January 30, 2016
Was it Confucius who said ” one picture is worth 1000 words ” ?
If he were alive today and had $1 million invested in the stock market ( SPY ), Confucius would say the ( chart ) of SPY for December 31, 2015 was a picture worth more than 1000 words because it was telling you how not to lose $ 49,786. by getting out of the market as soon as it opened on Monday, January 4, 2016.
The WHAT TO DO action was all there December 31…. SPY ( S&P 500 ), closed at $ 203.87 which was at a price lower than that presented by it’s 200 day moving average trend line ( $204.04 ). No examination of fundamentals ( WHYS ) could have told you that January 4 was the day for action.
All the WHYS are good for is for going through the ashes as losses mount starting the day after the WHAT TO DO day.
The current SELL signal is good till the close February 29, because yesterday (the final trading day of January 2016 ) the market again closed below its 200 day moving average $193.72 …..$202.79 for the second straight month
While a chart ( picture ) is all I need to decide on WHAT TO DO AND WHEN TO DO IT, there is additional information in the picture which reinforces the situation…
SPY’s 50 day moving average ( $200.31 ) is below its 200 day moving average trend line ( $202.79 ) and its 20 day moving average ( $192.26 ). is below its 50 day moving average trend line . That spells out NEGATIVE TREND to a trend follower. I am almost certain Confucius didn’t say ” let the trend be your friend until the end ” but I’ll bet he would wish he had !
Additionally, a chart plotting the trend line of “On Balance Volume ” is spelling out distribution volume not accumulation volume.
So much for WHAT TO DO. ( I’m not considering yesterday’s 2.44% surge in SPY on 50% higher volume anything more than proof that the devil can also be found in the stock market and is creating mischief to lure me away from my trading model. )
As for the WHYS….As I predicted in my previous post, the FED is laying the groundwork for backing off on the March interest rate hike and using face saving language to…..save its face.
How stupid is it to be raising interest rates while Japan and other central banks are lowering interest rates to below zero ! ?
If you were A Tokyo resident, would you rather pay your bank interest to keep your money on deposit with it , or would you buy dollars and move your money here? Worldwide buying of dollars to invest in the USA strengthens the dollar against other currencies and, importantly, against commodities such as oil which is being used as collateral to finance a lot of debt including that of sovereign hedge funds !
As the price of oil drops there are margin calls going out for more funds to secure existing under water positions. In turn, the debtors liquidate profitable positions ( including USA stock market positions and USA real estate ) to meet the margin calls or to offset losses.
It seems there is a worldwide ” stealth liquidation ” of USA assets in progress. This means there is almost no place to hide for USA investors and that all bets are off until Fed policy softens , oil prices stabilize etc.
So, I’m riding it out with the emphasis on ” Out ” …as in out of the market since December 31…
Or, as in ” a bird in hand ( cash ) is worth two birds in the bush ( stock market position ) “
Richard Maurice Gore.