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Breadth Internal Indicators: Winning Swing & Position Trading is an educational DVD by a division of the Pristine Capital Holdings (established in 1994, with over 60,000 subscribes, and online educational & training products at Pristine.com).

 

What Capra Does

Trader & author Greg Capra describes the role Breadth Indicators play in investing and trading decisions. Properly used, Breadth indicators can either reinforce a price action, or signal divergences from price action and potential turning-points in the market.

 

How He Does It

The Breadth Indicators Capra describes, include:

1. Advancing & Declining Issues
2. New 52-week Highs & Lows
3. Applying TRIN and McClellan Oscillators, and much more.

Some traders live-&-die by breadth indicators and other traders give it passing attention. I’ll leave the final decision of how much (or how little) attention to give to breadth indicators to the reader.  Suffice it to say that if you want a good introduction into Breadth Indicators and how to use them in your trading strategy then you should consider this product.

 

PROS: Capra gives you a no-frills introduction into Breadth Indicators, why they’re important, how to use them, and their limitations. The DVD does not over-kill with excessive examples, but does provide sufficient charts and examples to grasp the concepts and learn how to apply them.

 

CONS: 

1. There are examples that are virtually identical to those the author uses in another product, Sentiment Internal Indicators: Winning Swing & Position Trading.  Both DVDs use the same example with hedge fund Long Term Capital Management. They also have nearly identical discussion in the DVD segment in which the author describes why we should consider the indicators (they allow us to make objective decisions).  These two products ARE DIFFERENT, AND THEY DO COVER COMPLETELY DIFFERENT TOPICS. No questions with that. My only criticism is with the use of a few examples that seem identical between the products, but the discussion in the product is in fact completely different.
2. The charts presented during the DVD are sometimes over-packed with too much material, making following the DVD difficult. But neither of these criticisms is fatal. 

Sentiment Internal Indicators: Winning Swing & Position Trading is one of many educational DVDs by a division of the Pristine Capital Holdings.  The firm was established in 1994, has over 60,000 subscribes, and provides online educational & training products at Pristine.com.

 

What Capra Does

Trader & author Greg Capra describes Sentiment and the role it plays in trading. For example, market sentiment indicators can reinforce the trend in price, thus allowing a trader to hold onto their position and trade with the trend.  Sentiment indicators can be also signal extreme sentiment, in which case trader may consider: profit-taking, close positions altogether, and/or prepare to open counter-trend positions.

 

How He Does It

Capra describes three specific Sentiment Indicators:

1.  The VIX (he also broadly touches on VXN)
2.  PUT-CALL Ratio (he describes equity, index and OEX ratios)
3. Sentiment Surveys (The Market Vane Survey, The Investors Intelligence Survey, and The American Association of Individual Investors Survey)

 

Capra gives good advice for any trader. Having said that, the level of detail is better suited for novice or intermediate traders, not advanced or professional traders. While it is true that you could find a lot this material scattered at various free internet sites, what Capra does is save you the time, effort, and energy in researching, and provides you a complete and easy to follow discussion about the role of sentiment indicators, and a solid understanding of how to use the three major sentiment indicators (along with their limitations).

 

PROS: Capra successfully balances the level of detail in his analysis. This is no easy task considering his discussing some abstract topics such as the VIX and PUT-CALL Ratios. The ability to cover these detailed concepts in easy to follow manner is enough reason to get the DVD.

 

CONS:  There truly are not many cons with this DVD, other than the fact that the material covered is geared toward the novice/intermediate trader. But that’s a decision regarding the intended audience of the product, not truly a “con”.  The only fault I could find (and admittingly its purely cosmetic) has to do with many of the charts presented during the DVD. In an attempt to cover various indicators, there is too much material crammed into a single power point presentation, making following the DVD difficult (keep the remote control handy, you’ll be pressing the pause button often). But that’s not a deal-breaker, for an otherwise solid product. 

Will The Market Crash?

During the recent “Rally Without a Cause” there have been bull-&-bear commentators arguing why the equities rally is or is not justified. I will not rehashed the worn out arguments yet again. Let’s make the best possible arguments in favor of the bulls to see if these justifications stand the test of logic (a little less MAD MONEY and a little more Aristotle).

 

 

Bull-FALLACY 1: Market’s Are Higher Because The Economy Is (Or Well Soon) Recover

FACT:    The economy will recover due to one of the following factors:

1.       consumer spending picks up (about 60-70% of the economy), and/or

2.       corporate spending picks up (think of the Y2K, “Dot Com” spending build-up), and/or         

3.       US exports pick up

ISSUE:   But  how can the economy recover if:

1.       Consumers are financially wiped out and deleveraging, and/or

2.       Corporate spending does not seem likely to pick up (replenishing depleted inventory levels does not a recovery make. FYI "good" earnings season we just had was economically doctored up, and well documented by many commentators), and/or         

3.       Even if US Exports do increase…it’s not plausible to argue that US exports will pick up so much so as to compensate for declining consumer & corporate spending

Not convinced? Many commentators have presented well thought out, objective and thoroughly researched arguments why the economic pain is not over, and the recovery is not around the corner. I will not rehash other’s observations…there are many good commentators, among them Karl Denninger.

 

Bull-FALLACY 2: The Economy Right Now Doesn’t Matter, Markets Are Higher Because Of Successful Government  Intervention

FACT:    Government spending can compensate for contractions in a mild and short recession, by buying enough time for the economy to rebound…

 

ISSUE:   …but we’re neither in a mild nor in a short recession. We are in a credit induced recession with continuing deleveraging and government propped up firms, which have postponed difficult-&-painful economic restructuring. The only people who believe that government spending can-&-will stimulate an economy are the North Koreans, the Cubans, and the Green shooters. The sky is not falling, the world is not going to come to an end; but we’re not out of the woods yet…not by a long shot. More economic and financial agony may be ahead of us.

 

Bull-FALLACY 3: Markets Are Higher Because They Were Over Sold In March

FACT:    Assuming that markets were in fact oversold in March that does not necessarily mean current prices are justified. Markets could have been at extremes both then and now.

 

ISSUE: March lows were caused by economic worse-case scenario being “priced into” stocks along with a lack of liquidity due to market-sentiment. Both “information” (fact) and “noise” (sentiment, rumors) influenced prices in March….much like today’s prices are influenced by information (economy is not falling off the cliff) and noise (think CNBC pundits).

 

Bull-FALLACY 4: "Contrarian Call" By Bulls: Rally Should Continue Because Of Pervasive Perma-Bear Sentiment.

FACT:    Contrarian strategy is, in fact, a great investment strategy to follow.

 

ISSUE:   The markets are up 50% from the March lows, and there is pervasive bearish sentiment? If investors are predominantly bearish, then who is bidding prices up FIFTY PERCENT in the worst recession since WWII? Savvy contrarians realize that just because prices have gone down does NOT mean it’s a good time to buy. Sometimes prices go down for a reason.

 

 

Bull-FALLACY 5: Markets Higher Because Of The Lower Dollar, Change In Risk Appetite, Etc.

FACT:    Change in sentiment or asset rotation has historically provided the best entry-points for swing/trend trading because “the trend is your friend”.

 

ISSUE:   It’s entirely possible that: (1) demand for the dollar has gone down (the dollar is declining), and (2) demand for riskier equities has NOT gone up. These are not logically or financially contradictory positions. In fact, this rally has been characterized by low volume and record insider selling, not the hallmarks of a change in sentiment nor in asset rotation (going out of safe haven dollar and into equities).

  

CONCLUSION

Bulls have held some contradictory positions: (1) the economy right-now does and does not matter; (2) despite markets being up 50% this is a great contrarian time to buy because there are bears-bears-everywhere; (3) there’s a change in sentiment that’s fueling a shift into riskier equities…despite a generally low-volume rally with heavy insider-selling. The bullish case does not seem to hold up to logical scrutiny.

 Ask yourself this simple question: Are the "real" insiders (Goldman, JP) buying or selling (never mine what they're telling the investment public via their analysts)? If they were buying, would they let the word leak-out to the public who would then bid against them? Follow the elephant tracks. The trend is your friend, but in major bearish-trend there will be counter-trends like we’ve witnessed and these counter-trends are not your friend…merely a profitable trading opportunity for the quick-&-nibble traders. The more prices deviate from the norm due to “noise”, the more devastating the subsequent correction (statistical fact of Reversion to the Mean…or a “Really Mean Reversion”).

 

Disclosure: TZA.