SPY And EEM Chart Update

Apr. 24, 2012 10:32 AM ETSPY, EEM
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Long/Short Equity, Contrarian, Technical Analysis, Gold & Precious Metals

Contributor Since 2011

Why “Playing the Ponzi”? I view the entire monetary and financial system as something of a Ponzi scheme. Starting with currency that is created as debt, and running straight through a global economic model that is based on infinite growth in a finite world. This won’t end well. I’d go a step further and suggest that our materialistic value and belief system is another way in which we’re building castles on sand… but I digress. I view our financial markets as a casino, and frankly, I like gambling. I prefer technical analysis to fundamental analysis because I find the “behavioral” side of investing more interesting than longer term projections based on financial/numerical analysis. Pictures make more sense to me than numbers. I'm dumb like that. As for an investing “philosophy”, I believe in small/micro-caps. I believe the market rewards growth above all else, and growth is easiest (to spot, at least) and most explosive when a company is young and small. As a company matures, its growth inevitably slows. Microcap stocks tend to be extremely volatile so I believe strongly in taking profits on the way up (or exiting quickly if the entry point proves poor). I attempt to buy stocks that are pulling back in the midst of a longer term uptrend. I hold anywhere from hours to years, but usually in the 3-6 month range. I am an amateur investment enthusiast, who has committed every investing cardinal sin at some point - and sadly, sometimes still do. Between first entering the markets in 1999, and 2002, I lost 90% of my seed money. Since then, I’ve found an approach that works reasonably well for me. My average return has been about 20% annually since 2003.

Just to update a couple of charts that I've posted in the last few weeks:

The S&P remains rangebound after breaking to the downside of its rising (bearish) wedge earlier this month.

The iShares Emerging Market ETF (EEM) has broken the downside of the pennant pattern it formed over the last year.

With EEM breaking to the downside of its pennant pattern and so many of the leaders from this year's bull run showing weakness (AAPL, CMG, EMC, etc), I continue to think the likely direction out of the S&P's current consolidation will be downward.

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