Blow Off Top – Retail Bagholders

I’m throwing this out there now – more so as a warning to newcomers.

My “risk barometer” being the SP 500 / Dow Jones Industrial Average is cranked about as high as one can imagine – given the current global state of affairs. We are now looking at levels not seen since the highs, prior to the massive crash in late 2007.

One can only assume that right around now, every retail investor on the planet has heard of the “massive upswing in markets” and has just as likely received word from their local shyster (ooops… broker) that now is a fantastic time to buy – as to not “miss out” on the opportunity to make a quick buck.

Looking a few days / week out – one could very well see what I refer to as a “blow off top”. A market phenomenon where large numbers of retail investors chase prices in a frantic scramble to “get in” before the opportunity has passed and the ship has sailed. Unfortunately this is right around the same time that Wall Street is unloading its last few shares (at insane premiums) to the poor unsuspecting newbies – blinded by greed, stumbling over themselves to snap up whatever shares they can.

I’m not suggesting their isn’t money to be made (seeing market leaders such as Apple down 55 bucks looks like a buy opp to me too) but I am putting out a strong reminder that – this is how the markets work. You are the last to buy (at the top) and then will generally hold (until you can’t stand it any longer) only to then sell at the bottom. The big boys will “buy your fear” and “sell your greed” all day long – as retail investors continue to do what humans will do.

Does this at all sound familiar?

Take heed….watch these markets like a hawk here at the highs….thank me later.

10 Responses

  1. schmederling January 24, 2013 / 9:58 pm

    Hey Kong…. well USD still working on maing it’s move down – however there cannot be much left maybe a couple days or mid next week? I have started to scale in positions short usdjpy tonight in specific points and will start to ladder in. Gotta be close not… 92 is one of my main staring points & then little steps from there. With Japan not starting their paper games until 2014 – however I have a sneaky feeling they will start slowely under the radar. Hence why I will start off slow… one lot at a time and wait & see.

    Can you share you thought please?

    • schmederling January 24, 2013 / 10:01 pm

      Sorry – just one small note…. I do think the we are overbought…. however many are thinking the same thing… even on tv. Usually it happen when least expected. Now we should get a pull-back soon and then March forward… I’ll send you a note on something…

    • Forex Kong January 25, 2013 / 6:51 am

      Yes USD moving exactly as forseen / suggested – but (and not surprising) several currencies still not playing ball. Mostly just EUR movement here.

      I am still on the fence as to the degree of the next move – but am inclined to see something dramatic as perhaps we get the “blow off top” in risk – before a larger market turn downward. Things seem to be pointing in this direction but I really can’t say for certain as I need price to continue to guide. JPY has to correct obviously – but I won’t be playing a turn until Ive seen far more convincing price action.

      I like where your head is at – but would still suggest patience – and yes….small small little orders as you “sell around the horn.”

  2. zkotpen January 24, 2013 / 11:23 pm

    Kong — I saw your post #295 at Gary’s blog (1/24 portfolio change)… I am trying to decipher this, along with Thursday’s action. Both FXY and FXA showed substantial declines, extending beyond NYSE trading hours, then appear to be flattening in the overnight.

    If I understand correctly, you are looking at FXY to decline to $107.22, followed by an increase to around $115 over several weeks?? I see the Yen hit a low point at about 5:50 pm Mexico-time and appears to have risen a little and leveled off since. Could this represent the bottom, and therefore a good entry point to go long on the Yen?

    As for FXA, do you see yesterday’s close at $104.80 as a bottom, for buying back in, or do you recommend waiting for further Aussie decline below that level? In other words, are we getting a bottom here in the overnight, at around 10 pm Mexico-time?

    I bought in to FXA two weeks ago same as you, just before you went on your fishing trip. I missed your selling point, which was the maximum profit in the shortest time, but I did hang on and sell at a modest profit on Tuesday — before FXA’s recent drop.

    Thanks in advance for your insight!

    • Forex Kong January 25, 2013 / 6:40 am

      I generally don’t “switch hit” in nearly such a knee jerk / v type manner guys… can’t recommend getting “Long JPY” – until…..well…I get long jpy! My entries need to see several of the smaller time frames reversed first… it’s usually within a day of reversal – but entry is only made once price direction has begun it’s shift….and I think you guys can see how accurate it is.

      I can “assume” these levels look like good places for reversal based on horizontal lines previously drawn on my charts – but can’t confirm it until the actual “price action” shifts…and my little bells start dinging me at the computer. Kinda like fishing – and you feel your line starts to get tight.

      I don’t trade the currency etf’s at all (no fxa either so..not sure where you saw me get long there zkotpen – I trade the currency pairs related to AUD) but can say the recent “slide” in AUD would have me a bit perplexed too. If indeed “risk on” pushed forward I’d have to see it as a buy opp around 104.73 yes.

      Let me get at it here this morning – and lets touch base here in an hour or so.

      • zkotpen January 25, 2013 / 7:37 am

        Thanks for your patience Kong & I look forward to your update, as I’m sure your other readers do.

        Meanwhile, I see the Aussie slid below the indicated 104.73,… looks like right after you posted the above reply. Same with CAD. But while those two are bouncing near this daily low, JPY continues on down. GBP is off, Swiss Franc, too. All down versus the USD. Then, there’s the EUR, showing huge strength against the dollar, and, presumably, everything else.

        So, I am starting to get a little bit of a feel for this, though still unable to draw definite conclusions, as I’m sure you can tell.

        As for my mention of the ETFs, I thought you referenced FXY, the JPY ETF, in your comment on Gary’s blog, comment #295:

        I’m definitely fond of the Kong image in the Forex markets!! BTW, I took a couple of pics of the village monkey here in Hua Hin, Thailand. I had to bribe him with nuts, then he got aggressive and grabbed a tourist’s breakfast! Not quite a gorilla, but a bit less friendly than your typical Mexican Howler Monkey, which I’ve also had the pleasure of meeting up close, with camera in hand. Must admit, I love Palenque!

        Hope you are well & thanks!

        • Forex Kong January 25, 2013 / 7:50 am


          First off – it’s fantastic to have you over here – and I hope you will continue to post your thoughts as well as your progress in learning forex. Thus far I think you are doing great in starting to view the currencies individually – and trust me….the bigger picture stuff will come along quite soon. Keep digging in.

          I mentioned the ETF’s for those who “dont or can’t” trade currencies directly – I however – do not use them.

          I have debated a move to Thailand several times , and am envious of your incredible location – wow…..gotta love those monkeys!

          The moves against USD as of yesterday / today are a little cloudy for sure…often these things don’t all move at the exact same time so – again – patience is a virtue.

  3. schmederling January 25, 2013 / 1:25 am

    Hey Kong….. magnificent call on the ” Risk On” call on the 23rd dead on my friend….. how long do you suspect they will last…. I’ll look…. this looks yummy….!!!!!!!!! 🙂

    • Forex Kong January 25, 2013 / 6:44 am

      Thanks Schmed.

      I am extremely pleased with some of the final tweaks etc on my shorter term tech / aligned with my longer term fundamental analysis. This time around I sat on my hands for nearly 10 full days – got my signals – pushed the button and more or less banked serious profits for a straight 48 hours.

      In the month of January alone – I’ve more or less paid the coming years living expenses. Lets keep on keepin one here – lots of opportunities out there.

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