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Friday, January 25, 2013

Daily update 1/25

SPX closed above 1500 resistance.  Now we will just have to see if it stays there or not.   Here is the daily chart.

This the eighth day in a row SPX has closed higher.  How do you predict when a runaway market is going to stop, LOL.  Lets take a peak at the monthly chart for a change.

SPX has stopped at that upper line the last two rallies.  Here we are again.  Only this time people are piling into equity mutual funds and stacking up margin debt.  Not only that, but day after day on TV people are telling me how great things are.  Really, LOL.  There is a trader they interview once in a while that has a white jacket with black spots.  I call him cow guy.  If you have seen his jacket you know why, LOL.  Yesterday he was telling me how last Jan. he kept waiting for a pullback and missed the rally.  Not this year.  He says we can't wait for a pullback, we must get long now.  That is commonly called FOMO (fear of missing out).  There are many good investment strategies, however FOMO isn't one of them.  There are some things different from Jan. last year.  The manufacturing data started picking up considerably in Nov. and Dec. of 2011.  The indexes were still well below their 2011 highs not at bull market highs. The COMPX was charging up along with the other indexes.  There were lots of things to worry about and everyday the media was telling me all about them.  Apparently we have now solved every problem from what I hear and read.  I guess I am a lot skeptical in that area, LOL.  How much higher we go from here I do not know.  One thing I do know is that this will end with an ugly crash just like every other FOMO instance.  I don't think I have seen this much FOMO since the 2000 top.  We definitely did not have that in 2007.  The key to identifying that 2007 top was the big divergences in key indexes.  We don't have such an obvious disparity this time, but we have poor economic data and lots of FOMO. 

Here is a chart making the rounds on the internet.


I have to admit it is eerily similar.  It is too bad we didn't know it was going to trace out such a similar pattern, LOL.  What are the odds of it actually playing out the same way in the future?  That would be a bit hard to believe, but I guess stranger things have happened.

Chart practice has been updated with PPG the stock today.


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