You knew we were speculating about the upwave, right? We have been hitting bottoms with such regularity lately that we got too smart for our own good. This chart is, of course, miserable. Maybe Monday will cheer it up. After all those poltroons we call politicians did pass a stimulus plan so money will be gushing forth from Washington. And none too soon. Every economist we know (except the Cato Institute guys and we can ignore them now) thinks it’s not big enough. That’s what we think too. There will have to be more. But the fact that Obama can move Congress at all with an obstructionist conservative reactionary Senate minority is positive in itself. Few observers really credit the ability of 41 senators to road block legislation. To have gained support from 3 “moderate” Republicans and break the logjam is really quite amazing. Not one Republican representative voted for the package. Talk about post-partisan.
We think this sets the stage for more direly needed action, and we think the market will cheer up at this prospect. Note that this is thinking, but we might characterize it as economic — or socionomic — analysis.
In this context we present the present analysis of the Industrials.
You will note that a new Basing Point is indicated. This stop really is for very aggressive traders. Because we don’t really think taking it out would represent a change of trend. We think the previous stop is the valid one. The problem of course here is that we are in a sideways trend and sideways trends always do nasty things to systems, even a system as good as the Basing Points system. Adjusting stops like this, based on experience and chart analysis is what we regularly admonish our students to do. Knowing when to temper a good algorithmic system with further chart analysis is the mark of a good analyst.
One way to use this new stop would be to start scaling out if it falls.
There you have it. Ever the enemy of black and white reasoning and comforting certainty we remain your faithful correspondents.