Thursday, August 27, 2009
Why extended tops are important
Yes this is an extended top, IMO. As you can see, the advance has moved up smartly from Mar 9, 2009. Pretty historic when you look at the data, nice buys to be had, nice runs. Some have already shot all their ammo and are declining under the smoke screen of the rest rising.
Extended tops are important, as they allow all the stocks that could move up to synchronize at the top, so when a serious "wet your pants" downmove materializes as a correction or breaks the back of a bull move, the devastation is total, no sector is left untouched and all the Talking Heads freak out and tell everyone to sell everything. During that momentary panic, everything is sacrificed, there is no safe haven. You see the white space I left on the chart for your eye to fill in the moves. I will put Mr Nasty up for you to see, in another post, so you can see the dynamic. Its one of those "Just when you feel safe" moments that we will experience when the market turns down.
Classical economic theory says the markets anticipate conditions by 6 - 9 months. Thereby all the bad news that you hear now is already baked in, and the moves you see here, are short term waves, rather than long term effects, IMO. Then, we will be speculating on what bad things could come our way.
For subscribers and everyone else for that matter, I say, participate in the up side for as long as you can, BUT MIND YOUR STOPS AND LIMITS. That way you can profit with a clear head, and no excess of concern ! Gold and gold stocks will be an exceptions over a different time frame, but if the liquidity becomes an issue, the gold miners like all stocks, will take the hit.
A simple cautionary note: Protect yourself, routinely by assuring yourself the items required by the affairs of daily living. That includes paper money, some specie metals, and the necessities of food, clothing, shelter and transportation