November 12, 2018
November 6, 2018
What is typical of a major market top is how most professionals in the industry speak about normalizing the corrections.
Contrary thinking looks for one of two circumstances to correlate with such major turning points.
The one is when data or events remain the same but the marketplace’s interpretation of the events changes. The other is when the data/events change yet the way the market is interpreting the events remains the same. The one is a shift in mood, and the other is a denial of change both imply a regime change regarding the market; and possibly the economy.
These interactions give subtle clues of change that allows the contrary thinker to act before others, before the majority.
So today while the facts have remained the same, the interpretation has turned to the above-referenced normalization process, which is par for the course after the first signs of the new bear markets.
This normalization process sounds like this industry-wide: “Wall Street has seen 56 pullbacks (retreats of 5-9.99%) in the past 73 years; the S&P index dipped 6.9% in this last one.”
And they will add that, “…the benchmark fully rebounded from these pullbacks within two months.”
They are also eager to point out that since the March 2009 low there have been 5 or 6 setbacks of 10% +/- while the S&P is still up 335% even after the October decline. But here is the catch, there working assumption is they can not time the markets. Furthermore, the inference is that if they can’t no one can.
That’s because as one “wealth manager” puts it based on the current bull market history: “…waiting out the shocks may be highly worthwhile. The alternative is trying to time the market. That can be a fool’s errand. To succeed at market timing, investors must be right twice, which is a tall order.”
Why would it be a “tall order?” It only makes sense on what he says next: “Instead of selling in response to paper losses, perhaps they should respond to the fear of missing out on great gains during recovery and hang on through the choppiness.”
Wow! Instead of looking at price-based timing models to avoid the risk and to find opportunity, he is reacting to the profit and loss trail, which is post hoc, reactive and emotional based. Hence this wealth management is not based on any “discipline” I recognize. It is based on the profitable of the portfolio. This explanation is what brokers normally say about their client’s failure because its based on fear of loss and FOMO.
Another sign of an important top is in place along with the above apathetic attitude is the modest appearance they are giving to the risk. The rare bearish voices have only modest expectations for the decline.
Lastly, the majority of financial news pundits are kicking the can down the road with 2019 being the consensus.
With that said, done and dusted, our focus is on risk management point based on an objective model not a rationalization or cherry-picked array of Technical Analysis. It is the independent use of price-based tools, strategies, and macro filters to provide actionable and straightforward support.
November 2, 2018
Japanese Yen FX
If you liked the 90’s the yen may be a flashback to the bull run in the last 90’s. The rules are, to follow a buying surge because they almost always pick up a following.
The last four times %BB-Oscillator broke above .72 there was a multi-month advance. When %BB moves above .72 it is a momentum surge caused by the market’s realization of some bullish underlying fact that kicks off the trend. In this first chart, the length of the trend after the signals presented long-term opportunities for bull trading.
The context this buy signal occurred in supports a forceful trend. The Technical Event Matrix is registering twos for all three-time horizons. Technical Events Rule #2 precedes trending moves in most cases and provide a bias to trend following types of systems.
There are some other triggers to go along with the %BB-Osc signal. The triangle pattern – while it may not be a valid triangle in EWT terms – has the historical volatility background that supports it. In other words, a move above the descending trend line would be a breakout.
Furthermore, if the yen can get above the high end of the 20-year base, there is a point and figure count or measured move that targets 180.00 The base and triangle both project 160 to 180 for the USDJPY, a buying power for the yen not seen since 1995.
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