The Times, They Are a-Changin’

  • Posted by
  • on July 19th, 2011

“Come Senators, Congressmen, please heed the call”  Bob Dylan

Part of making this a regular afternoon exercise is to force me to share the evidence as it comes to me, and forget what was said yesterday.  Things DO change that fast, which is why we do the work every day.  For the past few days, I’ve been not-too-bullish.  Quoting Keynes again, “When the facts change, I change my mind…what do you do?”  

The facts have changed.  Not into a breakaway market, but a market coming “From a Low” is a different animal than one headed “To a Low”; regret for not buying below $SPY 131 will be the driving force keeping the next few intraday selloffs shallower than in past days.

As I said yesterday, “only a heavy flush or a move back into last week’s range(with appropriate stock leadership) will prompt me back to offense.  Not only did we start that process Monday with a solid close & positive divergence on “Stocks > 10 Day MA”, but we followed through in a big way today.  This doesn’t mean buy at any price and hold; to me, it means buy “fear of gain turning to loss”/sell “euphoria” vs. the prior short “fear of loss turning into gain”/cover “panic” that started developing after the July 8 jobs report.  I can now sift through the 53 buyables with less worry about being trampled by a negative climate that was helping drive down the 68 shortables.

Just as yesterday felt a little silly to note the obvious weakness, it seems a little silly as a trader to post bullishly after a 2% rally in 24 hours.  But as I’ve noted before, this is about identifying the climate, NOT pinpointing perfect entries & exits…that’s a little more personal.  In any case, it’s important to have a plan for all scenarios…early, right on, or late in acting on a turn.  That totally depends on one’s timeframe so it may feel early OR late depending on the operator.  I’d have preferred a more subtle resolution of the downswing, but markets don’t care what I prefer.

As the Jester sang above, “For the loser now will be later to win”…yes, maybe even $GS, $BAC, & the rest of the $XLF will come up for air.  I expect $SPX 1318-ish to continue acting as a magnet for now, just that the eventual outcome now favors an upside tail vs. the prior downside expectation.  Four times last week, we closed a few points above or below that level with the % of stocks above their 50 day MA ranging from 48% to 54%.  I’ll use those markers as an evaluation tool in future days as I suspect we’ll hover in that region to tease and torture trend chasers.

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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