More betrayal of principles and discipline

We capriciously moved the stop away from the market in the S&P.  Of course it is necessary to do that for the Industrials also, as that is our usual picture of the market.  So we have recomputed the stop from the Basing Point in January 09.  The significance of these recomputations is largely theoretical.  That is, the new stop is our analysis of change of trend to bull market.  We consider this largely theoretical in that following the principle of natural hedging and increasing capital commitments in successful trades our readers should be either largely hedged now or perhaps even net long.  The formation here is certainly interesting — perhaps a bastard Kilroy (H&S) bottom with mutated hands (shoulders).  We remain skeptical.  But.  Note that today’s action is a breakout signal.  It could be stronger and following days will prove it valid or not.  There is a measuring implication here.  Measured from top to bottom the formation is 1845+ points deep, which following conventional measuring conventions (yes, we hate them) would give us an objective of 10,160.39. That would take out our stop.  If this appears imminent we will look at the situation again.

To what is this blind rush to bullishness due?  We think there is a form of giddiness floating about the market — the feeling that this is just another bear market and it’s over and it’s business as usual.  Too bad we don’t have little emoticons for raised eyebrows.  (Visualize raised eyebrows.)  As you no doubt understand we are not convinced.  But the momentum  is running up and standing in the way is not a good idea.

Stop moved back based on January high.

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This Post Has 2 Comments

  1. sean.reynar@rbc.com

    Does volume have any bearing on your analysis. Volume seems to be decreasing and lighter on the up days versus the down days. I assume this is a bearish factor.

  2. WHC Bassetti

    Frankly I have yet (in a long career) to make any money on volume. Literally every volume situation to me is unique and must be evaluated at the time. I think if you trade the price volume will take care of itself. I save an enormous amount of time by not trying to analyze volume.

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