June 22nd, 2011

Is That A Right Shoulder We’re Beginning To See?

In my last post three weeks ago I talked about the technical supports that could act as breaks on the the market’s descent. In particular, I pointed out that

“…there is a potential neckline at around 1265, the low in March. Should the market touch that trendline then 2/3 of a potential head-and-shoulder reversal top would be put in place.

A cross by the Index under the 200-dma would indicate that the trend has clearly turned bearish for the first time since 2009. I don’t think that will happen. I still have faith in the resumption and successful completion of the “mid-term election cycle” market that began in November and, if the market follows the historical precedent, should end at around 1500 by year-end. But, I must confess, I’m going to get more and more cautious if (as) the market approaches that 200-dma.”

Fortunately for us who are of the “bullish” persuasion, the market stopped falling last Thursday with an intra-day low of 1258.07 and a close of 1267.64. Since then it’s been almost straight up with a close today 1295.52. I included the following chart in the Weekly Recap sent to subscribers this past Sunday:

The above chart shows:

  1. huge volume spike which seems to come regularly during options expiration triple and quadruple witching days. Interestingly, the past three triple witching days (December 17, March 18 and this past Friday) saw the market advance for the next 20-30 trading days.
  2. Will it or won’t it break below the 200-dma and the neckline? I hope and now don’t believe it will. I think we’re going to see the market attempt to form a right shoulder of the emerging head-and-shoulder reversal pattern. If it does, that will be our opportunity to lighten up further at more favorable prices. And finally,
  3. Symmetry would bring the market back up to around 1340, 5-6% above current levels, over the next few weeks. At that point we’ll find out whether we’re out of the woods for the next leg up or reversing again and put the final nail into the head-and-shoulder formation.

One additional piece of the puzzle for all those who follow the Lunar Theory as it relates to the stock market, last Wednesday was a full moon and the beginning of the bullish phase of the lunar cycle and conveniently coincided with the end of the market’s slide. But don’t get complacent, a new moon arrives on Friday, July 1 and could mean the end of the current bounce and the beginning of another bearish period.

April 23rd, 2010

Cruising Up The Highway

Wanted to let you know that there won’t be a blog post on Friday not because of the market but because I’m going to be heading North on I-95 (honk if you see me drive by).

If anything especially interesting develops tomorrow or the weekend, I’ll catch up with you on Sunday evening. Otherwise, I’ll be back on Monday.

By the way, in case you’re wondering, I don’t believe the market ever turns on a dime, I have confidence in the stocks in my portfolio and therefore, rightly or wrongly, don’t use stop loss orders in the thought that they provide some form of riskless protection.

Hold down the fort in my absence. I’ll be with you in spirit as I tune in to Bloomberg and yell at CNBC on the car’s Sirius satellite radio.

June 4th, 2009

Fear of Outliving Assets

I’ve been watching the market from a distance again due to travel. This time the travel was for something wonderful – my father’s 97th birthday (I was last here in February when my parents celebrated their 70th wedding anniversary). Both are still in possession of all their faculties and able to pretty much take care of themselves.

Many assume the beneficiary of great genetics; I see the risk of outliving my assets. So actively managing my money is one of the driving forces behind my focus on understanding and developing tools for outperforming the market averages.

I still see a bull market being born but it’s still not yet more than a vulnerable and stumbling calf. I was surprised by the significant profit-taking in precious metals and commodities yesterday (while weak, the total market retreat wasn’t too large and was on lower than average volume). “One day a trend doesn’t make” so I still believe that momentum has turned positive. Being on the road fortunately intervened becoming more fully invested (I’m still at only 50%) but I’m expecting to be an aggressive buyer next week.

See you again this weekend.