Bossa nova, nouvelle vague, new wave (wince)…

The Japanese probably wince at the word wave.  And so do we when we think of the their tsunami.  But while the sambistas are dancing away and the French are assuming world leadership we are looking at the market and feeling that a wave has just exhausted itself, and a new wave is beginning.    This is akin to a doctor listening to the heart.  A matter of educated opinion.

There is no opinion or subjective judgment involved in noting that a new Basing Point has been created by the downwave that ended March 16.  Creating a new stop at 1174.  The upwave that started that day is stalled at the old high — not just in the SPX, but in the OEX, and the Dow, while the Russell 2000 has made new highs.  We pointed out a while back that IWM represented a market worth following.

There are certain observations that can be made about the market and certain which cannot.  You can’t say that the major indices are just stalled and will shortly make new highs — unless you are Cramer.  You can say that the present trend tends to continue and that’s the way to bet.  You can also say that good technicians don’t exit until there is a confirmed change of trend.  That change of trend is now as illustrated at 1174 — in our opinion an excellent placement.  Note the proximity of the trendline to the stair stops.

When the SPX and the Dow make new highs we will be adding on to our profitable (very) positions in this area.

This Post Has 2 Comments

  1. Mark

    I am a little confused, using the 3 days away rule, I put the last basing point at 1294.26 (on $spx), the low of 2-24-11. The 3 days above that day’s range are 2-28,3-03, and 3-04. It seems that either this is a mistake (should not be a basing point), or the basing points (and stops) are being set lower, which defeats their purpose. What am I missing?
    Thank you,

  2. WHC Bassetti

    You raise an excellent point. A rigid use of the procedure might lead you to that point. I didn’t even look for a BP there because there was not enough of a downwave, and, as you can see subsequent price action made a more proportionate downwave and furnished us with a much stronger BP. Obviously a qualitative judgment. Nonetheless excellent close observation on your part.

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