BATTLE ROYAL

The Fly is not really human because he comes from the future where there are alien/human hybrids. He travels to his rocket ship by way of a space elevator. He is special. The rest of us, dare I say, are only human, especially me.

That said, I wish to first point out a great read from another blogger here at IBC, Chart Addict:

http://ibankcoin.com/chart_addict/2010/02/19/is-technical-analysis-for-idiots/

This story highlights the ongoing battle between technical and fundamental analysis. For years, nobody respected the charts because investors invested. Fundamentals mattered to investors. But that was a long time ago. Now, everyone is a trader, looking to catch the next move, up or down. For that, fundamentals matter little. Support, resistance, supply and demand is what matters–at least over the near term. That is the essence of what a chart is supposed to tell you.

I know about this battle because I helped bring it to the forefront. After the dot com crash, I started a service called “Hybrid Investors” that used both disciplines, merging technical and fundamental analysis, along with other factors, to make informed and low-risk trading and investing descisions. I have since taken my methods to a new service, createcapital.com.

Now, everyone uses the “hybrid” method of analysis. They say that you must use both to be successful in anything past the very near term. And they’re right. Charts are not for idiots, unless you don’t know how to decipher them. So learn!

Yesterday, the FED, in a surprise move, raised the discount rate. They did say since last year that the free money would end March 1st. So they are keeping their word for a change. The FED has been supporting and making a market in everything. They have been acting as the de-facto “specialist” for the capital markets. That cannot last. The handoff between nursing on the teet of the Treasury and standing on its own two feet is the next big risk for the markets. We’ve already had a 9% or so temper tantrum from Wall Street once the political pressure got too hot. The majority of the free money has to end. And so it shall–eventually.

Everyone feared this day. Yet the market opened down and is now up–without the wildness and volatility you may have been expecting. Yesterday I suggested a dip and then a rip. that is exactly what is happening regardless of the news. I would have been happy to get a pullback, but it is not ready to happen at this moment. There will be one soon, so be ready.

We are on our way to SPX 1120 and will get there shortly. Then I will determine if we should lighten up or not. Right now I expect to follow the discipline, but I remain flexible to adapting to the changing market condition and so should you.

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