Gersh, I really thought about your question a lot.
I would totally agree with the basic concept that once the trend is recognized it may be too late to play. However, this Bear Market has taught me that in a Bear Market one needs to believe in the concept of capital preservation, not capital expansion. The reason I came to this thread about the time MG started it was to gain an understanding of the TA game. I needed to learn the dangers of trying to catch the TA falling knife. I've paid a lot of tuition to the Investment Institute of Higher Education in this regard. I know you have as well.
The problem with your Red lines is that it tends to ignore all that has gone on before. Do we simply ignore the broken necklines of the H&S patterns? I would suggest that they are there and they are real. We certainly could run about 3% before we hit them. It would actually look like a breakout. Boy, this Bear has shown that view before!!!
Once before on this thread I stated that it is not where we go, but where we fall back to that is important. The FA side of me feels that this comment is more important now than ever before. I believe we are going to break these down trend lines; we've done it before. As before, what is important is where we fall back to. Simply put: do we test them or do we break them?
It is clear to me that last week it broke but held in the end. One thing I learned in the fourth quarter of 1999 is not to ignore the role of the fed in this equation. Liquidity, not the absolute value of interest rates, is the game. Consumers will continue to ignore oblivion as they always do: the Lord knows they are busy people, and have bought hook, line and sinker into the B&H game. I would only ask: Was Madison Ave created on Wall Street or was Wall Street created on Madison Avenue? Further, if we break them, we are going to do so into a Donald class One sell. Really, really, not a good thought.
There is also a major debate as to whether TA does the job based on a top down or bottom up approach. This week I decided to look at the issue from a bottom up approach. Boy, there are some bullish charts. If they hold, this move could be significant.
Again, from my Swamp perspective, it is not where this move goes, but where the Pull Back ends.
Just a View from the Swamp
TB |
