Why I'm Not Ready to Join the Bull Camp

A general rule when using the RSI is that values between 20-60 are associated with bear market fluctuations. While it’s easy to get drawn into these bullish rallies and it sure is nice to think that we’ve begun a new bull market the chances are really slim in my opinion. I’ll be the first to admit I got caught with my pants down with this latest show of strength in the markets. I’m not ready to join the bull camp until we see some higher highs and a break outside of the current range. That would be the range bound of the chart itself and the RSI.

We very well may rally up to the top range of this channel, but I wouldn’t expect much more. Until then I’ll probably be playing the long side on a few scalps, but having missed out on all of this rally I don’t have the cushion I would normally have to take on much upside risk.

Comments

[AndrewBaker:]

My hand's up too. I got caught out by this bull rally, and I agree with Jeff that it's not likely to go much further. But ... how much and how quick will any further be? I'm hoping I'll recover some of my losses from this rally in a while, but can't see when that might be. Help me corral the bulls.

Mar 26 09:20 AM

[Fred Voetsch:]

So you missed the move up and are now playing it long? I like that: buy high and sell low.

Mar 26 01:23 PM

[Fred Voetsch:]

On Mar 26 09:20 AM AndrewBaker wrote:

> My hand's up too. I got caught out by this bull rally, and I agree
> with Jeff that it's not likely to go much further. But ... how much
> and how quick will any further be? I'm hoping I'll recover some of
> my losses from this rally in a while, but can't see when that might
> be. Help me corral the bulls.


This is simple. Dow theory states that once a direction is established you stay with it until there is a clear signal that it has reversed.

We are in a bear market. Trade accordingly. If you accepted that back in 2007 when Dow theory signaled a bear market you would be way ahead by now by shorting tops and trading out on panic lows and maybe even going long from those lows into the rallies.

DON'T CHASE! Be early and follow the rules. With a little courage you will be sitting pretty when this rally runs out of steam and the markets heads to new lows. Even if we have hit bottom we are likely to retest the lows.

If Dow theory says to go bullish then you go bullish.

Mar 26 01:30 PM

[Jeff Pierce:]

Fred,

I haven't stated I'm buying long positions to hold them any longer than maybe a scalp here or there. I'm fundamentally bearish on the economy and buying high and selling low is not in my trade plan.

You shouldn't be so quick to judge, in fact you should put your investment performance up on covestor then you can pass judgements because all your trading is out in the open.

On Mar 26 01:23 PM Fred Voetsch wrote:

> So you missed the move up and are now playing it long? I like that:
> buy high and sell low.

Mar 26 04:50 PM

[robert99:]

I went mostly short in late 2007, but covered before the big plunge in the second half of 08. I started going long in January, sniping bargains where I could find them, only picking up the cheapest of the cheap, with lots of cash, little debt, and preferably, a nice yield. Most were microcaps and small caps. I sold recently, took 50% gains on a few, 30% gains on others, still hold half of those long, and am now sitting on a 25% gain on the year. I'm not buying into this rally - I am waiting on it to overextend itself, at which point I will sell a few of my weaker longs and go back short. Hopefully, I will see it coming. This bottom wasn't very difficult to see if you were actively looking around at stocks to see what was cheap and what wasn't. Valuations were getting ridiculous, even if one assumes earnings would plunge 75% this year. I'm thinking another 15% or so from here, and I will begin building a short position. Of course, that depends on market sentiment, which changes daily. If we had not had at EOD rally yesterday, we probably would have drifted downward to retest the lows before exploding up again. Like I keep telling people: no matter what happens, things are going to be interesting.

Mar 26 08:25 PM

[Big-P:]

Theoretically speaking Don Luskin is in the "bull camp" but, unfortunately for people stupid enough to listen to his stale babble on Kudlow's show, Luskin's been in the bull camp since DOW 14,000!

Don't take my word for it, check this out--

donluskinisatool.blogs.../

Mar 26 09:46 PM

[sr9web:]

good advice


On Mar 26 01:30 PM Fred Voetsch wrote:

> On Mar 26 09:20 AM AndrewBaker wrote:

Mar 27 12:45 AM