January 30 2004 Caution lights.

We could be well at the start of a new cycle. The little retracement here in the DIA would ordinarily be a yawner. But the length of this leg and the need for the inevitable retracement should sound a caution light. Or warning bell. Our students (and clients) are regularly driven crazy by our willingness to watch patiently as profits disappear in retracements. But this is the only way to hang in for the long trend. In view of the fact that it's time for a retracement to chase out the come-latelys before taking it back up we will not be overly concerned unless this down leg takes it past 99.
Pretty much the same sentiments might be expressed about the SPY. 108 and 107 are the critical levels here. Given the need for a down cycle, or consolidation, plus the Fed changing its juju (or appearing to change its juju, or maybe signs of juju changing related activities) (What a shame that this piece of wit will go unrecognized years from now. In Parliament last week Conservative wags reduced all the benches to hysterics with droll take offs on George the Second's State of the Union speech.) We adore malicious wit, as do all Street Traders. God save us from Presidential election years. A half billion for Medicare? And with a bill which is clearly the result of an elephant mating with a donkey producing an animal of obscene characteristics. Talk about miswedgeination.
Although the situation appears blacker in the techs, action in the Qs should give us some hint of what's in store for the big guys. In fact part of our suspicions about the market cycle right now are a result of looking at the Qs. Also a result of looking at the Dollar index and the gold. As well as foot pains from an old squash injury and a strange itch above the right ear. In other words stand by your methods. Not market analysis, but acute understanding of human nature makes us believe that the Fed will not raise rates until too late to affect the election. Remember George the First? One of the whiners he came up with was that Alan Greenspan cost him the election. No, it was the economy stupid, and the smartest politician from Arkansas since Fulbright. What?! we liked Clinton? It was the budget surpluses, stupidallofus.

January 23 2004 Eat your heart out bears. (And market predictors)

There is no arguing with these charts. This little bull is alive and kicking. And traders and investors who try to second guess it and catch the top are kicking themselves too. There are two ways you frustrate amateur traders. One is you take the market down in a sharp sell off before you take it up. The other way is waving to them from the back of the train as it never retraces to let them back in.
After you've finally got them chasing the train you stop without warning and they crash into the back of it, like the Keystone Cops. Then you punish them with a sharp reaction by backing the train up over them. Some people just never get the rhythm of the markets.
Meanwhile, a clear signal that the dollar dive may be over. Don't try this at home unless you are a professional. But adroit speculators should see this as an opportunity to get long the dollar. The stops are obvious. The last low on the downside to exit if you buy here, or more conservatively buy when last week's high is broken.
Reacting to the same forces, gold broke its trend chasing futures traders out. Long term well capitalized investors (rather than traders) will ignore this retracement. At least for right now. There are those who think this is the beginning of a major retracement.

January 16 Bull bulls on.

You can feel the bull butting against the wall, slogging into resistance. So far these developments are shaping up as a consolidation rather than a retracement. That would be consonant with the nature of the market the past six weeks.
In spite of the the increasing resistance new highs were made. What this market has done since late November is refuse to retrace. Rather, after a run it "drifts" for a few days. Then resumes course.

Building volume over the past five or six days will be called evidence of distribution if the market pulls back. What do we think? We think the pull back buyers missed the train. And we think the train has some more to run.

The Qs went through what might have looked like distribution--which as we remarked at the time was not a rectangle. Face it bears (that includes us) the bull is on the tracks against all economic common sense. Sometimes it is just amazing how short market focus is.
So, that's OK with us. Just take their money and don't be fussy. And, while our stop is tripped in the gold futures we anticipate the retracement with interest. We would not short this market and we would not be in a hurry to buy the retracement. Stay tuned.

January 9 2004. Runaway bull.

As always, belaboring the obvious. And just to gild the obvious, the stop is somewhere south of Baja Oklahoma. Close readers of the 8th Edition will point out that given the extreme high over the old high the stop may be raised, and that is true according to the basing points procedure, but we prefer to do it in blow off situations, which this is not. Instead we prefer to wait for the retracement to this run before raising our stops. Just be patient. There will be a retracement. When? When everyone has given up trying to anticipate it.
The current bull market (bear market rally--actually it is a bear market rally) totally validates the Magee method of trend following. Technically, at this point there is little difference between the SPY and the DIA, except the DIA is leading and is somewhat stronger.
While Friday gave us a key reversal day in the Qs we read the present markets as too strong to be deterred long by a jobs report. Really who listens to those things anyway except the impatient looking for excuses to book some profits. We suspect they will help fuel the run by having to make a frantic jump back into the market. They are of course expecting a pull back to get back in. What if there ain't none?

Meanwhile, remember what we told you about gold? Just to remind you, it was buy gold at 350. You've long forgotten what we told you about the Euro. ( Buy Euro at .85 and .82) We will be publishing a stop for gold shortly.