Transcendental Market Truths:
The Market:
Typically, rookie traders want to sell the top tick. But, that is something that will cost one a lot of money in the long run because for every time one actually catches a top or a bottom, there will probably be a dozen times one is early. Thus, I almost always sell after a top. As Jesse Livermore advised in Reminiscenses of a Stock Operator, one should sell a failing rally following the top. It's much more likely as a trader to make money if ones trade is in tune with the trend. Once the top is confirmed and the trend is confirmed, getting the exact price right is less of a concern because the underlying trend is in your favor.
The market ran up from February on a support trendline, but broke down through it last week. As per standard technical analysis, a broken support line represents resistance (1171-1172 on SPX) when it's retested from underneath. That's exactly what happened on Tuesday.
Clearly, the market could spend a bit of time here in this price area trying to break above resistance. But, if the market can't do it soon, I'll have a strong indication that the top is in place already.
Gold:
Gold rallied yesterday as expected, but is very likely to be in an exhaustion phase. It's drawing in sideline cash which was too timid to buy it cheaply in the recent past and now that timid money is being bolstered by rising asset prices. Normally, when prices rise, demand will fall or switch to a substitute. In asset markets, however, demand rises as price rises, which is the reason why bubbles develop so easily in asset markets.
There's a bit more of an advance to go in Gold, but I wouldn't fall in love with it here. Ultimately, there is no decoupling between Gold and equities. |
