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I think I'm pretty "blogged out" for now, this being my eighth post for the day. My final post last night garnered about 1,000 comments, so I wouldn't be surprised to see something similar in the morning.
Just for fun, I was curious to see in ProphetCharts what a chart of the SPY versus the $VIX yielded. This is an interesting ratio, particularly since the VIX nearly reached the triple digits a year ago and now is almost back in the teens. Here's the chart:
That red line pretty much sums up why I think the notion of a new bull market is misguided (I would normally describe it as clinically insane, but I'm trying to temper myself). The past year – – and by a lot of measures, this countertrend rally isn't 7 months old, but is 12 months old (take a look at GS to see what I mean) – – – has been nothing more than a recovery rally, fueled by government debt.
Today's very whippy tape shows the struggle continues. As I said in my post last night (which, if you didn't read it, please do), I grudgingly accept the possibility of an S&P as high as 1120, and, for the most part, I continue to wait and watch, with almost all my buying power sitting in cash.
At the risk of seeming utterly capricious, I will say that I got out of my DIG position soon after I got into it.
Why? Three reasons.
Volume Counts: The fact that the volume has been steadily falling for an entire year shouldn't be ignored.
Gold Envy: I realized a big part of this trade was to compensate for regretting not getting in on gold. That's illogical and a poor basis for a trade entry.
No Breakout: Yes, it's a nice inverted head and shoulders pattern, but there still isn't a breakout. Until there's a breakout, it's simply in formation.
Total loss? Three-tenths of one percent. I can live with that. But a handful of folks seem to get upset when I state a position and then they find out later I'm no longer in it. So I'm trying to make a bit more of an effort.
It's obvious that gold is on a runaway train, but as for jumping on the commodities bandwagon, I've selected DIG instead (the energy ultra-bullish ETF).
I'm all for head & shoulders patterns, included inverted ones, but I don't get too excited when they're at the top of a chart. I'd rather buy into them when they constitute a base. I've therefore gone long DIG, although I must say, I find the continuously withering volume to be a little disconcerting.
Gary Savage has been a long-time Slope reader. He used to comment pretty frequently, and his profile picture probably accounts for at least a portion of the female contingent here, since he was our closest equivalent to beefcake, but he hardly ever posts anymore.
Gary is a shameless, jumping-up-and-down precious metals bull, and he has been absolutely spot-on for as long as I can remember. His blog, Smart Money Tracker, is something I read each day. Even though Gary gently chided me in late 2006 and early 2007 for being bearish on equities, he was always constructive about it (and the fact that things eventually went my way took the sting out). So Gary's a good egg.
Of course, he probably thinks I'm doing a huge favor by sending traffic his way. But it's only because he doesn't understand the extraordinary magical powers I have when it comes to doing a post like this. Bwa ha ha ha………