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Your right..not sure I know what your saying but I posted that 742 number yesterday if you look back a few posts and it got hit right after the open today (around 8:35) and when I said I was considering posting an update it was getting taken out at the same time (around 9:20). sorry for the confusion.
I use 4 better renko. I need only 1 day data. I measure fib on renko body only. I have 15m open range at 745.7 (high) and 741.8 (low). Take a abc fib and I have 217% at 742.1 so confluence is around 741.8 - 742.1 so 742 is close enough. Does it work? who know, just something I see.
No chart today...there was a trade off the 734.5 area I spoke of a couple days ago...nice pinbar on my tick chart and a engulfing bar on the Kase bar chart I look at occasionally....you obviously know how that worked out.
As far as tomorrow....who knows, the daily is goofy and hard to even guess what will happen especially with NFP so just going to wing it.
AT the turn of the last century, it was widely accepted that American stocks were virtually certain to be good long-term investments. Now, far fewer people are confident of that.
A major reason for the earlier confidence was that in the 15 years from the end of 1984 through the end of 1999, the total return of the Standard & Poor’s 500-stock index was more than 740 percent, even after adjusting for inflation. That amounted to a compound annual real return of more than 15 percent.
At the end of 2011, by contrast, the 15-year return — from the end of 1996 — was just 3 percent. And most of those gains came in the first three years of the period. Since the end of 1999, the stock market has not come close to keeping up with inflation.
The first of the accompanying charts shows compound 15-year real returns on stock market investments from the period that ended in 1943 through the one that ended last month.
Broadly, it appears there is a cycle that is repeating itself, in which the 15-year return tops out at more than 15 percent and then falls precipitously.
In June 1964, the real return over the previous 15 years averaged 15.6 percent a year, the highest that figure had ever been. The stock market did not begin to fall then, but it could no longer maintain the torrid pace, and the 15-year return figures began to decline. On a real total return basis, stock prices hit their highs for the era in late 1968, and by the mid-1970s were in free fall as high inflation combined with a bear market.
By 1979, an investor who bought stocks in 1964, when the market seemed to be a sure moneymaker, had lost money after adjusting for inflation, even after including dividend income.
In the early 1980s, the stock market turned around, and by mid-1997 the 15-year return figure had reached a new high of 15.8 percent.
The second chart overlays the two cycles. The first line goes from the end of 1943 through the end of 1980, when the line was in negative territory. The second one, beginning at the end of 1980, continues through the end of last year.
The match between the lines is far from perfect, but there are significant similarities. If past is prologue, the 15-year return is likely to continue to decline and to turn negative in about four years. That does not necessarily imply that stocks will fall during that period, since that could happen with small gains over the period. And, of course, there is no assurance that history will repeat itself.
It is probably significant that opinion surveys show Americans are more pessimistic than they have been in many years. There is a fear that the American economy is in decline and that this country will be unable to compete with emerging Asian economies, principally China. There was a similar fear in the late 1970s, although then the fear was that the United States could not compete with Japan.
Perhaps overconfidence inspired in part by a strong stock market also played a role in American military history. Within a few years after the 1964 peak for 15-year returns, the United States escalated the Vietnam War. Within a few years after the 1999 peak, the United States decided to invade Iraq.
The other two charts indicate that the stock market may have done surprisingly well over the last 15 years, considering how little the economy grew over that period. Through the third quarter of last year — the most recent data available — real gross domestic product had risen at an annual rate of just 2.3 percent over the previous 15 years.
That was the lowest return since the 15 years ending in 1960, a period that was distorted because it included the rapid decline in real gross domestic product in 1946 as the production of weapons halted after World War II.
Similarly, over the last 15 years the total real personal income earned by Americans has risen at an annual rate of just 2.6 percent. That is the lowest for any similar period for which G.D.P. data is available. Both the G.D.P. and personal income rates of growth are well below where they were when the cumulative stock returns bottomed out in 1982.
After the pessimism of the late 1970s and early 1980s, the economy and the stock market turned around as it became clear the American economy was resilient and could adapt to a changing world. The question now is whether that can happen again.
One of my favorite quotes is by Howard Marks and is a principle that we live by in our little investment shop; "Resisting – and thereby achieving success as a contrarian – isn't easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. (That's why it's essential to remember that 'being too far ahead of your time is indistinguishable from being wrong.')
Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it's challenging to be a lonely contrarian."
If you think about the basic philosophies of the "great investors of our time" you will find that their rules are primarily based on going against the "madness of crowds". Selling when everyone is buying, buying when everyone is selling and betting against the herd mentality has always been advice that investors are told to live by - yet, because of human nature, we tend to do just the opposite.
As Howard Marks stated the act of being a contrarian is a very lonely endeavor and plays against the nature of human emotion. When things are going well - we want them to continue to do well. We ignore the signs that something may be going wrong because we don't want to the "good times" to end. However, these are the very signs that we need to pay close attention to even as unpleasant as that may be.
If you think about bullish/bearish sentiment like a "gas tank" in an automobile you will understand the idea better. At the end of September the majority of investors were very "bearish" on equities which, from a contrarian viewpoint, was like a full tank of gas. As sentiment began to become less negative investors piled back into equities pushing the market higher. Normally, from the levels of negativity that we witnessed, the markets should have at least reached old market highs or potentially set new highs for 2011.
Unfortunately, that was not the case. The market remained stuck in neutral, with the engine running, going nowhere while "burning up" the fuel in the tank.
Today, the level of weekly sentiment is beginning to approach levels of optimism that are normally witnessed near market tops. Which, as a contrarian, begins to make us more alert to the possibility of this cycle coming to an end. Our job as investors is simple - we all have pieces of paper to sell and our job is to "sell" them to some other "sucker" at the highest possible price. Remember that the stock market is based on the "greater fool" theory in that there is always someone there willing to pay a higher price. This is true until it isn't and you want to be the seller - not the "fool". [IMG]http://www.streettalklive.com/images/stories/600_williamsr-analysis-010412.png[/IMG]However, it isn't just this bullish/bearish composite sentiment index that is sending up a potential warning. Our weekly over bought/sold momentum indicator is confirming the same. The recent rally to "nowhere" has used up the "fuel" that was available very rapidly. With the indicator in over bought territory we may well be closer to the end of the current advance than the beginning.
Sell And Run Away?
At this juncture most individuals tend to let their emotions get the better of them and they make critical errors with their portfolios. Emotional buying and selling will always cause you to go against the basic contrarian investment views and leads to selling at the bottom and buying at the top. The point that we are making here is that you need to be aware that a) things do not go up forever and; b) they do not go down forever. The trick is understanding when things are getting to extremes which lead to a change in direction.
Being "contrarian" as an investor and going against the grain of the mainstream media feels like an abomination of nature. The halls of despair and broken portfolios are littered with the hollow cries of "what if I sell and the market continues to go up", or "if I sell at a loss I will lose money" and "I am a long term investor" .
These are all emotional pleas to keep you from doing what is necessary to navigate volatile markets safely. Becoming a successful investor requires a strict diet of discipline and patience combined with proper planning and execution. Emotions have no place within your investment program and need to be checked at the door. Unfortunately, unless you are Spock, being emotionless about your money is a very difficult thing for most investors to accomplish. As humans we tend to extrapolate the success or failure within our portfolios as success and failure of ourselves as individuals. This is patently wrong.
As investors we will likely lose more often than we win - the difference is limiting the losses and maximizing the winnings. This explains why there are so few really successful investors in the world.
However, with this in mind it doesn't mean that you can't do well as an investor. It is ever more important that you pay attention to the "risks" inherent in the market and act accordingly.
Generally, the process of acting accordingly requires nothing more than just dong the opposite of what everyone else is doing when the markets began to reach extremes. While bullish sentiment has yet to reach extremes other indicators that we monitor on a weekly basis have. This doesn't mean that you need to act immediately, however, it does mean that the "tank" in the car is getting close to empty.
After the next correction, which will come in time, the "fuel" will be replenished and another attempt will be made. The difference between success and failure will be determined by the amount of damage the correction does to your portfolio.
If you were Howard Marks what would you be doing?
Sentiment is awfully complacent, and volatility is low. Smells like May 2011--or August 2008.
Equities look ripe indeed for an "unexpected" bloodletting and resultant wicked correction. The general outlines of a equity bubble awaiting a nice little thumb-pricking are all present: high levels of confidence and complacency, massive divergences and a disconnect between the global economy and U.S. equities.
It's certainly possible that the stock market will reward the 83% bulls and further punish the 17% shorts, but it's ever so much evil fun to inflict the most pain on the greatest number of participants. If Mr. Market reverts to his usual evil ways, it's the bulls, slumbering a la Pearl Harbor, 6 a.m. 7 December 1941, feeling little need for hedging against any downside, who may hear "tora tora tora."
It's possible that the U.S. economy can keep logging positive statistics even as the global economy spirals into depression. Never mind that gasoline consumption has plummeted or that savings have dropped or that austerity and higher debt service payments insure a deep recession in Europe; and who cares about China's real estate bubble popping? None of that matters here--or so it seems.
Heck, maybe we've entered a new golden era of low volatility; that's possible, too. Everything's fixed, and the U.S. has successfully decoupled from the rest of the global economy.
Based on sentiment and volatility readings, those are the consensus views. Reportedly 16 out of 16 stock market mavens see nothing but rally ahead--and we all know unanimity is astonishingly accurate in predicting stock prices.
The U.S. dollar has traded on a see-saw with equities for years; recently, both equities and the dollar have surged. So either the see-saw has broken or this is the mother of all divergences.
Maybe short interest is at recent lows because it's now painfully obvious that equities have broken out into a new rally and only fools feel the need for hedges against downside.
Commodities such as copper have led the market for years; recently they've rolled over while the stock market surges higher. Once again, either historic correlations have been decisively severed or there is a gargantuan divergence that's about to be resolved.
Sentiment readings are firmly in extreme bullish territory, but hey, maybe the market will reward the majority with a rally that feeds on rising complacency.
And maybe the truism "volume is the weapon of the bull" is also voided, as low volume rallies may well lead to lower-volume rallies.
The market has been acting as if all these signs are bullish. Maybe, maybe not. Meanwhile, the witches are cackling quietly over their bubbling brew, and it certainly sounds like some evil is being conjured up.
While relying on technical analysis and chart patterns may lack the academic rigor that fundamental analysts (such as Bill Miller) and economists (such as Joe LaVorgna) assume, it seems that relying on the reality of what is actually going on within businesses is a fool's errand currently.
The 115 year Dow chart points to sideways price action in a broad range to an 80 year trend at best while the analog to the wave structure from the 2011 peak in the S&P 500 is echoing 2007/8's pre-crash levels rather accurately. While neither chart portends or guarantees an imminent precipice, given earnings downgrades and the box Bernanke appears to be increasingly squeezed in, perhaps they signal the flush that the market needs as an excuse to ramp up the printing press one more time.
The top one is a daily and the lower is 60m.
Intersting how similar they look....I did a double take on that....
Anyway still a bit confused here...you can make a good argument for being long already but greed tells me to wait for a better pullback somewhere. This may not happen....bus may have left the station already...
To be long now means that you would need about a 30 point stop....more than I want.
I guess the gist of it is that a long here is just to wimpy for my taste and I think a pullback is possible...the question after that is how far can it pullback and still be a long and not turn into a short.
The short possibilty I pointed out a few days ago looks horrible at this point too.
So to summarize my ramblings...we will just have to wait some more.
Just a couple spots to watch....763 ish is in the cards if it breaks to the upside (764.7 is high on 10/27)
728 ish on the downside......those are kind of the extremes..I haven't spent time to micro analyze anything in between yet....if I see something later I will post a heads up.
Just a tip for any new guys out there....If you can't figure where to initate a trade from just look to trade right around the highs or lows of the previous day.....you should do this anyway really but focus on getting PA in those areas and you should do pretty good. I know this is basic stuff but it is worth mentioning.
