TC2000: When the Shark Bites
I've never seen the country in such a dither over little things. For example, the widespread fear of small pox vaccinations. Instead of focusing on the statistical dangers of such shots, the government should be comparing them with other unavoidable risks that we all accept as part of the routine of life. For example, how do the risks associated with small pox vaccines compare with the risks of taking flu shots? I take a flu shot every year. I've known of people to die from them. I also know that small pox is a more dangerous disease than the flu. (With some exceptions, such as the 1918 flu epidemic.)
How does a vaccination compare with the risk of flying, of being struck by lightning, of talking on a cell phone while driving, of being poisoned by sushi, of being attacked by a shark? I've taken at least two small pox vaccinations in my life, probably more. When I was in school in the 1930s, we were all vaccinated, and nobody thought much about it. I personally never noticed anybody getting sick. All Americans had to show proof of a recent small pox vaccination to be able to enter the country after being abroad. All of the Worden Brothers traveled abroad at preschool ages. Maybe ignorance is bliss, but I never worried about them getting small pox vaccinations.
It seems to me we paralyze ourselves with fear, and our leaders paralyze us by offering exaggerated warnings – lest they be blamed for a death caused by a vaccination, or who knows what else? This unrealistic refusal to accept practical risks in stride is obviously spilling over into much of what we do. Our retail stores are rumored to be running out of merchandise, because they were afraid to order more than they could be certain could be sold during the holidays. This reticence “to spend money to make money” is possibly the worst psychological bug in the economy today. In the thirties, Franklin Roosevelt said, “We have nothing to fear but fear itself.” Now we have people quantifying risk with silly color codes. And we have the President announcing in somber tones that he will personally take this grave risk (of a vaccination). For Pete's sake, will somebody please stand up and tell us we should stop wasting energy being afraid.
THE MARKET: is at a critical point. I can almost get by deferring my commentary to Sir PMM's article above. Keep in mind, though, that Sir PMM's methodology is part forecasting but mainly a tactical approach, aimed at not getting into serious trouble no matter what happens. Everybody needs such an approach, but not everybody will do it the same way. So what I'm considering here is the probability of a further decline in the market.
The test of the 50-day MA for the SPY is not far from a test of the neckline of a toppy looking lateral formation, which resembles a dreaded “head and shoulder's top.” However, I should add that heads and shoulders are no more virulent than a dozen other top formations. An H&S is just a guideline to a reversal. It doesn't need to be an important reversal. To me the toppiness of the current situation suggests a possible correction of the advance that began in October. A half or two thirds retracement would suffice. Today's action leads me to believe there is a strong chance that the 50-day MA is going to be pierced in the Sp-500 and in the Nasdaq as well. And the November lows will probably be taken out. I do not see any reason to think the October low will be threatened. In other words, I see further weakness as further opportunity. In both of these averages, the 3-day chart is much more auspicious, particularly in a somewhat longer context. -DW |
