One of the most accurate 'predictors' of the market at 92.5%, the January Effect - how goes January foretells the rest of the year - just had the worse start (down 8.6%) since 1970. Actually, the worst ever. The Super Bowl is one of the next most accurate 'predictors" at 80% according to Snopes - if a former NFL team wins, the market is up - and given that both teams on Sunday are former NFL teams (the AFC Steelers transferred over from the NFL when the leagues merged), an up market is predicted. Now of course what good are these predictors?
Correlation without causation is not worth investing in or betting on. Tonight's STU reminds us that the wave approach gives us better guidance, and after the current down leg, it predicts a major counter-trend rally through most of this year. Whether it ends higher or lower at the end of the year doesn't really matter, for this rally will be tradeable.
Monday is Groundhog Day, and tradition says if the Pennsylvania groundhog Punxsutawney Phil sees his shadow, there will be six more weeks of winter. Of course, that is assuming he is willing to step out in the currently frigid temperatures - or whether he will even want to if the local team, the Steelers, loses to the Cardinals, who haven't won a title game in so long (1947, and then before that 1925) no one really believes they belong in the big game. At least, both times when they won the market had a good year. But who didn't in 1925?
The shadow that overhangs the market is the Dow 8000 level. It provided a ceiling back in 1997 that took a number of attempts to break through, and now it has provided a floor since last October, except for one rapid and momentary break before Thanksgiving, which was promptly retraced back over 8K. We butted up against it last week and bounced off it. Now once again the Dow sits right on 8000, and will have to come out and see its shadow on Monday.
The STU count says we have come off Jan6 with a wave 1 down and have just finished a wave 2 retracement back to the 'fourth of the prior third' level. Hence we have now begun wave 3 of (5) down, and it should break through 8000 and retest the Nov21 levels. But, every wave subdivides with counter-trend moves, and we may bounce off 8K on Monday before breaking through.
So if Groundhog Day feels like Deja Vu all over again, sit back and watch the decisive break of 8K a day or so later
PS - the groundhog indicator is a lousy predictor of weather, at 39%. Phil has predicted 6 more weeks of winter 90% of the time. Brrr! Makes you wonder why they don't all move to LA? Then again, LA is the only major city which lacks an NFL team! All this just proves that LA will freeze over before you make money following pagan ritual or flaky predictors.
I'm in cash. Will short at Dow 10,000 go long at Dow 5,000
Posted by: Reggieg | Sunday, February 08, 2009 at 04:28 PM
Actually I wouldn't be too surprised if in a week's time we're pretty close to where we are now. Truth is we haven't really gone anywhere for months now...just churning randomly...perfect environment for turning most participants stony broke. And when it comes to Hank's forecasts he says himself the whole time that fractals are random and change. Although I'm quite sure this isn't the way he sees it as far as I can tell his fractals are just attraction points, and his trading style pretty traditional support/resistance based. Once you realise that and stop trying to speculate on long term price behavior based on his forecasts - if not frankly ignoring them entirely - it all comes good. Point is that whilst following his trading's a hell load of work the fact he's so good at making gains week in week out makes his service well worth the fees many times over...
Posted by: Wavist | Sunday, February 08, 2009 at 04:38 PM