435 Neros fiddle while the economy smolders, about to burst into flame

Posted on Oct 01, 2008 by in Letters

In a long (long) career in the markets in which we have experienced many crashes and dramatic market moves we have just lived through a week to remember. This week an almost 800 point drop followed by an almost 500 point recovery. And you know what? No new lessons. There is nothing here for the technician or experienced investor that has not happened many times before. The old worn lessons of the past are reinforced, and the old worn principles of technical analysis are shown to work once again. Magee method investors have been short the Dow all year. So they watch with interest as the "others" ("they") run frantically around like characters in a Breughel painting. (Garden of Earthly Delights) And, as Rome smolders threatening to catch fire, 435 Neros in the House of Representatives fiddle and pout and stand on their ideological principals. If it were a comedy we would laugh our heads off. But it's not. It's a tragi-comedy. Amazingly the half of the traders in the world (or one tenth) who are not being bashed to pieces are lusting to catch the bottom and go long the market. Speaking of the Bonfire of the Vanities. Dear readers do not panic, either way. Technicians WAIT for the bottom to clearly manifest itself. (Remember Enron?) There is no sign of a bottom. Capitualtion is a dish best eaten cold.

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