Monday, September 20, 2004


Most pundits in our industry use the phrase Fear and Greed to label the poles of Sentiment in investing - I prefer the kinder, gentler terms of Fear and Hope. I also firmly believe that it is a Technician's duty and benefit to examine the media heuristics and disciplines that govern our trading. For example - trading stops. Should one place stop losses at a certain percentage from the top, as IBD dictates, or use our Support lines and Moving Averages, etc.? I recently did a small sampling of my trading accounts (IRAs) for 2004, because I always had this paranoia that I wound up selling at the very bottom of the down cycle the Pain Point. As it turned out, of the 10 losses I sustained, 9 of them returned to my buy point and ran higher - to the tune of several thousand dollars. As the lone stock was a Gold stock, it validated my stock selection process in which I should have had more confidence. As a position trader I do not recommend buy-and-hold, especially in this environment, but an examination of Fear's "tipping point's" patient expansion needs to be addressed.Another area of Behavior worth exploring is whether today's investors are acting on value, or re-acting to forced moves of having to put money into our stock and bond markets. Some of these motives are historically low Money Market/CD rates, foreigners receiving Petrodollars, "outsourcing" dollars - foreigners' dollars from our record import/export deficit. Barron's mentioned an observation of W.D.Gann that the date of the Autumnal Equinox - @ Sept.22- has coincided with the tops in 1929, 1987, 1997 and 1998; there were also cycle reversals upward, as in 2001 after 9/11.
This week's Indicator extremes begin with my record high Cumulative Adv./Dec. number, a Bearish divergence with the DJIA turning down off the downward Trend Channel @ 10,400. New highs to new lows reached nearly 10:1 on the NYSE for the third week in a row. The McClellan Summation Index (ratio-adjusted) at 960 is at the highest level since the recent Feb.6 top of 10,626.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Zero (IN)Tolerance

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