Thought I Would Share

Thought I would share the following document with you as you progressed in my ongoing argument for downside. Yesterday the Dow hit a theoretical low of 9744, which exceeds our 586 point average move over a 21 day period. Sure enough, the market dropped and the November 490 Put , an "option I fell in love with" hit highs of 12.73 before the 3 p.m.. hour. Available as low as 9.50 for the day, and with many traders, we'll close out our position with this put with many traders reporting 5 to 15 actual day or two day trades on this signal over the past weeks.
I've stuck to my guns downside, as logic will always "just for a moment" prevail.

So, read this article I wrote a few days ago:

Much has been make about Dow 10,000 last week, but technicians may want to focus about 500 points higher instead. The chart below shows Volume-by-Price for the Dow Industrials. Notice that the longest bar is around 10500-11000. This represents a potential resistance zone in the coming weeks or months.

Oct. 27 (Bloomberg) -- Investors worldwide are borrowing dollars to buy assets including equities and commodities, fueling “huge” bubbles that may spark another financial crisis, said New York University professor Nouriel Roubini.

“We have the mother of all carry trades,” Roubini, who predicted the banking crisis that spurred more than $1.6 trillion of asset writedowns and credit losses at financial companies worldwide since 2007, said via satellite to a conference in Cape Town, South Africa. “Everybody’s playing the same game and this game is becoming dangerous.”

The dollar has dropped 12 percent in the past year against a basket of six major currencies as the Federal Reserve, led by Chairman Ben S. Bernanke, cut interest rates to near zero in an effort to lift the U.S. economy out of its worst recession since the 1930s. Roubini said the dollar will eventually “bottom out” as the Fed raises borrowing costs and withdraws stimulus measures including purchases of government debt. That may force investors to reverse carry trades and “rush to the exit,” he said.

“The risk is that we are planting the seeds of the next financial crisis,” said Roubini, chairman of New York-based research and advisory service Roubini Global Economics. “This asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals.”

‘Wall of Liquidity’

The MSCI World Index of advanced-nation equities has surged 65 percent from this year’s low on March 9, while the MSCI Emerging Markets Index has jumped 96 percent. The Reuters/Jefferies CRB Index of 19 commodities has added 33 percent.

Roubini said he sees a bubble in emerging-market equities and that gains in some developing-nation currencies are becoming “excessive.” The rally in oil “is not justified by the fundamentals,” he said.

An asset “bust” may not occur for another year or two as a “wall of liquidity” pushes prices higher, Roubini said. In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets.

Roubini said the U.S. recession seems to be over, though the economic recovery in advanced nations will be “anemic.” He’s “more optimistic” on the outlook for emerging-nation growth.

The U.S. economy probably expanded at a 3.2 percent pace from July through September after shrinking the previous four quarters, according to the median estimate of 65 economists surveyed by Bloomberg News before the Commerce Department’s report on gross domestic product due Oct. 29.

Roubini on Stocks

The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades.

Roubini’s July 2006 warning about the financial crisis protected investors from losses in the Standard & Poor’s 500 Index’s worst annual tumble in seven decades. The U.S. equity benchmark has surged 58 percent from a 12-year low in March even as Roubini said that month the advance was a “dead-cat bounce,” that it may “fizzle” in May and warned in July that the economy is “not out of the woods.”

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Here's some commentary between a subscriber and myself on my predictions about the sell off. My comments are in bold:

> Hey brother..
>
> I am amazed at how you called the downside this week.
>
> I am also kicking myself that I did not purchase the 490 put on Friday of last week for 4.50 and then again on Monday for 5.50...She was over 12.00 a few minutes ago...unbelieveable...
>
> I've got some questions for you...
>
> Since you were "certain" of downside this week and being that we were so overbought...can you share with us how you specifically traded the put signal because I know that you sometimes hold out for bottoms or tops of your DOW projections and sometimes you grab your profits and get out...
The market struggles at 000's. I bought and sold the 490 11 times in the past 5 days.
>
> I sense that this week you held out one position for large profits while you scalped other positions using another account...or maybe you purchased another strike price as well and held one longer than the other...did you do something like that?
Always the same strike
>
> Also, I noticed that when the DOW hit 9800 (magic number and good support)...the market bounced nice...giving a trader an opportunity to grab and easy .70 on the 495 call...would you or did you play something like this too?
Absolutely.
>
> I love it when you share with us how you specificaly played the market...it helps me develop strategies in the future...
>
> Anyway, nice job again on the signals this week...you were right on...