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Thursday, January 07, 2010

RUNAWAY TRAIN



As much as any wise guy who thinks he knows something because of some fancy oscillator, and some great trading knack can say about how overbought and extended this market is, it keeps on rolling along. This market move is so unique in so many ways some of which I have reviewed in here. It is impossible to guess accurately if and when a correction will begin. This is what I call a running market, because it just keeps creeping ( running ) along without any even minor stumbles.

Oscillators no matter how you construct them, will often diverge often during moves like this and you just have to get that finger off the mouse. There is no sense feeding money into a brokerage accounts hands because you have a momentum divergence. As you can see from the momentum oscillator at the bottom of the chart, every minor dip into oversold has been an instant big win for buyers. There was one trade that would have been a loss that I have marked, so 10 out of 11 wins, not a bad ratio.

Of course it always looks so easy after the fact, and I have not done many of these pullbacks myself. We can argue about how the government is manipulating this market, and they probably are in ways we do not even want to know. That is really irrelevant. What matters is the trend, and it is clearly up with no end in sight. We do have the NFP report tomorrow, but with a market this strong, even if we were to get a dip on it, it will probably be immediately bought. What typically happens with these running markets, is that they eventually have a huge large range bar out of the blue that takes out several days of lows and closes weak, ending the party. This day will come out of the blue, so trying to time it I think personally is a waste of time.

I am continuing to trade stocks from the short side and doing well doing so. There are some underlying weaknesses that can be found if you know what you are looking for. In spite of how easy this uptrend looks, finding the type of short term buy setups that I prefer is not easy in this market. The greater number of setups are on the short side simply because there have been no pullbacks. We have gone through the one area that I thought would present trouble, 1122-1125. The next major resistance is 1235. Will we get there, nobody knows that, but it does seem like we will know.

It is prudent if you have been trading this well enough to diminish your long side exposure up here even if we continue upward. This is a house of cards that will give at some point, and there will be no notice when it happens. What the socialist government is doing now is going to matter at some point, and it will not be a public service announcement telling us when to run. Ironically if you look at other countries where they have changed their government to a socialist one, their stock markets have not crashed. However, they were not world leaders like we are/were. As a result when they changed their markets tended to follow the leaders ( our ) patterns, hence they did not collapse at all. The difference is, that this is a potential change in world financial leadership, so I am not sure the research means anything. There has not been a prior instance I can find where the leader intentionally removed itself from the leading position, which is what it appears we are doing.

It is possible they are intentionally weakening us, but not to the point where we lose the leading position. If this is the case, it is a brilliant plan to gain power over the people. We will never know if that is the case anyway. Alot of other countries actually have larger problems than we do.

Uncharted waters - be careful shorting stocks right now

2 comments:

robert said...

Great post - and great writing style.

Chris Johnston said...

Thanks Robert