The nanos actually raised their number today from 7910 to 7980, which says that the base level envelope for the market increased today..... which I guess in some ways is sort of bullish. At the same time, the market is way ahead of the nanos again after today which is definitely bearish!!!
The more I look at their past performance, the more I like the description of their number as an attractor. We should basically bounce off of it until they indicate otherwise. At the same time, in the past, the market actually did touch the nano line a number of times during an extreme period, until a reversal occurred. To do that, the TSE would have to lose about 5% in total again. We were relatively close yesterday (8114) and now we're way above it....BOING!!!
The question in my mind is - if the market gets pulled far away from the nanos, is there a maximum distance it can move and then, does it recoil with greater acceleration (like a spring) or is the relationship more like gravity with less pull as distance increases.
If it is like a spring, then we've already approached the maximum that the spring can be stretch again, based on historic observation... there might be another 50 points upside. If we do go to that limit then the release will be drastic again (as per yesterday). If we start edging back at the beginning of the week, then the pull back might be more gradual.
If it is a gravity type situation, then the market is more likely to drift higher the further it gets from the nano line.
Based on the back casts, I'd have to say the relationship has historically been much closer to that of a spring. As the nanos have evolved however, they really do project the market quite well (on a back cast basis) so that the only point of reference for an overshoot is now the October bottom.... which is a fairly short period of time to base the spring reference on. If the current situation is consistent however, then the longest the actual line will be able resist the nano line is a week.
As far as an official nano projection then, I'm going to interpret them as follows:
1) At best we might see a further gain of 50 points.
2) We'll see a recoil by the end of next week at the latest and most likely sooner than later.
3) If there are further gains on Mon/Tues, then the recoil will be swift. If the market starts to slip on Monday, then we'll see a more gradual recoil over a longer period of time - ie. up to Friday.
4) Once the markets come back down to the nano line, there's no way to tell whether we'll bounce or continue to slip until the nanos are allowed to see the data up to that day.
As in the past, any unexpected event could throw them.... political, economic, earning releases, etc. which haven't already been discounted into the market. They're only as good as the information contained in the market volume and price data. I guess we'll see very shortly what happens. In any case, caution may continue to be a good character trait for the next little while.
Personally, I'm going to try and continue playing with a "duck, drop and roll" strategy and may reduce some positions if I can do it at or near a breakeven point, flip to lower price points or average down, depending on the circumstances.
For the past week, as soon as I'd done a buy, I'd put in a sell based on TA... which worked fine... and I was able to nickle/dime myself into profitability. What this meant however is that I had to rely on mental stops and rapid Greenline execution to control risk... which also worked OK because in most cases I was bottom fishing with the TA and until late Thursday the technology was working well. When things went boom half an hour before the close however it very nearly created a disaster and I was just lucky that there was a rebound today. For next week, I think I'll do it the other way around. Place a stop with Greenline and then execute mental sells. That way, if something goes boom, I may not get my price but the risk is covered. Having seen this week how drastic a shift can occur in the current environment, that seems a more prudent strategy?????
As usual, all the nano stuff could just be total bunk since we're in price territory where they don't have any experience... still... the experiment continues!!! |
