Saturday, April 10, 2010


As the moonshot continues here I think it is very clear there is nothing even remotely slowing this down right now. The reasons behind moves like this or their internal components, become irrelevant when we get a momentum move like this. We have gone up about 15% just since the February low. I have repeatedly stated that 1235 was a lay up, that is only another 40 points which could happen in a day or two if we get a blow off situation.

One of the best trend measurements is the blue line at the bottom, a Larry Williams creation. When it gets into a horizontal flat lining type of look as we have now and had last year also as you can see, you just have to buy all the dips. It is indicative of a very strong trend. I do admit to also being in the camp that this is a bubble, and by most valuation measures it clearly is. However, we have certainly seen in recent years how far bubbles can inflate before they burst. Who knows how far this could carry?

One of the old adages on wall street is never short a dull market, and that definitely applies here. This is a dull market except for the last 45 minutes of most days. There is almost no intraday volume at all, then "magically" the last hour we rally to new highs for the day. This has happened such a high percentage of the time that of course it is not natural market flow. It does not really matter. The bottom line in trading is how much money you make or lose, not whether you are right or wrong or what your reasons for a particular view are.

One of my favorite things I have ever read was in a blog hosted by my friend Rich Toscano down here in San Diego during the housing and stock market bubbles. Some guy said that the people thinking stocks were overvalued were actually right and the markets were wrong. After I stopped laughing, which took an hour, I realized this is the problem most people have. They refuse to understand that the market is always right and if you are in disagreement with it you are the one who is wrong.


Wins and losses are tallied daily in the markets, if your views are contra to what is going on with actual prices you will be cleaned out. Now there are obviously times when divergences develop and a contra view can ultimately be proven correct if you hold on long enough. Just looking at this chart above. With all that is going on today it is certainly not a crazy view to believe that this all will come crumbling down. Now as Barry is apparently surrendering now to Russia, it appears to be another move that will wreck this country for decades. Make no mistake about it, the damage he is doing is going to take decades to correct. At age 50 I will not have time for the fixes to happen, and will likely be moving out of this country to a democracy since we are really moving away from being one. Ironically there are other countries in Europe that seem to be moving towards democracies as we move away from being one. Italy in particular, a place I love, may be my landing spot eventually. Another mil in the bank and poof I will exit this trainwreck he is staging. If I am wrong and the next administration can undo alot of this I can always move back.

With all that in mind though, the extension of that logic is that the stock market should decline if all that is true. There is no precedent for any of this, but the scenarios I can find where societies forms of government were transformed, do not show stock market declines. As I have written about before, there are so many other problems in the world right now economically, that even though we are being weakened by design, we are still the strongest except for maybe China. The market in it's price structure is not telling us that any of these big picture problems are daily issues here yet. We are getting a lift off across the board in alot of asset classes right now, and there does not appear to be a reason to step in front of that yet regardless of your macro views.

Alot of what is happening to me reminds me of my old days in the school yard. You have a kid who runs his mouth constantly, and everyone tolerates it to a point. However, he pushes it too far, then all of the sudden some discontent starts to boil ( this is happening now ). Eventually somebody stands up and calls him out, he mouths off in response. The next predictable step is he gets his ass kicked and is physically forced to stop being such a jerk off. That is where this country is heading, and probably although a metaphor, how all of this will get stopped. The uprising will have to become so strong that we get on the verge of another revolution or civil war. He is hurting alot of people, and just taxing people like me to pay for all of it is going to at some point get a pushback beyond what he can squelch. Barring that the F you I won campaign will continue onward. The arrogance of this guy and his flunkies is incredible, unprecedented in this country. It is going to take a long time for this to happen, so there is no need to assume that tommorrow all these bad things will crush the stock market. They will not. If it gets close they will buy futures with all they got to keep it up here.

I think we have to look to the May - July time zone now for a potential top in the market. Seasonally that is when most highs are made on average. There also has been a tendency historically for years ending in 9 or 0 to feature major tops in the market. I will be looking for signs of a shorting opportunity either in the 1235 zone or beginning in May, not likely before that other than a short term trade if one of my patterns shows up. I exited all my stock shorts yesterday, and even though more were losses than wins, they overall actually had a small profit. A miracle quite frankly considering how wrong I was about the short term decline I thought was here. I did state in here I was light on the short side and that was obviously a good judgement.

It does feel to me that overall the economy is getting a little bit better, and I am not one to fight the wave that is underway right now. I do like the fact that the intermarket relationships that had been so closely linked have finally decoupled and markets are moving on their own fundamentals again. This alone aside from anything else tells me things are getting better. It was panic that started that linkage to begin with. The US Dollar is looking good, and is getting close to this pullback buy I have been waiting for.

If this trade winds up being successful it will help boost stock prices further. Ideally we would go down one more week on this, but I am looking for buys right now in this market. We got clobberred here yesterday so maybe that gives us a little more downside movement. Let's look at the world's favorite market.

Recently I had commented that I was not sure which way this market was going, but I thought it could have a nice move. That move has been upward, the 3 billion market bulls in the world have been right. We now have an interesting juncture. The top panel has one of my favorite sell signals, the middle panel does not confirm, but the longer term bottom one does. Entries from these signals require lows getting taken out, so that would take a big move. Also, the daily chart is going straight up, so no short entry in sight there. This weekly chart just tells me to look for a potential short entry up in here.

The nice thing that has happened in this market for the bulls has been that the incredibly overbought situation that was in play at the high, has been worked off without too much technical damage being done. I made a large amount of money shorting this at that peak and at various times on the way down. Then had a nice long in the area of where that low was. This has been by far the market I have made the most money in over the last year, so I just root for continued movement. I do not care which way. If you are long there is no reason to exit here. However, if a weekly low gets taken out with my sell signal in place, it would be time to exit any longs. This sell signal often triggers large moves unlike some of my very short term ones were moves of just a few days to a week happen.Until that happens though,the path appears to be up here.

Good trading to everyone

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