Who doesn’t? Even the Market loves a good wet sloppy kiss. The chart below shows the NYSE composite index, one of my favorites for a longer term view, being kissed by the 200 week simple moving average. Lots a kissing going on here and the 200 MA is giving it a big wet sloppy one right now.
NO ONE is to say if this will be a kiss hello or good bye. Some gurus are very good at predicting the Market until they’re not. In other words, no one knows but everyone likes to guess. I hear just as many good technicians calling for more bullish action and just as many saying we going to hell in a hand basket (whatever that means).
In my opinion we should be going to hell in a hand basket because there is no fundamental reason for prices to be at this level. The Feds are simply dropping money from helicopters so that equity prices will rise on free and plentiful money and everyone will feel warm and comfy with their 401K statements and start back on the feast of over consumption and irrational exuberance. On the other hand, looking at the PIIGS and BRICs, we just might be the best game in town and deserve the money flow into US instruments (although if that was very true precious metals might not be on their highs).
My opinion doesn’t pay me. In fact my opinion has cost me more money than its made me. So I will leave it to writing in blogs so I can at least share it and maybe vent a little. My wife has long given up on being interested in my opinion of the Market. Once I start laying in on her with my economic opinions and start giving long winded reasons, she either looks like she has just finished the left over turkey or suddenly needs to go shopping.
What does pay me is the price action, knowing the markets opinion and knowing areas where it may change. It took me a while to figure out that price and the Market don’t give a rats ass about my opinion or the opinion of well paid gurus. If the price is going up then the opinion of the MARKET is bullish. If the prices is going down then the opinion of the MARKET is bearish. If the price is balanced or in a trading range then the MARKET has no opinion.
Our job as technicians and Market timers is to think in terms of probabilities and having an opinion can cloud that thought process. Right now the Market is going up. However it is at an important area where it may change this opinion. It is also at this important area below a long term and meaningful trend line. There is a high probability that if the Market kisses the 200 SMA good bye we could be in for a wild ride south. On the other hand, prices could toy in this area a while and then rally leaving the 200 SMA behind in its dust (a pretty good scenario if the PIIGS end up on the barbeque). Price could also pop up a bit more to form a top then head south, a better bearish scenario as the “look” isn’t quite right for top.
The pit action has been telling. Goldman played the long side going into Friday jobs and then have been covering longs and possibly scaling in short (know that GS trading may be different clients or their prop trading, you don’t know but when Goldman talks in size people listen). Locals have been getting run over. It seems that they are having less and less ability to muscle the market. As an example, Friday they were short and pushing lower but with very little buy paper, the Market rallied strong. This was all electronic trading which they can not influence.
We have had 5 days in a row of low ARMS readings and that is an indicator that the market is getting too over bought. We should see a nice break this week maybe Monday but maybe on Turn Around Tuesday. This will help us read the Markets opinion. If we rally back and retrace this break we may just be giving the Market that kiss hello. If we make a token new high and close the week lower it will start to have that right “look” for a top.
In the end there is a high probability that the Markets opinion shall change (or be reaffirmed) in this area. The Market will tell you what that opinion will be but you will have to be patient.
Good trading,
Tim Mack
Ps I think I will continue to refer to the Market as a proper noun, seems appropriate.
