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Monday, November 12, 2012

Daily update 11/12

I got some interesting comments on the personal anecdote from the daily update on Friday.  I received an email from somebody in the medical field that I found interesting and would like to share a snippet.

Apparently I have the "ability to consider various bits of information in a matrix and intuitively perceive coherent interrelationships"

I think that describes it pretty well.   He said that kind of ability makes for good intel analysts.  Maybe I should start a second career and work for the CIA or NSA, LOL.  When it comes to blogging there is one small downside.  Some things are totally and completely obvious to me that many people struggle to understand.  I am not a good teacher because I have a difficult time understanding why somebody else does not understand something that is so completely obvious.  If I write anything in this blog you do not understand, please feel free to email me with a question.  There is a good possibility there might be somebody else with the same question.  This is not a classroom.  Nobody else is going to know you asked a question.  There is nothing to be embarrassed about.  I understand that I am not good at explaining things so it will not offend me in any way.  Please ask away.  If you still don't understand my answer, ask again.  I will keep trying until I figure out a way to make myself clear.  I understand I have a short coming when it comes to communication.

In that vein, I got a question about what I meant by saying "fully bullish" or "fully bearish" in my article on the trend filter.  That was kind of a poor choice of words.  When the trend is neutral it can have a bullish or bearish bias.  When I said fully bullish that was my attempt at saying the trend indicator is now giving a long signal and is out of the neutral state.

In Friday's USA Today there were some interesting statistics.  The statistics come from a study of the last seven presidents elected two a second term.  The average gain for the fist term was 67% and stocks were up 90% of the time.  I would say that means if you knew when a president got elected that he would be elected for a second term you should be aggressively long, LOL.  However, the statistics are much different for the second term.  The returns dropped to 10.2% (2.5% per year).  Stocks were positive only 43% of the time.  At least that one we can kind of use a little.  We know when somebody gets a second term.  The statistics mean we should be a little more defensive when that happens.  Of course that is just something to keep in the back of your mind.  The first 18 months of President Bush's second term were pretty good for the market.  It was the last 18 months that were a disaster.  I believe we will have the opposite pattern this time.  The first 18 months of this president's second term are likely to be rough.

We now return you to the regularly scheduled daily update.  Not much of a day with the bond market closed for the holiday.  Here is the daily chart.

Price is consolidating at the 200 SMA.  Every little bounce is being sold into.  I don't see anything that indicates a strong bounce is coming yet.  Very weak markets get oversold and stay that way.  One possible outcome is that price crawls down that lower trend line instead of bouncing.  The fact that so many people are expecting a bounce makes me a little suspicious that we might see that in this instance.  Lets zoom in to the 130 minute SPY chart.

Price is treading water just above my last support line.  The volume bars show big red bars are still dominant.  Yes, the market is oversold, but here is no law that says it must bounce.  If we break that lower support line there is nothing for another 5 SPY points down that I see.  I am still holding out some hope for a bounce up to 1395-1400 on SPX, but I have no confidence that we will actually get that.  This is key support and the bulls can barely get the market off the floor so far.  I don't see much edge in the charts for what happens tomorrow.  Today was a pretty narrow range relative to what we have seen lately.  Getting outside today's high or low should see some continuation tomorrow.  Swing traders need to be ready to short again if we don't get our bounce.  We do not want to miss a break down here if that is what it decides to do.

Chart practice has been updated with SWK the stock for today.


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