge again. I like the volatility. 

We may see a little bump here but I believe we will be testing the 200 day ma again before the end of the month. There is just too much negative sentiment out there. Bernanke won't tell Congress anything important this week and then when the Fed has there big press conference mid month and then the reporter asks whether there will be a QE3 after TWIST is over, Bernanke will not confirm or deny. Initiating QE3 is admitting that the administration is a failure and Romney will be all over that. 

Bought some puts on ERY. Looks like I will need to cash in soon.