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September 10 2004 Cat bounces merrily along.
The key reversal day the 3d did not work its magic, but then it was a short week and everyone came back from the Hamptons all tan and rested and as Gary Anderson (equitypm.com) has observed proceeded to do what they were doing, which is buy the strong ones and short the weak ones. Nonetheless, as pictured this little rally is about nose to nose with the resistance at 104 (basis DIA). The chances of its getting to 105 are about nil and less than nil. (Ignore that bravado. It was the evil twin Karnak making another of his rash predictions.)
Speaking of Karnak, he, and we, will appear at the San Francisco Money Show, at the prophet.net exhibition Sept 24. There is also a rumor that a 2 1/2 day seminar will be given in November.
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Illustrating the cross currents of these markets only Friday did the NDX take out the previous wave high. This relative weakness augurs ill for the economy. Take a look at Intel (which we noted was diving long ago) and it gives you a queasy feeling. (Even bears have feelings.) When we exult in being bears it is for bearness alone and not from schandenfreude. We love being bulls when everyone else is bearish. Actually what we love most of all is winning, and that is what technical analysis is about, not about being right. |
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If you want uneasy feelings how about the possibility that this entire rally since March of 2003 being a huge rounding top? |
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And how many times do we have to tell you that broken long term trend lines can only have one of three conclusions? Well, maybe two. Formation of a pattern which leads to continuation or reversal (mule market); or change of trend which is marked by lower highs and lower lows. Recently less sensitive (nuanced?) observers have noted that the markets are approaching a record length for time in a sideways market. Would someone please tell us what is sideways about the last nine months? The definition of sideways is a horizontal line with two or more lows bouncing on it.
The markets are coiling up. Down is the only way they have to go.
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A State of the Markets Letter is being contemplated. Anticipate impatiently. |
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September 3 2004 Cat climbs wall to key reversal day
Yes, Virginia, that is a key reversal day on Friday. Does it always work? Sometimes. It may well be the end of this vigorous puzzling little bear market rally. We already shorted it anyway, because that is part of our trading system procedures. We don't particularly like the fact that the end of July high was taken out, and that often happens in basis point trading (see 8th Ed.). A lot of upside would have to occur here before the direction of the market would be altered.
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Key reversal in the S&P too, and looking like a weak one day reversal also. Volume picked up considerably the last three days. We think that is another sign of the crest of rally wave.
But look, gentle readers, this is not rocket science. In fact it's not science at all. It's black magic, guesstimation, consulting the entrails of secret black box indicators, then closing your eyes and throwing the dart. You always wondered how we did it, didn't you?
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Disregard the last comment. Occasionally Karnak our evil twin gets loose in our letters. In the NASDAQ the pattern we would expect to see here is traced our. No key reversal, but also falling short so far of the previous wave high. A sign of mixed markets tending lower. |
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Whereas you might have thought the name of this game was trading, or investing, the truth is the name of the game is patience. Crude seemed to be driving the market at times but now we think the market is looking for some other excuse to bounce around. As for crude the game is by no means over but only the most intrepid and experienced trader should even be in the market right now. |
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But if you like roller coasters try bonds. Enjoy the present low interest rates. Friday looks like a signal, and in fact it is a signal for day traders. We tried to short it at 110. Good idea for a trader with deep pockets. Deep, deep pockets. We still think this market, played one way or another will be a gusher over two to three years. Oh, and incidentally, G.A Nyar our colleague points out that that it's the third Fed interest rate boost that sounds the death knell for the market. |
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August 27 2004 In Dog days Cat shows 9th life (8th? K+n...?)
Just wait till the real traders get back from the Hamptons and put this market in its place. Well, the real traders are in the Hamptons, but the real sources of the rally here are contrarian behavior AND their absence. But, as Joe Kapp said, "The bear will not die." Referring of course to the Cal Bears burning Stanford in The Play. Neither will the bull evidently. Close is above the previous rally high. Raises caution flag. Readers familiar with "basing points" (See 8th Ed. TAST) will know that stops are still far out of reach. We will soon make a monograph on basing points available.
More bear baiting here. We will be looking to add to our short positions soon.
For reasons see next two charts.
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Note the strange phenomenon of strong rally and falling volume. Every wave has a counter wave. Of this one we can note, both in the SPY and the DIA, that these instruments closed higher than their underlyings. |
