Slope of Hope Blog Posts
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Well, I'm glad that's over with. I never look forward to FOMC days. I traded nimbly today, and I ended the day nicely in the green, in spite of the post-FOMC gyrations.
I've got some things to do this afternoon, but I'll do a post later this afternoon. Just wanted to put up a quick comment cleaner.
– Tim Knight (Mrs.)
Quick post on an interesting chart, CLDA.
What I like about it…
- Price has cleared a significant Volume by Price
- Volume is constructive over the last 10 days…but more volume needs to come in to push it forward
- It is solvent (but not profitable) and has already had a recent public offering.
- Revenues are growing
What I don't like about it…
- It's a biotech and subject to the vagaries of all biotechs.
- It is not profitable, so there is a cash burn.
Charts like this in industries like this have to be allocated risk capital.
As regular readers know, my 1937-1942 analog is very important to me, and it is something I have been following carefully for nearly two years now. There have been times when I've wondered if the analog had decoupled from the present, but each time, I find that it is holding fast.
The last time I took a hard look at this analog was back on August 8th, which called for the market to resume its fall shortly. In fact, the fall resumed almost at once, and equities stayed weak pretty much the rest of August. I guess Mark Everett's very nasty email was ill-informed.
But here's where I went wrong……..and it was a big wrong. I thought we were going to get one large down-move (labeled below as from "d" to "e"), but that move had already taken place between June 21 and July 1. We were already in the upswing, and my belief is that we are now at point "h" on the graph below.
This "recount" is pretty severe, because my expectation was that "e" was going to fall to 925, when in fact it didn't even make it to 1,000. I was positioned aggressively for this supposed fall, but we in fact went from "g" to "h".
Here's a closer look at the late 1930s; again, my view is we are at, or very close to, point h:
And here is the current market; compare this with the one immediately above to see the analog.
+ The bad news for the bears, I believe, is that no "mini-crash" seems to be forthcoming this year.
+ The good news for the bears (and it's small comfort, considering the hit I've taken this month) is that a small drop – less than 100 S&P points, I'd say – is imminent.
+ The good news for the bulls is that, following this aforementioned dip, it looks like we'll rally strongly, approaching the April highs.
Referring back to the first chart, I think that after this big rally, we are going to be in for the World's Most Boring Market Ever for a number of months, after which time some kind of Shock Event (which I've labeled S.E.) takes place. That would be sometime in 2011, although I have no idea when.
Some might think I'm making too much of this analog (I'm sure our buddy Mark Everett would), but the longer this analog continues to nail turning points, the more faith I have in it. My "miscount" (Good God, I sound like an EW'er – ugh) is regrettable, but the fuzziness of the past couple of months made it very hard to be sure where to align the points. I'm pretty confident in my current analysis, and I think the bears are going to enjoy some mild relief in the coming weeks, followed by a hearty rally – – – inspired, probably, by some emergency assistance in late October from Shalom.