Thursday March 24, 2016
Today we address the question, when should one be long stocks or when should one be short? The dozens of chart indicators seek to answer this question.
But in the volatile environment we now face, here is a constructive suggestion.
But first, a thought on timing and holding. Long term investors like Buffett and Templeton have done well. But even they are better market timers than they admit.
Here is a youtube of classic Templeton on Wall Street Week after the 1987 crash.
https://www.youtube.com/watch?v=o_fxEoF8Vl8
You can search you tube for the rest of the show just put in wall street week 1987 crash, Templeton is cearly the only one with any insight, the Merrill President, well you just wonder how this guy ever made it to President of ML...
But, we are not in a long term environment like 1982-2000 or 2002-2007 or 2009-2014
We are in a short term period subject to violent reversals. Recall I have sold my long positions over the last few days. So let's look at two opposites.
The main index charted here is the DJIA in red and black bars. The inverse DJIA fund, DOG, is the solid black line.
The blue dots represent the PAR SAR timing line.That has one still long the DJIA but clearly that is in danger of being broken.
I ran the correlation and it is perfect at a negative one or minus one. RSI at top and MACD at bottom are topping.
Each index has one moving average shown, a 13 day exponential moving average. Green for DOG and Red for DJIA.
Neither index has broken its MA in the other direction nor has the PAR SAR registered a sell signal.
But,this chart clearly shows an extreme has been reached. I am a bit amazed at just how quickly the stocks I sold Friday have already fallen.As others have written, the strength
of the DJIA and NASD (thanks to the FAB FIVE) have masked the overall weakness of the market.
I am accumulating DOG and DXD.
Zig Zag
I never see analysts using zig zag shown above but it does highlight the extent of the move. From the early November high
it took 2.5. months to hit a low. Most of the move happened in the first half of January. Socionomics holds that maximum mood occurs in the last stage of a move.
We are now two months out from that date, so if time equivalence holds it may take a bit longer for the move to really get going to the downside.
But maybe not. April 15 is a notorious time for extreme events, besides tax filing. And it typically marks the seasonal end of rallies beginning in November.
In this market we have been down and then up since November. This is a trader's market not a buy and hold market.
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