Brief supplement to the monthly report. Don’t expect me to make these weekly, just occasionally when I feel like it. Contrary to the November monthly trend report, on a weekly chart it is very bullish.
It’s shifting out of Oversold in slow stochastics giving a bullish signal, a bullish positive divergence in RSI was previously made (higher lows while stocks made lower lows), it’s shifted from bearish to bullish in the MACD histogram and now it’s gaining momentum and the parabolic SAR turned bullish this week. If the monthly signals weren’t so bearish and didn’t tend to be so much better than the weekly signals, I would be bullish here. But I don’t like to bet against the longer term trend. It’s like a train or cruise ship, slower moving, but causing tons of wreckage to those who get in it’sway compared to more of a car or speedboat. it’s the difference between the hot money moving in and out of the market (weekly) and the big money, the soverign wealth,central banks, government policy, longer term trends in global policy, major shifts and macro trends emerging, all within a business cycle that either expands or contracts,etc (monthly). The monthly charts are telling me a much different story. This weekly move is probably merely a reaction of the hot money against the grain of the larger forces at work. And when there are no more greater fools playing chicken in front of the train or trying to hit the waves of the cruise ship and you are the last man stuck in front of the train tracks or side of the cruise ship as it’s turning, you better hope you can get out with minimal injury. Then again, every now and then the unsinkable titanic sinks and the train derails, so the long term isn’t a sure thing, I just wouldn’t bet against it. The silver lining is that before the monthly trend changes there will indeed be this sort of reaction on a weekly chart, but there will also be this same type of move on a false move.
Everything on a weekly chart ripping bullish while everything on a monthly chart is bearish is very odd, but using 1937 as comparison, it makes sense that we could easily go higher over the next few weeks before we go lower. Probably being bearish just based on the monthly trend report is a bit stubborn. We are above the volume gap now and pushing against the 200 day MA as well. If you are stubborn like me, you added a bearish position here and will close it out tomorrow if we close the day above the 200, unless we open below the 200 day MA, then you will need to see another close below the 200 day MA to remain bearish. I take this line and if I close out the trade I will be looking for another opportunity to get bearish higher, perhaps at round 1300 in the S&P.
The more prudent thing would be to simply own a mixture of bonds and stocks, and when you are bearish limit your stock exposure to say 25% minimum and your bonds to 75% maximum, and when you are bullish 75% stock maximum and 25% bonds minimum depending on if you move with the hot money and institutional funds (weekly), the longer term trends (monthly) or even using The PPT signals for swing trades. History shows there is nothing wrong with always having a little skin in the game and always having a little bit out to protect yourself and give you capital to take advantage of opportunities.
Do as I say, not as I do. My heart is young and I say bring on the pressure. Pressure my be used to cook lobster and fry those who can’t handle it, but it is also what turns coal into a diamond and I’m not afraid of testing what I’m capable of. So we will see if come christmas time stocks are lower and santa turns my coal into diamonds, or if I’m just left with coal.Comments »