The indices (DJIA 15518, S&P 1697) declined yesterday. The Dow traded back below the upper boundary of its former short term trading range one day after confirming the break. Usually when this occurs, it gives reason for pause. After all, the length of time element of our time and distance discipline was set outside the second standard deviation of historical experience. Meaning that roughly 90% of all breaks of short term trends are confirmed broken after three trading days---so 10% are ‘false breakouts’.
However, right now, I am not going to reverse my call because not all these ‘false breakouts’ mark the end of a trend. For example, two weeks ago exactly the same thing occurred with the S&P, i.e. it broke out of its short term trading range, was confirmed, fell back below the upper boundary one day after the confirmation, bounced back and forth around the upper boundary for another week, then plowed ahead.
Bottom line, this pin action puts us on alert, suggests that it is unwise to make any further upside bets until we get a better confirmation of a break or a rejection and makes the Market uptrend call a bit iffy.
All that said, the S&P remained within its short term uptrend (1611-1767) and both of the Averages well within their intermediate term (14498-19498, 1544-2132) and long term uptrends (4918-17000, 715-1800).
Volume rose a bit but breadth was terrible. The VIX bounced hard from below the lower boundary of its short term trading range, invalidating Monday’s break.
GLD took it in the snoot. The chart is turning ugly again and warns us to stay away.
Update on ‘the best stock market indicator ever’ (now untradeable):
Monday night, we got more good economic news out of
Europe. Yesterday, good news was bad news
(‘tapering’) and as a result stocks got whacked:
To make matters worse (?), we received our own good datapoints and that only made things worse:
Then two Fed governors allowed as how ‘tapering’ could and perhaps should start early. And you wonder why Markets are confused and losing faith in the Fed.
Even though I believe stocks are overvalued and that Fed policy is apt to end in considerable pain, I am not getting jiggy about one day’s pin action. Investors have been flipping and flopping about whether better economic news is good news or bad news and what the Fed’s policy is or isn’t for at least a month; and I doubt that we will witness a serious move in stocks in either direction until they decide.
Nu Skin Pharmaceuticals (
NUS) is trading above
the lower boundary of its . Hence, the High Yield Portfolio will reduce
the size of this position to one half its normal size. Sell Half
News on Stocks in Our Portfolios
This Week’s Data
Only 40% of student loans are current (short):
Plus more problems for the big banks (short):
International War Against Radical Islam