the NYSE came right back to it's 200 dma 2 days ago and is heading back down. the OEX came to
it's downtrend line on the daily chart.
Todd Harrison has some thoughts that I can appreciate. Boo is his bearish posture when he takes it.
Trade It, Traderee
5/03/01 2:46 PM ET
When they come to take you down
When they bring that wagon round
When they come to call on you
and drag your poor body down
Just one thing I ask of you
Just one thing for me
Please forget you knew my name
My darlin Sugaree
As I outlined in the last post, this is a dicey juncture for the tape and I am admittingly wavering on whether to remove my leg (from our silly bearish imagery) and entering an edgeless event (payroll numbers tomorrow) more balanced. The little angel on my left shoulder is smiling sweetly and gently whispering that this is my chance to let Boo swagger back to his (rental) apartment with a little dignity. The tiny devil on my right shoulder is barking in my other ear that I've sweated out the liftage like a man, and I'd be panicking (for cover) on the first dip ... just like January!
There is no easy answer, and my gut is that it's a little cute that the rally respite will last only a single session. We're at the top end of the channel in a couple of indices, and the bulls haven't even begun to shvitz yet. This is healthy, they claim, and there is a notable absence of fear during this pullback ... which isn't bullish.
Let's see how the tape closes. Every time I think about getting more constructive, my eyes migrate to the stochastics and I think of the complacency, and I think ... we have room to the downside. Tough call here, and I just wanted to share my thought process, however fragmented.
Engine room, more steam!
R.P.
No positions.
Surprise Visitors!
5/03/01 1:10 PM ET
Holy cow, Froedrick and Frau just skipped into the office to ask if they could double with Dorothy and I tonight. Sorry friends, I am rarely selfish, but she's all mine. I can remember, with great clarity, what she used to say to me when I was a young boy: "What are you doing in the bathroom all day and night? Why don't you get out of there and give someone else a chance?" Hmmm, the more things change...
While you're here, though, let's review our thought process on this abby normal tape. The Schwannstucker question, in a nutshell, is whether this is the hydration before the resumption of the rally mode or the fail from our technical lines in the sand? Here's both camps...
The bulls would argue that stair-step rally is much more healthy than a parabolic rise, as it pulls some short money into the tape and alleviates the overbought condition somewhat. Further, psychology and momentum continue to be on the buyside (despite the seas of red today), and there is a potential "reverse head and shoulders" setting up in the N's and S's ... which would work to much higher levels.
Continued below
Surprise Visitors! Part 2
5/03/01 1:09 PM ET
The bears (or what's left of 'em) maintain that this is a bear market rally and, deja vu, the longs got suckered once more. They look at the same charts, maintain that we never broke the downtrend (N's or S's) and argue that the dissipated short base (and fresh long money) will exacerbate the downside. Further, Boo keeps pointing to the extended nature of the tape, the pending sell signals in the stochastic oscillators, and the slew of cocky bulls floating around.
Now do you see why the reanimation of dead tissue is a layup compared to calling the market? Each argument is salient, and each infers a huge move ... in a different direction! The wildcard, and what ultimately will determine the fate of the tape, is the perception of when the cycle trough is. We've rallied nicely (albeit from extremely oversold conditions) on the notion that business has stabilized. Now we need to see discernable signs of demand, which thus far has proven elusive.
While I have you, I wanted to address a quick issue. I've been receiving a lot of emails as to why I seem so convinced that the market will, at a point, trade much lower, and I want to be clear: I don't know anything. I don't think anybody can know (as the script is still being written), but the thought process keeps circling back to the "excess breeds excess" thesis. We've recently experienced the biggest bubble in the history of the world, and it seems unlikely to me that it's over, just like that, and we're in a new bull.
Not the most quantitative of analysis, admittedly, but intuitive to me. Hey, I could be wrong ... it certainly wouln't be the first time.
Now, if you'll excuse me, it's time for my roll in the hay. Taffeta, Baby!
No positions |
