Looking at the Market Through Slightly Bullish Lenses

As of the close on Wednesday we got another buy signal on the markets and I thought to myself that the whipsaws occurring these days are ridiculous. I’ve said this before that almost every time for the past two months the market looks like it wants to move in one direction and starts to gain steam it reverses course.

Looking at the chart below (click to enlarge), I drew some simple lines connecting recent highs to lows and lows to highs to show how much it resembles an EKG. If you're a swing trader like myself it makes it really difficult to enter positions and hold them longer than a few days because the trend reverses so quickly. For this reason I’ve mostly been trading gold/silver as the trend there seems to be a little bit longer, not changing every 4th day.

But the last time I got a bullish sign on the Dow I entered some longs and did fairly well, so near the close Wednesday I decided to enter a few long positions despite what common sense is telling me. What I mean by that is that it doesn’t feel quite right to buy this light volume holiday rally, but I’ve read that the difficult trade to make is more often the profitable trade. In fact, most traders I follow on Twitter or blogs I read seem convinced this market is going to roll over and play dead starting in January.

I wouldn’t be surprised to see heavy selling starting as early as today, but that’s one reason why I think we may move slightly higher than most expect. I’m not calling for a new bull or anything, just a continuation of this current bear market rally and I’m positioning my portfolio accordingly.

Comments

[Moon Kil Woong:]

Do you see the major resistance at 9,000? There is also a lack of resistance down to 8,000-8,350. My suggestion to you, don't bet the farm. This December on low volume looks like window dressing (with a big 50% off sign infront of it).

Ooops, did I say 50% off. That would make the market 7,000 something off it's high right?

Jan 02 04:49 AM

[sorgmot:]

We are looking for the market averages and gold to drift up some from Jan. 1,2009 to May 20, 2009 and then drop in another big leg down to perhaps 400 on the S&P 500 in Nov.2009.

The period form Jan 1 2008 to Nov. 30,2009 will set all the records for asset value losses.

The USA Federal Reserve Bank deserves all the credit. Governments and their agencies always wreck the wealth of nations by encouraging cartels and monopolies which in turn explodes the percentage of poor in their citizens.

Study Dave Hume and Adam Smith for more details about the roles of cartels and monopoliis in an economy.

To keep an even keel in times like these we recomend hugging a living and growing redwood tree and talking at a safe distance to a living buffalow in Yellowstone.

Good Luck. Ennjay Old Fathful.

Check all investment ideas with your financial advisor before acting on them.

Jan 02 11:15 AM

[GMiki1:]

Don't go near Yellowstone with all the unusual seismic activity! I say we rally for a few months before we fall. Gold and oil up for the coming year.

Jan 02 11:25 AM

[Smarty_Pants:]

Time will tell. Perhaps the author is anticipating an Obama bounce. Which way will the market go once it breaks out of this trading range? That's the question.

Jan 02 11:56 AM

[1977°C:]

Gold 600 in a blink of an eye.

Jan 02 01:20 PM

[Against Aph...:]

Gold may very well hit 600. I'm still loaded up and will buy more at that level.

The easiest way to make house prices, the market and the economy appear to be stronger is to inflate the dollar. Even if it fails to work in the longer term, it seems to be the government's chosen solution.

While not a rabid gold bug, gold's price seems to be manipulated as I've been buying it near spot and selling it at 45% profit on Ebay--often reserving my replenishment the same day from the mines. I also can't see central banks taking on any massive program of selling when they don't even trust each other enough to lend money. Gold (and silver) have not just made me about 65% in two years, they also serve as a nice insurance policy in case things get really bad.

Our society, and especially our politicians can very dependably be assumed to take the easiest and most expedient way out of a problem. Right now that looks to be throwing money at every problem.

Stocks should rise like everything else due to the watering-down of currencies, but gold still looks pretty good to me.


On Jan 02 01:20 PM 1977°C wrote:

> Gold 600 in a blink of an eye.

Jan 02 03:25 PM

[jepittman:]

Jeff your style is not mine but you do have one thing right. IMO the easy trade is most often wrong. Some of the best buys (and sells) I have ever made I felt like I was going to throw up just after entering them. Some of the worst trades I ever made was when I was comfortable making them. This is not a law but it sure seems to be the way it works most of the time for me. Good luck.

Jan 02 04:42 PM