Eddie Van Halen and the Stock Market

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August 17, 2010

I know the title of this post sounds like a children’s story that comes with a flask of Jim Beam and a prosthetic hip, but I have a point.

Eddie Van Halen is known for his great guitar skills and ability for creating and inventing new ways to play sounds on the electric guitar. EVH was proficient in the use of effects as well. One of his most important effects is delay. Delay allows a guitarist to play ahead of the music with the sound coming out of the speakers on a predetermined delay that is set on the effect. Eddie uses this when he does his “tapping.” Its a great technique and leaves the listener wondering what and how he does that, yet the music continues onward.

The market also constantly creates and invents new ways to confuse people out of their money.
The market also incorporates delay as one of its techniques in confusing people.

The death cross can be a delayed effect. The Hindenburg Omen can be a delayed effect. Like I’ve said before, I like having other things line up with my signals, which are currently short.

Currently this Hindenburg Omen nonsense is the talk of the town. Forget the name of it, forget that people associate it with a crash. Forget the idea of a crash. Just don’t forget that things are breaking down and gold is breaking out. That shit doesn’t happen just because.

-Death cross
-Hindenburg Omen
-Econ data shitty
-China slowdown

Look, I’m as bullish and as bearish as my signals dictate. If they turn upwards with price, I’ll put on my bullish cape and head in that direction, but right now I won’t do that because its not fact. (checked the futures 2:41 AM est – looks they are up – they can suck it).


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  • http://zentrader.ca zentrader

    I agree that overall things are bearish but I actually bought some longs today, expecting a bounce. You think we're going to go straight down?

  • http://www.stockrake.com StockRake

    Most likely not straight down, but we can never see what is on the right side of the chart. So just in case….However, seasonally its just not optimal for this type of move to happen and the market is due for a little screw over before the real move aka delay.

    I make these posts so I don't chicken out of the trade when these little counter trend moves happen.

  • Bill

    Nice post. I have noticed the same thing many times and I have equated it to the “delayed check raise” move in poker. Where when you are trapping with a big hand you don't check raise on the flop but wait fot the turn to do it. The does this all the time. For example I had a short-term pattern I was watching that called for a big gap up and run day on Monday. So the futures started rallied into the European open and it looked like all was on track and then WHAM they got smashed and we gapped lower. Confused the heck out of me until I realized that it was probably the “delayed check raise” move and the gap up and run day would come Tuesday instead. We'll see if that happens… I agree with you about the bearish intermediate-term but ideal would be to kill all the bears first with an Op-Ex squeeze week…

  • Bill

    Yep looks like it was indeed the old “delayed check raise”… This market sure loves to mind screw traders. Based on pattern match today should be a trend up day, and then choppy grind higher into Friday expo day. I am looking for 1860 min, 1900 average, or 1940 max upside target for NDX based on pattern match and for the top come in this Friday or next Monday. Then we tank hard to new lows… All IMHO, FWIW etc ;)

  • http://www.stockrake.com StockRake

    Probably. Yeh its going to be wild that would coincide with all recent gaps being filled?

  • Bill

    Minimum target of 1860 NDX tagged. Being Op-Ex week we might be flying from San Fran to NY with a layover in Houston mid-week. So, while I think this squeeze isn't yet we will likely see a shakeout to the downside tomorrow before upside resumes into Friday expo day. Best guess is we topped at 1860 or eek out one more pop to 1875 then pullback to 1830-40 Wednesday then final run to 1900 into Friday or Monday. Extreme bull scenario would entail no pullback Wednesday and just melt-up to 1940 max target by end of week. Began scaling into shorts at 1860 and will continue to scale in more if/when higher targets are reached.

  • Bill

    OK, now we got the pullback to 1830-40 area I was expecting off the 1860 resistance. Next stop should be 1900 by expo Friday… Then down down down… TWT.

  • Bill

    call me crazy but I still don't think this countertrend rally is dead yet. just bouncing around between 1860 res and 1830 supp. i still think 1 more leg up to 1890-1900 to finish it off… but since we did hit minimum pattern match target of 1860 we could just roll here, so holding onto short and hoping to get a chance to add more at higher prices. if we roll here after only hitting minimum upside target that would obviously be a very bearish sign.

  • http://www.stockrake.com StockRake

    It would be very bearish indeed if we roll over here. I could see some futzing around this whole week closing no higher than we've been already and rolling next week.

    Market needs an explosive move upwards to ruin the down trend imo such as a gap and go. At least that is what would happen if we were in an uptrend. However, now that the market is exhibiting down trend characteristics it should start acting unexpectedly weaker.