Stocks in a Coiled Spring, Fundamentalists in a Fetal Position

Scott Adams (Dilbert) had a priceless column in the WSJ on why it is smart to put your money on companies you hate. He of course picked BP (which he argued is at a bottom) and Apple, which he says he has hated for five years and should have gone in then. In the course of it he trashes most investment approaches, including Technical Analysis:

Technical analysis involves studying graphs of stock movement over time as a way to predict future moves. It's a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.

Wonderful satire, but sometimes the real world is dumb and dumberer - such as today, where the pundits asserted one cause of the market's rise and the same cause for its later fall:

• the market went up on the Fed's remarks that the recovery was still on but the improvements in employment were only "modest"
• the market fell on the Fed's Beige Book which showed that the recovery is still on but in some areas growth is "modest"

This reminds of a recent day when in the morning the fundamentalists stated that the market went up due to higher oil prices, which pointed to improving demand; then later in the day when the market fell back said that the market fell due to higher oil prices. which pointed to a future slowdown. 

The fact is these sorts of justifications du jour are simply nonsense delivered in ponderous tones of authority and have no better weight than astrology. Scott Adams take note!

To push this point home, simply note that the fundamentalists are all over the map on what happens in the next few days, and if anything are a bit bullish since we have tested the Dow9835/Sp1045 (the Feb low) now four times and not sustained a break below. 

The STU notes we are now in a coiled spring of a triple nested 1-2 which typically precedes a major move, in this case hard down. Whereas during the run up the right move was to buy dips, this time it is to sell blips, as the market is unable to sustain a rally: "Each near-term rise is swatted back." While investors are watching the Feb5 intraday low, we have now had two days closing below the close that day, and the two lowest closes since seven months ago, last November 4 at 9802. 

We could fall off the cliff tomorrow, or fall after a little more sideways action to swat back another bullish attempt and wear out the bullish interest with a fifth probe of the 9800 level. In either case the chicken droppings and all that are forecasting a coming fall. Let's see what contradictory and hopelessly shallow pontification the fundamentalists concoct when that happens. 

Comments

[Chabazite]

* the market went up on the Fed's remarks that the recovery was still on but the improvements in employment were only "modest"
* the market fell on the Fed's Beige Book which showed that the recovery is still on but in some areas growth is "modest"

You should know now Yelnick ... Its not WHAT you say, but THE WAY in which you say it. (Who was it that said that the actual language of communication only accounts for something like 5% of the 'meaning'? The other 95% is accounted for by emphasis etc.)

[min]

"The STU notes we are now in a coiled spring of a triple nested 1-2 which typically precedes a major move, in this case hard down."

Man that's a 90% effective contrary buy signal, at least for the short term —as good as it gets.

Hock, please take notice. But don't take action as you're on the sidelines until DOW 400 +/- 400% Prechter fudge factor

[OracleLurker]

Even Mish threw out some technical argument/observation yesterday that is total garbage in my view -

http://globaleconomicanalysis.blogspot.com/2010/06/dow-october-1929-october-1930-vs-60.html

As good a macro-analyst as there is but not on the same level when it comes to technical analysis.

[Account Deleted]

Dow jones analysis before opening bell
http://niftychartsandpatterns.blogspot.com/2010/06/dow-jones-analysis-before-opening-bell_10.html

[Wave Rust]

Yelnick,
for me trin is nearly useless as a trader. that trin chart of your last post, shows an absence of consistency and timeliness of any useful signal.

NYA overlaid with trin and volume: http://stockcharts.com/h-sc/ui?s=$NYA&p=D&yr=0&mn=6&dy=0&id=p94892394740

if I were to use it or its concept, I would start with something like this.

AD issues / updown volume: http://stockcharts.com/h-sc/ui?s=$NYAD:$NYUD&p=D&yr=0&mn=6&dy=0&id=p65547371972

Breaking the components apart keeps the ratio of two ratios, closer to the actual reality of the NYA stocks and what they are doing.

or maybe just this old standard, issues to volume

http://stockcharts.com/h-sc/ui?s=$NYADV:$NYUPV&p=D&yr=1&mn=6&dy=0&id=p23184885509

wave rust

[Wave Rust]

Scott Adams knows to not quit his day job. Ratbert told him.

Ratbert was head trader at GS and an adviser to Bush. TARP and all the other bailouts were his ideas. He also told BHO that the time was right for the health care reform swindle.

Ratbert told Joe Biden that it was a big effing deal. He told Biden that the oil spill was nothing to worry about ,,,, and would at least lubricate the financial system.

Ratbert's first name is Rahm ,,, but you knew that. Bet you didn't know his middle name- K.A.O.S.

wave rust

[Account Deleted]

Dow jones trying to reverse the trend

http://niftychartsandpatterns.blogspot.com/2010/06/dow-jones-trying-to-reverse-trend.html

[Trader123]

So much for the triple 1-2's . . .

[Wave Rust]

http://yelnick.typepad.com/yelnick/2010/06/psyching-the-market-the-leading-diagonal-pattern.html#tp

Close the 1025 gap and maybe the 980 one.
then the dow gap at 11,150 by mid-summer, then back down for the 907 gap for thanksgiving
then d & e of C
e of C can get to the spx 768 gap, otherwise known as a 78.6% retracement
That should clean out the last of the weak bulls.
wave rust
Posted by: Wave Rust | Monday, June 07, 2010 at 12:08 PM

This Week :
Trap Door all Week !
Posted by: Hank Wernicki | Monday, June 07, 2010 at 12:22 PM

Hank
thursday may change your mind :)
wave rust
Posted by: Wave Rust | Monday, June 07, 2010 at 01:50 PM

-------------------------------------

The spx 1025 gap wasn't reached but is still the next target for the next move down ,,,, perhaps later this month.

Today, looks like another oversold rally but it could morph into a bigger move if Monday and Tuesday are not a huge disaster down.

in other words, Mon/Tues are really important.

reeeeeelllllllyyy big shew early next week.

trade it. don't marry it.

wave rust

P.S. Hank's comment is just there for context. He does fine work.

[Account Deleted]

Dow jones faces resistance at 23.6% fibonacci level
http://niftychartsandpatterns.blogspot.com/2010/06/dow-jones-trading-near-important.html

[Roger D.]

I don't know exactly when this market will reverse down(today or tomorrow)but it will be a major thrust down when it does.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/48eca19d-12f6-4e79-9c85-a6d3e2856705

[DG]

So much for the triple 1-2's . . .

Posted by: Trader123 | Thursday, June 10, 2010 at 07:04 AM

Yes.

But, what's worse it that the people touting that count won't learn jack from their failure to call the market correctly in this instance. They'll be back with another triple 1-2 BS count that doesn't conform to basic logic soon enough.

[min]

"But, what's worse it that the people touting that count won't learn jack from their failure to call the market correctly in this instance. They'll be back with another triple 1-2 BS count that doesn't conform to basic logic soon enough.

Posted by: DG | Thursday, June 10, 2010 at 08:07 AM"

DEFINITELY! And you can count on Prechter's camp leading the charge while Hock observes in awe and cheerleads with utter reverence.

[Mamma Boom Boom]

I'm certainly happy to see you guys challenging the nested 1-2 theory.

[Roger D.]

Be carefull.

http://www.screencast.com/users/parisgnome/folders/Default/media/c9a058f5-9c8b-48d7-99a3-101e5906e91a

[Account Deleted]

Dow jones ascending broadening wedge in 5 minutes chart
http://niftychartsandpatterns.blogspot.com/2010/06/dow-jones-ascending-broadening-wedge-in.html

[yelnick]

Chab, you may be right (it is how you say it). I wonder if a British accent would have pumped the market even more?

[Roger D.]

The triangular top in the Dow

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/89f41326-ac9e-4824-89ef-120bfb5681cd

[Hockthefarm]

min:

"Hock, please take notice. But don't take action as you're on the sidelines until DOW 400 +/- 400% Prechter fudge factor"

There you go with your short term squiggles again.

My take is that the distribution is not complete yet. We go higher from here into mid July. If it happens, I'd take a look at shorting the q's (out to October). Then if gold hits 1365 I'll take half my profits and short it. Understand, I'm just looking to hit a few singles here. Nothing life style altering. So, that is the plan. What is yours?

HocktheRock

[yelnick]

Roger et al. - the rebound today means the LD and the nested 1-2s have likely given way to the Big Tease count where the Flash Crash is 3, the Flash Bounce 4, and the Flash Retest is 5 of the first wave down. So far we have done wave A and B of the wave 2, and are in wave c. It should go above the recent wave A high of Sp1102.

[upstart]

I'm glad Mamma and I held onto our longs. Roger D., there will be a big drop, but we're not quite there yet. It could be a week or two away now.

[Roger D.]

The Dow

http://www.screencast.com/users/parisgnome/folders/Default/media/fe207fa5-7475-48f1-a000-c72bbff08e4d

[upstart]

Nice job, Wave Rust.

[Hockthefarm]

Wave:

Talleb turned me on to this notion of robustness and I think he really has something.

That is what governments have really stripped from us over the last 20 years, and it has created biblical instability.

I want people putting 20% down to buy a house on my street, and then I want to see them hustling their asses off in their 30's and 40's to pay the thing off.
Creates a very robust consumer, someone that can take heat from time to time as the garbage is stripped out of the system.

Same for mergers: creating global reach and passing all the synergies on to the stake holders. What a crock of chit, I want 10 Bof A's grinding the chit out of each other daily. It is more robust. So what if 2 or 3 drop by the wayside because they are poorly managed.

The European Union created this big block to garner economic efficiency. The Euro is going to disappear because the big block is unstable.

Capitalism and robustness go hand in hand. When government eliminates the robustness, capitalism can't survive.

Time to choose,
Hock

[DG]

DEFINITELY! And you can count on Prechter's camp leading the charge while Hock observes in awe and cheerleads with utter reverence.

Posted by: min | Thursday, June 10, 2010 at 08:28 AM

I have said before that I think one thing that biases wave analysts is that they want to trade "exciting" patterns, which a series of nested 1-2s certainly would be, as one anticipated the explosive power of the "3 of 3" that would follow such a set-up. The problem is that they ignore all the pesky details that undermine that count 99.9 times out of a 100.

Whatever else you say about Neely, you have to give the man credit for not falling prey to that sort of hype. Yes, he has hyped things in other ways, but in terms of patterns, it's all "triangle, triangle, triangle" with him. Which seems so boring, but then you realize that if he's right about all this stuff being Corrective, clearly traders don't need patterns to be Impulsive to have good trading opportunities. If the market can decline more than 50% from its all-time high in a Corrective Triangle pattern, why would I need to insist that it's an Impulsive pattern if wave structure doesn't warrant that conclusion?

[Bird]

Roger, I think Mcd 30 min high could be a real top.

[Chabazite]

'I wonder if a British accent would have pumped the market even more?' - Yelnick, the only thing the British are any good at pumping is oil. And we ain't too good at that at the moment either. However (foolhardy or otherwise) it has given me an opportunity to get a couple of thousand BP shares at a bit of a knock down price which I thought was worth taking a risk on. Three years time horizon.

[Steven_737]

yesterday's setup seems to trigger LONG

cheers

NQ entry 1809; 3 contracts
stop 1806

[Steven_737]

1 contract off at 1810.5

raise stops to 1807.5

[Steven_737]

2nd contract off 1810.75

raise stop 1808.5

[Mamma Boom Boom]

Chab, I'd be quite concerned with BP filling a strategic BR. After all, they've been given leadership from our government. I really don't think they want to pay all those claims for the next 10 years.

[Steven_737]

raise stop 1809.5 on the runner

[Steven_737]

raise stop 1811

[Steven_737]

exit 1813.5

[Steven_737]

I had a fibo projection at 1814
exit was on what looked like the 5th of an ending diagonal

[Account Deleted]

EUR/USD rally has helped Dow Jones and SP 500
http://niftychartsandpatterns.blogspot.com/2010/06/eur-usd-rally-helping-us-markets.html

[Roger D.]

The Dow

http://www.screencast.com/users/parisgnome/folders/Default/media/aed44855-1989-4eb9-bf9c-de9aed4b2b50

[Hockthefarm]

Soros Says ‘We Have Just Entered Act II’ of Crisis

By Zoe Schneeweiss and Andrew MacAskill

June 10 (Bloomberg) -- Billionaire investor George Soros said “we have just entered Act II” of the crisis as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits that may push the global economy back into recession.

“The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”

Soros, 79, said the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak.

Concern that Europe’s sovereign-debt crisis may spread sent the euro to a four-year low against the dollar on June 7 and has wiped out more than $4 trillion from global stock markets this year. Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp.

“When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide,” Soros said.

Soros gained fame in the 1990s when he reportedly made $1 billion correctly betting against the British pound. He also wagered that Germany’s mark would appreciate after the collapse of the Berlin Wall in 1989 and that Japanese stocks would start to fall in the same year. His firm, Soros Fund Management LLC, manages about $25 billion.

Credit default swaps, which aim to protect bondholders against the risk of a default, are dangerous and a “license to kill,” Soros said today. CDSs should only be allowed if there is an insurable interest, he said.

"CDSs should only be allowed if there is an insurable interest, he said."

I wonder what the lobby at GS think of this.
Hock

[Chabazite]

Mamma - Yes, probably one of my dafter moves. I bought a load of Barclays shares a year or so ago when they were on their knees and the value quickly tripled. Sometimes the risk pays off. Only hope that Cameron 'sweet talks' Obama into saying ... well ... not quite so harsh things about 'British' Petroleum when they meet later in the week! Best. Chab.

[min]

Hock;

I thought you were madly in love with Prechter and all his musings. You know he wouldn't approve of you owning more than just a small core position in gold. I hope you aren't "cheating" on him?

My longer term plan is similar to what you laid out earlier in this thread except I'll just short the market in lieu of selling my PMs as it's physical and it was quite difficult acquiring at decent premiums.

The next PM meaningful dip will probably just be a paper price number. Anyone trying to get a physical hold of the shiny stuff will be quite disappointed in the premiums they'll have to pay.

So it turns out you are not a fanatical Prechter devotee after all. You just like to cheer him on because you think he gets more bashing than he deserves?

You actually never put any real money of your own on any of his calls short or long term did you?

I can't see you being so naively supportive of him if you had. Good for you, I wasn't so cautious early on and most of the negative things I have to say about him are factual and based on first hand experience. Mostly I keep my mouth shut about it these days, but every once in a while when someone starts diefying Prechter about things I know first hand are not true I do a free public service anouncement. Sorry, it's definitely nothing personal.

Yeah, I do good with trading the squiggles especially on NDX futures and QQQQ options. I just do this with my trading account to keep the wife from having a heart attack. She always appreciates the results at the end of the month but not the ride to the destination —can't blame her as squiggle trading is not for everyone but hey, it makes me plenty when I do it and keeps me from getting bored while I wait for no-brainer long-term investments and during down time from my main line of work.

Take care Hock.

[da bear]

Can I write the next Elliott Wave Theorist?

EWI cannot pick out the 'wave 3's down' on charts of markets that have already happened. How can they then pick them out ahead of time?

DOW still in Primary 2 up as Primary 1 finished five waves down. shouldn't take that long but DOW 10,666 is a decent target...

The May Crash resembled the Fall 2008 crash, the Crash of '29 and the Crash of 1987. The big part of the crash, the famous, volatile, cringe-inducing phase of the crash is the '3' down. Followed by a 'snap-back 4' and then an 'aftershock 5.' Please relay this to EWI.

Then tell them to dust off and old copy of ELLIOTT WAVE PRINCIPLE. The analysis of the gold market on page 178-182 is interesting reading. This present market is in a 'B' wave. A 'C' wave lower will then set up a great wave 5 blow-off. Off course, their gold chart (Figure 6-11) on page 179 should show their '5' as being the '3'. I wonder if they changed their counts after the fact. ... then Figure 8-3 on page 203) shows what they thought that the rest of the bull market and subsequent crash would look like. Well, they were damn close if you count the move directly following the circled '4' as a circled '5' and their circled '5' as a circled 'B'. ... basically a replay of the run-up into 1929 and the following epic crash... but on a larger scale. On this chart it would seem that a better count for 1929 is having the 1929 top being the 'B' wave top with the orthodox top coming a little bit earlier (1928?). The big '3' of '3' of 'C' down occurred from 1930 to 1932. The rally into 1937 then counts best as a '4'. Finally, the '5' was a higher low coming in 1938. Interestingly enough, the rally off the March 2009 lows in the DOW looked very similar to the 1938 low. I pointed it out here and got credit for it.

Figure 5-7 in At The Crest of the Tidal Wave shows what the current bear market would look like if compared to the 1987 crash. It is the most alternate of alternate counts. The 1987 market was a smaller version of the 1929 crash. But the major part of the crash was still a wave '3' of 3 in C down.

The famous crashes are all similar, however, they might be mislabeled.

da bear

So the major bear markets are the same. However, I think that they have been mislabeled.

[min]

DG wrote:

"Whatever else you say about Neely, you have to give the man credit for not falling prey to that sort of hype. Yes, he has hyped things in other ways, but in terms of patterns, it's all "triangle, triangle, triangle" with him. Which seems so boring, but then you realize that if he's right about all this stuff being Corrective, clearly traders don't need patterns to be Impulsive to have good trading opportunities. If the market can decline more than 50% from its all-time high in a Corrective Triangle pattern, why would I need to insist that it's an Impulsive pattern if wave structure doesn't warrant that conclusion?

Posted by: DG | Thursday, June 10, 2010 at 09:42 AM"

I've never studied Neo-Wave but have to agree with you on the triangles. I see them a lot too and are some of my most profitable trades LOVE THEM!

Only other thing I love more is a 2008 type market but those don't come along that often.

[Trader123]

Hey,

How is that "nesting" of 1-2's doing for all of the Prechter and Hochberg BEARS today???

LOL!

[upstart]

A failed "nesting of 1-2's" is most useful, just like a failed head and shoulders is.

[Hockthefarm]

min:

Hock;

"I thought you were madly in love with Prechter and all his musings. You know he wouldn't approve of you owning more than just a small core position in gold. I hope you aren't "cheating" on him?"

I don't own gold. The profit I was referring to would be from the q short. I do believe Prechter is on record as saying a small position in gold (3-5%) is not a bad idea.

"So it turns out you are not a fanatical Prechter devotee after all."

We are just in the 2nd or 3rd inning. Ask me after the game.

"You actually never put any real money of your own on any of his calls short or long term did you?

Not since about Q1 2008. I lost about 10 to 15 percent in my 401k and broker accounts and that is my current pain threshold. Since then, nada. I didn't start the Prechter service until 2009.
But I'm always looking and think a good short is on the horizon.

If you can make money trading I think it is fantastic. I'd get cut to pieces.

Hock

[Roger D.]

I went short at the close again! I expect a down day tomorrow. Todays action was unexpected by me atleast the measure of the move. But there is so much bearish and bullish sentiment here that the market needs to do what it has to to resume the main trend. If it is down and I think it is. Todays action was a thrust up in a final "e". If coreect we should fall tomorrow and most of next week.

But you never know, right Mamma?

Cheers,

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/02a7b84a-6d14-44a5-9bbb-42995249413f

[Mamma Boom Boom]

No Roger, ya don't! I have to admit, it was looking a little dicey a couple of days ago. The market was trying to make a liar out of me. But I've survived worse.

[Thrill]

Yelnick, you see that post of Paul Kedrosky's over at Infectious Greed on "Go to Cash"? I would love your take on BMO's leading indicators.... it seems as if the Shanghai and/or copper have a new leader??? Their case is very compelling!

[Guido]

"Can I write the next Elliott Wave Theorist?
Posted by: da bear | Thursday, June 10, 2010 at 11:49 AM"

Sorry dat's a no can do bear.

Dat fonzanoon Bob's got his dog spot doin' da EWT;

After dat it'z dat mook Hochberg's canary's turn;

next month? fuhgetaboutit!

Dat jibone Kendall's Gran'ma a doin' it;

Den we gotz that moolie Vadim, he'z a bringin' his chimp in to write.

Perichico goombah but Bobby'z a real mamaluke zometimes! You know whatta mean?

He thinks he's a real Dennis DeMaio but could use a scaffoombaggia from time to time, kapish?

Let me plant a couple vavine and talka some sense into him and I get you in around Decemba?

Dat cool with ju?

You'll have to do a lotta BS'in for da reezon weez been off on are predicjunz but ju can handle it right?

[Account Deleted]

Dow jones analysis after closing bell
http://niftychartsandpatterns.blogspot.com/2010/06/dow-jones-end-of-day-analysis.html