Lsat Gasp Revisited
http://liverocket.blogspot.com/search?q=last+gasp
On APril 5th and 7th I presented what I call the Last gasp Theory. Looking at the last 2 recessions, I noticed two similarities:
1. Markets surge ~15% right before they begin the big crash
2. The final surge ocurs AFTER the recession has begun, typically a few weeks after
The Dow doesn't drift along and then suddenly fall - it shoots up and then drops down hard. hence the Last Gasp. And form a timing standpoint, it does it AFTER the recession has begun.
A cursory reading of headlines shows that recession is nearby, if not already here.
Meanwhile, the Dow has moved from 11,700 to 12,900, a 10% surge. Could this be it?
Clearly the market is behaving irrationally. Very bad news is released, and the market sentiment remains positive. HOG, for example, cuts EPS expectations 20% and begins to hunker down for bad sales. But the stock rose ~4% Friday.
This is what I would expect to see. The market fools itself into thinkingthat all will be well. It can't possibly be midnight yet; the bell isn't about to toll an dturn Cinderella into a pumpkin.
We are obviously short and this surge hurts in the near term. The market could go a few more points higher before crashing like a wave on the surf. If it does, we'll short more.
In the meantime, patience
On APril 5th and 7th I presented what I call the Last gasp Theory. Looking at the last 2 recessions, I noticed two similarities:
1. Markets surge ~15% right before they begin the big crash
2. The final surge ocurs AFTER the recession has begun, typically a few weeks after
The Dow doesn't drift along and then suddenly fall - it shoots up and then drops down hard. hence the Last Gasp. And form a timing standpoint, it does it AFTER the recession has begun.
A cursory reading of headlines shows that recession is nearby, if not already here.
Meanwhile, the Dow has moved from 11,700 to 12,900, a 10% surge. Could this be it?
Clearly the market is behaving irrationally. Very bad news is released, and the market sentiment remains positive. HOG, for example, cuts EPS expectations 20% and begins to hunker down for bad sales. But the stock rose ~4% Friday.
This is what I would expect to see. The market fools itself into thinkingthat all will be well. It can't possibly be midnight yet; the bell isn't about to toll an dturn Cinderella into a pumpkin.
We are obviously short and this surge hurts in the near term. The market could go a few more points higher before crashing like a wave on the surf. If it does, we'll short more.
In the meantime, patience
posted by Andrew at
6:53 AM
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