Analysis Paralysis

Since my return from San Diego I have been diligently perusing the blogosphere in the past 24 hours. And I don’t think I am exaggerating when saying that since last Monday pretty much everyone has turned ‘medium term’ bullish again. Which in a way is weasel speak for ‘the trend remains up because it’s been up for eight months now’. Damn it – even Hochberg suddenly switched from Wednesday’s ‘rips are bearish opportunities’ to a wishy washy ‘mixed stance’ on Friday, which probably freaked out every single option trader following his work. FYI – he’s famous for doing that – Berk opined that the times when he is confident in a top call, he is usually wrong. Times like this when he is unsure, the bottom traditionally falls out. Yes, yes – the eternal trepidations of our financial druids attempting to forecast the future 😉

Now, as evidence everyone points to a different cocktail of magic TA brew to quickly slip back into the bull costume – I’ve seen it all this weekend. Let’s have a quick role call:

• A three drives pattern (a.k.a. we stay locked in the long term channel)
• This was only another X wave (popular among Elliotticians).
• Evil VIX broke through it’s upper trend line, so the world is ending.
• Market sentiment is too bearish again (same excuse we had for months now). Admittedly however the AAII reading was the most negative since the conclusion of Primary {1}. This is the only one that worries me.
• Greedy MMs are pushing the tape up for Nov OPX.
• A ‘seasonal strong period’ (conveniently forgetting that the ‘seasonal weak period’ has been AWOL this year).
• Bernanke’s Revenge.
• Turn cycle wave of your choice.
• [fill in bullish argument of your liking]

I personally see some bullish evidence on the horizon but I don’t think this is where everyone should throw in the towel. At this point at the very worst the evidence is still mixed – let me show you:

Yes, we got that snap back rally I expected over a week ago but apparently the P/E ratio has not budged. Very strange behavior and it bodes the question of whether or not we might break that channel the 10-day MA has been trapped in for about a year now.

And yes, the VIX did close below that long term trend line which had three touches in the last year. Wow – I’ll alert the media. Two touches is nothing but a line, three touches maybe is a trend line but not one I would base my entire long term outlook on. Alright, so even if we keep pushing lower here – great – which will get us to below 20 potentially (50% mark of channel), which would be this bear’s wet dream.

My wave count has not changed at this point – plus I don’t really enjoy putting up CYA postings. Of course it’s possible we push higher tomorrow and the next day and the next day but as of right now we have not even touched the fucking 61.8% fib line. If we were close to the 78.6% fib line I’d understand that ya’ll getting cold feet and I’d probably be cursing like Popeye. But let’s give this tape a chance to complete this correction:

We might have a developing fractal in the works again – yes, it seems to be painting the same pattern over and over again.

Or is it? Kindly compare the down trend signal on the PZI (i.e. left side) with the up trend signal. This thing was running on very thin fumes and it’s possible we are seeing a distribution pattern. Which is also supported by the Zero Lite’s flatline throughout the majority of last week.

A higher close on the SPX, the DJI, and the NDX on Friday – not supported by the small caps btw, as the Russell 2000 closed down for the day. Meanwhile the NYSE A/D ratio was barely above 1.0 and there was a clear divergence in comparison with Thursday’s readings at the close.

All eyes right now are on the Euro – and rightfully so. It’s getting a strong bid this evening and most likely we’re going to open higher tomorrow. But are we going to bust higher on steroids? Frankly – I don’t know – but I choose to not freak out unless the tape tells me so.

Emotions are running very thin these days, and I frankly can’t blame you guys. But whatever you do and whoever you listen to – make sure your trades are based on your system and that your system is based on your own solid technical analysis. There are a million ways to peel this onion folks and most everyone is confused right now – some of the toughest tape I can remember. So, get a clue or get out – otherwise you might as well book a Vegas flight over at Southwest – at least Vegas offers hot babes with anatomically impossible curves willing to separate you from your money the good old fashion way 😉

But hey, what do I know – participation on this blog has shrunk to basically nothing (just look at the prior thread which was up most of the day) and it’s completely understandable as I’m nothing but some loon spouting charting platitudes and exotic wave counts. Doesn’t really mean much unless we can turn all this into some real coin. And that has been tough lately for the bears, thus the sweet smell of capitulation is still hovering in the air. Seems being a bear for more than a week has become quite unfashionable these days – and hey, that’s just fine with me – I am enjoying the solitude.

BTW, big kudos to the Stainless Steel Hamster, who’s been keeping this place from falling into a coma for quite a while now. I won’t forget this, mate – Mole and Berk have elephant memories.

Cheers,

Mole