I hope you’re having a wonderful weekend, my Slope family. The Rev was a little under the weather this week, so my usual radio voice will have to be replaced by some illuminating keystrokes.
Before the year ends, I wanted to take a brief look back at the last six month, but more importantly, at the year ahead that awaits us. In my last market update, from June 23rd of this year, we discussed the continuing bull market in SPX and how it was following nicely the 10 year crude oil analog. We forecasted continued strength in SPX, as a period of sideways consolidation was likely to breakout to new highs before year end. SPX closed on 6/23 at 2438, and currently trades at 2675. Voila! The crude oil analog in practice. (more…)
There are few experiences in this life that will more fully expose your strengths and weaknesses like trading the markets… Mentally, emotionally, spiritually, even physically.
Before we move forward, let’s take a look back. Do you remember where you were in Oct/Nov 2014, and what was happening in the markets? The market was doing something that it had never done before. It was making a record number of daily advances. Day after day, after day…like the market had never before seen in recorded history. It was also the time when ATR-based trading was birthed out of the pain of my unseen bias. My trading moved from fundamental, to technical, and then to unbiased trading based on ATR. (more…)
Note from Tim: I wanted to preface this thoughtful post from Rev with something that happens very rarely……..a coupon to Slope Plus for those of you considering it. I am offering a free month for you to try the service by clicking on this link. When you do, enter the coupon code winter2017 and it will give you the first month for free. (This coupon is only going to be working for a few days, so don’t lollygag). Please note this discount works for ANNUAL subscriptions as well, so you’ll save the most by going for an annual, since you get two months free already.
Besides all the normal extras you get as a Slope Plus subscriber, you’ll also be getting the very best ideas I’ve got (many of which have been doing really well, even in this market, as you’ll see once you have access). I hope you’ll give it a try. On with the regular post now…………
Happy weekend Slopers! It has been over a year since I have offered a header post, so let’s take a look at the interesting point markets are currently at.
Starting with SPX, shown below, the markets have been in a slow building parabolic rise since the Brexit lows, continuing their rise off the November election last year, followed by another leg higher to start 2017. Have we arrived at the short term top, or is there more to come?
The bears certainly had a shot at the end of this past week to end the short term uptrend. ATR’s short term sell reversal going into next week would be a close under 2353.80. For those that have been riding the trend higher this year, the next short term sell reversal would be the time to take trading profits. Until then, using ATR reversals to ride the trend as long as it last is enormously profitable in long lasting short term trends.
“All of us show bias when it comes to what information we take in. We typically focus on anything that agrees with the outcome we want.” – Noreena Hertz
I have been wanting to write this article for some time now this year. I wanted to wait until the results I was attempting to achieve became overwhelming. I think we’re there, so I am eager to share. Before I do, let me take a step back and share briefly my history as a trader and investor. I would divide my investing & trading history into three segments.
1998-2007 – Long term investor. Buying and holding assets.
2007-2014 – Combination of buying long term investments & discretionary trading
2015 – Combination of buying long term investments & ATR based trading
I graduated from college in 1998, began working, and investing. My focus was accumulating capital, and putting it to work buying companies that I believed in, understood, had good balance sheets, and for the most part paid dividends. It worked. I enjoyed it. I was good at it. At this point in my life my expertise was understanding companies, not the global economy, or technical analysis. My father was an executive, and my brother was an entrepreneur. I had grown up in business, and been educated in the management of companies.
It may sound counter-intuitive, but the United States needs a recession. I don’t say that to wish ill will on our nation. I say it for our good. Recessions are the market’s form of cleansing the excesses, and generating new innovations that only pressure can bring. Just as nature protects against major forest fires by having smaller fires from time to time, our economy needs to retreat from time to time to cleanse itself.
Obviously, the Federal Reserve over the seven years has been doing everything in its power to prevent even the smallest retreat in economic activity through an unprecedented expansion of the monetary supply. Distortion is not creation, and printing money does nothing to expand genuine economic activity. On the contrary it leads to mal-investment and greed, two things our nation and economy needs to be cleansed of.
This can best be seen in the energy sector. Contrary to what the public may believe, the world has been drowning in oil for the past few years. The oil market has been badly over-supplied in recent years, as more oil has been coming out of the ground than the world can use or even store.
(Editor’s Note – just to be clear, the post below is written by TNRevolution, not me!- Tim)
No, that wasn’t a typo.
If you frequent the comments section on the Slope, you’ve undoubtedly noticed a change in my viewpoint on the markets over the past couple weeks. Let’s take a look at why.
Starting with the Russell 2000, the market has seen multiple genuine opportunities to see significant weakness this year. They have all failed to this point. I have circled each opportunity on the chart below. Beginning with the drop in January of this year, the Russell broke down out of it’s rising wedge off the November 2012 low. This was a well formed wedge. We saw an initial drop down to the 1080 level, followed by a move higher to new highs and a backtest of the wedge. After the backtest, the Russell began to fall away again, leading to another good bearish opportunity. The decline again stalled at the 1080 level, moving higher, thereby making 1080 a key support level on the Russell. The final good bearish opportunity came in September of this year, as the Russell broke down out of its larger rising wedge off the 2009 low. This breakdown was also followed by a breakdown of the 1080 level. Prices stayed below 1080 for over a week, reaching a low of 1040. However, prices began to move higher, and retook the 1080 level, continuing higher since. (more…)