Dumpity, bumpity, dumptity…

2010-06-22-induThese are times of high anxiety for investors who lack a compass and a barometer.  If you have no instruments how do you know what to do in a storm — which is what we are in at the moment.

On the other hand if you have a method for analyzing the market which sets out clear signposts you can watch the snakes bite each other to death with some (if not a lot) equanimity.

Magee’s methods offer us that compass.  It has been pointing East for some time, but over the last few sessions it has begun to point North.  And the market has not yet got to those coordinates (9729) which would have told us that the ship was going down — or going South.

We have called the pattern above the dumpity etc because it has seemed to us to provide a way to identify the end of a downwave and increase our commitments to the market.  There is no guarantee of this, of course.  Just as there is no guarantee of anything — even death and taxes.  (Ted Williams is involved right now in an attempt to disprove the first in a very cool experiment.  And Hedge Fund managers have proven that taxes can be manipulated out of sight with the assistance of their toadies in Congress.)

2010-06-22-spxAt the moment we are betwixt and between — the May high and the June low.  While it is a death struggle between bulls and bears it looks to us like the bulls are winning, and the penetration of the dumpty trendline is a positive buy sign for the moderately aggressive investor.

Sell in May and go away?  Those who mechanically obey these old dictums are as unenlightened as buy and hold investors.

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