August 22nd, 2009
This blog gets many “over-the-transom” visitors each time Cramer mentions the S&P Oscillator as his market timing tool because I posted comments several times last year when he claimed that the bear market had ended based on that indicator ….. and you know how steeply the market continued to fall until March of this year. So if you’re reading this because you landed here through doing a search on the term “S&P Oscillator” then “Welcome”.
As I wrote in “Strike Four Your Out” last August:
By my count, this past Monday will be the fourth time since February he’s mentioned it on the air or in an online article. Monday’s show was devoted to “25 rules that he says will help investors play the markets defensively to avoid big losses and keep their money safe.” Again, his timing was perfect. The show, though welcomed and probably 6 months too late, came the evening before a 2.8% up day on Tuesday. We always kid around – but perhaps its true – that Cramer is a near perfect contra-indicator. Whatever he says, do the opposite. Among the 25 rules for avoiding big losses was rule number 12:
“After a big run, get defensive. Check the S&P Proprietary Oscillator, a paid product, to determine if a stock is overbought or oversold. Plus or minus 5 is the key number to look for.”
The other times last year I wrote about Cramer’s mention of this proprietary oscillator were:
- February 15
- March 6
- May 24
- June 12
- June 13
Cramer admits he’s not a market timer but I have to tell you that I couldn’t disagree more with what he was trying to sell you tonight. The contr-Cramer trade is going to be a winner again. According to the recap on theStreet.com, Cramer said tonight:
“rallies are times for action.”….too many investors don’t trade during rallies and thus watch their gains disappear….He said investors shouldn’t let their emotions prevent them from doing what is needed during big rallies…..investors often let emotions sway them to hold on to their stocks — the exact opposite of what they should be doing. “The goal is to buy low and sell high,” he reminded viewers, “so when the market’s up big, it’s time to lock in some profits.” ….gains in the market are not really gains until the stocks are sold….the way to play big market rallies is to sell in increments during the rally. “Get the great prices while they last,”
How can he be so irresponsible? So many have been sitting on the sidelines, too frightened to put any money to work in this market. And now, when the market looks as if the market has finally succeeded in crossing the last major hurdle (the 1010 resistance trendline) before a sustained upleg, he’s out there telling uninformed, reticent, severely damaged and vulnerable individual investors to cash in a portion of their recent small gains and put it into cash – waiting for some pullback that he sees or hopes will come at prices lower than today’s close. You have gotta be kidding.
The market went essentially sideways following its 35% move up from March 9 to May 8 (beginning with that false head-and-shoulders pattern followed by the admittedly weak “Traders’ Remorse test of the successful inverted head-and-shoulder neckline). It’s now moving into a “vacuum” above that inverted head-and-shoulder base reversal pattern, the mirror image of the descent from the bottom of last years consolidation pattern of 1230 exactly a year ago (September 2, 2008) to 996 on October 7.
Have we driven those excruciatingly painful memories out of our minds. Everyone was throwing stock, any stock, overboard. There was no demand, only supply. Comparisons were being made against the Great Depression and the 1987 Crash. People were looking for places to hide their cash because banks and financial institutions were going bankrupt. And the market is ready to begin attempting to scale that void back to normalcy. And all voids need to be filled.
That’s why this writer believes that if there were any time to be in the market it’s now. I can envision looking back from next January and seeing a sharp upward move during which much of the money that abandoned the ship a year ago now is trying desperately to clamber back on before the ship leaves the dock. And the one thing “they” don’t want is you competing and bidding for stock against them….actually, they want you to sell them your stock at what we may look back on as ridiculously prices – just as we now look back on the lows of this past March as once in a lifetime sale prices.