Debbie Downers of the Dow

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I profiled the long-term view of Wal-Mart a few weeks back, and surmised that the stock was poised for a big move after over a decade of being “dead money.” You can see the updated monthly chart below, which shows that the stock has performed quite well since my post and is in the process of printing a strongly bullish monthly candle.

Turning to two other components of the Dow Jones Industrial Average, you can see that Disney has essentially been dead money over the past decade as well. To make matters worse, Intel has actually been in a downtrend even after its ferocious “Dot-Com” crash at the turn of the century. Disney has found the initial support you would expect it to after a straight down multi-month move to its median price of the past decade. Now, however, comes to the hard part for the bulls, as the initial bounce wears off and strong hands are needed to hold the line.

On a more constructive note, Intel is breaking out from a decade-long downtrend. There is still quite a bit of heavy lifting to be done, but a move through $25 should bode very well for long-term bulls of this bellwether in the chip sector.

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I posted that symmetrical triangle on the 5-minute SPY chart earlier to add value for you short-term guys. As you can see below, the triangle resolved with a big move lower. Recall that periods of compression often lead to periods of explosion, and on this particular timeframe that is what we have seen. For those of you focused on that timeframe, you saw a nice scalp opportunity.

Now, the broader issue for me is how this development fits into a more intermediate-term perspective for swing traders. As you can also see below on the second chart, the SPY is still coming to terms with the upper end of a broad multi-month trading range. I have been discussing this concept ad nauseum in my video recaps of late, that when you arrive in a virtual straight line from the bottom to the top of a trading range, the presumption is that we have some “work to do” at that level before there is the next big move, in whichever direction. This is simply my “going to the mattresses” concept applied with the chart flipped upside down, but the same thesis holds true. It does not guarantee any major top or bottom forever, but it does give you an insight into how your market posture should be for now.

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(Starring #12631 and PPT Member Marc David {of Marc David NO BULL BODYBUILDING Fame})

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Alternate Title: “As the Bernanke Twists”

You have to take several steps back and look at the big picture here. Stocks are still in a secular bear market that began back in 2000 with the end of an egregious bubble in stock speculation. Long-term secular bears, especially of this magnitude, tend to last at least 13 years, and can last as long as 20. If you know your history, then you know we had not seen anything quite like the dot-com bubble since the “Roaring Twenties,” culminating with the 1929 crash and subsequent Great Depression. Back in the early 1930’s, the stock market fell well, well below those 1929 crash lows for a variety of reasons.

This time around, we have somewhat followed the path of the 1930’s, but not quite. We have seen much easier monetary policies which supposedly have helped stock prices not completely collapse roughly 90% like in the 1930’s, although the debt and deflationary issues do, in fact, “rhyme” with that period in history. With each major and seemingly minor move that Ben Bernanke makes at the Federal Reserve, he is fighting a battle with the intricate knowledge he has of the 1930’s. His critics argue that he is living in the past and looking at the wrong issues, since liquidity is not the problem but rather solvency.

Either way, if you are a stock trader then you have to accept this for what it is–The man is waging war on a battlefield of a fight that took place 80 years ago, and we are all being dragged out, forced to fight in our uniforms and bayonets against an enemy that may or may not be a phantasm. Monetary policy is, and will remain, easy for quite some time. Bernanke’s latest gambit of “Operation Twist” coincided with the October 4th stock market bottom, with those lows holding firmly since then. Plenty of people saw Bernanke as playing hardball, but the market did not seem to mind.

When you take all of this into account, if you are a bear pointing to the weak fundamentals of the U.S. and global economies to support your case of lower stock prices, you are doing yourself a disservice by discounting Bernanke’s unwavering conviction to fight the demons of the 1930’s. Whether the two periods in time are truly similar is academic at this point, since the man with the power has given his answer to that question time and time again. The only issue for me is just how much “power” over the markets Bernanke actually has. With this latest twist in the saga, though, it is tough not to say that he is still calling many of the shots.

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