Ao minuto: Trump critica violações do cessar-fogo e aponta especialmente a Israel

[Camisa Roxa]

xxx

[Camisa Roxa]

MONDAY a.m.
February 10, 2003



"You can't time the market"
by David Nichols

I guess I've been reading too many academic finance papers lately, as it's really starting to tweak me how it's just assumed within the academic community that the market is efficient, and market timing is impossible.

It just crystallized for me how ironic it is that those who say "you can't time the market" -- the same group who castigates technical analysis -- are actually putting their market fates exactly in the hands of those who do believe in these things.

Let me explain this a bit better. Almost every short and mid-term trader uses some type of technical analysis as a framework for buy and sell decisions. Most long-term, buy-and-hold investors espouse that you can't time the market, pooh-poohing the efforts of these shorter-term traders. Yet it is precisely the short-term gyrations caused by technical traders that move the markets tick-by-tick.

The market is driven to a large extent by technical factors -- as millions of people are looking at charts and indicators and reaching singular conclusions. Technical analysis is actually what makes the market efficient in the short-term. In the long term, the fundamental underpinnings assert themselves, but this is a tough process to wait through, as it sometimes takes years -- beyond the horizon of most people.

So it's not helpful to castigate technical analysis. Whenever you hear the phrase "you can't time the market", what the person really should be saying is " I can't time the market".

Along these lines, I can't recall a situation where more people were aware of a historical script for the market to follow. Market participants are keenly aware of what happened to the market during the first Gulf war, and looking for a repeat this time (the market rallied strongly when the first bombs began to drop, and never looked back).

I think playing for this scenario a second time is dangerous. I also suspect that many who have been making bullish bets ahead of the war -- expecting this scenario to unfold -- have been fuel for the downtrend over the past few weeks. It's been tough to hold onto long positions, as the market just continues to sink away.

We may indeed see a sizeable rally develop soon -- within the next few weeks, possibly -- but I just don't think it's going to come when everybody is expecting it. The script will be different this time, catching the majority by surprise. That's the way the market really works. It's better to toss that script into the trash can, and watch the action in real-time with a clear head.

The market has now dropped four straight weeks, and last week gave the third lowest weekly close of the entire bear market. Only two weeks back in October did the market close the week lower.



We're now "into" that last weekly candle at the October bottom on the OEX and SPX. The VIX also put up a white weekly candle, which shows that fear is still spreading among market participants, and has not been vanquished.



Interestingly, bonds just had their highest weekly close. Although the inverse relationship between stocks and bonds has not been as closely correlated lately, there is still this "flight-to-safety" element that is helpful to watch as a sentiment gauge.



We're not sitting on a nice little profit cushion in our bearish Rydex positions, as we entered a small position at the close on January 22nd in the Venture Fund (RYVNX) and the Tempest Fund (RYTPX). Here's how these positions look so far:





I like having this cushion now, as even a strong knee-jerk up move won't eat into our capital at this point. If you missed this recommendation, or are itching to pile into more short positions here, then just sit on your hands. The lower-risk entry points are already behind us on this move, and you don't want to be allocating more capital to end-of-day positions at this point in the mid-term trend.

Sentiment Dashboard
by Adam Oliensis



SENTIMENT TANK: The tank filled less than 1% on Friday, so while it did rise it remained "legally" at "81% full" of negative sentiment. That means that sentiment as measured in our proprietary formula (called the Negativity Composite) is more negative than it has been about 81% of the time over the past year. That's a lot of negativity. We may not be there yet, but we're getting close to a spiky bottom. (Top/Bottom Finder projects that the current decline phase will be exhausted in 3-days' worth of cumulative volume.)

SHORT-TERM: The hourly gauge closed the week headed toward neutral from its decline phase. It hasn't quite made the turn, but it may well be ripe for an hourly oversold bounce. If, though, that doesn't develop on Monday morning, we'll look for this gauge to collapse further intraday.

MID-TERM: The mid-term gauge progressed (as did the tank above) less than 1 point in its decline phase. (We can't capture that small a move on the graphics of the gauge.) The decline phase is sufficiently mature that any positive shocks could cause a decent bout of short covering. We do not have any easing off of the decline phase yet, however. Our Confidence Diffusion Index (CDI) remains at 6 out of a possible 7. Had the VIX closed out the week nearer to its daily high on Friday we would be at 7. If the VIX closes above 40 before it closes under 37.5, we'll almost certainly hit 7 on the CDI.

LONG-TERM: The weekly gauge remained at 33 in its decline phase, unchanged from Thursday's reading but having progressed from the prior week's 23 in its decline phase. The weekly chart is clearly showing a decline phase that has plenty of room to work lower. Our weekly CDI also remained at 6 out of 7 on Friday.