Daily Archives: December 27, 2009

Let the Charts Tell the Story

By -

Salutations from the frozen wastelands of Northstar. I bid you greeting on this dark Sunday morning, and the approach of year's end has me in a reflective mood. Here's what I wrote a year ago………

But the fact is that we're all equal again. My return so far is 0%. So is yours. So is Paul Tudor Jones'. The crowns on our heads come off, be they made of gold or thorns. Behold, the market makes all things new. And we have no one to depend on but each other, and no one to blame (or credit) but ourselves.

And thus 2009 is almost complete. The bulls have done great. The el-cheapo stock bulls have had a once-in-a-lifetime experience of wonderfulness. The bears, after a final hurrah early in the year, have been alternately kicked in the gut and the teeth. Now, as 2010 approaches, the bulls surely view the year ahead with tremendous optimism as the bears are wondering if they're going to have to sign up to join Obama's expanded welfare state.

I let the charts tell the story. I see a VIX, back in the teens, that speaks of complacency on such a scale that it's as if the "great Recession" didn't even happen:

1227-vix

I see a Dow 30 that rose just as quickly as it dropped, but is confronting a much more serious wall of overhead supply (tinted in green) now that it's back into the quintuple digits:

1227-INDU

I see small caps within a hair's breadth of the index's neckline:

1227-SML

And I see the Dow Transports, having enjoyed a 100% explosion higher over the past ten months, facing a huge overhead supply as well as a major Fib retracement level:

1227-TRAN

The ascent we saw last week seemed to represent the Santa Claus Rally as a self-fulfilling prophecy. Whether old Saint Nick runs out of steam this year, next week, or early March (which is a possibility) remains to be seen.

Although I've balanced my many short positions with a respectable quantity of longs, I dream of the day when Slopers can return to doing what they do best: calmly analyze a market that is bewildering to the rest of the world, using their cerebral powers for their financial benefit in the face of an otherwise scary plunge………..

1227-slopers