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In this last day of reflection prior to the resumption of trading tomorrow, I thought I would share this with you. Here are the top lessons the market handed out to us in the year just passed. Most are old lessons that just need to be reinforced. In the heat of the "battle" some are difficult to keep foremost in our thinking.
Lesson #1: Price patterns work.
I, personally, have difficulty trading classical chart patterns as I note they tend to fail to deliver the next technical expectation as often as they deliver. That being said, there is no denying that, for the broad markets in 2011, they did deliver on two notable occasions. 1) The summer of 2011 with the head and shoulders off the May high and 2) The double bottom off the August and October lows. One of my personal goals this year is to attempt to do better in this area. To that end, I will be using Tim Knight's and Tom Bulkowski's works predominately.
Happy New Year, everyone! Hope everyone had a safe and fun NYE. I am sorry I haven't been updating as much over winter break. Unlike other investors/traders, I have no target for the S&P 500 by the end of 2012. I am not even going to waste my time guessing.
After reviewing 1500+ charts (no life) ,there are cases for both bull and bear and that is why I think the Sp500 ended with the yearly Doji candlestick as well. I will still be referring to deflation/inflation scenarios as opposed to risk on/risk off as I think the markets still haven't decided what will be the real outcome.
For example usually bonds and stocks move in the same direction…but when there is a deflation spiral, bonds and stocks start moving the inverse of each other…. Some guys who have been spot on in 2011, like Hugh Hendry and Jerry Lou from Morgan Stanley called the commodity spike as a "head fake" and only time will tell if they were right.
I used to think multi-billionaire hedge fund managers were a lot smarter than me. I used to think that, because of their past success and their inside connections, whatever investment strategy they were executing was better than mine.
Boy, was I wrong.
Exhibit A in this is, of course, John Paulson. His passionate bullishness for Bank of America and financial stocks in general made me really wonder how off-base I was in early 2011. After all, he's John Paulson, and I'm a nobody. Well, we see how well that worked out. His Advantage Plus fund was down something like 50% or more last year. So much for green shoots.