{"id":191,"date":"2009-07-27T18:56:38","date_gmt":"2009-07-27T22:56:38","guid":{"rendered":"http:\/\/www.cheapiv.com\/?p=191"},"modified":"2010-09-30T18:59:47","modified_gmt":"2010-09-30T22:59:47","slug":"trade-the-markets-7-27-2009","status":"publish","type":"post","link":"http:\/\/www.cheapiv.com\/?p=191","title":{"rendered":"Trade the Markets 7-27-2009"},"content":{"rendered":"

The run continued last week aided by earnings \u00e2\u20ac\u0153beats\u00e2\u20ac\u009d<\/strong> of significantly reduced analysts estimates.\u00c2\u00a0 There has also been a good deal of discussion around \u00e2\u20ac\u0153performance chasing\u00e2\u20ac\u009d<\/strong> and other concepts like \u00e2\u20ac\u0153have to be invested\u00e2\u20ac\u009d<\/strong> or \u00e2\u20ac\u0153can\u00e2\u20ac\u2122t miss this rally\u00e2\u20ac\u009d<\/strong>.\u00c2\u00a0 The \u00e2\u20ac\u0153market as an indicator\u00e2\u20ac\u009d<\/strong> theme also gained strength as did the references to algorithmic momentum trading.\u00c2\u00a0 This is all well and good and it\u00e2\u20ac\u2122s times like these that we\u00e2\u20ac\u2122re glad that we keep an open mind with regards to the market direction.\u00c2\u00a0 Sometimes it\u00e2\u20ac\u2122s good to remind ourselves that \u00e2\u20ac\u0153the market\u00e2\u20ac\u009d and the economy are two separate things<\/strong> and that there doesn\u00e2\u20ac\u2122t have to be a direct link at all times.\u00c2\u00a0 We learned long ago that nonsense begets nonsense in the markets and that it\u00e2\u20ac\u2122s better to trade it if possible as opposed to fighting it with research and logic.\u00c2\u00a0 Fortunately we\u00e2\u20ac\u2122ve noted on several recent occasions that the players have been \u00e2\u20ac\u0153monkeying\u00e2\u20ac\u009d around with key technical levels <\/strong>and patterns because: a) That\u00e2\u20ac\u2122s what they do and b) That\u00e2\u20ac\u2122s what can add fuel to movement.\u00c2\u00a0 It happened again last week as the DOW ripped through 9000 and then above 9100.\u00c2\u00a0 These areas were key levels at which we\u00e2\u20ac\u2122d expect to see \u00e2\u20ac\u0153pros\u00e2\u20ac\u009d<\/strong> run things to in order to force capitulation of all kinds, be it from shorts, or ancy wannabe longs.\u00c2\u00a0 We warned about the haze of the summer a few weeks back because we\u00e2\u20ac\u2122ve seen this type of activity in many summers of the recent past.\u00c2\u00a0 Lighter trading volume and the mass psychology of the seasons help to amplify the desired effect.\u00c2\u00a0 After all, it was only two \u00e2\u20ac\u0153Augusts\u00e2\u20ac\u009d<\/em> ago that DENIAL<\/strong> made its final stand on the way to the all-time highs in the DOW only 2 months later in October.\u00c2\u00a0 Please recall the \u00e2\u20ac\u0153Subprime is contained\u00e2\u20ac\u009d mantra that most of the \u00e2\u20ac\u0153experts\u00e2\u20ac\u009d were bandying about at the time.<\/em> This time we\u00e2\u20ac\u2122re being told that the recovery will start sooner rather than later and most people are acting as if the investing paradigm of the past 50 to 60 years will be the road to investor salvation yet again.\u00c2\u00a0 In fact, we\u00e2\u20ac\u2122re probably not too far off from the days when Mark Twain will be all too frequently misquoted in relation to \u00e2\u20ac\u0153buy and hold investings\u00e2\u20ac\u2122 demise being greatly exaggerated.\u00e2\u20ac\u009d<\/em> If our friends are able to goose the DOW back between 10,000 to 11,000 at some point in the near future remember what you read here today.\u00c2\u00a0 Those levels should sound ridiculous to you if you have an appreciation for why in great likelihood the economy of the near future is not likely to be one like those of the recent past but \u00e2\u20ac\u0153ridiculous\u00e2\u20ac\u009d<\/strong> could be the stock market\u00e2\u20ac\u2122s middle name at times if it had one.\u00c2\u00a0 We have to remember that our pals need to rebuild their franchises and one leg of which is still standing happens to be \u00e2\u20ac\u0153wealth preservation\/wealth management\u00e2\u20ac\u009d.\u00c2\u00a0 They fail to mention that really it\u00e2\u20ac\u2122s THEIR<\/strong> wealth that is of primary concern in both instances but in all seriousness that \u00e2\u20ac\u0153business\u00e2\u20ac\u009d<\/em> remains somewhat intact despite the fact that investors are open to change at this point in time like they rarely have been before.\u00c2\u00a0 The point is that an epic \u00e2\u20ac\u0153jam job\u00e2\u20ac\u009d<\/strong> to coincide with the recovery would be a shot in the arm<\/em> that could go a ways toward restoring the asset management model for profits.<\/p>\n

What we failed to mention above we\u00e2\u20ac\u2122ll mention here now.\u00c2\u00a0 The cheerleading has been tremendous as it always is and though the \u00e2\u20ac\u0153positive surprises\u00e2\u20ac\u009d<\/em> are many we\u00e2\u20ac\u2122ll choose to stay fixed on actual improvement in the economy.\u00c2\u00a0 The maneuvers that enhanced the \u00e2\u20ac\u0153beat the number\u00e2\u20ac\u009d<\/em> results may be fine for corporate accountants and shady CFOs but all of that cost cutting at the expense of what was formerly known as personnel is actually detrimental to the economy at large.\u00c2\u00a0 We still see far too many serious issues that we believe can retake the \u00e2\u20ac\u0153front page\u00e2\u20ac\u009d<\/em> in the not so distant future for us to simply \u00e2\u20ac\u0153buy and hold\u00e2\u20ac\u009d<\/em> style invested for the long run at this point.\u00c2\u00a0 We\u00e2\u20ac\u2122ll still trade any rally or selloff though!\u00c2\u00a0 Trading and investing are two different approaches from our perspective and the macro backdrop is much less important to the former.<\/p>\n

Our final note is that this type of surge is generally unsustainable and now that it seems, and we stress seems, that Cap and Tax and Healthscam may at the very least be postponed, and it\u00e2\u20ac\u2122s quite possible that \u00e2\u20ac\u0153gridlock loving\u00e2\u20ac\u009d<\/em> Wall St. might just \u00e2\u20ac\u0153sell on that news\u00e2\u20ac\u009d<\/em> since all of US know it now.\u00c2\u00a0 Maybe we should all get together and get ourselves some lobbyists and analysts so we can know the likely news ahead of time too?\u00c2\u00a0 Of course, Nancy Pelosi is still threatening August as we write so one never knows\u00e2\u20ac\u00a6<\/p>\n

The Technical Picture:<\/strong><\/p>\n

\"\"<\/p>\n

Above is a 30 minute chart of the SPYs.\u00c2\u00a0 The manic market rise that we\u00e2\u20ac\u2122ve witnessed over the past few weeks just happens to coincide with the CBO releasing what\u00e2\u20ac\u2122s become known as the $1 Trillion death blow to the healthcare rush\/push.\u00c2\u00a0 We think that the boys would have used the earnings beats to maximum effect regardless but we believe that silver linings of gridlock really added to the velocity of the movement.\u00c2\u00a0 A double bottom back in mid-July helped to launch the news powered rally that we\u00e2\u20ac\u2122ve seen and now we see what could be a double top.\u00c2\u00a0 Only time will tell but any type of Fibonacci retracement will result in a correction of significance in terms of points simply because of the great magnitude of the rise.\u00c2\u00a0 We could also be in the process of forming an ascending triangle as well and that augers more pain for the bears, at least in theory.<\/p>\n

We\u00e2\u20ac\u2122d think that smart bulls would even prefer a respite here to regain strength but with the volume levels reduced anything can happen especially if the news continues to be covered in as positive a light as possible and that\u00e2\u20ac\u2122s a near certainty.\u00c2\u00a0 Housing sales are touted but the reduced prices that produced the sales are glossed over at best.\u00c2\u00a0 Reduced earnings estimates are surpassed on the backs of furloughed employees and new and federally improved accounting gimmickry and the wheel goes \u00e2\u20ac\u02dcround\u00e2\u20ac\u00a6\u00c2\u00a0 Oil back up and demand possibly heating up and thus driving up mortgage rates\u00e2\u20ac\u00a6\u00c2\u00a0 those don\u00e2\u20ac\u2122t seem like good ingredients for the recovery cocktail but they may not matter at all as only the nature of the markets seem to matter during phases like this.<\/p>\n","protected":false},"excerpt":{"rendered":"

The run continued last week aided by earnings \u00e2\u20ac\u0153beats\u00e2\u20ac\u009d of significantly reduced analysts estimates.\u00c2\u00a0 There has also been a good deal of discussion around \u00e2\u20ac\u0153performance chasing\u00e2\u20ac\u009d and other concepts like \u00e2\u20ac\u0153have to be invested\u00e2\u20ac\u009d or \u00e2\u20ac\u0153can\u00e2\u20ac\u2122t miss this rally\u00e2\u20ac\u009d.\u00c2\u00a0 The \u00e2\u20ac\u0153market as an indicator\u00e2\u20ac\u009d theme also gained strength as did the references to algorithmic momentum […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[22,17,8,49],"class_list":["post-191","post","type-post","status-publish","format-standard","hentry","category-week-ahead","tag-economy","tag-market","tag-options","tag-portfolio-protection"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/191","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=191"}],"version-history":[{"count":0,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/191\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=191"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}