OK, I've finally found the time and energy to put a post together.
We now know that everyone on the planet is following The Triangle. Even the Wall Street Journal – – hardly the bastion of technical analysis – featured this story earlier today:
It's interesting to see that the Street's take on the chart is that it's "super-bullish". It sort of reminds me of how we bears were beside ourselves with excitement last August when the giant head and shoulders had formed and a "super-bearish" plunge seemed to be right at hand.
One interesting trade I saw mentioned was long United States/short everywhere else, best expressed with the ratio chart shown below. It has performed awfully well the past couple of years.
I spent some time yesterday looking at technical indicators, and I've found four that I like – – the Aroon Oscilator, the PSAR, Linear Channel Regression, and Relative Strength Index. I call it my Power Quartet. Anyway, applying these to the S&P 500, they're bearish across the board:
Backing up to a longer-term view, these indicators seem to provide pretty good signals:
I've been doing a lot of self-talk about the whole subject of "hedging" lately. I am increasingly convinced that, by and large, hedging hurts more than it helps. Yes, from time to time, its nice to have one large SPY on a morning when things are strong, just so I can take some profits on that trade and diminish the damage from the shorts. But more often than not lately, the combination of shorts and longs is neither helpful nor clarifying. I think I'll consider cash levels to be my hedge. I don't need to be long and short. I can simply be less short.
Speaking of which, I stupidly had a long position on FXE, which I sold at a loss this morning from the overnight move down. Yes, this thing may bounce at some point, but let's face it, it has been in a waterfall decline lately, and it isn't exactly forming a base just yet.
Similarly, the Broker/Dealer Index (whose participation is important to any bull market) continues to erode badly. It totally dropped the ball when it failed to follow through on that horizontal line shown below. It had been a nice breakout, but no longer.
The NQ is sporting a very impression diamond pattern, but I say the same thing I say every ten minuets these days – – we need to break support for the pattern to matter.
We are at a moment of truth on the ES. As I am typing this on Wednesday evening, the price level is right at the support line. If history is any guide, this stupid thing wil bounce to 1250 again, which seems to be Home Base for the ES these days. If we just keep farting around 1250, we're eventually going to push past the right extreme of the triangle, at which point the entire pattern peters out into irrelevance.