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.

Bear in Mind

By -

Years ago, I would tell people that I was a really good chart analyst, but a lousy trader. And it was true. I had a natural knack for reading charts, but the actual firefight of trading was something that was horribly challenging for me.

After many years of study, reflection, and effort, I'm still a really good analyst, and my trading skills are starting to catch up. If I may say so, I've gone from "great chartist/terrible trader" to "great chartist/good trader." Once I reach "great chart/great trader", I'm going to take over the world.

A reader brought this to mind by sending me a screen shot of a chart I posted around March 20th, speculating on what I saw ahead for the market in the coming months. It is shown below, precisely as I scribbled it out nearly four months ago………

0711-prediction

Let's highlight in yellow the chunk of time which has transpired between then and now:

0711-pred2

So what I predicted was (a) down a little (b) up a little (c) down a little (d) up a lot (e) the formation of a head and shoulders pattern.

What does the actual chart look like? I've shown it below, drawing in the lines that correspond with my prediction:

0711-pred3

In the words of the Sloper who sent this to me, "You nailed it!"

I must say, I was kind of taken aback. Now, just to be clear my ego hasn't run away with me, let me beat myself up some: I called practically every wiggle of the market four months in advance with eerie precision, but I took advantage of maybe 20% of it. All in all, I'd say I screwed up royally, because only in my 401-k did I derive benefits from my insight.

So I give myself an A+ for my analysis, and a C- for my execution. Or, more accurately, a C- for my ability to believe in my own foresight. So hurray for me. And shame on me.

Thus ends today's combination of self-adulation and self-loathing. Draw from it what you can.

A Reader Responds

By -

Hi Tim

I'm a big fan of Slope and was intrigued by a comment in your latest missive – "I cannot picture a scenario in which we get above it this year." Perhaps there is. I call it Rally 2, instigated in much the same way as Rally 1, but in a much more compressed time frame.

I am a behaviourist at heart. Once I have digested some of the fundamentals, the technicals, EWs, chart-pattern formations, Dow Theory, Fibs (and trader views such as yours) et al, I put my behaviour hat on.

Elliot Wavers such as Robert McHugh, Karimba, Lamoureux and even EWI's own STU, have expected this June 11 top to be followed by:
       – a zig-zag down (albeit on differing wave counts) to a mid/late July bottom
       – followed by a final summer surge (or what I call Rally 2)
       – followed by Catastrophic wave C down in the autumn.

I know this idea is popular out there, except with Elliot Waver Bill Neely who has called the top as Jun 11, like you.

I am not a conspiracy theorist but I do believe that we have just witnessed some of the strongest market intervention by the President's Committee or the PPT (call it what you will) that we have ever seen. The conditions for intervention were perfect. Loaded up shorts, lower-than-average volume, a weakening USD, bail-out funds sloshing to big banks balance sheets via the AIG conduit, and the outrageous tweaking of accounting rules. It didn't take much buying of the market to drive a short-squeeze that could be put into fifth gear by 'dumb money' and fed by the 'green shoots' brigade.

I expect much of that to happen again. I expect a down towards 7800 in the next fortnight. Shorts will be loading up as the Jun11 top argument gains traction. This is just as we enter the summer doldrums on volume. Next, I believe the USD isn't going to bounce any further than 84 on the index in the coming fortnight. Thereafter, the pressure will be back on (for all sorts of very obvious reasons) and we'll see a falling dollar that's great for stocks (Inflation looms, will be the call). The bond recovery is looking like the dollar too. Renewed pressure on bonds will reignite the yields (inflation looms, will be the call) and drive minds to stocks again. And people will be saying "where's that next rally?".  Oh, and "Inflation is looming". Did I mention inflation?

Behaviourally, the mood will be dominated by those not wanting to miss out on 'the next rally'. Many of them did miss out on Rally 1. But not Rally 2. They will be in there early when the very first of the new green shoots appear (what do we call these?). As usual, these will have been planted by the Fed, watered by the big banks, and fertilised by the media. Expect the last week of July and the first week August to be happy blue-sky days on the news tickers. We'll get commodity speculation to kick it all off, and upswings on market-proxy Goldman Sachs. I really don't think it will take much to turn this current mini-reversal and create Rally 2.

But compared to Rally 1, I expect a take-off of rocket proportions – a true stampede for the markets. 1050 tops for the S&P, 9700 for the DOW look like a shoe-in  under this scenario. And then the rocket fuel will run out as some piece of macro news, that can't be manipulated, finally makes folks understand what deflation is really all about, and why we need Austrian economics not fiscalism. The plunge will be un-protectable.

I'm a behaviourist and I know things have a (bad) habit of repeating themselves, so I'm for Rally 2.

And I know I may also be wrong. That's why I'm currently 75% cash and ready either way, watching GS, BKX, copper, gold and oil like a hawk.

Thanks for your site.

Nick

The Waves

By -

First off, the folks at Elliott Wave International wrote me today saying they are kicking off a 17-city How to Trade in a Fast-Moving Bear Market tour from September 4, 2009 to February 2, 2010. You might want to click on the link to see if they'll be anywhere near you, since I really like their work and – – assuming this danged bear market fires its engines up sometime again – – I have found Elliott Wave to be helpful as we stairstep our way down.

Second – speaking of the same folks – here is a graph from their Short Term Update tonight (they allow me to occasionally republish graphs from time to time here) which I like:

0629-nasdaq

As usual, click on the graph to see a bigger version – but it does a nice job labeling the past year of market activity. The horizontal line marked as a .382 retracement is the crucial line in the sand. Either the countertrend rally has exhausted itself (which would agree with the "2" labeling), or what we experienced over nearly four months was simply the first phase of a more hefty push higher.

My money is at least oriented toward the notion of a meaningful "B" wave down, but not cracking March's lows yet. What would harm me the most – and this is why I'm relatively lightly positioned right now! – would be a swift rise above that line, prompted either by (1) end-of-quarter window dressing on June 30 or (2) a surprisingly bullish jobs report Thursday morning.

You know what three words are next………..we shall see!

Watch the Euro

By -

In tonight's Short-Term Update from Elliott Wave International, I found this chart of sentiment (used with permission) quite fascinating:

0601-sentiment

Optimism has returned to the levels seen in late October 2007 when the S&P was well above 1500! Bulls are everywhere! Cramer is actually uttering the phrase "Four Horsemen" again! It's as if November 2007-March 2009 never happened.

My snark-o-meter continues to peg pretty high. Fistfights are breaking out at other blogs. Slope tends to hold the high ground in terms of etiquette and comment decency, although some modest snarks are appearing here and there. And I would remind those who sneer that this is a "bearish blog" that I was quite vocal about being bullish on energy and commodities, which have performed spectacularly. So foo-foo to you.

It appears there are some of you who don't spend every waking hour on Slope, and thus the blog platform change was completely unknown to you. Many of the features to which you grew accustomed on the old blog are gone, but most will be returning. A notable one is the watch list feature, which resembled this:

0601-watchlist

Rest assured, Slope is going to be better than it ever was. I've performed a few miracles to change platforms and move thousands of old posts over in the span of three days, so just give it some more time.

Finally, keep an eye on the EUR/USD. Its ascent has been driving just about everything higher, and it's reaching an exhaustion level. Once this turns down, you can expect energies and commodites to follow suit.

0601-eur