Sunday, December 28, 2008

Taking Stock

Wow am I exhausted. After countless trips around the Tri-State area we are back in town. A tremendous holiday for all - especially the little ones.

In any case, let me get back on the proverbial bike and start riding again - if not, the atrophy will take hold and it will be back to that blissful ignorance I remember so well as a child - or more truthfully, as a young man.

Over the course of the last month, the markets have been reseting their traps for another violent move. Who's to say it won't be that "equal and opposite reaction" - a bull charge of the likes we haven't seen since the early 1930's. It really does seem absurd to not be bullish on the markets in the short term. The bearish equivalent of greed perhaps? How much risk could possibly remain after being bisected in a matter of months? Isn't everyone tired of guessing the bottom? Hardly.

I can't say with any tangible description or reference; but I suppose the old phrase will apply - I will know it when I see (or hear) it. And frankly, there has been a bull market in bottom feeding and rather orderly markets (equity) considering the alternative to capitalism. Anecdotally, that doesn't help the markets in the near term. Here are a few things churning inside me.

I realize I keep coming back to the same reference points - but just as a trial lawyer methodically builds his case - I have been refining my perspective and trading thesis towards this market. The targets are always moving against sliding landscapes - the secret is to keep framing and observing the primary subject and its relationship and kinetic reaction to the current landscape at hand. I am not a pure technician. Far from it, I use technical analysis as a tool in the development of the thesis. Consider it my forensics lab. It isn't full proof - and it is still at the mercy of human error and misjudgement. If the detective only relied on the forensic report he would rarely be able to piece together a representable version of the story. Likewise, charts need to be placed within the broader context of market psychology, fundamentals and the intangible art of reading the Matrix. If it was a pure science the formula for success would be readily available and patented for sale at the neighborhood drug store - the smooth returns of Bernie Madoff would be legit! But as we all know, it isn't a pure science and just as much an interpretive art.

Here are some technicals that I am reading.

The Transports appear on the cusp - again. And just as I have mentioned in the past, the Transports have led us into every major market bottom. Those Dow Theorist really do deserve a merit badge. If I could be so brazen, it appear tomorrow will decide the near term fate of the Transports - and I suppose by extension, the overall market.

Although there appears to be two camps for interpreting the VIX - it has been cut in half in a rather timely fashion with very little benefit extended towards the equity markets. The same goes for the dollar's weakness as well.

No comments: