Let's hope we don't get 'caught napping'... the long view can be short-sighted...... (Bulls on Parade)

Support our Troops...

Just because we peer over a flat horizon does not mean that the world is flat. Just because stocks have generally gone up over time in the US markets since the 1940s does not mean that it will continue to do so. Is the long view really as long as we perceive it to be?

We have not reached a preliminary target of 1150 on the SP. Please understand that this is just one line in the sand. Much more subtle markers are needed to examine the exchange of millions upon millions of dollars.

The Heisenburg Uncertainty Principle, Type I vs Type II error, sensitivity vs. specificity... they are all saying the same thing... the more you know one thing the less you know its counterpart. Therefore, there is no argument whatsoever that trying to be too fine in the market is a big mistake. My belief is that a systematic method can be employed to get you in the ballpark. From there, once the probability is stacked in your favor, it is important to stick to the system and realize that trying to be too fine can mean opportunity lost. At last week's high we were within 5% of my target... and more importantly... statistics imply that that the weather MAY be transforming. Just realize that the stock market is a multi-layered pyramid scheme... and then you will understand that the further we go up the more bearish we should become.

For the more subtle details of this understanding, one that is translatable into quantified methods, Elliott Wave Theory and statistical analysis can help. I won't discuss statistical data but I can say that, though I emphasize while I don't always agree with him, though I do greatly respect his analysis, I think that Bob Prechter provides one of the freshest perpectives in the market and is on the money here. I also want to make it clear that it can take years, decades, or lifetimes, to become a masterful Elliott Wave Technician and since I don't have that kind of time I have chosen to look further for methods that expand upon that knowledge. For individuals who really are masters in the art of Elliott Wave Theory that may be all that is needed. Statistics layered upon Elliott Wave Theory may provide even greater insight. I did see that Mr. Prechter was at one point looking for a statistician so if this interests you perhaps investigate further. Overall, each individual is different, of course, and must do what he or she thinks is best.

All of that being said... nothing in trading is a certainty, and risk management is of paramount importance.

It is also interesting that while my stats are showing potential weakness in stocks I have not encountered that as of yet in the corresponding data points for gold and silver. It would seem logical that a strengthening dollar, decline in stocks, and decline in commodities priced in dollars would all go hand in hand. Yet I am not seeing the smart guys in any way indicating that the rise in gold/silver is over... this could change and probably will but it does make me wonder if a fall in stocks could be accompanied with a continued rise, or at least modest drop, in precious metals. Just something to watch at this time.

One other thing that needs to be emphasized... on a more general level, including but not limited to the stock market... is that dogma can be one of the most limiting elements of this planet... it hinders people from realizing, among other things, that Black Swan events are, in fact, quite common, provided that you take a long enough view... At this transitory moment in time in the market the 'Bulls are on Parade'. An inflection point....?




"The Yellow Rose Street Beat" is for informational purposes only. It does not give investment advice.