Good Evening,
Wow! Did God bless us or what? I’m in awe of the ground we have made up in a week’s time. The bears are being mauled and we are 100% invested. Both TSP and AMP gained well in the triple digit category again today. I would even call the gains gaudy. Another thing that shocked me was how traders loaded up at the close. It wasn’t so long ago when they were afraid to hold stocks over the weekend. Now they’re afraid not to. The action is so scorching hot that they are afraid of being left behind. Why? you ask. As if you didn’t think I’d have to add my 2 cents worth on the subject.
Once again traders entered the day wondering how the heck this extended market is becoming more extended and you know what? They’re right! The bears have a lot of good arguments. Many of us– including myself– thought that the V shaped bounces had come to an end with the FED closing out QE III, but we were all wrong. Most of us got whipsawed three or four successive times causing our funds to under-perform. After three successive times, I finally found some indicators that could tell me when a V- Shaped bounce was going to occur and I was chomping at the bit to show everyone that I had finally conquered this thing. I really thought it would be a long time before I saw it happen again. As I said above, I was wrong!! Needless to say, I didn’t strike out again. With God’s help, we made it through this one! What many of the market players failed to notice is that while our QE program is winding down, the rest of the world is still trying to save their economies. Well this morning the US passed the baton to Japan who expanded its QE program, buying even more Japanese Bonds. I’m not sure where all this money printing is going but the market really likes it now! The result of this additional QE by Japan was another big world rally. As we have talked about many times, you just can’t expect the market to act normal anymore. The trading no longer reflects normal human emotions. It is now driven by computer trading and central banks. I hate it, but that’s the way it is. Quantitative Easing and computer trading together have created conditions where markets never get too extended to go up. There’s rarely even a dip when things head up. As I said, the power of the current rally is incredible.
Out of the last twelve days, there has only been one day of selling and it was pretty weak. I write time and time again that I expect some consolidation and it never comes. One of the other crazy things about a market like this is that it creates conditions that keep it going. Every time the market moves up, there’s a bunch of money on the sidelines that wants to jump in. The big problem with that is that nobody likes to chase extended stocks, but they just keep moving up anyway and that’s what’s caused so many hedge funds to under perform in 2014. Money managers prefer enter the market on pullbacks or at the very least when the market move sideways. However, this market never gives them that chance as it seems to always do exactly what they think it wont do!
So how does one deal with this? The most important thing is not to keep digging when you are already in a hole. You’d think that is an easy concept, but when you get whipsawed and find yourself in a hole you tend to want to get out as fast as you can. If you try to force the action and get out because “you are a good trader” you will find it to be an extremely costly proposition. Betting against this type of action simply hasn’t worked for some time. It is a mistake to be overly bullish or on the other hand to try to time the action on what you “feel” will take place. Emotions can and will get you killed in this business. The way to deal with a V Shaped bounce is to respect the price action. Take your emotion out of it, watch your charts using quick indicators and do what they tell you to do. Quit trying to anticipate what this type of market will do because more than likely you’ll be wrong. There’s my two cents. It was worth well over 1% today…
Dow, S&P 500 end at record highs; BoJ move adds fuel to rally
| 10/30/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.5648 | 16.6627 | 26.2093 | 34.9817 | 24.6477 |
| $ Change | 0.0009 | 0.0144 | 0.1646 | 0.1863 | 0.0831 |
| % Change day | +0.01% | +0.09% | +0.63% | +0.54% | +0.34% |
| % Change week | +0.04% | -0.10% | +1.55% | +1.99% | +1.12% |
| % Change month | +0.19% | +1.07% | +1.26% | +2.68% | -2.55% |
| % Change year | +1.94% | +5.85% | +9.78% | +3.89% | -3.59% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.3131 | 22.611 | 24.4286 | 25.9242 | 14.6869 |
| $ Change | 0.0205 | 0.0625 | 0.0861 | 0.1049 | 0.0664 |
| % Change day | +0.12% | +0.28% | +0.35% | +0.41% | +0.45% |
| % Change week | +0.32% | +0.77% | +0.99% | +1.15% | +1.30% |
| % Change month | +0.33% | +0.34% | +0.41% | +0.49% | +0.45% |
| % Change year | +2.95% | +3.74% | +4.13% | +4.39% | +4.43% |
“Price closed at a new all-time high and in the process moved our intermediate-term Trend Model to a BUY signal. What is interesting when comparing the 10-minute bar chart above the daily chart below, we see that when price hit overhead resistance at the all-time high, it stopped and traded sideways instead of making a significant breakout. Volume was up on today’s rally which is bullish.”
“Conclusion: Our Trend Model switched from a Neutral signal to a BUY today as price set new all-time highs. The concern right now is the inability of the market to make this a significant breakout. Ultra-Short and Short-term indicators are extended and could definitely use a break. We keeping waiting for a digestion period, now that price has hit these highs, it could be a great place to do that. Intermediate-term indicators still favor higher prices.”
