Friday, July 3, 2009
Mud on the tires, Boots on the ground.
Well Mr. Nasty didn’t like the bouncing Advances and Declines, unable to approach, let alone the two peaks, one the 2nd week of May, and then the 2nd week of June. Roughly speaking, the S & P price level, is approximately coincident with the Peaks in Mr. Nasty.
Insert [ MR. NASTY chart]
Typically in price waves, often the 2nd wave is the the more extreme of the two, relative to price. That means the 2nd peak is Higher in advances, and Lower in declines. Again, the S & P 500 has lived up to this pattern.
Tips, hints, clues. All work. BUT, to fail to consider the evidence right before our eyes, will considerably hinder our attempts to SEE.
Looking at the Wilshire [ $WLSH] you see a steep decline of the 200 DMA,and its upward cross of the 50 DMA. Some would attempt to call this a “GOLDEN CROSS”, but classically it is not so defined. CLASSICALLY, a Golden Cross of the 50 DMA above a 200 DMA, is when the DMA is trending upward and positively inclined.
The cross you see here [ Insert WLSH chart] is that of a temporary BLIVIT CROSSING, like the Wandering Figure 8’s we see when trend is NOT DEFINED. Further observed, since a BULL Market creates an UPWARDS sloping 200 DMA, we define this as something OTHER than a Bull Market.. Define that as you may, I call it dangerous ground, thin ice.
INVESTOPEDIA [ I like their stuff] says: nvestopedia explains Golden Cross
As long-term indicators carry more weight, the Golden Cross indicates a bull market on the horizon and is reinforced by high trading volumes. Additionally, the long-term moving average becomes the new support level in the rising market.
Look carefully at the trading volumes on any exchange during this time period and generally you see a pattern of lower UP-Volume on this rally, than on the rally that lead to the previously established peak. VOLUME DOES NOT SUPPORT THE “Continued Rally” Thesis. Without a consistent pick-up in volume to bid for stocks to support the rally, THEREfore, IMO, this is a Bear Market Rally, not supported by volume. VOLUME speaks Volumes. Again, MY Opinion Only, given the financial shenanigans we have witnessed in the last two years, I suggest that the rally we see here, trying to suck in as much money as possible, as a total rear guard action to hold the door open to the escape of PREFERRED capital, before these market levels are breeched to the downside.
Considering what has transpired in the last two years and the continuing trend to the transfer of wealth throughout the world, it would not surprise me that extreme measures are being taken to combat the drain of funds out of established patterns. Therefore, while it’s a bit edgy, in a public place, to suggest that certain groups get preferential treatment, that is what I am saying. The rest of us will have to fend for ourselves.
It is said that the Summation Index [ Mr. Nasty if you use the NASD] shows the flow of funds in and out of the markets , as a matter of observation, I agree.
Basically, Price can lead you merry chase, but BREADTH and VOLUME will confirm both price and each other. Failing the classic interaction of those three, the premise is false. BREADTH & VOLUME, consistently, over time, no matter how you slice them, are the most reliable confirming indicators I have observed.. Given that, I will try to include some charts for you to access in links, so you can check your conclusions against the Volume and Breadth Indicators.
Far as I am concerned, Breadth and Volume are the Boots on the Ground and the Mud on the Tires, they are the real thing