Tuesday November 20 2012
If you are reading this blog you are one of the relatively few attempting to manage your ow money or learn more about the markets. Bravo, most individuals trust someone else with this task. As we will explain in our forthcoming e book, someone else of course has a completely different point of view and objective than you might have. While you might believe your objective is maximum return ,their objective is minimum risk so as to maximize the number of potential clients. Hence buy and hold is the mantra of the typical financial adviser. We sold September 18 which would have been a good time to unload Apple shares by the way. I doubt many advisers recommended doing so.
We featured Gayed last week noting the sell off might end soon, he suggests his ATAC model may soon issue a buy signal.
At any rate, our suspicion of a High Noon Friday for a mood change was correct. The markets have rallied since then. The reason for the dramatic rally Monday was not the Fiscal Cliff rumors but exactly what we told you this weekend, an absence of sellers. Once the selling was exhausted, the buyers did no encounter any resistance on the way up, Ka Boom.
Summation Index
Yes I do show some charts that are a bit complex but this is not an easy business, it requires study and vigilance. The top panel features the McClellan Oscillator bounded by Bollinger Bands. Bollinger Bands are standard deviations on either side of the index. The point here is that the vertical line at left was drawn right at the top of the oscillator. The main panel is the summation index, an cumulative indication of the McClellan Oscillator in the top pane. Of course the Summation index lags the oscillator as it arithmetically adds each day's result. Notice the same thing is true at a bottom. The Oscillator bottoms first then the summation index starts to turn. The Oscillator at top appears to coincide with the Commodity Channel Index at bottom.
I read numerous articles and other blogs this morning. My conclusion looking over the internal indicators is that a bottom of some significance has been made.
GDXJ
A couple of interesting things here. First we remind you how nearly all quantitative trading programs are tied to the 200 day MA. As GDXJ broke it, a flood of automatic sell orders drove GDXJ down two points.
Second, note that the 125 day MA again prOved decisive, just as it did on the pullback in early September. At this juncture we have a higher low than in September, a bullish sign.
I have all my positions bought over a week ago. I see others trying to draw out what will happen in the next few months but I still like the analogy to the correction and rebound earlier this year. Let's keep our eye focused on that.
SPX
SP
The move up from June to September was about 200 points. A similar move would take the SPX to 1540 form here. That's probably a decent target for now.
If this analog is correct we will have several pullbacks along the way. A succession of lower and lower orders should be entered for GDXJ, REMX, MOO XME. Place them evenly and in small increments. There will be pullbacks.
Update it is now 11:53 AM Tuesday November 20 2012
Note I sruck through the above comment. I am not so sure, if you bought a small amount as suggested no great harm done. But we really need to see the Dollar start to drop to be more assured of a low here. TLT is down today but not much.
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