Looking for a Signpost in the Fog

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  • on March 14th, 2011

“Give me a one-handed economist.  All my economists say on the one hand…on the other.” Harry S. Truman

I think ol’ Harry would escort me out of the room for having nothing but hedged answers.  It could be too much exposure to “breaking news” from the earthquake and tsunami footage, but since Friday morning I just haven’t had clarity.  I can usually come up with solid “if/then” planning, and then execute within that plan.  But I allowed myself to get anchored on Thursday night’s lows, and failed to accept Friday morning’s tepid selloff as a sign the bid still lived under the market.

Before the earthquake, I had written that Thursday was breaking the ascending triangle, that it might result in a nasty down day, and that it was too obvious to have implications beyond that day.  I went to bed Thursday excited about the opportunity to buy any weakness on Friday morning.  Then we got what I wasn’t expecting(a major human tragedy while I was asleep), and found myself unable to properly incorporate that information.  Throw in my breadth indicator giving its first warning signal since last May, and I’ve been trapped in indecision.

Long-term frame?  Decisively up.  Intermediate-term frame?  Newly down.  Short-term frame?  Down but doing an impressive job of incorporating bad news events.  Initially, I assessed Friday’s opening as weak…I know the earthquake was an emotional event but would also bring major money pumping, and the “Day of Rage” passed with a whimper rather than a bang leading to a big selloff in oil.  Why would we celebrate its resilience when this should have been a bounce day anyway?  I felt better about a rally attempt when the market absorbed an awful U of M confidence number and bears couldn’t capitalize, but I still laid low most of the day.

Today, I’m completely confused.  It could be West Coast time, but I’ve been going through my usual prep all weekend and don’t have a clear plan to deal with Monday.  As I said above, intermediate-term breadth is heavily wounded and needs time to heal.  Short-term is still shaky and not deep enough in the hole to go bidding for a bounce.  But I see markets absorbing a 5% selloff in Japan with a tiny selloff in European markets, and the trader in me thinks “How can you not buy this?”

Successful trading requires high confidence, and I’m just not feeling it.  I need more evidence to overcome the mushy setups I see.  I see sporadic bullish setups in things like $MAS and $BMY and $AVY, but no sector theme that could drive broad strength.  On the other hand(had to say it), the damage to groups like tech and materials may not follow through but any rally attempts will be stymied by overhead supply.  I don’t, however, think we’ll sit here for long.  Friday’s range was more narrow than I’d expect given the confluence of factors, and I see a good chance that a wide range day will occur soon to usher in the next move.  Harry would give me hell, so I’ll be sitting on my hands until one of them is ready to take charge.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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