Hello BBTL Blog readership,
Financial markets are now winding down for the traditional Christmas and New Years holidays. As a result, my blog postings will become less frequent over the next two weeks.
However, I will do my best to post a timely blog,
if and when anything big happens. Further should I change my mind about the market outlook which I have made bearishly
very clear, I will also post an update regarding any change.
Going back over my last posting or two, one can read that I was largely bearish. For the record, I remain so today.
In those recent blogs, I had been discussing the current bad risk to reward relationship, and also the elastic nature of financial markets to snap back as they get too far above a moving average. In that regard, absolutely nothing has changed over the last week or so, and thus, all of the risks I was previously describing
still remain.
I see the lack of selling recently, as typical of highly complacent holiday period optimism. It may also be based on the Bernanke QE2 events recently (adding more liquidity), in that there has been some potential fear in large institutions that were deliberately influenced by the FED to believe that selling now - is not a good idea. After all, Bernanke is a powerful man, has expressed a the concept that he desires higher stock prices, and the PPT is well known by savvy institutions.
Yet, as it stands the SP500 Index closed just one point higher today, than the trading high of last week, thus tracing out a perfectly
sideways market.
I have previously taught the valuable and important principle before on this blog, that
momentum precedes price.
Like a car goes into neutral before reversing direction, financially this implies that a stalled or sideways market, especially after a several month run-up, is in huge danger sign of possible trend reversal. Moreover, the longer the sideways trend lasts, the more probable that a reversal will happen.
Does any of this ring your caution ahead - bell?
Moreover, those traders and investors on the buy side of the markets lately, are indeed very similar to the silly late or last-minute Christmas shoppers. In short, they are not smart or intelligent savvy shoppers that seek high value by tactical planning.
By now, and at the last minute before Christmas, all of the good past bargains are long gone, and the picked over products that remain are simply too expensive.
In essence, buyers who now choose expensive Christmas gifts (or last minute expensive stocks) which are being purchased very late or at the last minute are really the suckers whom are likely to be in for deep disappointment, when January comes with far cheaper prices, or at a time when better values will flourish.
In essence, planning when you buy stocks, is not a lot different than how you plan to buy Christmas gifts.
Nonetheless, some of the highly stubborn bulls will refuse to believe such practical advice and sound risk-to-reward money management talk. The bold bulls seem to be dominating the financial conversations and news media lately. There is a market maxim about bold bulls. Right now I suspect that the more practical and value driven bears are smiling to themselves, as they sell stocks to the
bold bulls.
Yet frankly anyone, with a little perspective, market knowledge and hindsight could easily realize, just how shallow this overly optimistic bold bullish talk really is.
Consider that the April 2010 high in the SP500 Index was essentially the 2019 price level, implying that today's record yearly close was just 28 points higher. Here we are eight months later and just 2% higher in the SP500 Index. Does that sound like a raging bull market? Not to anyone with a few years of market experience.
Frankly, and more in speaking about the
financial truth, this is a classic or textbook technical analysis double top pattern, whereby a marginal new high is set on the second or subsequent high.
Yes, the negative divergence is there screaming caution in many charts for those with intelligence or those that will notice and listen.
I have observed recently that some BBTL blog followers might be trying in explain the current financial markets
using logic or select economic data. I certainly hope that you are not being brainwashed by the media spins. This jump to conclusion approach - based on the latest popular spin, is not just a bad idea - it is a very bad idea in my opinion - that will garner poor or mixed results at best - over the longer term.
I must therefore again suggest to those involved, and wanting to gain a better financial education based on the financial truth, to download and then read the free editorial on
research methods on this blog, or even read a few of W.D. Gann's books.
I will say again
with emphasis that the financial markets follow Science and Natural Law, rather than logic.
Speaking of Natural Law, tonight is an extremely
rare full lunar eclipse that directly occurs on the winter solstice.
The last such eclipse on the winter solstice was in 1638, 372 years ago or about 4434 months.
Most of our KRTT clients have been educated in such powerful cycles and the significance, but unfortunately that is well beyond the scope of our free blog.
In conclusion, although the equity markets may drift over the low volume holiday trading sessions, make no doubt about it, I remain of the opinion that a high degree of future bearish caution is warranted.
My general advice based on what I observe is that conservative types should sell here, or at minimum use very tight protective stops.
The two graphical chart exhibits with my usual mark-up comments speak volumes about the trend truth. Again, I will do my best to update the blog as I see fit, and especially, if things or my opinion should change.
In the meantime, I would like to personally wish all of our BBTL blog readers, a safe, healthy, fun, and love filled Christmas, as well as a prosperous New Year in 2011.
I will be staying up late tonight to catch a rare glimpse of the blood red
Luna eclipse and solstice event.
PS - In a future blog, if there is enough interest, I may discuss the statistical nature of financial markets when lunar and solar eclipses occur in close proximity. This is relevant now since a solar eclipse is also just 14 days away.
James Kelly Sr.,
Editor in Chief, BBTL Blog
www.KRTT.com
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