So, the best “news” the free world has received in the past decade, the death of OBL, was the trigger for a vicious sell off in the market’s leading sectors. Sure, silver was parabolic, margin requirements were raised five times, etc. But look at the entire commodity complex. Do you think leveraged speculators are responsible for insane prices not related to supply/demand or are we simply Bernankes puppets just doing as we’re told? Think about that for a second.
After last weeks Bernanke presser, everyone was convinced that the primary trends that were underway would continue past the extremes they were already reaching. But clearly prices were at demand destruction levels and the momentum buyers/chasers were the bagholders. When something goes parabolic, no matter how awesome it looks, it is time to sell, not to buy. Try and remember that the next time nasdaq/housing/commodities/anything moves straight up.
The conspiracy theorist in me wants to say that the powers that be decided to put on their “Whip Inflation Now” pins and manipulate prices lower. While a bit of that may be true, I bet some truly smart money has been liquidating throughout the latest extension of the parabola in prices as they are unsustainable. Of course, the change in trend brought everyones trigger finger to bear and this weeks selling is as historic as the previous weeks upside party. To find major support, simply calculate one-third to one-half of the recent gains as your first and second buy/cover level if you are a “roulette” trader.
On the equity front, the major indices broke above a double top and has appeared to have broken out. But it may very well be a “Wyckoff Spring” (look it up) when everyone leans the wrong way before a vicious reversal. Interestingly, almost every reversal and pullback over the past two years has stopped at the latest primary breakout and the uptrend has resumed. A major top or bottom is made when the index/equity/commodity in question moves briskly and in a substantial percentage away from the top or bottom. So far that has not happened yet but what makes this pullback different is the broad draw-down of most leadership stocks. That is clearly a warning for the future performance of the overall indices.
Our strategy has been to be long mostly boring stocks. While most folks are now walking around like zombies because they are down 30% in silver in a week, my Intel (long at 18) is doing just fine, thank you very much. As the market corrects I will have a few more of those low-risk, boring stocks to buy and look to quietly make 30% over the next several months. My one and only prediction for this year is that it will closely resemble last year in its technical picture. So far, so good.
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Thanks for the fundamental update and tech. forecast Scott. I saw a graph the other day that matched commodities with the US’s wars. Current late ’10 prices have recently returned to a century old resistance region. Whether, and what effects, this will lead to (a full on bull?) this year or next decade is my question for you? I cannot see Obama letting the market sag in any direction as he’ll need to pull a Clinton exhibit A that he’s economically savvy and qualified (never mind reality).
Remember this morning when you said there would be a dollar rally that would rage everyone? Well played, sir.
I say so many things that sometimes I forget! But I do remember that…
Scott – you called this.
You said it. And you wrote it.
The naysayers are nowhere near now. Wish I paid full attention – I did scale back somewhat based on the sheer ridiculousness of my gains, but I still hold mostly boring stocks as well (like CDN banks), so my losses are muted. The only losses I suffered were the chase the puck moves that I allocated play money into. And man did those ones every BURN me! I need to focus and get back in the game. Stick to the bread and butter on the great buying opportunity days.
First, thanks for the recognition.
Second, I make a conscious choice to play it safer in the midst of obvious insanity. During insane times, the disease is infectious, even smart folks are affected.
I keep my risk low because for all the fun of the upside, all it takes is a week like this to wipe it out PLUS MUCH MORE.
Everyone likes to go to concerts but only some enjoy the mosh pit.
“all it takes is a week like this to wipe i out ” ….And one day for it to come back with monster gains
Buy buy buy until the end of July
Try Devildriver for moshpits. Saw three taken out (no strechers – minimize club liability) clenching their faces with hands in Ventura, CA (broken noses MeThinks).