Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
Market Stressors In Your Trading Strategy (by Ryan Mallory)
NOTE: I'm planning on doing a market video tonight. It should be up at about 6:30 PST or so. – Tim
I want to continue on the article I published last week on Eliminating "Hope" from your trading. One way to do that is by identifying the key market stressors in your trading style and how they affect you personally in how you approach the market. Because Hope, as great and wonderful that word sounds, is detrimental to your trading, because Hope has a personality complex with Frustration. When Hope meets reality, you end up with a Dr.Jekyll and Mr. Hyde scenario, and for trading such a mindset leads to destruction of your capital.
Inviting the Vampire
Dear SOH, I love October and Halloween, don't you? 😉
This article in no way pretends to be real, actionable analysis like that which appears in Notes From the Rabbit Hole (NFTRH) each week. Rather, it is just a metaphorical riff on a big picture macro economic theme that is currently in play.
Setting the clock back to January of 2011, we find long term Treasury bond yields hitting a critical high along the 'continuum' and finally beginning to signal an end to the inflation hysteria – born of the previous Fed sponsored QE campaign – as illustrated on the blog in May. At that time, it was noted that the Wizard (metaphor temporarily switched to 'Vampire' for today's article) was powerless to work his magic against an oncoming economic contraction in the face of inflamed inflation expectations (long term yields at a 'do or die' breakout point parameter) and a then rising 'austerity' movement in the US.
Well, you see in the picture above (source info) that times are much different, a mere 6 months later. Indeed, austerity has been cast to the scrap heap as the usual macro-managers come out of the woodwork, one after another, and invite the Vampire back into our homes. You know the legend is that the Vampire must be invited in, don't you? There is nothing like decelerating global macro-economic fundamentals and caving asset markets when it comes to inviting the Vampire to do his work.
Why are we using the Vampire as the metaphor for the US Fed (and I might add, its counterparts the developed world over)? Because they are now being called upon… invited to provide more policy – in the name of asset price inflation – that is ultimately destructive to would-be normal, healthy economies that thrive on productivity and investment of capital toward these things of productivity and value.
In short, more inflationary policy creates more macro debt burden, provides potential asset price inflation and a growing overhang from which many economies will fail to recover (insert here the macro subplot in Greece and the PIIGS in general, which are just a tip of an awfully big iceberg) as inflationary policy sucks the life out of a real economy over time and cycles.
So we have come full cycle. The updated chart of the 'continuum' is in a picture, an invitation. The most recent red arrow indicated a time when the Vampire was reviled and politically scorned.
|The 'continuum' AKA secular trend in 30 yr yields|
Now we have a different atmosphere – expected by this writer and indicated by the chart above so many months ago – with deflation and systemic collapse at the forefront of the collective financial and economic mindset. Austerity? Please, give me a break. The Vampire has already received his invitation, but having been scorned so soundly earlier this year, he sits back and lets the call become louder by the week.
The balance of current NFTRH analysis holds that he may await a final capitulation to be sure that the invitation is near unanimous.
Well, that was a pretty terrific day. And now I'm going to ditch all you guys.
Seriously, I'm heading off to my son's school to show them some of my old maps. I've never mentioned this, but I collect very old maps (400-500 years old), and since they are studying the ancient explorers, I thought I'd bring some in to share. Yes, I'm doing some Show & Tell. I suppose my interest in maps is further proof of my obsession with all things visual.
Looking Lower (by Springheel Jack)
NOTE: I neglected to put up this post, which Jack wrote five hours ago; definitely an oversight on my part; my apologies!! – Tim
I was watching for one of the last bear market indicators to trigger at the close last week, and that was a close below the monthly 20 SMA on SPX. SPX closed a long way below this and the history of the last two bull markets suggests that we can expect no more than a retest of this trendline before the next cyclical bull market has begun. I've added the bollinger bands to this chart as a touch of the lower monthly bollinger band would generally be a minimum bear market target and so it's worth noting therefore that the lower bollinger band is currently in the 1000 area: