The power of triangles — so far…

Posted on Nov 21, 2011 by WHC Bassetti.

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It is not wise at all to ignore chart formations. The triangle we pointed out as the present dominant formation in the market appears to be working — or wreaking — its power over prices.  Readers have heard us disavow measuring formations over and over and disavow responsiblity. With this disavowal in mind the predicted downwave of the triangle targets 1138.18 — uncomfortably close to our trend stop, but still 7 points off it. That target comes from measuring the depth of the triangle and subtracting it from the bottom of the triangle.

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How the mighty have fallen…

Posted on Nov 20, 2011 by WHC Bassetti.

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The past six months have been one of the most turbulent experiences of our fifty years in the market.  The volatility, the false signals the naked mud wrestling (not co-ed).  It is no mystery to us why this is so.  Start with one of the historic bear markets fueled by two wars, a historic tax cut, a historic refusal to fund the wars, a historic refusal to take fiscal responsibility, a historic implosion of the housing market, historic unemployment, a historic refusal  to deal with the problem by a dysfunctional congress (except for their ability to make insider trades with impunity).

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Pennant shot down. Market shot down. Take a couple of shots of Wild Turkey…

Posted on Nov 17, 2011 by WHC Bassetti.

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Talk about fickle. We never sit on an idea or a position.  One of our concepts is that of the hairtrigger stop. Which means market conditions can chase you from a position like a hare fleeing a coyote. Today prices fell out of the powerful pennant. We are hedging our SPX longs. This may be percipitate — institutions are making every effort to drive the market higher and in these treacherous markets you never know whether they will actually close the market higher.

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What is the mystic explanation behind it all? Revealed here.

Posted on Nov 12, 2011 by WHC Bassetti.

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Why did the market not tank in October? Simple. It encountered strong support at the lower horizontal line. From 2010? you say.   Indeed.  These zones can have influence over years.  Magee said once that he had found a support line 13 years long.

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I.P.O. — Investors p.o.ed

Posted on Nov 11, 2011 by WHC Bassetti.

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We rarely comment on I.P.O.s. This is because we understand the essential mechanics of these deals.  They exist to transfer money from the public to entrepreneurs and Wall Street underwriters. Viz, Groupon, above. These deals are always priced at what the market will bear — meaning overpriced most of the time. Back in the 90s in the tulipomania I.P.O.s shot up like rockets on offereing day.  We later learned it was because of “laddering”.  That is, the sponsors sold pre offering shares to their fund and hedge fund buddies with the understanding that the buddies would buy more shares in the after market — rocket fuel boosters.

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