Monday, January 31, 2011

31 January 2011

 Short-term:  bearish trend seems to be slowing, but not reversed yet.  I usually like when this hits around 75% for a trend change.  However, you can see this has been rendered useless by QEII, much like other indicators.
 Medium-term:  rate of change is slowing again.  Could very well turn up.  This has also been rendered useless the past few months.
This hasn't been rendered completely useless because it still shows the strength of moves and helps give us timing.  However, its gravity defying climbs (not really strong, just trickles aimlessly upward) the past few months do slightly show that this is also losing its usefulness.

All in all, you might as well stop reading this blog.  Although, I have been successful identifying the bull cycle turning points, I have been very wrong trying to identify bear cycle movements.

My theory has always been that when you set the price of a good at too high of a level or too low of a level, supply and demand eventually takes over and causes prices to overreact to the opposite side due to overcoming mean-reversion and then some. 

This has been happening in housing. 

The diamond market is still relatively tight, but I would imagine that whole scheme will eventually blow up, given enough time. 

The stock market is yet another that has been successfully inflated by QEII.  This seems to be mainly aimed at shoring up confidence.  However, confidence is not what makes the economy go around.  Once the free fresh new cash is all used up, the bears will remain bears, the bulls won't be able to buy any more and everyone will run for the exits.  This is the ultimate problem with Ponzi/Pyramid Schemes, they always requires more and more capital to keep it going leading ultimately to currency devaluation. 

If this classic model applies, the reaction, if and when it comes, should be far worse than if corrections could have naturally come along the way. 

They will come to learn in the end, at their own expense, that it is better to endure competition for rich customers than to be invested with monopoly over impoverished customers.
Frederic Bastiat

Sunday, January 30, 2011

30 January 2011

 Medium term:  seems bearish
Short term:  seems bearish
Contrarian hold long short-term signal.  I usually don't share this one because it doesn't do much for me.  The purpose was to find stuff that is saying to hold-long from price action (as in the chart immediately above it) that has all technical indicators (MACD, BOP, MS, TSV) bearish.  Notice it usually spikes near bottoms (as prices go up before indicators), but can give a signal on premature bounces too - like in May.

Percent of stocks two standard deviations below 200 day moving average seems to be quite strong. 
McClellan's cycle indicator (middle works well for this) still trending negatively.  Peaks still very divergent from November and May.  Note that while the indexes can go higher and they have been, most stocks have not been.  That is the key takeaway.  I'm not trying to predict where the Dow goes (because its only 30 companies), I'm trying to predict where most other stocks go.  To be fair, they are influenced by the major indexes, but only to a certain extent.

And last but not least, I said sometime in December that I would create my own buying climax scan.  This happens when a stock makes a new high sometime within a given week and closes that five day period under where it was five days earlier.  In programming speak, High (within last five days) > High (within last 260 days) AND Close (today) < Close (five days earlier).  Anyways, last Monday - only run on Mondays, this scan produced 679 buying climaxes, the highest number by a factor of two that I have seen since I started in December.  I'd show you the data, but its so short that its not that impressive.

Tuesday, January 11, 2011

11 January 2011

 Check the middle area.  Typically it has a crossover before the overall index actually follows.  Another key takeaway if this fall holds (I'm honestly unsure if it will until we get a big down day), is that the peak on this cycle is less than both previous highs.  Very divergent from the insane indexes.
 Lower peak than November.  8 EMA over 20 EMA.
 Crazy oscillations and gravitation.  We have typically been "bottoming" once this crosses below 50% lately.  It is trying to again.
Seemingly very bullish (bearish for market) configuration for the percent of stocks two standard deviations below the 200 day moving average.  Divergent from the lithium infused indexes.

Best of luck

If we agree on everything, only one of us is necessary.
Dan Millman

Thursday, January 6, 2011

6 January 2011

Excel has been driving me nuts.  This is all you get.  The main cycle indicator (TSV oscillator for the McClellan Summation Index) I use seems to have hit a top.  It can continue sideways for a while if its wants to. 

I urged my parents to invest in gold/silver and gold/silver miners in 2008.  They finally decided it was a good idea to buy USAGX.  I think this change of heart lines up quite well with my opinion that they will be consolidating or falling (maybe 20% if we're lucky) for sometime.  In my opinion, this also does not bode well for the overall equity inflation trade.

Best of luck. 

Monday, January 3, 2011

Gold Versus Silver Versus Nasdaq Versus USAGX

Seems like the last time silver outpaced gold by this much was in 2008.  It looks like gold is about two and a half years ahead of the Nasdaq as far as performance goes.  Considering gold is more of a "fear" instrument - being the truest form of money, this makes sense.  Hope takes longer to build than fear.  Fear causes much quicker reactions.  Since this is two years faster over ten years, we can expect the bubble to end around four years earlier than the Nasdaq's.  The Nasdaq took 18 years, this should complete by around 2014/2015 if fundamental changes take place - likely a new monetary system.